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
III. Geographic: Becoming less relevant
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Levels of Competition
Beer
Ice
cream
Tea
Regular
colas
Diet
lemon
limes
Diet-Rite
cola
Wine
Diet
Pepsi
Diet
Coke
Fast food
Bottled
water
Baseball
cards
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Fruit
flavore
d colas
Lemon
limes
Coffee
Product form
competition:
Diet colas
Juices
Product
category
competition:
Soft drinks
Video
rentals
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
Definition
Product form
Super-Premium
Product category
Ice cream
Generic
Snacks
Desserts
Novelties
Budget
Other supermarket,
Convenience store products
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Competitors
Haagen-Dazs
Starbuck/Godiva
Ben & Jerry’s
Breyer’s
Dreyer’s
Private labels
Frito Lay
Nabisco
Nestlé
Mrs. Fields
Yoplait
Many
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Example 3: PDA
Level of
Competition
Definition
Competitors
Product form
Full-featured PDAs
Product category
PIM (Personal
Information Managers)
Generic
Tablet PC/
Cell phones
Budget
$100-$1,000
Paper-based solutions
Business items costing
$100-$1000
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Palm Pilot VII
Handspring
Compaq Aero
Pocket PC makers
Palm III
Royal
Casio PV-100
Toshiba
Nokia
Samsung
Need Satisfied
Personal information
management plus
integrated
communications
PIM only
Other solutions to the
above
Rolodex
Day Timer
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
Form
Convince Customers that the
Brand is Better than Others
Product
Category
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
Budget
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Convince Customers that the
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
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
B
Different
C
D
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Customer-purchase-based measures
Switching Data  The Extent of
Substitutability among Brands
 Cross-Elasticity of Demand:

Change in Brand B’s Sales/
Change in Brand A’s Price
 Brand
 Mainly
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Used for Nondurable Products
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Brand-Switching Matrix
A
Time t
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Time t+1
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
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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
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 crème pie mix
•
“
Stir’n
Frost
cake mix
“Light Style” cake mix
Pudding mix
Local mix •
•Jell-O
D-zer ta •
Custard mix
•Tapioca
pudding mix
•Canned pudding
•Individual pie
•Quick bread mix
Coffee cake mix •
“Snackin’ Cake” mix •
•Hostess cupcakes
Date bar mix •
Brownie mix •
Homemade cookies
Cookie mix •
•
Good for a coffee break •
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Bakery cookies •
Pillsbury cookie dough •
• Oatmeal cookies
•Pepperidge Farm cookies
• Between meal snack
•Easy to carry with me
In my school work lunch •
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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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