3.2 Competitive Advantages Chapter 3: The Competitive Market

Sustainable Competitive Advantage Methods by which a business holds onto its customers, in spite of the competition Four types of sustainable competitive advantage Developing a unique selling proposition Lowering production costs Servicing a niche market Creating customer loyalty Page 89

Developing a Unique Selling Proposition A unique selling proposition (USP) is the one thing that a company’s product has that competing companies do not have and are not likely to develop Does a company have a USP? They need to ask: “Why would my target customer buy from me instead of from my competitor?”

Developing a Unique Selling Proposition If the answer to the question is something that CAN be duplicated by the competitor, then the company does NOT have a USP “I advertise more” “I deliver” “I produce the product in green” Page 89

Developing a Unique Selling Proposition If the answer to the question is something that CANNOT be duplicated by the competitor, then the company DOES have a USP EXAMPLES: “This is a patented design” “I licensed the rights to the name and image of that character “The supplier will only sell to me” Page 89

Lowering Production Cost Using cost-efficient and high-technology manufacturing systems to reduce the costs associated with its products can create a sustainable competitive advantage E.g. Business can reduce production costs by building a plant in a country that has: Lower resource costs Fewer taxes Lower cost of living Page 89 - 90

Servicing a Niche Market A competitive advantage can be achieved if a marketer recognizes an opportunity to create a niche market and takes advantage of that opportunity E.g. creating software packages for specific markets like billing software for dentists Page 90

Creating Customer Loyalty Consumer loyalty can also be referred to as relationship marketing The consumer develops a strong relationship with the product or retailer and will not consider another brand or store E.g. buying Honda or Heinz ketchup Loyalty will hold up unless if the favoured product or retailer makes a mistake Page 90 - 91

Non-Sustainable Competitive Advantages Competitive advantages that can be used by competitors to shift sales in their direction Promotion Placement Quality Benefits of use Price Design features Page 91

Promotion A company can obtain a competitive advantage through promotion if it can create top-of-mind awareness top-of-mind awareness means that the consumer is most likely to think about one brand of a product before he/she thinks of another This is a major goal of marketers and advertisers E.G.- Tim Horton’s ROLL UP THE RIM Page 91 - 92

Your Turn… Take a moment and write down as many advertising slogans as you can think of… NIKE – Just Do It Nestlé: "Good Food. Good Life" Pepsi: "It's the Cola" The Home Depot: "You Can Do It. We Can Help." Mazda: "Zoom Zoom" McDonald's: "I'm Lovin' It"

Which ones do you know…? Think Different Apple Macintosh                          When you care to send the very best Hallmark

Which ones do you know…? “Where’s the beef?” Wendy’s                                                Wendy’s http://www.spike.com/video/wendys-commercial/2423864

Which ones do you know…? Look, Ma, no cavities Crest M’m! M’m! Good!                                                                      M’m! M’m! Good! Campbell’s Soup

Which ones do you know…? Snap! Crackle! Pop Kellogg’s Rice Krispies                                                                                     

Which ones do you know…? Because I’m worth it!                                                                                                                        L’Oreal

Placement The more placement a product has the more competitive that product can be If a product has exclusive distribution in a market, it has a very competitive edge The big retail stores that specialize in a specific product category such as books (e.g. Chapters), hardware, or pet supplies are called category killers Why?-- Page 93 - 94

Quality A company can compete with other products in its category by being the best of its type A company must decide to offer either a product that is of high quality or of low quality—“you don’t want to be stuck in the middle” Why? - Page 94 - 95

Quality Low Price, Low Quality High Price, High Quality

Benefits of Use The value of the product is not the product itself, it is what the product will do for the customer e.g. car – good mileage or prestige A product that can do more or perform better than another product will have a competitive advantage Page 95 - 96

Price If a customer believes that one product is equal to another then the cheaper product has a competitive advantage Only focusing on price as a way of obtaining a competitive advantage will cause problems for that company Why?- Page 96

Design Features Design features and changes in design have to catch consumers’ interests and a design that a consumer prefers provides a product with a competitive advantage E.g. Unique design of a car Page 96 - 97