To be a long-term market leader is the goal of any marketer. Today’s challenging marketing circumstances, however, often dictate that companies reformulate their marketing strategies and offerings several times. Economic conditions change, competitors launch new assaults, and buyer interest and requirements evolve. Different market positions can suggest different market strategies.
Former University of Maryland football player Kevin Plank was dissatisfied in his playing days with cotton T-shirts that retained water and became heavy during practice. So with $500 and several yards of coat lining, he worked with a local tailor to create seven prototypes of snug-fitting T-shirts that absorbed perspiration and kept athletes dry. Under Armour was born and quickly became a favorite at high schools, colleges, and universities. Intense, in-your-face advertising featuring NFL player “Big E” Eric Ogbogu grunting and screaming, “We must protect this house,” sent a loud message to target teens and young adult males that a new brand of athletic clothing and gear had arrived. With a focus on performance and authenticity, Under Armour later introduced football cleats to cover players literally from head to foot. The introduction of a full line of running shoes in 2009, however, put them squarely into competition with formidable opponents Nike and adidas. The launch also reflected an attempt to move away some from team sports to attract individual consumers and, in particular, reach a new demographic—women. An ad campaign themed “Athletes Run” introduced the technologically advanced, high-end Apparition and Revenant running shoes showing many accomplished athletes who were not well-known as runners running in the shoes. The next new product initiative under consideration—basketball shoes—would capitalize on one of their athletic endorsers, up-and-coming NBA player Brandon Jennings, but would also represent an even more full-on, direct assault of some of Nike’s and adidas’s market turf.
This chapter examines the role competition plays and how marketers can best manage their brands depending on their market position and stage of the product life cycle. Competition grows more intense every year—from global competitors eager to grow sales in new markets, from online competitors seeking costefficient ways to expand distribution, from private-label and store brands providing low-price alternatives, and from brand extensions by mega-brands moving into new categories. For these reasons and more, product and brand fortunes change over time, and marketers must respond accordingly.
Competitive Strategies for Market Leaders
Suppose a market
is occupied by the firms shown in Hypothetical Market Structure. Forty percent
is in the hands of a market leader; another 30 percent belongs to a market
challenger; and 20 percent is claimed by a market follower willing
to maintain its share and not rock the boat. Market nichers, serving
small segments larger firms don’t reach, hold the remaining 10 percent.
Hypothetical Market Structure
A market leader has the largest market share and usually leads in price changes, new-product introductions, distribution coverage, and promotional intensity. Some historical market leaders are Microsoft (computer software), Gatorade (sports drinks), Best Buy (retail electronics),McDonald’s (fast food), Blue Cross Blue Shield (health insurance), and Visa (credit cards).
Xerox Xerox has had to become more than just a copier company. Now the blue-chip icon with the name that became a verb sports the broadest array of imaging products in the world and dominates the market for high-end printing systems. And it’s making a huge product line transition as it moves from the old light lens technology to digital systems. Xerox is preparing for a world in which most pages are printed in color (which, not incidentally, generates five times the revenue of black-and-white). Besides revamping its machines, Xerox is beefing up sales by providing annuity-like products and services that are ordered again and again: document management, ink, and toners. It has even introduced the managed print-services business to help companies actually eliminate desktop printers and let employees share multifunction devices that copy, print, and fax. Once slow to respond to the emergence of Canon and the small-copier market, Xerox is doing everything it can to stay ahead of the game.
In many
industries, a discount competitor has undercut the leader’s prices.“Marketing
Insight : When Your Competitor Delivers More for Less” describes how leaders
can respond to an aggressive competitive price discounter.
When Your Competitor Delivers More for Less
Companies offering the powerful combination of low prices and high quality are capturing the hearts and wallets of consumers all over the world. In the United States, more than half the population now shops weekly at mass merchants such as Walmart and Target. In the United Kingdom, premium retailers such as Boots and Sainsbury are scrambling to meet intensifying price—and quality—competition from ASDA and Tesco.
These and similar value players, such as Aldi, Dell, E*TRADE Financial, JetBlue Airways, Ryanair, and Southwest Airlines, are transforming the way consumers of nearly every age and income level purchase groceries, apparel, airline tickets, financial services, and computers. Traditional players are right to feel threatened. Upstart firms often rely on serving one or a few consumer segments, providing better delivery or just one additional benefit, and matching low prices with highly efficient operations to keep costs down. They have changed consumer expectations about the trade-off between quality and price.
To compete, mainstream
companies need to infuse their timeless strategies like cost control and
product differentiation with greater intensity and focus, and then execute them
flawlessly.
Differentiation, for example, becomes less about the abstract goal of rising above competitive clutter and more about identifying openings left by the value players’ business models. Effective pricing means waging a transaction-by-transaction perception battle for consumers predisposed to believe value-oriented competitors are always cheaper
Competitive outcomes will be determined, as always, on the ground—in product aisles, merchandising displays, reconfigured processes, and pricing stickers. Traditional players can’t afford to drop a stitch. The new competitive environment places a new premium on—and adds new twists to—the old imperatives of differentiation and execution
Differentiation
Marketers need
to protect areas where their business models give other companies room to
maneuver. Instead of trying to compete with Walmart and other value retailers
on price, for example, Walgreens emphasizes convenience. It has expanded
rapidly to make its stores ubiquitous, mostly on corners with easy parking, and
overhauled store layouts to speed consumers in and out, placing key categories
such as convenience foods and one-hour photo services near the front. To simplify
prescription orders, the company has installed a telephone and online ordering
system and drive-through windows at most freestanding stores. These steps
helped it increase its revenue from $15 billion in 1998 to over $59 billion in
2008, making it the largest U.S. drugstore chain.
Execution
Kmart’s disastrous experience trying to compete head-on with Walmart on price highlights the difficulty of challenging value leaders on their own terms. To compete effectively, firms may instead need to downplay or even abandon some market segments. To compete with Ryanair and easyJet, British Airways has put more emphasis on its long-haul routes, where value-based players are not active, and less on the short-haul routes where they thrive
Major airlines have also introduced their own low-cost carriers. But Continental’s Lite, KLM’s Buzz, SAS’s Snowflake, and United’s Shuttle have all been unsuccessful. One school of thought is that companies should set up low-cost operations only if: (1) their existing businesses will become more competitive as a result and (2) the new business will derive some advantages it would not have gained if independent. Low-cost operations set up by HSBC, ING, Merrill Lynch, and Royal Bank of Scotland—First Direct, ING Direct, ML Direct, and Direct Line Insurance, respectively—succeed in part thanks to synergies between the old and new lines of business. The low-cost operation must be designed and launched as a moneymaker in its own right, not just as a defensive play.
Sources : Adapted from Nirmalya Kumar, “Strategies to Fight Low-Cost Rivals,” Harvard Business Review, December 2006, pp. 104–12; Robert J. Frank, Jeffrey P. George, and Laxman Narasimhan, “When Your Competitor Delivers More for Less,” McKinsey Quarterly (Winter 2004): 48–59. See also Jan-Benedict E. M. Steenkamp and Nirmalya Kumar, “Don’t Be Undersold,” Harvard Business Review, December 2009.
