As a Competitive Advantage (CA) or Strength declines in competitiveness, so too does the company’s ability to shape customer expectations. It is instead replaced with the greater need for the company to adapt to the target customer’s changing needs.
Nature shows how to best adapt and three key rules are:
1. Ecological systems are continuously sub-dividing.
Therefore marketing researches and targets newly formed segments or smaller customer segment or product variation niches.
2. Rivals that compete in the same way for the same resource cannot co-exist for long (Gause’s Competitive Exclusion Principle).
Therefore marketing differentiates from rivals when competing for the same target segment of customers.
3. Survival of the best fitting to an environment comes about through trying multiple ways of fitting, selecting whichever proves most successful and then amplifying it (Darwin’s Natural Selection through Evolution).
Therefore diverse marketing mix configurations are tested for fit with the market, select the most successful and then amplify.
Diversity- Select- Amplify.
This latter notion is briefly covered, as the marketing mix (product, price, promotion, place, process and people) represents the final adapting of the company’s product to best fit within the consumer’s life.
1. Diversity of marketing mix configurations.
For each target segment there could be numerous marketing mix permutations:
Strategy: Integration, AIDA, push or pull, inbound or outbound, below or above the line, media reach and frequency and timing.
Twitter/ LinkedIn/ Youtube account, billboard, online advertising, field sales, postal mail, magazine adverts, online content, white paper, mobile advertising, street art, mobile or desktop app, seminar, catalogue, sponsorship, PR, competitions, community participating, word of mouth, product placement, leaflets, radio, corporate gifts, email, SMS text, website, affiliates, partner sales, fax, local search marketing, exhibitions, pay per click, SEO, blog, carrier bag, point of sale, telesales, TV advert, Amazon/ eBay store, endorsement, product label.
Distribution channel (place):
Strategy: multi-channel or single, reach density, cost, distributor value contribution, customer service, supply logistics.
Channels: direct, salesforce, wholesaler, retailer, peer-to-peer, own retail, agent/ broker, white label.
Strategy: skimming, penetration, loss leader/ fighter brand, value-based.
Tactics: discount rates, promotions, vouchers, payment extensions, price matching/ beating, credit, lease hire, free samples, equity partner, pay-for-performance, trade-ins.
Strategy: portfolio, NPD pipeline, market adoption, life cycle, intellectual property rights.
Tactics: packaging, features, quality, name, no-frills, accessories, upgrades, compatibilities, size variations, bespoke.
Proposition’s end-to-end touchpoints, CRM, set-up service, nil service, arm’s length, aftersales, SLAs, warranties, channel support.
By considering many mix configurations from the above, a company has a higher probability likelihood of finding the marketing mix that best fits the target’s needs.
2. Select the best fitting mixes.
To find the optimal marketing mix for each target, a few mix configurations are selected and tested. In choosing the configurations, the ones most likely to succeed will fit both the target and also fit the CA and differentiation:
For as Philip Kotler commented “once you have the target and positioning [differentiation] decided, everything else [regarding mix] falls into place” (Clancy, 2008).
Therefore a few mix configurations of high likelihood to succeed are tested and those proven to be effective are selected and further amplified by scaling up the activity.
The mix can be better understood as a sequence, starting with core product, its augmented delivery (marcomms and distribution) and finally price:
• The product and service as the company’s best expression of its understanding of the target customer’s needs and desires,
• Marcomms and distribution channels selected to both widen perceived and actual value and lower company cost, as well as open up any purchasing process bottlenecks or reach bottlenecks, to receive all the sales that are realisable,
• For this full product+communication+channel proposition, price can then be set based upon:
o CA objective: setting a lower, penetration price in order to raise sales volume to develop a CA. Later setting a higher, skimming price in order to harvest profits from a strong CA, and
o The segment’s price elasticity of demand’s sensitivity to price increases or reductions that affect sales volume (based on general price sensitivity and convenience at the point of purchase).
3. Amplify the optimal mix.
Having found a marketing mix configuration that is effective, resources are poured on to grow the success. The decided marketing mix is amplified in two directions:
– Within that individual target segment, and
– Across multiple segments served by the company.
The purpose of distinguishing how mix elements are either within a target segment or across multiple segments is to strike the best balance between:
– Costly adapting to each individual target segment to heighten customer utility, and
– Lowering company cost in delivering utility by applying the same mix element across multiple segments.
Marketing mix elements as a source of Competitive Advantage (CA).
It is those mix elements that can be shared across the company’s target segments that have the potential to be CA sources.
The reason is because it will be an investment into a mix element that raises customer value across segments that the company likely dominates volume market share of over rivals (due to customers valuing the ebbing CA or strength) and therefore it is an investment that rivals are less able to financially justify imitating.
These are examples of marketing mix elements that can be CA sources:
Scale economies (see Sources of Advantage for a description of each CA type):
– Increase marcomms spend as a fixed cost spread over a greater share of the target market.
– General customising of a mix to a target as a fixed cost that is spread over more customers in that target market, for a lower per customer cost than rivals could achieve.
– Market Research as a fixed cost spread across a bigger customer base than smaller rivals.
– Comprehensive online ecommerce site or offline catalogue available at a point of purchase, both made viable by having a wide product range to a broader market that better utilises each asset (catalogue or website) (also a Toll distribution CA).
– Increase the service options or the product range to gain more sales volume and so better utilise the distribution branch network.
– Offer a customer service delivered by the product technical team, to better utilise the department and so enable its further growth (and product tech. gain customer feedback for innovative ideas, therefore a learning curve CA too).
– Employ specialist niche marketers in areas of high value across the segments served: new product developer, database marketer, digital manager, PR, ‘big data’ analyst, SEO executive, media manager.
(All marketing job specialisms can represent a CA source for a company as part of Learning curve CA type).
Scale this up further into a separate team: online communications team, product development team etc.
– The sales team to elicit customer feedback and record it, for marketing and the company to learn from a larger client base over rivals.
– Develop systemised procedures for streamlining tasks which marketers repeatedly perform (e.g. weekly performance dashboard to monitor metrics).
– Partner with an MR agency to better understand the needs within each segment of the market during a period of change.
– Alter the product proposition to make it easier for subscribers in the network to both join up and share the high value information that each other wants.
Toll distribution access:
– Develop a direct marketing competency to serve the existing customer base.
– Fill up a distribution channel with increased product options, such that the distributor has no need for holding rivals products.
– Develop a capability to analyse Big Data, to better engage with customers and gain access to customer information that rivals struggle to have any insight into.
– Heighten switching costs by product bundling or encourage habitual purchasing (smaller units more conveniently located), encourage the learning of a process for customers to gain more value (e.g. develop a mobile phone app).
– Create a key accounts team to build relations and value chain integration to heighten retention of 5% of customers bringing 95% of revenue.
If a company can find a marketing mix element that would increase customer value across the majority of its customer segments served, then that mix element is worthy of significant investment.
The reason is because it is unlikely to be duplicated by rivals as they would likely lack the customer volume necessary to financially justify matching the level of investment into the mix element, making that element a source of competitive advantage.
These marketing CA sources bring us back to the potential to re-start a CA in a new direction.
Re-developing a CA.
The start of a Broad or Niche Competitive Advantage describes how a CA could be developed from “top down” internal planning onto the market.
A path to developing a CA from the market upwards (“bottom-up”) might involve:
1. In a segment of the market that the company has a strength in serving and that might offer CA sources to #1 volume leader or alert #2 or #3 volume challenger,
2. Gain an informational advantage insight into the needs of that chosen segment from market research, that can be converted into marketing’s change to the product proposition, and
3. Invest into potential CA sources– such as one from the list above under marketing mix- to raise customer value which rivals cannot imitate.
4. As sales increase, coordinate further investment into subsequent CA sources recognised as being available to a leader in that chosen segment of customer needs, to repeat the reinforcing the loop to dominate share of that segment.
This represents a stacking and concentration of 3 types of advantage in competing within a segment of the market, to enable the start of a CA reinforcing loop:
As a CA deteriorates in terms of competitiveness over rivals, marketing is increasingly relied upon to prolong the CA or Strength by ensuring the adapting of the company to its environment.
Specifically, marketing’s development of a product portfolio, market research, targeting, differentiation and mix enables the company to:
• stay in touch with the market reality of changing customer needs,
• inhibit rival’s growth of share that would otherwise enable imitating the ebbing advantage, and
• sustain sales volume to prolong the economics of an ebbing CA or strength.
The result is a longer period of years with a CA or Strength from which a company can grow shareholder value. Eventually competitive forces will drag a CA down to being a mere minor Strength. At this point, marketing focuses on protecting and sustaining shareholder value that was created from the past CA.