Chapters 8 & 9

1. Chapters 8 & 9 Differentiation, Positioning & Product Market Analysis

2. Exhibit 8.1Generic Competitive Strategies Note similarity to theCompetitive StrategyGrid in Exhibit 3.2 Competitive Advantage Competitive Scope Source: Adapted from Michael Porter, Competitive Advantage,New York: The Free Press, 1985, p. 12.

3. Markets (Customer Groups) M1 M2 M3 Products P1 P2 P3 Product Market Grid

4. Home Location Away Breakfast Meal Lunch Dinner Family Social Business Occasion Product Market Analysis:Quick Service Dining

5. What do we mean by positioning? • The act of designing the firm’s market offering so that it occupies a distinct and valued place as perceived by the target customer. • Key Components: • distinct and valued • physical and perceptual • differences between one’s product and its competitors.

6. Exhibit 8.3Comparison of Physical and Perceptual Positioning Analysis • Physical positioning • Technical orientation • Physical characteristics • Objective measures • Data readily available • Physical brand properties • Large number of dimensions • Represents impact of product specs and price • Direct R&D implications • Perceptual positioning • Consumer orientation • Perceptual attributes • Perceptual measures • Need for marketing research • Perceptual brand positions and positioning intensities • Limited number of dimensions • Represents impact of product specs and communication • R&D implications need to be interpreted

7. Latest Style Current Conservative Exhibit 8.5Product Positioning Map (Women’s Clothing Retailers in Washington, D.C.) Washington 1990 Women’s fashion market The Limited Neiman-Marcus Saks Bloomingdale’s Macy’s Nordstrom Hit or Miss Women’s-wear fashionability Dress Barn TJ Maxx Garfinkels Sassafras The Gap Casual Corner Loehmann’s L&T Marshalls Britches Hecht’s Kmart Woodward & Lothrop Sears JC Penney Talbots Women’s-wear value for the money Worst value Best value Source: Adapted from Douglas Tigert and Stephen Arnold, “Nordstrom: How Good Are They?” Babson College Retailing Research Reports, September 1990, as shown in Michael Levy and Barton A. Weitz, Retailing Management (Burr Ridge, IL: Richard D. Irwin, 1992), p. 205.

8. Latest Style Current Conservative Exhibit 8.7Perceptual Positioning Map (Women’s Clothing Retailers andSegments Based on Ideal Points) Washington 1990 Women’s fashion market The Limited Neiman-Marcus 3 2 Saks 4 Bloomingdale’s Macy’s Nordstrom Women’s-wear fashionability Hit or Miss Dress Barn TJ Maxx Garfinkels Sassafras The Gap Casual Corner Loehmann’s 1 L&T Marshalls Britches Hecht’s Kmart Woodward & Lothrop 5 Sears JC Penney Talbots Women’s-wear value for the money Worst value Best value Source: Adapted from Douglas Tigert and Stephen Arnold, “Nordstrom: How Good Are They?” Babson College Retailing Research Reports, September 1990.

9. Positioning Statement for Volvo in North America • For upscale American families, Volvo is the family automobile that offers maximum safety • Generic format for positioning statements: For (target market), (brand) is the (productcategory) that (benefit offered).

10. Value Proposition for Volvo in North America • Target market: Upscale American families • Benefits offered: Safety • Relative price: 20% premium to domestic family cars • Generic format for value propositions: • Target market • Benefits offered (and sometimes not offered) • Relative price

11. Exhibit 9.1Categories of New Products Defined According to Their Degree of Newness to the Company and Customers in the Target Market High 10% 20% New-to-the world products New product lines Additions to existing product lines Newness to the company 26% 26% Revisions/ improvements to existing products 11% 7% Repositionings Cost reductions Low Low High Newness to the market Source: New Products Management for the 1980s (New York: Booz, Allen & Hamilton, 1982).

12. Exhibit 9.4Potential Advantages of Pioneer and Follower Strategies • Follower • Ability to take advantage of pioneer’s positioning mistakes • Ability to take advantage of pioneer’s product mistakes • Ability to take advantage of pioneer’s marketing mistakes • Ability to take advantage of pioneer’s limited resources • Pioneer • Economies of scale and experience • High switching costs for early adopters • Pioneer defines the rules of the game • Possibility of positive network effects • Distribution advantage • Influence on consumer choice criteria and attitudes • Possibility of preempting scarce resources

13. Exhibit 9.5Marketing Strategy Elements Pursued by Successful Pioneers, Fast Followers, and Late Entrants These marketers... Successful pioneers Successful fast followers Successful late entrants • are characterized by one or more of these strategy elements: • Large entry scale • Broad product line • High product quality • Heavy promotional expenditures • Larger entry scale than the pioneer • Leapfrogging the pioneer with superior: product technology • product quality • customer service • Focus on peripheral target markets or niches

14. Advice for Would-Be Pioneers • First mover advantage is often trumped by followers who are better. • Best beats first. Concentrate on being best. • Best and first is the ideal. • Being a pioneer without the basis for sustainable competitive advantage is a trap!

15. New Product Development Key success criteria include: • Product fit with market need • Product fit with capabilities • Product or cost superiority • Cross-functional team approach • Clear vision of future market based on customer feedback • Continuous, quality-based process