Sustainable Competitive Advantage Product Differentiation Market Segmentation

INTRODUCE AND APPLY STRATEGIC CONCEPTS OF… Objectives INTRODUCE AND APPLY STRATEGIC CONCEPTS OF… Sustainable Competitive Advantage Product Differentiation Market Segmentation

"This is the market group we'll be targeting" Dave Carpenter Copyright 2002, Harvard Business Review

Sustainable Competitive Advantage OBJECTIVE Deliver Benefits at Lower Price - “Single Dimension Competition” or… Deliver Superior Benefits - Requires Capability to “Add Value”

Sustainable Competitive Advantage FORMULATION Expand Consumer Perceptions of Product to include Attributes that will have Enduring Value Acquisition Price (Amount paid to Get Something) Value Attributes (Amount paid to Have Something) TOTAL PRICE

Distinctive Competencies Competencies Necessary to Create Value-Adding Attributes Innovativeness Efficiency Quality Customer Responsiveness

Tactical Elements of Sustainable Competitive Advantage Four “Ps” of Marketing Mix Price: Quality/Price Relationship Place: Distribution Methodology Promotion: Customer Communication Product: Features and Benefits

Product Differentiation Set of Meaningful Differences… Designed to Distinguish a Firm’s Product or Service… From its Competitors Note: “Meaningful” equates with Long-Term Financial Value, Not an Unsustainable Short-term Windfall

Product Differentiation DIFFERENTIATION VARIABLES Form: Size, Shape or Physical Structure Features: Supplement Product’s Basic Function Quality: Level where Product’s Primary Characteristics Operate

IDENTIFY RELEVANT SEGMENT Market Segmentation IDENTIFY RELEVANT SEGMENT Mass Marketing: Mass Production, Distribution and Promotion of Single Product for All Buyers Segment Marketing: Large, Identifiable Group with Similar Buying Attitude and Habits, Purchasing Power and Preferences Niche Marketing: Small Market with Un-served (not under-served) Needs

IDENTIFY COMMERCIALLY VIABLE GROUP WITHIN MARKET SEGMENT WITH SIMILAR… Market Segmentation IDENTIFY COMMERCIALLY VIABLE GROUP WITHIN MARKET SEGMENT WITH SIMILAR… Tastes and Preferences Purchasing Power (Economics) Geographical Location, Age, Gender (Demographics) Purchasing Patterns and Habits (Sociological)

TOOLS: Perceptual Mapping VISUAL REPRESENTATION OF MARKET SEGMENT AND CUSTOMER PERCEPTIONS Identify Meaningful Product Attributes Compare on X- and Y-Axis Analyze Key Competitive Characteristics

Perceptual Map Crunch Chocolate Opportunity? KitKat Nestlé Crunch Hershey’s w/ Almonds Hershey’s Milk Chocolate

STRATEGIC DEVICE FOR IDENTIFYING AND ANALYZING: TOOLS: SWOT Analysis STRATEGIC DEVICE FOR IDENTIFYING AND ANALYZING: Strengths: Internal Capabilities to Expand Product Market Share Weaknesses: Vulnerabilities in Product Mix or Line Opportunities: External Market or Competitor Conditions Threats: External Macroeconomic or Industry Factors

TOOLS: SWOT Analysis INTERNAL EXTERNAL Strengths Weaknesses Opportunities Strategic Implications of Strengths and Weaknesses versus Opportunities and Threats Threats INTERNAL EXTERNAL