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C H A P T E R

Defining the Competitive Set 2Key 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 ApproachSimilar Physical AttributesFunctional Similarity

II. Customer-oriented ApproachWho they are competition for same budget

When they use the productWhy 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

Dietlemonlimes

Baseballcards

Fruitflavore

d colas

Coffee

DietCoke

DietPepsi

Diet-Ritecola

Bottledwater Lemonlimes

Regularcolas

Beer

Juices

Wine

Fast food

Tea

Videorentals

Icecream

Product formcompetition:Diet colas

Productcategorycompetition:Soft drinks

Genericcompetition:Beverages

Budgetcompetition:Food andentertainment

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Example 1: Energy Bar Competition

Odwalla Power Bar

Balance Bar Clif

EnergyBars

Snack/HealthBars

Healthy Snacks

Other Snacks

Nutrigrain Bars Slimfast Bars Granola Bars

FruitsNutsJuice

CrackersChips

Candy

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Example 2: Super-Premium Ice Cream

Level of Competition

Definition Competitors

Product form Super-Premium Haagen-DazsStarbuck/GodivaBen & Jerrys

Product category Ice cream Breyers Dreyers Private labels

Generic Snacks

DessertsNovelties

Frito LayNabiscoNestlMrs. FieldsYoplait

Budget Other supermarket,Convenience store products

Many

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Example 3: PDA

Level of Competition

Definition Competitors Need Satisfied

Product form Full-featured PDAs Palm Pilot VIIHandspringCompaq AeroPocket PC makers

Personal informationmanagement plusintegratedcommunications

Product category PIM (PersonalInformation Managers)

Palm IIIRoyalCasio PV-100

PIM only

Generic Tablet PC/ Cell phones

ToshibaNokiaSamsung

Other solutions to theabove

Budget$100-$1,000

Paper-based solutionsBusiness items costing$100-$1000

RolodexDay TimerFax MachinesPersonal copiersFurniture (e.g.Steelcase)

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Levels of Competition:Implications for Product Strategy

Budget

Generic

ProductCategory

ProductForm

Competitive LevelConvince Customers that theBrand is Better than Others

Convince Customers that theProduct Form is Best in the

Category

Convince Customers that theProduct Category is the Best

Way to Satisfy Needs

Convince Customers that theGeneric Benefits are the

Most Appropriate Way toSpend their Money

Product Management Task

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Methods for Determining Competitors*

Existing categories: ex) IRI; SIC NAICSwww.census.gov/epcd/www/naics.html

Managerial judgmentCustomer-purchase-based measuresCustomer-judgment-based measures

http://www.census.gov/epcd/www/naics.htmlhttp://www.census.gov/epcd/www/naics.html

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Managerial Judgment of Competition

Markets Same DifferentProduct/Services

Same

Different

A

C

B

D

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Customer-purchase-based measures

Brand Switching Data The Extent of Substitutability among BrandsCross-Elasticity of Demand:

Change in Brand Bs Sales/Change in Brand As Price

Mainly Used for Nondurable Products

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Brand-Switching Matrix

Time t+1A 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

Time t

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Customer-Judgment-Based Measures

Overall similarity (by Perceptual Mapping)*Similarity of consideration sets

Product deletion (based on productunavailability)Substitution In Use:

List all the uses of a productList other products that provides the same uses

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Perceptual Mapping

Means graphic description of customersperception about different brands/products.You can use it to gain

Better understanding of market structureCustomer perceptions for a new product

conceptDirection for R&D efforts to satisfy customersbetter

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Developing A Perceptual Map

Two Alternative waysAttribute Rating method (AR)Overall Similarity method (OS)

Attribute Rating MethodData Cube (brands*attributes*respondents)Statistical Analysis (Factor Analysis)Find out two (or three) axes for the perceptual mapAttribute AnalysisLimitations

Suitable for B-to-B products

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Developing A Perceptual Map

Overall Similarity method (OS)Suitable for consumer products and servicesAsk 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 Mappingexample: desserts

MoistNeeds refrigeration

Tapiocapudding mixLocal mix

Pudding mix

Chocolate torte mix

D-zer ta Jell-O

Canned pudding

Individual pie

Hostess cupcakes

Quick bread mix

Good for a coffee break

As a formal dessert

Homemade cake Bakery cake

Homemade cookies

Cheese cake mix

Snackin Cake mix

Frozen cake

Layer cake mix

Stirn Frost cake mix

Takes a longtime to prepare

Bundt cake mix

Custard mix

Boston crme pie mixLight Style cake mix

Coffee cake mix

Bakery cookies Pillsbury cookie dough

Cookie mix

Easy to carry with me In my school work lunch

Between meal snack

Pepperidge Farm cookies Oatmeal cookies

Frozen pie

Homemade pie

Date bar mix Brownie mix

Bakery pie

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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