Chapters 8 & 9 Differentiation, Positioning & Product Market Analysis

Exhibit 8.1 Generic Competitive Strategies Lower CostDifferentiation Broad Target Cost Leadership Strategy Differentiation Strategy Narrow Target Focus Strategy Focus Strategy (Differentiation Based) Competitive Advantage Competitive Scope Source: Adapted from Michael Porter, Competitive Advantage,New York: The Free Press, 1985, p. 12. Note similarity to the Competitive Strategy Grid in Exhibit 3.2

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

Product Market Analysis: Quick Service Dining Location Meal Occasion Home Away Breakfast Lunch Dinner Family SocialBusiness

What do we mean by positioning? The act of designing the firms 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 ones product and its competitors.

Exhibit 8.3 Comparison 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

Exhibit 8.5 Product Positioning Map ( Womens Clothing Retailers in Washington, D.C.) Washington 1990 Womens fashion market Womens-wear value for the money Worst valueBest value Womens-wear fashionability Neiman-Marcus Saks Bloomingdales Hit or Miss The Limited Macys Nordstrom Garfinkels Casual Corner Kmart Britches Sears Dress Barn The Gap Loehmanns TJ Maxx Sassafras Talbots Woodward & Lothrop JC Penney Hechts L&TMarshalls 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 Latest Style Current Conservative

Exhibit 8.7 Perceptual Positioning Map ( Womens Clothing Retailers and Segments Based on Ideal Points) Washington 1990 Womens fashion market Womens-wear value for the money Worst valueBest value Neiman-Marcus 2 Saks Bloomingdales Hit or Miss The Limited Macys Nordstrom Garfinkels Casual Corner Kmart Britches Sears Dress Barn The Gap Loehmanns TJ Maxx Sassafras Talbots Woodward & Lothrop JC Penney Hechts L&TMarshalls Source: Adapted from Douglas Tigert and Stephen Arnold, Nordstrom: How Good Are They? Babson College Retailing Research Reports, September Womens-wear fashionability Latest Style Current Conservative

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 (product category) that (benefit offered).

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

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

Exhibit 9.4 Potential Advantages of Pioneer and Follower Strategies 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 Follower Ability to take advantage of pioneers positioning mistakes Ability to take advantage of pioneers product mistakes Ability to take advantage of pioneers marketing mistakes Ability to take advantage of pioneers limited resources

Exhibit 9.5 Marketing 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

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!

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