- Value proposition.
- Competitive advantage.
- Sensitivity and flexibility.
CUSTOMER ELIMINATION PHILOSOPHY.
On more than one occasion, I have noted that nothing is more important when developing a marketing strategy than a customer focus. The customer lies at the heart of every genuinely cost-effective marketing strategy. Consistent with this view, my philosophy on eliminating the competition might be summarised as follows:
- The closer any organisation gets to exceeding the expectations of a well-defined target market, the closer that organisation will be to optimising performance.
- The elimination of the competition, or at least the minimisation of direct competition, is central to developing a cost-effective marketing strategy.
- Eliminating the competition is best served by exceeding the target market’s expectations in ways that set the organisation apart from its competition.
This could be a relatively short missive. I could just outline the lethal weapons you should use and how to use them when carrying out a hit on your competitors. Recognising the downsides of such an approach, however, I will instead focus on 5 commercial weapons for eliminating competitive forces.
It will not be suggested here that the competition should be exterminated. Instead, it will be suggested here that the impact of competitive forces on any organisation can and should be minimised – ideally to a point where they are virtually irrelevant.
WHY ELIMINATE THE COMPETITION
Advertising agencies talk a great deal about ‘cut through’ and the difficulties associated with ensuring that marketing messages, communicated through advertising, PR and other forms of promotion, are heard and engaged with. However, few advertising agencies talk about how this process would be much easier and cheaper without direct competition. Eliminating the competition can dramatically reduce the cost of marketing.
Marketers more generally recognise the value of brand loyalty – the central driver of repeat business and referrals. As it happens, brand loyalty is best served by having little or no direct competition. The absence of direct competition is tantamount to the consumer perceiving few if any options. In the absence of options, it stands to reason that the target market will buy your product.
Eliminating the competition, especially direct competition, is central to minimising the cost of marketing and maximising both enquiry rates and the lifetime value of each enquiry. To quote Peter Theil (one of the founders of Pay Pal and a leading venture capitalist) – ‘competition is for losers.’
Beyond the use of firearms, there are many strategies that organisations can use to eliminate or dramatically reduce the competition. These strategies include those associated with – differentiation, positioning, value proposition, competitive advantage, and sensitivity. This missive addresses all five of these. It also touches on the critical issues to be considered in addressing them.
If I present you with two shirts made from the same fabric, in the same colour, in the same style and with the same availability, it is almost certain that you would buy the cheaper one. The more similar two products are the more important price becomes – and the higher the cost of marketing the product in a noisy environment. Direct competition drives marketing costs up and margins down.
Conversely, the more different the two shirts, the easier it is to distinguish between the two shirts and the more likely you are to choose based on something other than price. For many audiences, a cotton shirt and a nylon shirt are not the same things, and if your preference is for cotton, you will likely buy the cotton shirt even if it is a little bit more expensive than the nylon option.
Differentiation has the power to separate two products in a way that limits the extent to which the target market views them as competitors. While both a Mini and a Rolls Royce are cars – they are not competitors. Few potential new vehicle purchasers would test drive the Mini and the Rolls Royce. This kind of differentiation involves:
- Identifying the target market to be addressed.
- Understanding the expectations of that market.
- Differentiating the product, based on market expectation.
In other words – eliminating the competition can be as simple as understanding and addressing the expectations of the target market – and doing so better than the potential competition.
Such differentiation can be:
While it is powerful for consumers to perceive a difference between two otherwise identical products (Deloitte and PWC), it is even more powerful when the difference is both perceived and tangible (Zegna and Banana Republic suits). The more tangible the differentiation, the more credible and sustainable it tends to be.
There are two general levels of differentiation:
- In category.
- Out of category.
While differentiation within a product category (as with the I-phone and a Galaxy phone) can be very effective, shifting your product into a different or even new product category (such as eating at Mcdonald’s or dining at Nobu) is stronger. Products deemed to be in their own category will be more strongly differentiated than those in the same category. Certainly, a direct comparison is less likely.
Differentiation can be:
Some brands differentiate on both axes, especially when targeting complex markets. Vertical differentiation (upmarket, middle market or lower end – slow, moderate, or fast) is perhaps the most common form of differentiation. Horizontal differentiation (differences in features, functionality, and deliverables) is also common.
Regardless of the nature or direction of the differentiation, there is no doubt about the power of differentiation in reducing marketing costs and maximising returns. And the more tangible that differentiation and the more it establishes the product in a new category – the less likely a direct comparison will be made.
While few businesses successfully achieve tangible differentiation, most have the potential for establishing and leveraging differentiation that will reduce direct competition.
To quote Hub Spot – ‘Brand positioning is the process of positioning your brand in the mind of your customers. More than a tagline or a fancy logo, brand positioning is the strategy used to set your business apart from the rest.’ In essence, positioning is an extension of the concept of differentiation. It involves making differentiation more comprehensive and using it to create a perception that eliminates direct competition.
Effective positioning involves:
- Identifying the target audience.
- Understanding the expectations of the target market.
- Identifying the most critical expectations of the market.
- Developing a comprehensive image built around the most critical expectations.
Ultimately the positioning, defined in this way, places all potential competitors on a matrix to identify the opportunities for your brand – to identify and own a unique positioning that not only sets the brand apart from its competitors but makes it the preferred option within the target market. Few businesses have been more effective at brand positioning than Apple. While Apple sells essentially the same product as Samsung – it is positioned very differently, especially in terms of – design, ease of use, functionality, and quality.
Positioning involves a more complete and all-encompassing approach to differentiation and market identification. The objective is to ensure that the target market identifies with the brand as exemplified by the positioning – such that purchase, and brand loyalty is assured.
While most businesses can establish a unique positioning, few businesses I come across address positioning well. The result is often higher marketing costs and lower returns.
When I meet a new potential client, one of the first questions I ask is – ‘in one sentence – why should I buy your XYZ instead of the XYZ available from ABC (the nearest competitor?’ To me, very few questions are more important in marketing than this one, and in my experience, few businesses can answer the question concisely and convincingly. Rarely are the responses I receive to this question, tangible. Most reactions are vague and indeterminate, like:
- Better quality.
- Better service.
- Better value.
What on earth do such statements mean? Define ‘better’ and what makes them better. Such statements are certainly less powerful than more quantifiable and specific answers like:
- Same-day delivery (when all others are three days).
- Lifetime guarantee (when others have two years warranties)
- Free servicing for life (when others charge).
The more tangible, concrete, and relevant to the consumer’s needs, wants, and expectations a value proposition is – the more effective it will be in differentiating the brand in a sustainable way.
A ‘value proposition is a market-specific feature that makes a business or product attractive to customers. It is a single point of differentiation, consistent with the overall brand positioning that makes a product or brands the preferred option within a target market. It is a powerful tool in eliminating competition. It is the answer to the question – ‘why should I buy your XYZ instead of the XYZ available from ABC.’
Many businesses attempt to develop a strong value proposition and end up with a vague promise that requires a leap of faith on the part of the target market. Why should I buy your product and not that of your competitor?
STRATEGIC COMPETITIVE ADVANTAGE.
Some people incorrectly use the phrase “strategic competitive advantage’ interchangeably with the term ‘differentiation.’ While a strategic competitive advantage can drive differentiation, they are not the same thing. Investopedia defines differentiation as ‘Distinguishing a company’s products or services from the competition. Successful product differentiation involves identifying and communicating the unique qualities of a product or company while highlighting the distinct differences between that product or company and its competitors. Product differentiation goes hand in hand with developing a strong value proposition so that a product or service is attractive to a target market or audience.’
A strategic competitive advantage, on the other hand; ‘refers to factors that allow a company to produce goods or services better or more cheaply than its rivals. These factors allow the productive entity to generate more sales or superior margins than its market rivals. Competitive advantages are attributed to a variety of factors including cost structure, branding, the quality of product offerings, the distribution network, intellectual property, and customer service.’ While differentiation may only represent a perceived difference, a competitive advantage is a concrete difference that:
- Facilitates differentiation.
- Enables differentiation to be sustainable.
The ideal strategic competitive advantage is:
- Tangible – real.
- Strategic – relevant to customer needs.
- Sustainable – durable.
In many respects, a strategic competitive advantage is a holy grail for eliminating the competition. A phrase coined by Michael Porter, the Harvard University icon, strategic competitive advantage is often applied to the five forces Porter identified:
- Competition in the industry
- Potential of new entrants into the industry
- Power of suppliers
- Power of customers
- Threat of substitute products
Every business should identify and maintain a strategic competitive advantage (SCA). In my experience, however, few do. This is despite the potential for the correct SCA to drive costs down, margins up and overall revenue up.
SENSITIVITY AND FLEXIBILITY.
Eliminating the competition should not be addressed just once. If the level of differentiation is to be maximised and maintained – set and forget – it is not an option. Once the competition has been eliminated or primarily so, it is an ongoing struggle to ensure it stays eliminated. In this regard, due consideration needs to be given to:
- Changes in competitor strategies.
- New products and new entrants.
- New technologies and solutions.
- Changing consumer expectations.
Competitor strategies will change on an ongoing basis. New products can come into the market anytime – sometimes driven by new technologies. Consumer expectations will invariably change over time. All of these factors need to be provided for in an approach to strategy that involves:
- Developing a strategy that differentiates, positions, and leverages an SCA.
- Monitoring the market and competitive landscape.
- Finetuning the strategy as and when indicated by the monitoring.
Eliminating the competition requires that changes be accommodated in the evolving marketing strategy. While changes should not occur daily, the strategy to differentiate and position – and the access to a strategic competitive advantage to build on – will change over time. These issues should be reviewed at least annually as part of a comprehensive marketing audit and strategy review.
The critical issues to be considered when eliminating the competition include:
- The market – identifying a market segment that can be dominated.
- The customer – understanding their needs and expectations.
- Tangibility – developing a concrete point of differentiation.
- Quantification – using numbers and evidence to substantiate claims.
- Perception – with or without tangibility, the perceptions in the market.
- Sustainability – the durability of the points of difference.
- Capabilities – the strengths of the business the differentiation is built on.
- Value – using differentiation to add value – at least in the eye of the consumer.
Avenues for differentiation include, but are not limited to:
Part of the challenge of eliminating the competition involves identifying new and more effective avenues for differentiation, positioning, competitive advantage, and your value proposition.
- Tangible product differentiation drives marketing costs down.
- A strategic competitive advantage facilitates sustainable differentiation.
- To maximise returns, a brand must have a credible value proposition.
- Effective brand differentiation ultimately reduces competition.
- Few businesses fully leverage the benefits of brand positioning.
RECOMMENDED READING – MUST READ
- To reduce or eliminate competition – differentiate tangibly.
- To reduce or eliminate competition – position your brand strategically.
- To reduce or eliminate competition – develop a credible value proposition.
- To reduce or eliminate competition – establish and build on a competitive advantage.
- To reduce or eliminate competition – remain sensitive, adaptable, and flexible.
- Given that tangible differentiation can eliminate the competition and drive marketing costs down while revenues increase – how tangible is your point of difference?
- Since strategic positioning can eliminate the competition and drive marketing costs down while revenues increase – how strategic is your positioning?
- Given the importance of a simple and credible value proposition, what is your value proposition, and how simple and credible is it within the target market?
- Given the power of a strategic competitive advantage in underpinning a sustainable point of difference or positioning – what capabilities underpin your SCA?
- If you have not established a strategic positioning, credible value proposition and strategic competitive advantage – why are you avoiding the art of the possible and the necessary?
- 94% of customers are likely to show loyalty to a brand that offers complete transparency.
- 73% of people prefer brands that personalise the shopping experience.
- 59% of shoppers prefer to buy new products from the brands they trust.
- 63% of people pay particular attention to brands when choosing a smartphone.
- 86% of consumers prefer an authentic and honest brand personality on social networks.
Return on investment in marketing is maximised when the customer is at the centre of the strategic planning process. Many businesses claim to be customer focused, but few are. Being customer focused requires a commitment to understanding consumer behaviour. Such a commitment drives costs down and results up.