Chapter 11: Relationship Marketing

Chapter 12: Competitive Strategy

Reporter (sunod sunod)

1. Krizia Mae colega
2. Ivy Dalumpines
3. Erika Sioson
4. Kimberly Tejadilla
5. Emmalyn Parane
6. Jhoy Bacarro
#2 reporting : Dalumpines, Ivy

Chapter 11: Relationship Marketing

“kasunod ng customer value under parin ng defining customer value and satisfaction”

Customer satisfaction
~Consumers form judgements about the value of marketing offers and make their buying
decisions based upon these judgements. Customer satisfaction with a purchase depends upon
the product’s performance relative to a buyer’s expectations. A customer might experience
various degrees of satisfaction. If the product’s performance falls short of expectations, the
customer is dissatisfied. If performance matches expectations, the customer is satisfied. If
performance exceeds expectations, the customer is highly satisfied or delighted. Expectations
are based on the customer’s past buying experiences, the opinions of friends and associates, and
marketer and competitor
In contrast, if they raise expectations too high, buyers are likely to be disappointed.
For example, Holiday Inn ran a campaign a few years ago called ‘No Surprises’, which
promised consistently trouble-free accommodation and service. However, Holiday Inn
guests still encountered a host of problems and the expectations created by the campaign
only made customers more dissatisfied. Holiday Inn had to withdraw the campaign.
Still, some of today’s most successful companies are raising expectations – and delivering
performance to match.

Tracking customer satisfaction

~Successful organisations are aggressive in tracking both customer satisfaction and
dissatisfaction. Several methods are used.

1. Complaint and suggestion systems ~ A customer-centred organisation makes it easy for

customers to make suggestions orcomplaints. Hospitals place suggestion boxes in the
corridors, supply comment cards to existing patients and employ patient advocates to
solicit grievances. Some customer-centred companies may set up free customer hotlines
to make it easy for customers to enquire, suggest or complain.

Example :
~Successful companies try very hard. All visitors to Richer Sounds shops get
a card showing the shop’s team and saying: ‘We’re listening.’ It’s a Freepost
letter addressed to Julian Richer, the owner of the chain.
2. Customer satisfaction surveys ~ Complaint and suggestion systems may not give the
company a full picture of customersatisfaction. One out of every four purchases results in
consumer dissatisfaction, Rather than complain, most customers simply switch suppliers.
As a result, the company needlessly loses customers. Responsive companies take direct
measures of customer satisfaction by conducting regular surveys. They send
questionnaires or make telephone calls to a sample of recent customers to find out how
they feel about various aspects of the company’s performance.

Example :
~Bozell Worldwide’s Quality Poll gives a league table and shows how biased local
perceptions can be. Gallup conducted a study that asked 20,000 people in 20 countries to
rate the quality of manufactured goods from 12 countries. All countries rated themselves
higher than other people did. The French put French goods on top, while the Japanese
gave themselves twice the rating (76 per cent) that the full sample did (38.5). All other
countries were optimistic too: Germans gave themselves 49 per cent against the full
sample’s 36 per cent and the United Kingdom 39 per cent against 22 per cent.

3. Ghost shopping ~ This involves researchers posing as buyers. These ‘ghost shoppers’ can
even present specific problems in order to test whether the company’s personnel handle
difficult situations well.

Example :
~ghost shoppers can complain about a restaurant’s food to see how the restaurant
handles this complaint. Research International’s Mystery Shopper surveys can measure
many dimensions of customer performance. By telephoning it can measure a firm’s
telephone technique: how many rings it takes to answer, the sort of voice and tone and,
if transferred, how many leaps it took before being correctly connected.

4. Lost customer analysis ~ Companies should contact customers who have stopped buying
or who have switched to a competitor, to learn why this happened. Not only should the
company conduct such exit interviews, it should also monitor the customer loss rate. A
rising loss rate indicates that the company is failing to satisfy its customers.

Example :
Universities and colleges usually compete by putting on new or improved
courses or attracting excellent teachers, but one college’s lost customer
survey found major reasons for prospective students deciding to study
elsewhere that were far from academic. Many prospective students and
 parents who visited mentioned the unsatisfactory state of the toilets in the
Students’ Union.

Chapter 12: Competitive Strategy (repoter #2)

6. Selecting competitors to attack and avoid (karugtong ng steps in

analysing competitors)
Management has already largely determined its main competitors through prior decisions on
customer targets, distribution channels and marketing-mix strategy. These decisions define
the strategic group to which the company belongs. Management must now decide which
competitors to compete against most vigorously. The company can focus its attack on one
of several classes of competitors.

Strong or weak competitors

Most companies prefer to aim their shots at their weak competitors. This requires fewer
resources and less time. Conversely, the firm may gain little. Alternatively, the firm should
also compete with strong competitors to sharpen its abilities. Furthermore, even strong
competitors have some weaknesses and succeeding against them often provides greater
returns. A useful tool for assessing competitor strengths and weaknesses is customer value
analysis – asking customers what benefits they value and how they rate the company versus
competitors on important attributes. Customer value analysis also points out areas in which
the company is vulnerable to competitors’ actions.

Close or distant competitors

Most companies will compete with those competitors who resemble them the most. Thus,
Citroën/Peugeot competes more against Renault than against Porsche. At the same time, the
company may want to avoid trying to ‘destroy’ a close competitor to avoid accusations of
excessive monopolistic power or to keep the known competitors as a bulwark against new
competitors. A company really needs and benefits from competitors. The existence of
competitors results in several strategic benefits. Competitors may help increase total demand.
They share
Customer value analysis— Analysis conducted to determine what benefits target customers
value and how they rate the relative value of various competitors’ offers.

Designing the competitive intelligence system

We have described the main types of information that company decision-makers need to
know about their competitors. This information needs collecting, interpreting, distributing
and using. Although the cost in money and time of gathering competitive intelligence is high,
the cost of not gathering it is higher. Yet the company must design its competitive intelligence
system in a cost-effective way.
The competitive intelligence system first identifies the vital types of competitive
information and the best sources of this information. Then the system continuously collects
information from the field (sales force, channels, suppliers, market research firms, trade
associations) and from published data (government publications, speeches, articles)

Competitive strategies
Having identified and evaluated the main competitors, the company must now design
competitive marketing strategies that best position its offer against competitors’ offerings.
No one strategy is best for all companies. Each company must determine what makes the
most sense, given its position in the industry and its objectives, opportunities and resources.
Even within a company, different businesses or products need different strategies. Johnson &
Johnson uses one marketing strategy for its leading brands in stable consumer markets and
a different marketing strategy for its new high-tech healthcare businesses and products.

Competitive positions
Firms competing in a given target market will, at any moment, differ in their objectives and
resources. Some firms will be large, others small. Some will have great resources, others will be
strapped for funds. Some will be old and established, others new and fresh. Some will strive
for rapid market share growth, others for long-term profits. And the firms will occupy
different competitive positions in the target market.
Michael Porter suggests four basic competitive positioning strategies that companies can
follow – three winning strategies and one losing one.8 The three winning strategies are:

1. Overall cost leadership. Here the company works hard to achieve the lowest costs of
production and distribution, so that it can price lower than its competitors and win a large
market share. After years of stable industrial structures, changes in the economics of the
EU and technology have stimulated a rush for mergers and acquisitions as once nationally
dominant firms struggle for scale in the enlarged market.

2. Differentiation. Here the company concentrates on creating a highly differentiated product

line and marketing programme, so that it comes across as the class leader in the industry.
Most customers would prefer to own this brand if its price is not too high. Bose follows
this strategy with its ultra-small hi-fi speakers as do Dualit with Alissi with their stylish and
fun kitchen utensils.

3. Focus. Here the company focuses its effort on serving a few market segments well rather
than going after the whole market. Many firms in northern Italy excel at this. Among them
are Luxottica, the world’s leading maker of spectacle frames, pasta makers Barilla, and
many dynamic small textile firms in the Prato.

Competitive moves
Businesses maintain their position in the marketplace by making competitive moves to attack
competitors or defend themselves against competitive threats. These moves change with the
role that firms play in the target market – that of leading, challenging, following or niching.
Some 40 per cent of the market is in the hands of the market leader, the firm with the largest
market share. Another 30 per cent is in the hands of a market challenger, a runner-up that is
fighting hard to increase its market share. Another 20 per cent is in the hands of a market
follower, another runner-up that wants to hold its share without rocking the boat. The remaining
10 per cent is in the hands of market nichers, firms that serve small segments not being pursued
by other firms.

Market-leader strategies
Most industries contain an acknowledged market leader. The leader has the largest market
share and usually leads the other firms in price changes, new product introductions,
distribution coverage and promotion spending. The leader may or may not be admired, but
other firms concede its dominance. The leader is a focal point for competitors, a company
to challenge, imitate or avoid. Some of the best-known market leaders are Boeing (airliners),
Nestlé (food), Microsoft (software), L’Oréal (cosmetics), McDonald’s (fast food) and
De Beer (diamonds). A leader’s life is not easy. It must maintain a constant watch. Other firms
keep challenging its strengths or trying to take advantage of its weaknesses. The market leader
can easily miss a turn in the market and plunge into second or third place.

Expanding the total market

The leading firm normally gains the most when the total market expands. If people take more
pictures, then as the market leader, Kodak stands to gain the most. If Kodak can persuade
more people to take pictures, or to take pictures on more occasions, or to take more pictures
on each occasion, it will benefit greatly. Generally, the market leader should look for new
users, new uses and more usage of its products.