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CHAPTER

Defining the Competitive Set


Key Question for This Chapter: Who do we or will we compete against?

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2002 The McGraw-Hill Companies, Inc., All Rights Reserved.

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 (cont).


III. Marketing oriented: promotion & distribution - Media - Distribution IV. Resource-oriented Approach (Internal) - Raw materials - Employees - Financial resources III. Geographic: Becoming less relevant

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Levels of Competition
Beer Ice cream

Tea

Regular colas

Diet lemon limes

Wine

Diet-Rite cola Diet Pepsi


Product form competition: Diet colas Juices

Fast food
Fruit flavore d colas

Diet Coke

Bottled water

Lemon limes

Product category competition: Soft drinks

Video rentals

Baseball cards

Coffee

Generic competition: 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 Competition
Product form

Definition
Super-Premium

Competitors
Haagen-Dazs Starbuck/Godiva Ben & Jerrys Breyers Dreyers Private labels Frito Lay Nabisco Nestl Mrs. Fields Yoplait Many

Product category

Ice cream

Generic

Snacks Desserts Novelties Other supermarket, Convenience store products

Budget
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Example 3: PDA
Level of Competition
Product form

Definition
Full-featured PDAs

Competitors
Palm Pilot VII Handspring Compaq Aero Pocket PC makers Palm III Royal Casio PV-100 Toshiba Nokia Samsung Rolodex Day Timer Fax Machines Personal copiers Furniture (e.g. Steelcase)

Need Satisfied
Personal information management plus integrated communications PIM only

Product category

PIM (Personal Information Managers) Tablet PC/ Cell phones Paper-based solutions Business items costing $100-$1000

Generic

Other solutions to the above

Budget $100-$1,000

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Levels of Competition: Implications for Product Strategy


Competitive Level
Product Form Product Category

Product Management Task


Convince Customers that the Brand is Better than Others

Convince Customers that the Product Form is Best in the Category

Generic

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
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Budget

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Methods for Determining Competitors*


Existing

categories: ex) IRI; SIC NAICS

www.census.gov/epcd/www/naics.html
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 C

B D

Different

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Customer-purchase-based measures
Switching Data The Extent of Substitutability among Brands Cross-Elasticity of Demand: Change in Brand Bs Sales/ Change in Brand As Price
Brand Mainly

Used for Nondurable Products

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Brand-Switching Matrix
Time t+1 A A .6 .2 .2 0 .1 B .2 .3 .3 .1 0 C .2 .4 .5 .1 0 D 0 .1 0 .5 .4 E 0 0 0 .3 .5

Time t

B C D E

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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)


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
2002 The McGraw-Hill Companies, Inc., All Rights Reserved.

Attribute Rating Method

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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 Bakery cake Homemade cake Homemade pie Takes a long Layer cake mix time to prepare Cheese cake mix Bundt cake mix Frozen pie Chocolate torte mix Frozen cake Boston crme pie mix Stirn Frost cake mix Light Style cake mix
Coffee cake mix Snackin Cake mix Date bar mix Brownie mix Homemade cookies Cookie mix Bakery cookies Pillsbury cookie dough Individual pie

Pudding mix Local mix Jell-O D-zer ta

Custard mix Tapioca pudding mix

Canned pudding

Quick bread mix


Hostess cupcakes

Oatmeal cookies Pepperidge Farm cookies Between meal snack

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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 Firms Market Position

II. Time Horizon III. Product Life Cycle and Technology Change IV. Your Position in the Firm
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