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C H A P T E R

Defining the Competitive Set2

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 ApproachWho they are – competition for same budget When they use the productWhy 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

Diet lemon limes

Baseball cards

Fruit flavored colas

Coffee

DietCoke

DietPepsi

Diet-Rite cola

Bottled water

Lemon limes

Regularcolas

Beer

Juices

Wine

Fast food

Tea

Video rentals

Icecream

Product form competition: Diet colas

Product category competition: Soft drinks

Generic competition: Beverages

Budget competition: Food and entertainment

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Example 1: Energy Bar Competition

Odwalla Power Bar

Balance BarClif

Energy Bars

Snack/Health Bars

Healthy Snacks

Other Snacks

Nutrigrain Bars Slimfast Bars Granola Bars

FruitsNutsJuice

CrackersChipsCandy

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Example 2: Super-Premium Ice Cream

Level of Competition

Definition Competitors

Product form Super-Premium Haagen-DazsStarbuck/GodivaBen & Jerry’s

Product category Ice cream Breyer’sDreyer’sPrivate labels

Generic Snacks DessertsNovelties

Frito LayNabiscoNestléMrs. FieldsYoplait

Budget Other supermarket, Convenience store products

Many

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Example 3: PDA

Level of Competition

Definition Competitors Need Satisfied

Product form Full-featured PDAs Palm Pilot VIIHandspringCompaq AeroPocket PC makers

Personal information management plusintegrated communications

Product category PIM (Personal Information Managers)

Palm IIIRoyalCasio PV-100

PIM only

Generic Tablet PC/Cell phones

ToshibaNokiaSamsung

Other solutions to the above

Budget $100-$1,000

Paper-based solutionsBusiness items costing$100-$1000

RolodexDay TimerFax MachinesPersonal copiersFurniture (e.g. Steelcase)

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Levels of Competition: Implications for Product Strategy

Budget

Generic

Product Category

Product Form

Competitive Level

Convince Customers that the Brand is Better than Others

Convince Customers that the Product Form is Best in the

Category

Convince Customers that the Product Category is the Best

Way to Satisfy Needs

Convince Customers that the Generic Benefits are the Most

Appropriate Way to Spend their Money

Product Management Task

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Methods for Determining Competitors*

Existing categories: ex) IRI; SIC NAICSwww.census.gov/epcd/www/naics.html

Managerial judgmentCustomer-purchase-based measuresCustomer-judgment-based measures

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Managerial Judgment of Competition

Markets Same Different

Product/Services

Same

Different

A

C

B

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

B .2 .3 .4 .1 0

C .2 .3 .5 0 0

D 0 .1 .1 .5 .3

E .1 0 0 .4 .5

Time t

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Customer-Judgment-Based Measures

Overall similarity (by Perceptual Mapping)*Similarity of consideration setsProduct 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 gainBetter understanding of market structureCustomer perceptions for a new product

conceptDirection 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 Mappingexample: desserts

• Moist• Needs refrigeration

• Tapioca pudding mixLocal mix •

Pudding mix

Chocolate torte mix •

D-zer ta • • Jell-O

• Canned pudding

• Individual pie

• Hostess cupcakes

• Quick bread mix

Good for a coffee break •

As a formal dessert•

Homemade cake •Bakery cake

•

Homemade cookies

• Cheese cake mix

“Snackin’ Cake” mix •

• Frozen cake

• Layer cake mix

• “Stir’n Frost cake mix

Takes a long time to prepare •

Bundt cake mix •

Custard mix

Boston crème pie mix“Light Style” cake mix

Coffee cake mix •

Bakery cookies •Pillsbury cookie dough •

Cookie mix •

•

• Easy to carry with meIn my school work lunch •

• Between meal snack

• Pepperidge Farm cookies• Oatmeal cookies

• Frozen pie

• Homemade pie

Date bar mix •

Brownie mix •

••

Bakery pie •

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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