Thursday, March 28, 2019

Competitive Strategy 101


One of the concepts that I recall from my Competitive Strategy course at Harvard Business School (based on Michael Porter's Competitive Strategy book) is that to win in the marketplace, you need to pursue one of the following three competitive strategies - value, focus or differentiation. That is as true today as it has ever been.

In some categories, on some occasions and for some consumers, value is all that matters. When a purchase is not that important to us and we want to save money, we seek out value. There are many brands that deliver a good value these days. Amazon.com delivers value as do many other Internet brands. Ikea is all about value. H&M focuses on value, as does Walmart. Kia and Hyundai also focus on value. ALDI is known for delivering on value. And there are many no frills, low cost airlines that also focus on value. Increasingly, people shop Marshalls, Stein Mart, Tuesday Morning and T.J. Maxx for good value on name brands. 

And then there is focus. Bass Pro Shops focus on outdoorsmen, and especially fishermen. Orvis focuses on fly fishermen. Lane Bryant focuses on plus sized women and Big & Tall focuses on men's big and tall clothing. Pilot Flying J focuses on the needs of truckers. The Aspen Skiing Company focuses on skiing, as does Vail Resorts. Varsity Spirit Corp. focuses on cheerleading and dance. 

Finally, there is differentiation. Christian Louboutin shoes are differentiated as are Vilebriquin bathing trunks, Robert Graham shirts and Loudmouth apparel. MINI Coopers are differentiated as are Tesla automobiles. Opaque restaurants are differentiated as are Bojangles' Restaurants, Cracker Barrel restaurants and CoreLife Eateries. 

The trick is to know when to differentiate and in what ways and for which consumers. American markets are continuing to bifurcate. That is, most of these markets are tending to go upscale or downscale with fewer options in between. That is because the middle class is shrinking at the same time that more people are becoming increasingly affluent while others are struggling more and more financially.

Differentiation is most important in upscale markets. It is also important in categories through which consumers are making personal statements such as automobiles, home decor and clothing. 

But the need to differentiate (versus seeking out value) can be highly situational. For instance, I may be looking for value when purchasing a pair of khaki casual pants. Whereas, I might want to make a statement with a shirt that I would wear at a party or out on the town. In the latter instance, I am looking for something highly differentiated and am willing to pay extra for that differentiation. 

As a marketer, it is important to know what competitive strategy or strategies will work best for your brand and in what situations and with which consumers. 

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