CHAPTER
Defining the Competitive Set
2
Key Question for This Chapter:
Who do we or will we compete against?
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Major Topics for Ch. 2
I. Bases of Competition
II. Levels of Competition*
III. Methods for Determining Competitors**
IV. Right Level of Competition for You
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Bases of Competition
I. Product-oriented Approach
Similar Physical Attributes
Functional Similarity
II. Customer-oriented Approach
Who they are – competition for same budget
When they use the product
Why they use the product - benefits sought
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Bases of Competition (con’t).
III. Marketing oriented: promotion &
distribution
- Media
- Distribution
IV. Resource-oriented Approach (Internal)
- Raw materials
- Employees
- Financial resources
IV. Geographic: Becoming less relevant
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Levels of Competition
Beer
Ice
cream Tea Regular
colas Diet
lemon
limes
Diet-Rite
Wine cola
Diet Product form
Pepsi competition:
Diet Diet colas
Fast food Coke Juices
Fruit
Product
flavore
Lemon category Video
Bottled d colas
limes competition: rentals
water
Soft drinks
Generic
Coffee competition:
Baseball
cards Beverages
Budget
competition:
Food and
entertainment
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Example 1: Energy Bar Competition
Other Snacks
Healthy Snacks
Snack/Health
Bars
Energy
Bars
Odwalla
Power Bar
Balance Bar
Clif
Nutrigrain Bars
Slimfast Bars
Granola Bars
Fruits
Nuts
Juice
Crackers
Chips
Candy
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Example 2: Super-Premium Ice Cream
Level of Definition Competitors
Competition
Product form Super-Premium Haagen-Dazs
Starbuck/Godiva
Ben & Jerry’s
Product category Ice cream Breyer’s
Dreyer’s
Private labels
Generic Snacks Frito Lay
Desserts Nabisco
Nestlé
Novelties Mrs. Fields
Yoplait
Budget Other supermarket, Many
Convenience store products
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Example 3: PDA
Level of Definition Competitors Need Satisfied
Competition
Product form Full-featured PDAs Palm Pilot VII Personal information
Handspring management plus
Compaq Aero integrated
Pocket PC makers communications
Product category PIM (Personal Palm III PIM only
Information Managers) Royal
Casio PV-100
Generic Tablet PC/ Toshiba Other solutions to the
Nokia above
Cell phones
Samsung
Budget Paper-based solutions Rolodex
$100-$1,000 Business items costing Day Timer
$100-$1000 Fax Machines
Personal copiers
Furniture (e.g.
Steelcase)
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Levels of Competition:
Implications for Product Strategy
Competitive Level Product Management Task
Product Convince Customers that the
Form Brand is Better than Others
Product Convince Customers that the
Product Form is Best in the
Category Category
Convince Customers that the
Generic Product Category is the Best
Way to Satisfy Needs
Convince Customers that the
Budget
Generic Benefits are the Most
Appropriate Way to Spend
their Money
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Methods for Determining Competitors*
Existing categories: ex) IRI; SIC NAICS
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Managerial judgment
Customer-purchase-based measures
Customer-judgment-based measures
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Managerial Judgment of Competition
Product/Services
Markets Same Different
Same A B
Different
C D
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Customer-purchase-based measures
Brand Switching Data The Extent of
Substitutability among Brands
Cross-Elasticity of Demand:
Change in Brand B’s Sales/
Change in Brand A’s Price
Mainly Used for Nondurable Products
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Brand-Switching Matrix
Time t+1
A B C D E
A .6 .2 .2 0 0
Time t B .2 .3 .4 .1 0
C .2 .3 .5 0 0
D 0 .1 .1 .5 .3
E .1 0 0 .4 .5
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Customer-Judgment-Based Measures
Overall similarity (by Perceptual Mapping)*
Similarity of consideration sets
Product deletion (based on product
unavailability)
Substitution In Use:
List all the uses of a product
List other products that provides the same uses
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Perceptual Mapping
Means graphic description of customers’
perception about different brands/products.
You can use it to gain
Better understanding of market structure
Customer perceptions for a new product
concept
Direction for R&D efforts to satisfy customers
better
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Developing A Perceptual Map
Two Alternative ways
Attribute Rating method (AR)
Overall Similarity method (OS)
Attribute Rating Method
Data Cube (brands*attributes*respondents)
Statistical Analysis (Factor Analysis)
Find out two (or three) axes for the perceptual map
Attribute Analysis
Limitations
Suitable for B-to-B products
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Developing A Perceptual Map
Overall Similarity method (OS)
Suitable for consumer products and services
Ask consumers’ perception the extent of similarity
of pairs of items.
Similarity Data Analysis (Multidimensional Scaling)
You name the axes and infer the attributes
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Defining Competition with Perceptual Mapping
example: desserts
• Moist
• Needs refrigeration
As a formal dessert
• Bakery pie Custard mix
Bakery cake Pudding mix
• • Tapioca
Homemade cake • • • Homemade pie Local mix •
Takes a long • Layer cake mix pudding mix
time to prepare • • Cheese cake mix D-zer ta •
• Jell-O
Bundt cake mix ••• • Frozen pie
Chocolate torte mix • • Frozen cake • Canned pudding
Boston crème pie mix
“Light Style” cake mix • “Stir’n Frost cake mix
Coffee cake mix • • Individual pie
“Snackin’ Cake” mix •
• Quick bread mix
• Hostess cupcakes
Date bar mix •
Brownie mix •
Homemade cookies
Cookie mix •
• Oatmeal cookies
Bakery cookies • • • Pepperidge Farm cookies
Pillsbury cookie dough • • Between meal snack
Good for a coffee break •
In my school work lunch • • Easy to carry with me
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Enterprise Competition in Financial Services
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Two Key Things to Remember
I. How would you determine competition?
II. Choose the focal level of competition*
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Right Level of Competition for You
I. Your Firm’s Market Position
II. Time Horizon
III. Product Life Cycle and Technology Change
IV. Your Position in the Firm
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