3.2 Competitive Advantages

Chapter 3: The Competitive

Market

Sustainable Competitive Advantage Methods by which a business holds onto

its customers, in spite of the competition

Four types of sustainable competitive advantage Developing a unique selling proposition Lowering production costs Servicing a niche market Creating customer loyalty

Developing a Unique Selling Proposition A unique selling proposition (USP) is

the one thing that a company’s product has that competing companies do not have and are not likely to develop

Does a company have a USP? They need to ask: “Why would my target

customer buy from me instead of from my competitor?”

Developing a Unique Selling Proposition

If the answer to the question is something that CAN be duplicated by the competitor, then the company does NOT have a USP “I advertise more” “I deliver” “I produce the product in green”

Developing a Unique Selling Proposition

If the answer to the question is something that CANNOT be duplicated by the competitor, then the company DOES have a USP

EXAMPLES: “This is a patented design” “I licensed the rights to the name and

image of that character “The supplier will only sell to me”

Lowering Production Cost

Using cost-efficient and high-technology manufacturing systems to reduce the costs associated with its products can create a sustainable competitive advantage

E.g. Business can reduce production costs by building a plant in a country that has: Lower resource costs Fewer taxes Lower cost of living

Servicing a Niche Market

A competitive advantage can be achieved if a marketer recognizes an opportunity to create a niche market and takes advantage of that opportunity

E.g. creating software packages for specific markets like billing software for dentists

Creating Customer Loyalty Consumer loyalty can also be referred to as

relationship marketing

The consumer develops a strong relationship with the product or retailer and will not consider another brand or store

E.g. buying Honda or Heinz ketchup

Loyalty will hold up unless if the favoured product or retailer makes a mistake

Non-Sustainable Competitive Advantages Competitive advantages that can be

used by competitors to shift sales in their direction Promotion Placement Quality Benefits of use Price Design features

Promotion A company can obtain a competitive

advantage through promotion if it can create top-of-mind awareness top-of-mind awareness means that the

consumer is most likely to think about one brand of a product before he/she thinks of another

This is a major goal of marketers and advertisers

E.G.- Tim Horton’s ROLL UP THE RIM

Your Turn…

Take a moment and write down as many advertising slogans as you can think of…

Which ones do you know…?

Think Different

                        

Apple Macintosh

When you care to send the very best

Hallmark

Which ones do you know…?

“Where’s the beef?”

                        

Wendy’s

http://www.spike.com/video/wendys-commercial/2423864

                     

Which ones do you know…?

Look, Ma, no cavities

                        

Crest

M’m! M’m! Good! Campbell’s

Soup

                                           

Which ones do you know…?

Snap! Crackle! Pop

                        

Kellogg’s Rice Krispies

                                                           

Which ones do you know…?

                        

Because I’m worth it! L’Oreal

                                                                                             

Placement The more placement a product has the

more competitive that product can be

If a product has exclusive distribution in a market, it has a very competitive edge

The big retail stores that specialize in a specific product category such as books (e.g. Chapters), hardware, or pet supplies are called category killers

Why?--

Quality A company can compete with other

products in its category by being the best of its type

A company must decide to offer either a product that is of high quality or of low quality—“you don’t want to be stuck in the middle”

Why? -

Quality

High Price,High Quality

Low Price,Low Quality

Benefits of Use The value of the product is not the

product itself, it is what the product will do for the customer

e.g. car – good mileage or prestige

A product that can do more or perform better than another product will have a competitive advantage

Price If a customer believes that one product

is equal to another then the cheaper product has a competitive advantage

Only focusing on price as a way of obtaining a competitive advantage will cause problems for that company

Why?-

Design Features

Design features and changes in design have to catch consumers’ interests and a design that a consumer prefers provides a product with a competitive advantage

E.g. Unique design of a car