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1 Sustainable Competitive Advantage Product Differentiation Market Segmentation.

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2 1 Sustainable Competitive Advantage Product Differentiation Market Segmentation

3 2 Objectives INTRODUCE AND APPLY STRATEGIC CONCEPTS OF…  Sustainable Competitive Advantage  Product Differentiation  Market Segmentation

4 3 "This is the market group we'll be targeting" Dave Carpenter Copyright 2002, Harvard Business Review

5 4 Sustainable Competitive Advantage OBJECTIVE  Deliver Benefits at Lower Price - “Single Dimension Competition” or…  Deliver Superior Benefits - Requires Capability to “Add Value”

6 5 Sustainable Competitive Advantage FORMULATION Expand Consumer Perceptions of Product to include Attributes that will have Enduring Value  Acquisition Price (Amount paid to Get Something) + Value Attributes (Amount paid to Have Something) TOTAL PRICE

7 6 Distinctive Competencies Competencies Necessary to Create Value-Adding Attributes  Innovativeness  Efficiency  Quality  Customer Responsiveness

8 7 Tactical Elements of Sustainable Competitive Advantage Four “Ps” of Marketing Mix  Price : Quality/Price Relationship  Place : Distribution Methodology  Promotion : Customer Communication  Product: Features and Benefits

9 8 Product Differentiation Set of Meaningful Differences… Designed to Distinguish a Firm’s Product or Service… From its Competitors Note: “Meaningful” equates with Long-Term Financial Value, Not an Unsustainable Short-term Windfall

10 9 Product Differentiation DIFFERENTIATION VARIABLES  Form: Size, Shape or Physical Structure  Features: Supplement Product’s Basic Function  Quality: Level where Product’s Primary Characteristics Operate

11 10 Market Segmentation IDENTIFY RELEVANT SEGMENT  Mass Marketing: Mass Production, Distribution and Promotion of Single Product for All Buyers  Segment Marketing: Large, Identifiable Group with Similar Buying Attitude and Habits, Purchasing Power and Preferences  Niche Marketing: Small Market with Un-served (not under-served) Needs

12 11 Market Segmentation IDENTIFY COMMERCIALLY VIABLE GROUP WITHIN MARKET SEGMENT WITH SIMILAR…  Tastes and Preferences  Purchasing Power (Economics)  Geographical Location, Age, Gender (Demographics)  Purchasing Patterns and Habits (Sociological)

13 12 TOOLS: Perceptual Mapping VISUAL REPRESENTATION OF MARKET SEGMENT AND CUSTOMER PERCEPTIONS  Identify Meaningful Product Attributes  Compare on X- and Y-Axis  Analyze Key Competitive Characteristics

14 13 Perceptual Map Chocolate Crunch Hershey’s w/ Almonds Hershey’s Milk Chocolate Nestlé Crunch KitKat Opportunity?

15 14 TOOLS: SWOT Analysis STRATEGIC DEVICE FOR IDENTIFYING AND ANALYZING:  Strengths: Internal Capabilities to Expand Product Market Share  Weaknesses: Vulnerabilities in Product Mix or Line  Opportunities: External Market or Competitor Conditions  Threats: External Macroeconomic or Industry Factors

16 15 TOOLS: SWOT Analysis StrengthsWeaknesses Opportunities Strategic Implications of Strengths and Weaknesses versus Opportunities and Threats Threats

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