Point of difference (POD) is a term used for an outcome of product differentiation. In business economics, differentiation is seen as an important strategic move for companies to make. Because of an overwhelming variety of products and services on the market, those that stand out in some manner are better noticed by consumers. There are various (positive and negative) ways of being different compared to competitors in the same market. Differentiation is the term given to the positive way in which a company's product differs from its competitors. Points of difference (PODs) describe the individual factors of differentiation.
The key points of difference of a company are synonymous with its unique selling proposition (USP), and are critical in defining its competitive advantage and branding strategy. They must be attributes or benefits that consumers strongly, uniquely, and positively associate with the company's brand; and not with any competing brand. Once points of difference have been clearly communicated to consumers, the company and its brand are set apart from its competitors. Brand loyalty depends upon the ability of the company to establish and maintain clarity of communication with the consumer regarding their brand; and to maintain and expand the points of difference that defines the brand.
Points-of-parity (POP) are driven by the needs of category membership to create category of POPs and the necessity of negating competitors’ Points of Difference (POD) to create competitive POPs. In choosing points-of-difference, two important considerations are that consumers find the POD desirable and that the firm has the capabilities to deliver on the POD.
There are three key consumer desirability criteria for PODs,
1.Relevance:
Target consumers must find the POD personally relevant and important. The Westin Stamford hotel in Singapore advertised that it was the world’s tallest hotel, but a hotel’s height is not important to many tourists.
2.Distinctiveness:
Target consumers must find the POD distinctive and superior. When entering a category where there are established brands, the challenge is to find a viable basis for differentiation. Splenda sugar substitute overtook Equal and Sweet ‘n Low to become the leader in its category in 2003 by differentiating itself on its authenticity as a product derived from sugar, without any of the associated drawbacks.
3.Believability:
Target consumers must find the POD believable and credible. A brand must offer a compelling reason for choosing it over the other options. Mountain Dew may argue that it is more energizing than other soft drinks and support this claim by noting that it has a higher level of caffeine. Chanel No. 5 perfume may claim to be the quintessential elegant French perfume and support this claim by noting the long association between Chanel and haute coutre.
There are three key deliverability criteria.
1.Feasibility:
2.Communicability:
3.Sustainability:
Marketers must decide at which level (s) to anchor the brand’s points–of-differences. At the lowest level are brand attributes, at the next level are the brand’s benefits, and at the top are the brand’s values.
Thus marketers of Dove soap can talk about its attribute of one-quarter cleansing cream; or its benefit of softer skin; or its value, being more attractive. Attributes are typically the least desirable level to position. First, the buyer is more interested in benefits. Second, competitors can easily copy attributes. Third, the current attributes may become less desirable.
Research has shown, however, that brands can sometimes be successfully differentiated on seemingly irrelevant attributes if consumers infer the proper benefit. Procter & Gamble differentiates its Folger’s instant coffee by its “flaked coffee crystals, “created through a “unique patented process. In reality, the shape of the coffee particles is irrelevant because the crystals immediately dissolve in the hot water. Saying that a brand of coffee is “mountain grown is irrelevant because most coffee is mountain grown.
Crtsy - Prahalad Krishnamurthi.
Wednesday, November 24, 2010
Tuesday, November 23, 2010
Household Potential Index (HPI)
Something that is “wanted by many” but “consumed by few” is our definition of Premiumness. Simply put, premuimness is defined as the inverse of penetration. For example, 41 per cent of all homes in India have Television. Only 2 per cent have a flat TV. Hence, homes with a flat TV is considered to be “premium” by HPI measure.
The concept of HPI allocates high scores for less penetrated product categories and services. On the other hand, lower scores to higher penetrated categories or mass consumed categories. Thereby, HPI eliminates judgmental factors and is therefore a more systematic approach, making it applicable across all segments of households, from the “super affluent” to the so-called “desperates”. HPI is a holistic measure of potential, and not just based on few durables.
In order to ensure that a specific ownership of a durable or consumption of a particular category of FMCG or services does not result in very high scores, 50 different measures have been incorporated into the HPI system.
HPI considers a wide spectrum of categories from Durables, FMCGs, Services, which are covered in IRS and scores are assigned in a scientific and automated method to products owned, consumed/ used. In addition to product categories, HPI also takes into account the key differentiating household demographics, such as, Highest Education in the household, Number of working members, education of the housewife, area occupied by the household vis-à-vis the number of people residing etc.
Look at the table-1 below. Going by the definition of SEC, A1 should be the most affluent class. However, it is not the reality. As per HPI, if we look at the top 1 per cent of consuming homes in India, only 39 per cent is from the uppermost SEC A1 and the remaining 61 per cent is from other SECs in Urban and Rural segments.
Conversely speaking, 61 per cent of SEC A1 does not feature in the Top 1 percent of the consuming households.
Crtsy - FMCG blogspot
The concept of HPI allocates high scores for less penetrated product categories and services. On the other hand, lower scores to higher penetrated categories or mass consumed categories. Thereby, HPI eliminates judgmental factors and is therefore a more systematic approach, making it applicable across all segments of households, from the “super affluent” to the so-called “desperates”. HPI is a holistic measure of potential, and not just based on few durables.
In order to ensure that a specific ownership of a durable or consumption of a particular category of FMCG or services does not result in very high scores, 50 different measures have been incorporated into the HPI system.
HPI considers a wide spectrum of categories from Durables, FMCGs, Services, which are covered in IRS and scores are assigned in a scientific and automated method to products owned, consumed/ used. In addition to product categories, HPI also takes into account the key differentiating household demographics, such as, Highest Education in the household, Number of working members, education of the housewife, area occupied by the household vis-à-vis the number of people residing etc.
Look at the table-1 below. Going by the definition of SEC, A1 should be the most affluent class. However, it is not the reality. As per HPI, if we look at the top 1 per cent of consuming homes in India, only 39 per cent is from the uppermost SEC A1 and the remaining 61 per cent is from other SECs in Urban and Rural segments.
Conversely speaking, 61 per cent of SEC A1 does not feature in the Top 1 percent of the consuming households.
Crtsy - FMCG blogspot
Tuesday, October 19, 2010
Brand Update : Peter England is the Beginning of Good Things
In these four years, Peter England has become a Rs 500 crore brand growing more than 30% annually. In the last IPL season, Peter England hit the branding circuit with a bang by sponsoring Chennai Super Kings. The brand also dabbed into suits as well as casual wear in this time. At one point in time, the brand had a campaign featuring Kareeena Kapoor.
2010 is witnessing another beginning for the brand. The brand has roped in the South Indian Actor Siddharth as brand ambassador and is currently running a campaign featuring the celebrity. Along with the brand ambassador, Peter England is also repositioning itself on a new platform. The brand has changed its tagline to " Beginning of Good Things ".
In their press releases, the brand talks about the new positioning. Peter England wants to epitomize confidence that arises out of self belief. The brand wants to remind the users about their inner strength that will arise of self-confidence and Peter England will be the source of that self confidence.
Although the brand's new proposition sounds good and is a sort of laddering up, I surely miss the first campaign of Peter England - The Honest Shirt . That was a campaign that expressed the brand completely. The promise of a Honest Shirt was embraced by consumers because the message was so simple , direct and relevant.
But how ever, the brand got bored with the positioning and moved over to an aspirational " Honestly Impressive " theme. Although the concept was good, it was no where near the original one interms of relevance and simplicity.
To be frank, I did not like the new tagline -Beginning of Good Things ( personal opinion !) . The positioning almost is similar to Cadbury Dairy Milk's Shubh Aarambh theme ( for an auspicious beginning). And theme of self confidence arising out of dress is neither new nor clutter breaking. Its just another campaign and the brand will see its sales going northward because of the smart selection of the celebrity.
Siddharth will make the brand more appealing to youngsters. The flooding of the market by various regional brands/private labels and the trend among youngsters to go for street fashion rather than branded ones is making the lives of brands like Peter England difficult . The popularity of Siddharth among youngsters will bring back lot of them to the brand.
Peter England as a brand will make sense because of the inherent value proposition. As long as the value proposition remains the same, there is no stopping for this brand.
2010 is witnessing another beginning for the brand. The brand has roped in the South Indian Actor Siddharth as brand ambassador and is currently running a campaign featuring the celebrity. Along with the brand ambassador, Peter England is also repositioning itself on a new platform. The brand has changed its tagline to " Beginning of Good Things ".
In their press releases, the brand talks about the new positioning. Peter England wants to epitomize confidence that arises out of self belief. The brand wants to remind the users about their inner strength that will arise of self-confidence and Peter England will be the source of that self confidence.
Although the brand's new proposition sounds good and is a sort of laddering up, I surely miss the first campaign of Peter England - The Honest Shirt . That was a campaign that expressed the brand completely. The promise of a Honest Shirt was embraced by consumers because the message was so simple , direct and relevant.
But how ever, the brand got bored with the positioning and moved over to an aspirational " Honestly Impressive " theme. Although the concept was good, it was no where near the original one interms of relevance and simplicity.
To be frank, I did not like the new tagline -Beginning of Good Things ( personal opinion !) . The positioning almost is similar to Cadbury Dairy Milk's Shubh Aarambh theme ( for an auspicious beginning). And theme of self confidence arising out of dress is neither new nor clutter breaking. Its just another campaign and the brand will see its sales going northward because of the smart selection of the celebrity.
Siddharth will make the brand more appealing to youngsters. The flooding of the market by various regional brands/private labels and the trend among youngsters to go for street fashion rather than branded ones is making the lives of brands like Peter England difficult . The popularity of Siddharth among youngsters will bring back lot of them to the brand.
Peter England as a brand will make sense because of the inherent value proposition. As long as the value proposition remains the same, there is no stopping for this brand.
Thursday, October 7, 2010
Brand Update : Garnier Goes Beyond Shampoos
A lot of activities are happening for Garnier brand in the Indian market. From a brand focused on shampoo, Garnier has moved into personal care category with a range of products from fairness creams to deodorants.
Garnier earlier had moved to a broader personal care market with a wide range of personal care products for women. Later the brand broke into men's personal care with the launch of Garnier men's fairness creams endorsed by Bollywood hunk John Abraham.The brand also launched Garnier range of deodorants endorsed by the same celebrity.
Now,Garnier is all set to cover the entire shampoo market with the launch of Garnier Kids Shampoo in the Indian market. It is interesting to see how this brand is slowly covering the entire Indian personal care market. The brand is adopting a segment by segment targeting strategy. It consolidated its position in shampoo then moved into men's personal care and now into kid's hair care market.
The launch of Garnier Fructis kid's shampoo is expected to revive the kid's personal care category in India. The kid's hair care market is dominated by HUL's Clinic Plus brand and the other players being Parachute Starz. But recently the activities in this category has been minimal.
The entry of Garnier into the kid's segment may have been to catch them young.The new generation kids have a mind of their own and they are brand conscious. So tapping them with a variant makes sense. Moreover mothers feel that young hair /skin needs special care and adults products may be too strong for the kids.
Garnier's brand strategy of slow systematic growth has been reaping rich rewards. The brand has gained consumer acceptance and retail support across various markets in India.The brand is careful in using the same imagery across various categories. The brand uses a mix of foreign and Indian models for its campaigns and is never fixated on depending on a celebrity face to push the product. The brand although started as a shampoo brand has flexibility to move into various categories. The core brand values of " Green " and the tagline " Take Care " can be used across multiple categories without any dilution to the core brand positioning.
Garnier is wise enough to make maximum advantage of those attributes.
Sunday, September 26, 2010
Marketing Strategy : Making Brand Portfolio Decisions
Brand portfolio decisions are strategic in nature. These decisions have very powerful impact on the entire brand architecture and marketing strategy of the firm. According to marketing theory, there are two basic brand portfolio models –House of Brands and Branded House.
Recently Rajiv Bajaj, CEO of Bajaj Auto announced a decision that the company will not be using the corporate brand Bajaj for any of the motorcycles produced by the company. Instead, the bikes will sport individual brand names and Bajaj Auto will be a garage of independent brands like Unilever and P&G. According to newspaper reports, the company will focus on four brands – Pulsar, Boxer, Discover and KTM and will not use the parent brand to endorse these individual brands. Bajaj Auto has made the decision to move from a Branded House portfolio model to House of Brands portfolio model.
House of Brands
House of Brands model refers to a brand portfolio where firms will choose different brand names for various products across categories. These brands will have own identity and personality. Different products in the same category will also have individual brand names. FMCG giants like Hindustan Unilever, P&G l follow the model of House of Brands. For example HUL has soap brands like Lux, Rexona, Hamam, Lifebuoy, Dove etc.
House of Brands portfolio model have many advantages. One of the biggest advantages is the focus that managers can give to individual brands. Since each brand will have separate identity, brand managers can devise focused strategies with regard to segmentation, positioning etc. Individual brands also give tremendous amount of freedom as far as strategies are concerned. Brand managers are not constrained in devising their strategies since the brand is not linked to any other brands in the portfolio.
Since the brands in the portfolio are independent, the failure of any one brand is not going to have an impact on other brands. Controversies affecting one brand will have minimal impact on other brands from the same company and brand managers can distance other brands from the brand which is facing the issue.
House of Brands model also have its fair share of disadvantages. Since the firm intent to have different brand names for various products, the cost of promotion of these multiple brands will be more compared to Branded House model.
In the case of House of Brands, the promotional budget has to be shared which will create internal competition among various brands for a larger share. While internal competition can be beneficial, there is also a chance of internal conflicts within the brand management teams.
Another potential disadvantage is the chances of brand cannibalization within a category. For example soap brands Rexona and Hamam from HUL compete with each other in some southern markets. Thums Up and Coca Cola compete with each other in markets where they co-exist.
If not done carefully, different brands in the portfolio can also create confusion in terms of positioning and segmentation. Overlaps in segments, cannibalization, same positioning, and clutter etc can occur if the firm is not careful about the individual brand strategy. At one point of time HLL (now HUL) found its brand portfolio with too many brands that overlapped with each other. The company had to undertake a brand rationalization exercise which reduced the number of brands from 110 to 30 power brands.
Branded House
Branded House portfolio model is where the firm chooses to have one brand name for all the products that is marketed by the company. Many firms use the corporate brand name for all the products that they sell in the market. Dell is often cited as a classic example of a Branded House.
The biggest advantage of Branded House is the economies of scale in terms of brand promotion activities. Since there is only one brand to promote, the firm can channel the entire resources more effectively.
Another advantage of Branded House is that the promotional cost of introducing new products into the market will be significantly lower compared to House of Brands. Since the new product will carry the common brand name, there is an increased chance of consumer acceptance because of the existing brand equity of the parent brand. The firm is thus spared of the task of building brand awareness from the scratch.
A major disadvantage of Branded House model is the possibility of brand dilution arising out of different products from the same brand. Unless carefully monitored, product proliferation within the brand portfolio can dilute the core positioning of the parent brand. It may not be possible for all products to have the same positioning theme and any deviation from parent brand’s positioning will dilute the core positioning them of the Branded House.
Firms strictly adhering to Branded House portfolio model may have to forego many market opportunities if those categories do not fit into the parent brand’s positioning. For example a Branded House marketing luxury product may have to forego the mass market opportunities because of the positioning constraints. That constraint is not applicable for House of Brands because the positioning of one brand may not affect another.
Another disadvantage of Branded House portfolio is the impact of product failures/controversies on entire portfolio. Since all products carry the same brand name, failure of one product can have a negative impact on the parent brand. Any controversy involving a single product can have devastating influence on the entire product range.
Although theoretically these two portfolio models exist, in practice firms tend to use various elements of both models together while devising their brand portfolio strategy.
(Reference: Tybout, A., & Calkins, T. (2006). Brand Portfolio Strategy. In Kellogg on Branding (pp. 104-129). Wiley India.)
Originally Published here at Adclubbombay.com
Recently Rajiv Bajaj, CEO of Bajaj Auto announced a decision that the company will not be using the corporate brand Bajaj for any of the motorcycles produced by the company. Instead, the bikes will sport individual brand names and Bajaj Auto will be a garage of independent brands like Unilever and P&G. According to newspaper reports, the company will focus on four brands – Pulsar, Boxer, Discover and KTM and will not use the parent brand to endorse these individual brands. Bajaj Auto has made the decision to move from a Branded House portfolio model to House of Brands portfolio model.
House of Brands
House of Brands model refers to a brand portfolio where firms will choose different brand names for various products across categories. These brands will have own identity and personality. Different products in the same category will also have individual brand names. FMCG giants like Hindustan Unilever, P&G l follow the model of House of Brands. For example HUL has soap brands like Lux, Rexona, Hamam, Lifebuoy, Dove etc.
House of Brands portfolio model have many advantages. One of the biggest advantages is the focus that managers can give to individual brands. Since each brand will have separate identity, brand managers can devise focused strategies with regard to segmentation, positioning etc. Individual brands also give tremendous amount of freedom as far as strategies are concerned. Brand managers are not constrained in devising their strategies since the brand is not linked to any other brands in the portfolio.
Since the brands in the portfolio are independent, the failure of any one brand is not going to have an impact on other brands. Controversies affecting one brand will have minimal impact on other brands from the same company and brand managers can distance other brands from the brand which is facing the issue.
House of Brands model also have its fair share of disadvantages. Since the firm intent to have different brand names for various products, the cost of promotion of these multiple brands will be more compared to Branded House model.
In the case of House of Brands, the promotional budget has to be shared which will create internal competition among various brands for a larger share. While internal competition can be beneficial, there is also a chance of internal conflicts within the brand management teams.
Another potential disadvantage is the chances of brand cannibalization within a category. For example soap brands Rexona and Hamam from HUL compete with each other in some southern markets. Thums Up and Coca Cola compete with each other in markets where they co-exist.
If not done carefully, different brands in the portfolio can also create confusion in terms of positioning and segmentation. Overlaps in segments, cannibalization, same positioning, and clutter etc can occur if the firm is not careful about the individual brand strategy. At one point of time HLL (now HUL) found its brand portfolio with too many brands that overlapped with each other. The company had to undertake a brand rationalization exercise which reduced the number of brands from 110 to 30 power brands.
Branded House
Branded House portfolio model is where the firm chooses to have one brand name for all the products that is marketed by the company. Many firms use the corporate brand name for all the products that they sell in the market. Dell is often cited as a classic example of a Branded House.
The biggest advantage of Branded House is the economies of scale in terms of brand promotion activities. Since there is only one brand to promote, the firm can channel the entire resources more effectively.
Another advantage of Branded House is that the promotional cost of introducing new products into the market will be significantly lower compared to House of Brands. Since the new product will carry the common brand name, there is an increased chance of consumer acceptance because of the existing brand equity of the parent brand. The firm is thus spared of the task of building brand awareness from the scratch.
A major disadvantage of Branded House model is the possibility of brand dilution arising out of different products from the same brand. Unless carefully monitored, product proliferation within the brand portfolio can dilute the core positioning of the parent brand. It may not be possible for all products to have the same positioning theme and any deviation from parent brand’s positioning will dilute the core positioning them of the Branded House.
Firms strictly adhering to Branded House portfolio model may have to forego many market opportunities if those categories do not fit into the parent brand’s positioning. For example a Branded House marketing luxury product may have to forego the mass market opportunities because of the positioning constraints. That constraint is not applicable for House of Brands because the positioning of one brand may not affect another.
Another disadvantage of Branded House portfolio is the impact of product failures/controversies on entire portfolio. Since all products carry the same brand name, failure of one product can have a negative impact on the parent brand. Any controversy involving a single product can have devastating influence on the entire product range.
Although theoretically these two portfolio models exist, in practice firms tend to use various elements of both models together while devising their brand portfolio strategy.
(Reference: Tybout, A., & Calkins, T. (2006). Brand Portfolio Strategy. In Kellogg on Branding (pp. 104-129). Wiley India.)
Originally Published here at Adclubbombay.com
Tuesday, September 21, 2010
NEW ALLOUT - "Mosquito to Flies"...!!!
From now on, Allout Frog will not only catch mosquitoes but also catch flies. India's popular liquid mosquito repellent has launched a campaign claiming the additional benefit of repelling flies. This is the first major change in the brand's strategy ever since SC Johnson's took over the brand from Karamchand Appliances.
What I make out of the ad (seen only once) is that the fly repellent property is an additional benefit of the core product - mosquito repellent. The brand expects that consumers will find more value in the product because of the additional benefit provided. Also, the current move can be seen as a larger plan for the brand to become a pest control brand from the current space of mosquito repellent.
The brand website also mirrors such a plan. The tagline of the brand is now " Worry No More " as against the " Macharoan ka Yamraj".
The new campaign follows the core theme of previous ads of Allout - talking about disease spreading pests and how the Allout Frog protects the entire family from those disease spreading pests.
The interesting question is whether launch of the additional attribute of " fly repellent" will add value to Allout brand or will it dilute the core positioning of the brand ?
My perception is that consumers will be delighted to have such an additional benefit with Allout. So far no brand has been able to provide relief from the irritating pest like housefly. So in that sense , Allout will standout ( differentiated) from the rest of the crowd.
Regarding the positioning of Allout, the brand has been careful in continuing with the same theme of ' protection from disease carrying pests ' for the new ad also. I feel that the brand will continue using this theme as its positioning and move away from the " mosquito -Yamraj " theme in future.
courtesy - Marketing Blogspot.
What I make out of the ad (seen only once) is that the fly repellent property is an additional benefit of the core product - mosquito repellent. The brand expects that consumers will find more value in the product because of the additional benefit provided. Also, the current move can be seen as a larger plan for the brand to become a pest control brand from the current space of mosquito repellent.
The brand website also mirrors such a plan. The tagline of the brand is now " Worry No More " as against the " Macharoan ka Yamraj".
The new campaign follows the core theme of previous ads of Allout - talking about disease spreading pests and how the Allout Frog protects the entire family from those disease spreading pests.
The interesting question is whether launch of the additional attribute of " fly repellent" will add value to Allout brand or will it dilute the core positioning of the brand ?
My perception is that consumers will be delighted to have such an additional benefit with Allout. So far no brand has been able to provide relief from the irritating pest like housefly. So in that sense , Allout will standout ( differentiated) from the rest of the crowd.
Regarding the positioning of Allout, the brand has been careful in continuing with the same theme of ' protection from disease carrying pests ' for the new ad also. I feel that the brand will continue using this theme as its positioning and move away from the " mosquito -Yamraj " theme in future.
courtesy - Marketing Blogspot.
Thursday, September 2, 2010
Should Your Marketing Strategy Be Customer Oriented or Competitor Oriented?
Originally published here in Adclubbombay.com
Although many marketing literature propounds the dictum “Customer is the King”, it is seldom practiced in its fullest sense. Marketers would love to put customers at the center of their business strategy but the intense competitive environment forces them to think beyond the customer and move towards the competitors.
There is a dilemma in the marketers mind with the choice of whether the firm’s principal orientation should be towards customer or competitors. Conventional wisdom say that firms should be oriented more towards customers than competitor. Peter Drucker famously said “The purpose of business is to create customers “. When a firm is customer oriented, the entire business is centered on customer needs and satisfaction.
According to academic literature, there are three components of market orientation (1) Customer Orientation (2) Competitor Orientation (3) Inter-functional coordination. Customer Orientation is where the firm spends its resources on gathering information about customer needs and behavior. Competitor orientation is where the firm directs its resources to gathering information about competitor behavior and activities. The firm’s strategies will then be based on the information gathered through any of these orientations. (Source: Narver, John C. and Stanley F. Slater. 1990. "The Effect of a Market Orientation on Business Profitability." Journal of Marketing 54 (October):20-35.)
Customer orientation helps firms with a clear in-depth understanding of consumer which results in a focused marketing effort. Research has confirmed that customer orientation helps firms to increase performance and enhance customer satisfaction.
Too much customer orientation also can be dangerous. There is a chance of marketers becoming blinded by their current focus thus oblivious of the changes brought about by the competitors. There are critics who argue that customers may stifle innovation in companies because customers may not be able to explicitly state their expectations or anticipate future needs. Customers are often resistant to change and this forces the highly customer focused firms to maintain the status quo thus refraining from game changing innovations.
The firms who are skewed towards competitor orientation are blamed for launching me-too products in an effort to fight competition. Too much focus on competitor often forces firms to invest in understanding customers or anticipate their needs better. Too many resources will be spent on competitive activities which may restrict investment on breakthrough innovations. Competitor oriented firms are more open to the changing trend in the market. Since their actions are more directed by the actions of the competitor, there is less chance of lethargy in marketing activities.
Firms must understand that there is a trade-off between these two orientations. Firms will have to lose something if they chose either of the two orientations. The ideal option is to balance both the orientation. It is easy to advocate that firms should have both customer and competitor orientation but with a limited resources in-terms of men and money, firms will find tough to have best of both worlds.
Companies must realize that the choice of customer / competitor orientation is dependent on the environment in which firms operate. There are external and internal factors that will decide the orientation of the company. For example, there are organizations like Zappos.com which is totally customer oriented. The customer orientation run deep within the organization’s DNA and the entire firm is structured around the customer.
Competitor orientation is more preferable in markets which are growing very fast. In fast growing markets, firms should invest in gathering more data about competitors which will enable them to develop innovations at lower costs.
Customer orientation is preferable in more uncertain markets. When the markets are changing very fast, firms can focus on customers which will enable them to change their marketing strategies quickly in accordance with changing customer needs. Also firms that deal with complex markets need to focus on investing in customers rather than competitors.
The choice of customer vs. competitor orientation is ultimately depended on the top management’s world view. The choice is important because there are only limited resources available with the managers to spend on either of these orientations.
Firms can strike a balance between these orientations if they can focus on the following guidelines.
Invest in a robust market intelligence mechanism in the marketing department. The mechanism can be internal or outsourced, but the emphasis will be on information gathering and dissemination. When a mechanism exists, depending on the market environment, organization can decide on the type of information that should be gathered.
Encourage free flow of information within the organization. Market orientation tends to be ineffective if the organization is bureaucratic. Hence firms should ensure that important market information is passed to various levels quickly.
Although many marketing literature propounds the dictum “Customer is the King”, it is seldom practiced in its fullest sense. Marketers would love to put customers at the center of their business strategy but the intense competitive environment forces them to think beyond the customer and move towards the competitors.
There is a dilemma in the marketers mind with the choice of whether the firm’s principal orientation should be towards customer or competitors. Conventional wisdom say that firms should be oriented more towards customers than competitor. Peter Drucker famously said “The purpose of business is to create customers “. When a firm is customer oriented, the entire business is centered on customer needs and satisfaction.
According to academic literature, there are three components of market orientation (1) Customer Orientation (2) Competitor Orientation (3) Inter-functional coordination. Customer Orientation is where the firm spends its resources on gathering information about customer needs and behavior. Competitor orientation is where the firm directs its resources to gathering information about competitor behavior and activities. The firm’s strategies will then be based on the information gathered through any of these orientations. (Source: Narver, John C. and Stanley F. Slater. 1990. "The Effect of a Market Orientation on Business Profitability." Journal of Marketing 54 (October):20-35.)
Customer orientation helps firms with a clear in-depth understanding of consumer which results in a focused marketing effort. Research has confirmed that customer orientation helps firms to increase performance and enhance customer satisfaction.
Too much customer orientation also can be dangerous. There is a chance of marketers becoming blinded by their current focus thus oblivious of the changes brought about by the competitors. There are critics who argue that customers may stifle innovation in companies because customers may not be able to explicitly state their expectations or anticipate future needs. Customers are often resistant to change and this forces the highly customer focused firms to maintain the status quo thus refraining from game changing innovations.
The firms who are skewed towards competitor orientation are blamed for launching me-too products in an effort to fight competition. Too much focus on competitor often forces firms to invest in understanding customers or anticipate their needs better. Too many resources will be spent on competitive activities which may restrict investment on breakthrough innovations. Competitor oriented firms are more open to the changing trend in the market. Since their actions are more directed by the actions of the competitor, there is less chance of lethargy in marketing activities.
Firms must understand that there is a trade-off between these two orientations. Firms will have to lose something if they chose either of the two orientations. The ideal option is to balance both the orientation. It is easy to advocate that firms should have both customer and competitor orientation but with a limited resources in-terms of men and money, firms will find tough to have best of both worlds.
Companies must realize that the choice of customer / competitor orientation is dependent on the environment in which firms operate. There are external and internal factors that will decide the orientation of the company. For example, there are organizations like Zappos.com which is totally customer oriented. The customer orientation run deep within the organization’s DNA and the entire firm is structured around the customer.
Competitor orientation is more preferable in markets which are growing very fast. In fast growing markets, firms should invest in gathering more data about competitors which will enable them to develop innovations at lower costs.
Customer orientation is preferable in more uncertain markets. When the markets are changing very fast, firms can focus on customers which will enable them to change their marketing strategies quickly in accordance with changing customer needs. Also firms that deal with complex markets need to focus on investing in customers rather than competitors.
The choice of customer vs. competitor orientation is ultimately depended on the top management’s world view. The choice is important because there are only limited resources available with the managers to spend on either of these orientations.
Firms can strike a balance between these orientations if they can focus on the following guidelines.
Invest in a robust market intelligence mechanism in the marketing department. The mechanism can be internal or outsourced, but the emphasis will be on information gathering and dissemination. When a mechanism exists, depending on the market environment, organization can decide on the type of information that should be gathered.
Encourage free flow of information within the organization. Market orientation tends to be ineffective if the organization is bureaucratic. Hence firms should ensure that important market information is passed to various levels quickly.
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