Marketing strategy is a function of market context, competitive landscape, your own capabilities, and your objectives for the business. In this topic, we will see how does competition shapes our marketing strategies. An effective way to formulate a marketing plan would be to conduct a consumer analysis. This analysis consists of:
- Identifying the major product features that the consumer likes
- Prioritizing these features in terms of importance for the consumer
- Rating your and competitor's capability to deliver on important features
- Assessing your and competitor's performance on each of these features
When Amul had launched ice cream, the market leader was HLL with its Quality Walls brand and there were other regional players like Dollops, Go Cool and Vadilal. All these ice creams were expensive and offered limited choice to the consumer. Amul launched the ice creams in variety of flavors at far lower price to make it affordable to masses; invested in cold chain and gained a significant
market share to become the undisputed market leader.
i.Strategies
Companies in a market may have to follow various competitive strategies. These strategies are a function of relative leadership position of the respective market player.
a. Defensive Strategy
A market leader - a company having largest market share- has to be always attentive to protect its leadership position. It may have to continuously produce innovative products, keep the price competitive, and ensure that its profitability is not hurt. A market leader has to adopt three steps method to retain its number one position:
i) Expand the Market: You can do it in two ways by -
a) Finding new users of the product - Amul entered into many new potential markets and at the same time reduced prices to motivate and get new consumers. It launched the family pack for ice creams. This ensured that it found new users in form of family members, party caterers. It also ensured the increased usage.
b) Promoting more use of the product i.e. increasing per capita consumption Amul did it by reducing per unit price of the product to make it affordable.
This resulted in increase in consumption. Where earlier a person used to have ice - cream once a week increased his consumption to twice or may be thrice a week.
ii) Protect Market Share: For a dominant market player first thing to do,when competition increases, is to protect its market share. Subsequently, it needs to device ways to consolidate its market position. E.g., Kwality Walls has been trying to eat into Amul's share. To prevent any erosion of market share, Amul keeps running new marketing campaigns and many sales promotion schemes like buy 1 get one free.
iii) Increase Market Share: Amul has been investing heavily in building cold chain environment at the retailer level by providing them cool refrigerators to store ice creams and has started opening exclusive outlets selling only Amul products. It helps in increasing awareness, availability of the product, and channel loyalty that in turn results into increased market share.
b. Attack strategy: The companies who occupy second, third, and lower position in a market are called challengers. The challengers adopt different attack strategies.
i) General Attack Strategy: The challenger attacks the leader by matching its product, price, reach, positioning etc. In this strategy, the challenger must have enough financial capabilities to withstand any retaliation from the leader and it must attack the leader on different fronts - better product, better price, enhanced features, greater margin to distribution channel etc. Amul was the market leader in Mumbai market for liquid milk. Mother Dairy lunched a frontal attack on Amul by launching a blitz of brand awareness campaign, better discount to distribution channel, better packaging, and ensuring a reach equal to that of Amul. In some time, Mother Dairy has gained respectable market share in Mumbai market.
ii) Guerilla Strategy: This approach consists of engaging in intermittent attack on the leader to confuse him and use the opportunity to make its foothold strong.According to military strategists, a continuous guerrilla attack is more powerful in creating a permanent impact in competitor organization than a few large attacks.A challenger typically uses guerrilla warfare strategy to attack weak markets of the competitor.
a. Flanking: In this approach, the challenger attacks the weakest spot of the leader in terms of any uncovered geographic market or market segment.The leader is caught unaware in such a situation and it provides the challenger a good opportunity to make its foothold strong. This approach is also used when the marketer spots a shift in the needs of the consumer segment. This shift can be used to reposition the product and gain market share.
b. Niche: Niche refers to a small unique market segment. A company, which is into third or a lower position, may decide to leave the conventional market segment and instead focus on a small market and gain a leadership position there. Niching requires the nicher to clearly identify the market segment that it wants to serve and develop new specialized products for that segment,keep costs low and develop low cost channels to service customers of that segment. In essence, niching is all about specializations. Some of the possible
specializations possible are as follows:
market share to become the undisputed market leader.
i.Strategies
Companies in a market may have to follow various competitive strategies. These strategies are a function of relative leadership position of the respective market player.
a. Defensive Strategy
A market leader - a company having largest market share- has to be always attentive to protect its leadership position. It may have to continuously produce innovative products, keep the price competitive, and ensure that its profitability is not hurt. A market leader has to adopt three steps method to retain its number one position:
i) Expand the Market: You can do it in two ways by -
a) Finding new users of the product - Amul entered into many new potential markets and at the same time reduced prices to motivate and get new consumers. It launched the family pack for ice creams. This ensured that it found new users in form of family members, party caterers. It also ensured the increased usage.
b) Promoting more use of the product i.e. increasing per capita consumption Amul did it by reducing per unit price of the product to make it affordable.
This resulted in increase in consumption. Where earlier a person used to have ice - cream once a week increased his consumption to twice or may be thrice a week.
ii) Protect Market Share: For a dominant market player first thing to do,when competition increases, is to protect its market share. Subsequently, it needs to device ways to consolidate its market position. E.g., Kwality Walls has been trying to eat into Amul's share. To prevent any erosion of market share, Amul keeps running new marketing campaigns and many sales promotion schemes like buy 1 get one free.
iii) Increase Market Share: Amul has been investing heavily in building cold chain environment at the retailer level by providing them cool refrigerators to store ice creams and has started opening exclusive outlets selling only Amul products. It helps in increasing awareness, availability of the product, and channel loyalty that in turn results into increased market share.
b. Attack strategy: The companies who occupy second, third, and lower position in a market are called challengers. The challengers adopt different attack strategies.
i) General Attack Strategy: The challenger attacks the leader by matching its product, price, reach, positioning etc. In this strategy, the challenger must have enough financial capabilities to withstand any retaliation from the leader and it must attack the leader on different fronts - better product, better price, enhanced features, greater margin to distribution channel etc. Amul was the market leader in Mumbai market for liquid milk. Mother Dairy lunched a frontal attack on Amul by launching a blitz of brand awareness campaign, better discount to distribution channel, better packaging, and ensuring a reach equal to that of Amul. In some time, Mother Dairy has gained respectable market share in Mumbai market.
ii) Guerilla Strategy: This approach consists of engaging in intermittent attack on the leader to confuse him and use the opportunity to make its foothold strong.According to military strategists, a continuous guerrilla attack is more powerful in creating a permanent impact in competitor organization than a few large attacks.A challenger typically uses guerrilla warfare strategy to attack weak markets of the competitor.
a. Flanking: In this approach, the challenger attacks the weakest spot of the leader in terms of any uncovered geographic market or market segment.The leader is caught unaware in such a situation and it provides the challenger a good opportunity to make its foothold strong. This approach is also used when the marketer spots a shift in the needs of the consumer segment. This shift can be used to reposition the product and gain market share.
b. Niche: Niche refers to a small unique market segment. A company, which is into third or a lower position, may decide to leave the conventional market segment and instead focus on a small market and gain a leadership position there. Niching requires the nicher to clearly identify the market segment that it wants to serve and develop new specialized products for that segment,keep costs low and develop low cost channels to service customers of that segment. In essence, niching is all about specializations. Some of the possible
specializations possible are as follows:
- Specific customer segment: A milk company may only want to focus on party caterers with bulk supplies.
- Geographic specialist
- Channel specialist - Like Baskin Robbins sells its ice - cream only through company owned or franchisee parlors.
ii. Strategic Planning Pyramid
Strategic planning shapes your business to gain higher profits and growth. According to Kotler, "Strategic planning calls for action in three areas: The first is managing a company's businesses (Product) as an investment portfolio. The second key area involves assessing each business's (Product) strength by considering the market's growth rate and the company's position and fit in that market. The third key area is strategy.
For each of your businesses or products, you must develop a game plan for achieving its long-run objectives. You must determine what makes the most sense in the light of its industry position, objectives, opportunities, skills, and resources with respect to each product.
Strategic planning shapes your business to gain higher profits and growth. According to Kotler, "Strategic planning calls for action in three areas: The first is managing a company's businesses (Product) as an investment portfolio. The second key area involves assessing each business's (Product) strength by considering the market's growth rate and the company's position and fit in that market. The third key area is strategy.
For each of your businesses or products, you must develop a game plan for achieving its long-run objectives. You must determine what makes the most sense in the light of its industry position, objectives, opportunities, skills, and resources with respect to each product.
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| Strategic Planning Pyramid |
iii. SMART Goals
One of the outcomes of a good marketing strategy should be to spell out goals of that strategy. These should be SMART goals. Each alphabet of the word stands for a word:
(S) Specific - A specific goal should answer six "W"s
One of the outcomes of a good marketing strategy should be to spell out goals of that strategy. These should be SMART goals. Each alphabet of the word stands for a word:
(S) Specific - A specific goal should answer six "W"s
- Who
- What
- Where
- When
- Which
- Why
(M) Measurable: The goal should clearly state the expected outcome and how will it be measured.
(A) Achievable: The goal should be a stretch one and yet achievable. Setting unachievable goals have the danger of the developing a defeated feeling and not working towards it.
(R) Realistic: The goal should emerge because of your analysis of your strengths,weaknesses and market opportunity and not just based on dreaming.
(T) Time: The goal should clearly state the timelines for achieving each of the sub goals and the overall goal of your business.
iv. SWOT Analysis
SWOT analysis is one of the widely used tools for analyzing the business opportunities and the company's preparedness to capture them. Under this framework, you need to analyze external environment in terms of opportunities and threats to various businesses, product lines and internal environment in terms of organizational strengths and weaknesses. Let us take example of a new dairy unit at village level, which engages in SWOT analysis.Internal analysis: There are three parameters, which are anlaysed and assessed.As per this analysis, the village unit decides that procurement and farmer relationship is its key strength while it is neutral on logistical support and weak on financial capability. This analysis suggests that the dairy unit should keep working to make its procurement strength stronger and leverage it by allying with some other unit,which requires procurement capability.
(A) Achievable: The goal should be a stretch one and yet achievable. Setting unachievable goals have the danger of the developing a defeated feeling and not working towards it.
(R) Realistic: The goal should emerge because of your analysis of your strengths,weaknesses and market opportunity and not just based on dreaming.
(T) Time: The goal should clearly state the timelines for achieving each of the sub goals and the overall goal of your business.
iv. SWOT Analysis
SWOT analysis is one of the widely used tools for analyzing the business opportunities and the company's preparedness to capture them. Under this framework, you need to analyze external environment in terms of opportunities and threats to various businesses, product lines and internal environment in terms of organizational strengths and weaknesses. Let us take example of a new dairy unit at village level, which engages in SWOT analysis.Internal analysis: There are three parameters, which are anlaysed and assessed.As per this analysis, the village unit decides that procurement and farmer relationship is its key strength while it is neutral on logistical support and weak on financial capability. This analysis suggests that the dairy unit should keep working to make its procurement strength stronger and leverage it by allying with some other unit,which requires procurement capability.
Internal analysis: There are three parameters, which are anlaysed and assessed.
External Environment Analysis:
In this framework, the dairy unit analyzes the external business environment for possible business opportunities and threats. The dairy unit may take up each business possibility and subject it to this analysis to decide the worthwhile ideas.For example, it may analyze the possibility of entering loose milk and milk products market.
Opportunities in Loose Milk
In this framework, the dairy unit analyzes the external business environment for possible business opportunities and threats. The dairy unit may take up each business possibility and subject it to this analysis to decide the worthwhile ideas.For example, it may analyze the possibility of entering loose milk and milk products market.
Opportunities in Loose Milk
- Low cost of transportation, therefore pricing could be competitive
- Freshness can be offered because procurement is your strength
- Both cow and buffalo milk could be marketed
- Consistent supply as the procurement centre is closer to market
- Threats
- The competitor may lower the prices significantly
- The competitor may package the milk in a more hygienic packaging
- The Govt. may announce high packaging standards
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