week 3: all competitors react Flashcards
(25 cards)
MP#3
MP#3: All Competitors React: Managing Sustainable Competitive Advantage
List 4 ways in which competitors can displace firm
1) Technical innovations:
Platform to launch a disruptive offering
2) Exploiting changes in customers’ desires:
Due to cultural, environmental, or other factors
3) Individual entrepreneurship:
Constantly seek a better way to solve a problem
4) Copyats:
Improve efficiency or effectiveness
How should managers anticipate competitors’ reactions (now and future)
By building Barriers / SCA that can withstand competitive assaults
List the 3 criteria that SCA has to meet in order to create a barrier
1) Customers care about what the SCA offers
2) Relative advantage: Firm does it better than competitors
3) SCA hard to duplicate or substitute, even with significant resources
–> to do this, firms often turn to key marketing-based sources of SCA
Being first to market is NOT sufficient to create a barrier! Especially if deep-pocketed copetitors recognise threat of an innovative new entrant
List the 3 market-based sources of SCA
BOR
1)Brands
2) Offerings
3) Relationships
3 sources are additive and often work synergistically to give firm strong relative position in marketplace
Brands: explain barriers to duplication, describe where it’s most effective, and give examples
BRAND:
Barriers to duplication:
- Brand images reside in customer’s mind, so: hard to duplicate
- Awareness facilitates habitual buying
- provides identity benefits to customers
Most effective in: large consumer markets (not many other differentiation points), status-based offerings and where consumption is more visible.
Eg: soft drinks, beer, fashion, cars
BMW, Coca Cola
Offerings: explain barriers to duplication, describe where it’s most effective, and give examples
Barriers to duplication:
- Cost benefits
- Performance advantages
- Access to distribution channels
Most effective in: most markets, tech-based business
Eg: software, electronics
Apple iPhone, Bose, Tesla
Relationships: explain barriers to duplication, describe where it’s most effective, and give examples
Barriers to duplication:
- Trust
- Commitment and interpersonal reciprocal bonds: hard to build or duplicate
Most effective in: B2B, services, complex products
Eg: test equipment, hairut, financial services
Investment, industrial suppliers
Customer Equity Perspective: Describe the BOR equity stack
3 additive elements that add or subtract from the value provided by a firm’s core offering
1) Brand Equity: brand assets and liabilities that add/subtract to offering, lies in mind of customers
- Difference in WTP for branded vs unbranded (holding all else equal)
- Brand. building be hard to target, so better for offerings with large homogenous user groups.
- Hard to quickly adapt or change brand equity
2) Offering Equity: core benefits relative to costs of an offering, stripped of brand and relationships.
- WTP for stripped core offering
- Price and performance only
- Large portion of total equity for commodity products (eg. EveryDay Low Pricing strategies)
- Less important in servicers/high involvement products, products providing meaning or status, and maturing markets/industries
3) Relational Equity: relational assets and liabilities that add/subtract to offering
- Difference in WTP for relationship vs none (holding all else equal)
- Relational-based decision-making (20-30% of brain)
Evolution of SCA in marketing: Pre-industrial age
Greatest barrier to competitive attacks: relationships
Producers: both marketer and retailer
Sales: geographic proximity
Trading –> relational trust
Evolution of SCA in marketing: Industrial Revolution
Brands –> more important to signal product quality
Mass production –> EOS
Sales: more geographically dispersed
Large supply –> aggressive sales promotions
Eg. Original brands based on family names to signal quality and differentiate: Gilette, Ferrari, etc.
Evolution of SCA in marketing: Technological Revolution
Offerings and innovations become key source of differentiation
Tangible products –> Digital and Knowledge products
Fast tech change and turbulence
Eg. Apple and Google: both focus on tech innovation
Evolution of SCA in marketing: Services Revolution
All 3 BOR strategies critical, but relationships making a comeback: shift to service economy (85% US GDP)
Disintermediation removes middleman
Shift from focus on products to services
Describe the Relationship Marketing (RM) process
Identifying, developing, maintaining and terminating relational exchanges (both in B2B and B2C) to improve performance
–> Can produce relationship equity
Describe Customer Relationship Management
Managerially relevant, organisation-wide customer-focused application of Relationship Marketing.
Using IT to achieve performance objectives
RM: describe Social Exchange Theory
Relationship Marketing leads to:
- Feelings of gratitude
- Customer trust
- Customer commitment
All of these impact performance outcomes
Describe the benefits (4 mechanisms) and limitations of relationship equity
1) Relational loyalty
- Likelihood that customer provides seller with benefits
- Lower perceived risk, minimise risk costs by buying from trusted sellers
- Loyalty important in competitive marketplaces
2) Referrals and WOM
- Likelihood to comment positively
- Only those with strong trusting relationships will risk their reputation by advocating
3) Empathetic behaviours
- More likely to put themselves in seller’s shoes
- May attribute failures to external causes
- May prevent them from imposing price-reducing pressures after service failures
4) 4) Cooperative behaviours
- Coordinated complementary actions between partners to achieve common goal
- Creates more value than each individual firm could on its own
- Increases customers’ flexibility and adaptiveness to sellers’ requests for changes, info, reciprocation
- Commitment: encourages parties to remain in relationship, even if reciprocity delayed or non-equivalent
Limitation: RM activities don’t directly affect financial performance
Most effective RM strategies at each stage of building relationship equity (inverted U graph donde sube relationship quality y luego baja)
1) Exploratory/Early stage:
Gratitude-communication, competency-based strategies to build reciprocity norms and explore potential.
2) Growth/Development stage:
Use bilateral investment to exploit relationship potential by building strong relationship bonds
3) Maturity/Maintain stage:
Don’t neglect (ongoing communication and investments) or betray (unfairness and conflict) the partner
4) Decline/Recovery stage:
Use communicayion and compromise to recover the relationship and avoid an exchange that is based solely on dependence
Describe 2 main steps in process of building relationship equity
1) Develop a strong foundation that supports relationship building and maintenace
2) Implement relationship marketing and loyalty programs targeted at specific customer groups, designed to generate specific relational outcomes across firm’s customer portfolio
Describe the 3 different Relationship Marketing programs (with examples)
**1) Social RM Programs: builds emotional bonds and trust through social interactions.
- Using social engagements to convey customers special status
- eg. free tickets to concert or sporting event
2) Structural RM Programs: uses systems and processes to ensure consistency and loyalty.
- Provide investments that customers might not make themselves
- eg. customised packaging
3) Financial RM Programs: encourages loyalty with financial incentives and rewards (eg. based on purchase volume or frequency).
- Provide economic benefits (ultimately, offer little relative advantage bc competitors can easily match them)
- eg. special disocunts, giveaways, free shipping, extended payment terms
Each of them builds different forms of relational ties that generate varying returns from different types of consumers
Maintaining relationships: activity with largest (in ABS) coerrelation with relationship quality:
Conflict (negative!) –> losses loom larger than gains. A negative event can overwhelm an accumulation of positive activities very quickly.
Negative activities generally have approx twice as strong an effect as positive ones (not all of them are the same though)
Discuss perceptions of unfairness in RM
Liyalty, reward, or relationship programs could sometimes generate perceptions of unfairness (jealousy).
Antidote: make benefits for targeted customers invisible for bystanders
- Best: pre-emptive
Extent of negative effect on customer and firm portfolio will depend on:
1) Visibility of reward
2) Clarity of rules
Measuring relationship equity: key relational dimensions and multiple regression analysis
1) Relationship breadth: number of relational ties with an exchange partner
(“contact density”)
2) Relationship quality: nature of relational bond with an exchange partner
3) Relationship composition: decision-making capability of the relational contacys at an exchange partner
(“contact authority”)
All of these influence seller performance outcomes
MULTIPLE REGRESSION ANALYSIS:
- Captures statistical association between a marketing outcome of interest (eg. CLV) and several marketing interventions that may simultaneously affect the outcome (eg. RM efforts, marketing mix)
Eg: Relational equity i = B1SocialRMi + B2StructuralRMi + B3FinancialRMi + Dcontrolsi + ei
Look at significance, sign, size and controls
Discrete choice model: RM programs
ContinueRelationshipi as a binary dependent variable, Social Structural and Financial RM as dependent variables.
–> Logistic function: Assume there is a latent variable z that is continuous and there is a limit value d.
Continuerelationshipi = 1 if z > d
Continuerelationshipi = 1 if z <= d
–> z = B0 + B1Xi + e
P (Continuerelationshipi = 1) = e^ z / (1 + e^z)
