Tag Archive Competitors

Marketing And The Dynamics of Competition

Introduction

Marketing in the 21st century is not like it was in the ‘60s, ‘70s and even the ‘80s. This is because there are enough products to satisfy customer’s needs.  In fact, customers are “very satisfied”!  Companies have segmented the market until it has become almost too small to service profitably. Companies have refined the dynamics of competition so well that customers have a large variety of choice.

A group of people around a laptop discussing marketing

Giant corporations such as Wal-Mart, Costco, Woolworths, and Coles control most of the distribution. There are a lot more brands and fewer producers. Products “life” has been shortened and in most cases it’s cheaper to replace than to repair, complicating the process even further.

Customer or Product?

In marketing, the needs of the customer were always the first principle. However, today many companies are changing and are now focusing on the actual product. These companies are focusing on what category it falls into, and then what sub-category (e.g. ice cream and then what flavours). They concentrate on the product first then focus on who will use the product, and those considered “not using” are deleted from the sequence. Therefore, by following this concept, companies give their competitors a target market.

This system may capture 75% of the “user market” because it has a USP (Unique Selling Position) i.e.; more flavours, more colours, more convenient packaging, longer shelf life, etc, etc.  However, why can’t the other 25% be taken care of instead of leaving to the competitor?

Capturing the other 25% can be achieved by using “Lateral Marketing” and this is where the dynamics of competition are used to the full. . . . . Companies should stop thinking about how to retain the 75% in love with the product (i.e. Vertical Marketing), but think about drawing in the other 25% of the market and make them your customers. This is can be done by thinking out of the square. Although it may be seen as further “dividing” the market-place, in actual fact it’s making it bigger.

Example: Let’s imagine your company sells hand cream. It has captured 75% of the market because of some formulator development that makes the hands feel smooth and uses less product. The other 25% that your competition is trying to take would rather spend less for soap, then use less. Therefore, to capture the other 25% is to start thinking “innovation” and not to produce a different or variant product.

Lateral Marketing

The objective is to use Lateral Marketing to work within the original category of the product complementing it and not competing with it. One could come up with a particular hand cream that has more lanolin, absorbs better into the skin, a nice fragrance or has more natural ingredients. It can be innovated by size, like selling in large economy bottles and/or selling in tubes and without ever changing the formula of the product. This kind of marketing works better for mature markets (i.e. the ones with no growth), after all, what new uses can one come up with, for hand cream. This method can also create markets from start. However, it requires greater resources and may redefine one’s company mission and business focus.

This way of thinking in marketing doesn’t create “new” categories, it always occurs “within” the category where the idea originated.  If the company followed the right procedures, it would have gathered the 25% of customers. These are customers might have gone away to another competitor. It didn’t require a lot of overheads and this company still producing hand cream!

Good Companies Grow, No Matter The Market Conditions

Introduction

Good companies grow and every single business demands growth and double-digit growth is the vision of every dedicated business owner, even when uninspiring results show up at the end of the quarter.

Most business owners need a funnel to navigate their way toward considerable, sustainable growth.  It can be done even in a slow economy as demonstrated by such companies as Harley Davidson, Starbucks, and WalMart.  Even smaller companies such as Paychex and Oshkosh Truck have been able to make gains in revenue, gross profits and net profits.

Here are 5 simple techniques that show how good companies grow:

1. Hold On To Your Customer Base:  Keep the growth that you have already earned by coaxing customers into complex relationships that make it a hassle for them to switch to your competitor.  Modify your products/services using data gathered from your customers giving you an advantage.  Proactively managing customer defections will help you predict and anticipate them. Bonding with customers wherever sentiment is tied to an interaction is another great way to retain them.

2. Gain Market Share At The Expense Of Your Rivals: Give customers a reason to abandon a competitor’s product/service for yours.  Do what it takes to lower the switching costs.  Pulling customers away from a competitor can be difficult, so you must devote many resources to raiding their customer base.  Offering higher value and quality are crucial to this end.  Buying a competitor is another way to do this, but costly in the short term.

3. Take Advantage Of Market Position:  Illustrate where growth is going to happen by spotting it early.  This can be done by watching the industry for shifts in buying criteria, product or service innovations, and population trends.  You must be able to spot positioning opportunities to make the most of them by continually using a systematic approach to the process.

4. Occupy Adjacent Markets: Before moving into a nearby market, decide whether it offers significant long-term growth and profitability.  Determine whether you have an advantage over a competitor, and ensure you can match its standards of quality and value.

5. Invest In New Lines of Business:  If you take this approach, never overpay for a new line.  You must find simple strategies instead of complex ones, and partner with the new business by assessing its leadership team and balance sheet.

Conclusion

For a business to have a successful growth portfolio, may not need all five of the disciplines mentioned above, but it must contain more than one for the company’s growth.  Only a balanced growth portfolio can keep an organization growing when the market shifts dramatically. This is how good companies grow.

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