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C H A P T E R

2. C H A P T E R . Defining the Competitive Set. Key Question for This Chapter: Who do we or will we compete against?  Set the boundary of our business. Major Topics for Ch. 2. Bases of Competition Levels of Competition* Methods for Determining Competitors**

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C H A P T E R

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  1. 2 C H A P T E R Defining the Competitive Set Key Question for This Chapter: Who do we or will we compete against?  Set the boundary of our business

  2. Major Topics for Ch. 2 • Bases of Competition • Levels of Competition* • Methods for Determining Competitors** • Right Level of Competition for the Project

  3. Bases of Competition • Product-oriented Approach Similar Physical Attributes Functional Similarity • Customer-oriented Approach Who they are – competition for same budget When they use the product Why they use the product - benefits sought

  4. Bases of Competition (con’t). • Marketing oriented: promotion & distribution - Media Channel - Distribution Channel IV. Resource-oriented Approach (Internal) - Raw materials - Employees - Financial resources • Geographic: Becoming less relevant

  5. Beer Ice cream Tea Regular colas Diet lemon limes Diet-Rite cola Wine Product form competition: Diet colas Diet Pepsi Diet Coke Juices Fast food Fruit flavored colas Product category competition: Soft drinks Video rentals Lemon limes Bottled water Generic competition: Beverages Coffee Baseball cards Budget competition: Food and entertainment Levels of Competition*

  6. 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

  7. Example 2: Super-Premium Ice Cream

  8. Example 3: PDA

  9. MP3 Phone Competition

  10. Levels of Competition:Implications for Product Strategy Competitive Level Product Management Task Product Form Convince Customers that the Brand is Better than Others Convince Customers that the Product Form is Best in the Category Product Category Generic Convince Customers that the Product Category is the Best Way to Satisfy Needs Budget Convince Customers that the Generic Benefits are the Most Appropriate Way to Spend their Money

  11. 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*

  12. Managerial Judgment of Competition Product/Services Markets Same Different A B Same C D Different

  13. 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

  14. Brand-Switching Matrix Time t+1 Time t

  15. 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

  16. 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

  17. 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

  18. 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

  19. Defining Competition with Perceptual Mappingexample: desserts • Moist • Needs refrigeration As a formal dessert • Custard mix Bakery pie • Bakery cake • Pudding mix • Tapioca pudding mix Homemadecake • • Homemade pie Local mix • • Layer cake mix Takes a long time to prepare • • Jell-O D-zer ta • • Cheese cake mix Bundt cake mix • • Frozen pie •• Chocolate torte mix • • Canned pudding • Frozen cake Boston crème pie mix “Light Style” cake mix • “Stir’n Frost cake mix • Individual pie Coffee cake mix • • Quick bread mix “Snackin’ Cake” mix • • Hostess cupcakes Date bar mix • Brownie mix • Homemade cookies Cookie mix • • Oatmeal cookies • • Pepperidge Farm cookies Bakery cookies • Pillsbury cookie dough • Good for a coffee break• • Between meal snack • Easy to carry with me In my school work lunch •

  20. Methods versus Competition Levels and Information Required

  21. Enterprise Competition in Financial Services

  22. Two Key Things to Remember • How would you determine competition? • Choose the focal level of competition*

  23. Right Levelof Competition for You • Your Firm’s Market Position • Time Horizon III. Product Life Cycle and Technology Change IV. Your Position in the Firm

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