The Competitive MarketBMI3CC

4 Ps and 2 Cs of Marketing

■The study of marketing can be narrowed down to the 4 Ps and 2 Cs■4 Ps:

■Product■Price■Placement■Promotion

■2 Cs:■Customer/Consumer■Competition

■We spent a few days studying consumers, now we will learn about competition

The Benefits of Competition

■BRAINSTORM –■ Why is competition good for

consumers?

■ Why is competition good for companies?

The Benefits of Competition

■ Increased Selection■Alternative Choices – i.e. bad

service■Better Prices■ Increased Productivity■Product Improvements■Technology Advancements

Competition in a Free Market

■ In a free market, businesses can make a profit. Profit drives business; the more successful a business becomes, the more profit the owner keeps. (private property)

■Competition is allowed and defines the structure of market

Four major market structures

■ Perfect competition - large # of small companies; nobody controls market

■ Agricultural Market, eBay■ Monopolistic Competition – large # of

companies; each of them has an opportunity for market control

■ Most products e.g. detergent, fast food■ Oligopoly - small # of large companies, each

with a substantial amount of market control■ Banking Industry, Apple, Microsoft, Android

■ Monopoly – a single company has complete market control

■ Hydro, LCBO

Types of Competition

■ Direct competition■ Products that are similar■ Consumers choose among products in the

same category■ Indirect competition

■ Every business is in competition with every other business for consumers’ discretionary income.

Example:

INDIRECT COMPETITION DIRECT COMPETITION

In-Class Task – 10 minutes

■Pg. 88 3 b & c

Competitive Advantage

■Businesses look for advantages over their competition. A true advantage is one that is sustainable over the long term.

■Sustainable competitive advantages: methods by which a business holds on to its customers, in spite of the competition (ideas?)

Under the influence

■ “Tales of customer service”■ Read the article■ Answer the following questions:1. List three extraordinary examples of customer

service.2. What was the point of Nancy writing the letters?

What did the results show?3. How does a restaurant that is rated 10th best food,

and worse for decore, end up rated 3rd best restaurant in Manhatten?

4. What happened when a Chevy dealership matched the Disney model of customer service?

5. Summarize this article in 5 or fewer words.

Sustainable competitive advantages

■ Create a unique selling proposition (USP) – patented design, licensed products

■ Lowering production costs: cost-efficient, high technology manufacturing systems

■ Servicing a niche market – keep competitors out of that market

■ Create customer loyalty – relationship marketing

Non-sustainable competitive advantages

■ Non-SP used by competitors to shift sales in their direction■ Promotion: “top of mind”■ Placement: more placement=more

competitive (Chapters – category killer)■ Quality■ Benefits of use: do more and better than

other products■ Price: all features being equal…■ Design features: catch consumers’ interest –

product design

Activity!

Before entering a market, marketers must study the competition. One way of doing so is by preparing a competitive analysis of the sustainable and non-sustainable advantages that the major competitors have. In this activity, you will develop a comparative analysis for a marketer in the video game market.

Activity Time – try it for yourself!

Product’s design features

Price

Benefits of Use

Quality

Placement

Promotion

Non-sustainable

Customer loyalty

Cost Advantage

Niche

Unique Selling Position

Sustainable

Microsoft’s Xbox OneSony Play Station 4Competitive Advantages

No. Video system delivers the most realistic games.

No. 128 bit, 300 Mhz processor.Product's design features

No. Introductory price was much higher.Yes. U.S. $299.99.Price

Yes. 67 games now available. Many games are educational in nature.

Yes. Games for Play Station 1 can be used as well as a wide selection of new games for this system. Doubles as a DVD and CD player.

Benefits of Use

No. Both products have equally high quality.No. Both products have equally high quality.  Quality

Yes. In major stores and online.Yes. In stores and online at the Sony Store.Placement

Yes. Introduced and well promoted by Bill Gates.

Yes. Sony promoted its new product in time for Christmas gift giving.

Promotion

   Non-sustainable

No. This is Microsoft's first venture into this market. 

Yes. Sony Play Station is better known. Consumers are familiar with it. Many have used Sony Play Station 1 for years. 

Customer loyalty

No. All manufacturers of video game systems have access to inexpensive electronic components produced in countries with cheaper labour costs. 

No. All manufacturers of video game systems have access to inexpensive electronic components produced in countries with cheaper labour costs.

Cost Advantage

No. Video game systems are very popular.No. Video game systems are very popular.Niche

Yes. Ethernet port for rich, fast-action online gaming via a broadband connection.

Yes. System doubles as a CD and DVD player.  Unique Selling Position

  Sustainable

Microsoft's XboxSony Play Station 2Competitive Advantages

Service Competition

■ Some Businesses offer services: Fed Ex, Moving companies)

■ Others offer Value – Added Services:support the sale of a product or other service.

■ Both service businesses and businesses that offer value-added services market intangibles. (hair salons, dentists, personal trainers)

Service CompetitionService companies are in competition with

other companies that perform the same service. e.g., UPS vs. FedEx

1. Convenience• Internet shopping, ease of use

2. Degree of service• e.g., Barber vs. Hair Salon

3. Selection4. Reputation 5. Price

Convenience

■ Making some activity easier or more comfortable. Some services actually sell convenience.

Degree of Service

■ offers more services (full service salon/spa) or fewer services (West Jet, Ikea)

Selection

■Offering a greater selection of services■ Wide – a store carries a wide array of

different brands of types of merchandise or it can be

■ Deep – a store carries a large quantity of one specific product or type of product.

■ See page 103

Reputation

■ Important for a service business to maintain a good reputation because it does not have a tangible product to show the customer (word of mouth, professional reviews)

Price

■ If two services are similar, the business with the lower price has the competitive edge.

■ However, in some cases, consumers may question services with prices that seem ‘too low’.

■ Price depend on supply & demand

Product/Service Mix

■Retail & wholesale businesses are part of the service sector, providing a service to both the consumer and to the manufacturer…

Measuring Results

■ We compare within certain market segments to understand how a company performs vs. the competitive set. (Direct Competition)

■ How it is Measured:■ Market Share – what % of the category

or sector sales is a certain brand■ Example:

BRAND MARKET SHARE

Tropicana 58%

Private Label 17%

Minute Maid 7%

All Other 18%

Ready to Drink, Chilled

Fruit Juice Market

Example:

■ 59% market share■ Market leader –

how to sustain position over compeititors?

■ 18% market share■ Market follower –

how to increase market share from leader?

Competing within Sectors

■How can a company improve MARKET SHARE?

■A company can increase market share in one of two ways: ■ increase the size of the overall market

■ E.g. Drink more juice■ take sales away from its competitors.

■ Other promotion effort■ School Cafeteria, etc.

International Competition

■What do you think the impact has been of the internet with international competition?

■Multinational Corporations■ Does business in more than one

country■ Some large MNCs have budgets

greater than an entire country’s wealth!

■ Trend of “micro-multinationals” = small businesses enabled by technology

International Competition

DOMESTIC■ Canadian products■ Domestic

production or international production

INTERNATIONAL■ International-based

products/companies

■ Produced outside of North America

May want to expand internationallyfor future growth

Factors to consider with International Competition

Factors to consider with International Competition

■ Regulations■ Promotion restrictions / local laws

■ Research■ Consumer preferences / consumer needs

■ Distribution■ How will it be sold? Local partners?

■ Pricing■ Covering expenses, plus tariffs

■ Design■ Legal standards + local taste

Competing in International Markets

■Businesses use the same methods to compete in international markets that they use in domestic markets: promotion, placement, quality, benefits of use, price & design

■Business must tailor its competitive efforts to the foreign market customs and preferences.

Culture

■ It is important to consider factors such as climate and religious beliefs when considering entering a foreign market.

■ For example, there is no market for Canadian pork in Israel, as Jewish culture forbids eating this product.

The name Coca-Cola in China was first rendered as Ke-ke-ken-la. Unfortunately, the Coke company did not discover until after thousands of signs had been printed that the phrase means "bite the wax tadpole" or "female horse stuffed with wax" depending on the dialect. Coke then researched 40,000 Chinese characters and found a close phonetic equivalent, "ko-kou-ko-le," which can be loosely translated as "happiness in the mouth."

VolkswagenNamed the sedan version of Golf the Jetta. However, the letter "J" doesn't exist in the Italian alphabet, so Jetta is pronounced "Ietta", which means Misfortune...

IKEA

Sells this workbench as the FARTFULL.

Swedish is a Germanic language, and "Fährt" is German for travel, so "fartfull" is being used here to suggest mobility. Swedish has several words for fart, but one of them is "Fjärt", which strikes as close enough that their marketing department knew what it was doing. If even bad press is good public relations, then this is a case of allowing an ill wind to blow some good.

Pepsi

In Taiwan, the translation of the Pepsi slogan "Come alive with the Pepsi Generation" came out as "Pepsi will bring your ancestors back from the dead."

■ Promotion is challenging in international markets. In many cases, a Canadian promotion may not translate well in other countries

■ Distribution of products in other countries can also be difficult. Canadian firms may set up their own offices in other countries, or they may enter into joint ventures.

Joint Venture

■ A Canadian firm and a foreign business with similar goals combine resources (money, facilities, distribution networks) to make or sell a specific product in another country

■Tariffs are taxes placed on goods being imported into a country in order to protect the local industries from too much foreign competition.

■Marketers must also be able to calculate the landed cost of the product which takes into account the shipping costs and the currency exchange as well as tariff rates.