C H APT E R

Defining the Competitive Set

Key Question for This Chapter:

Who do we or will we compete against?
Set the boundary of our business
This is the starting point
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Major Topics for Ch. 2

I.

Bases of Competition

II.

Levels of Competition*

III.

Methods for Determining Competitors**

IV.

Right Level of Competition for the

Project

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Bases of Competition
I.

Product-oriented Approach
Similar Physical Attributes
Functional Similarity

II.

Customer-oriented Approach
Who they are competition for same budget
When they use the product
Why they use the product - benefits sought

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Bases of Competition (cont).

Marketing oriented: promotion & distribution
- Media Channel
- Distribution Channel
IV. Resource-oriented Approach (Internal)
- Raw materials
- Employees
- Financial resources
III. Geographic: Becoming less relevant
III.

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Levels of Competition*
Beer
Ice
cream

Tea

Regular
colas

Diet-Rite
cola

Wine
Diet
Pepsi
Fast food

Bottled
water

Baseball
cards

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Diet
lemon
limes

Fruit
flavore
d colas

Diet
Coke

Lemon
limes

Coffee

Product form
competition:
Diet colas

Juices

Product
category
competition:
Soft drinks

Video
rentals

Generic
competition:
Beverages
Budget
competition:
Food and
entertainment

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Example 1: Energy Bar Competition

Other Snacks
Healthy Snacks
Snack/Health
Bars
Energy
Bars
Odwalla
Power Bar
Balance Bar
Clif

Nutrigrain Bars
Slimfast Bars
Granola Bars
Fruits
Nuts
Juice
Crackers
Chips
Candy
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Example 2: Super-Premium Ice Cream

Level of
Competition

Definition

Competitors

Product form

Super-Premium

Haagen-Dazs
Starbuck/Godiva
Ben & Jerrys

Product category

Ice cream

Breyers
Dreyers
Private labels

Generic

Snacks
Desserts
Novelties

Frito Lay
Nabisco
Nestl
Mrs. Fields
Yoplait

Budget

Other supermarket,
Convenience store products

Many

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Example 3: PDA
Level of
Competition

Definition

Competitors

Need Satisfied

Product form

Full-featured PDAs

Palm Pilot VII

Handspring
Compaq Aero
Pocket PC makers

Personal information
management plus
integrated
communications

Product category

PIM (Personal
Information Managers)

Palm III
Royal
Casio PV-100

PIM only

Generic

Tablet PC/
Cell phones

Toshiba
Nokia
Samsung

Other solutions to the

above

Budget
$100-$1,000

Paper-based solutions
Business items costing
$100-$1000

Rolodex
Day Timer
Fax Machines
Personal copiers
Furniture (e.g.
Steelcase)

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MP3 Phone Competition

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Levels of Competition:
Implications for Your Product Strategy
Competitive Level

Product Management Task

Product
Form

Convince Customers that the

Brand is Better than Others

Product
Category

Convince Customers that the

Product Form is Best in the
Category

Generic

Convince Customers that the

Product Category is the Best
Way to Satisfy Needs

Budget

Convince Customers that the

Generic Benefits are the Most
Appropriate Way to Spend
their Money

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Methods for Determining Competitors**

Existing

categories: ex) IRI; SIC

NAICS
Managerial judgment
Customer-purchase-based measures*
Customer-judgment-based measures*

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Managerial Judgment of Competition

Markets

Product/Services
Same
Different

Same

Different

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Customer-purchase-based measures*
Brand

Switching Data The Extent of Substitutability among Brands

Cross-Elasticity of Demand:

Change in Brand Bs Sales/

Change in Brand As Price
Mainly

Used for Nondurable Products

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Brand-Switching Matrix
A

Time t+1
B

.6

.2

.2

.2

.3

.4

.1

.2

.3

.5

.1

.1

.5

.3

.1

.4

.5

Time t

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Customer-Judgment-Based Measures*
Overall

similarity (by Perceptual Mapping)*

Similarity of consideration sets
Product deletion (based on product
unavailability)
Substitution In Use:
List all the uses of a product
List other products that provides the same uses

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Perceptual Mapping
Means

graphic description of customers

perception about different brands/products.
You can use it to gain
Better understanding of market structure*
Customer perceptions for a new product
concept
Direction for R&D efforts to satisfy
customers better
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Developing A Perceptual Map

Two

Alternative ways

Attribute

Rating method (AR)

Overall Similarity method (OS)
Attribute

Rating Method

Data Cube (brands*attributes*respondents)

Statistical Analysis (Factor Analysis)
Find out two (or three) axes for the perceptual map
Attribute Analysis
Limitations
Suitable for B-to-B products

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Developing A Perceptual Map

Overall

Similarity method (OS)

Suitable

for consumer products and services

Ask consumers perception the extent of
similarity of pairs of items.
Similarity Data Analysis (Multidimensional
Scaling)
You name the axes and infer the attributes

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Defining Competition with Perceptual Mapping

example: desserts
Moist

Needs refrigeration

As a formal dessert

Bakery pie
Bakery cake

Homemade cake
Homemade pie

Layer
cake
mix
Takes a long
Cheese cake mix
time to prepare
Bundt cake mix
Frozen pie

Chocolate torte mix
Frozen cake
Boston crme pie mix
Stirn Frost cake mix
Light Style cake mix
Individual pie
Coffee cake mix
Quick bread mix
Snackin Cake mix

Pudding mix
Local mix
Jell-O
D-zer ta

Custard mix
Tapioca pudding
mix

Canned pudding

Hostess cupcakes

Date bar mix

Brownie mix
Homemade cookies
Cookie mix

Good for a coffee break

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Bakery cookies
Pillsbury cookie dough

Oatmeal cookies
Pepperidge Farm cookies
Between meal snack

Easy to carry with me

In my school work lunch
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Methods versus Competition Levels and

Information Required

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Enterprise Competition in Financial Services

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Two Key Things to Remember

I.

How would you determine competition?

II.

Choose the focal level of competition*

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Right Level of Competition for You*

I.

Your Firms Market Position

II.

Time Horizon

III. Product Life Cycle and Technology Change

IV. Your Position in the Firm
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