Competitive Advantages BMI3C

Competitive Advantage An advantage a business has over its competitors May be Sustainable (i.e. an advantage you can maintain over your competitors in order to hold onto customers) Non-sustainable (i.e. an advantage that your competitors could take away from you in order to shift sales in their direction)

Sustainable Competitive Advantages Develop a unique selling proposition (USP) develop something (a benefit) that the competition does NOT have and likely will not develop or match

Sustainable Competitive Advantages Lower production costs reduce costs use cost-efficient, high-technology manufacturing systems and processes to reduce the costs associated with its products (eg. move to another country with lower resource costs, fewer taxes, & a lower cost of living)

Sustainable Competitive Advantages Service a niche market recognize an opportunity to create a niche market & take advantage of it

Sustainable Competitive Advantages Create customer loyalty this is called relationship marketing the consumer develops a strong relationship with the product or the retailer

Activity For each type of sustainable competitive advantage, give an example of a company that you think is a good example USP Lower production costs Niche market Customer loyalty

Non-sustainable Competitive Advantages Promotion consumers advertise their products to place their brands in the minds of the consumer (eg. Tim Hortons – “roll up the rim to win”) brand awareness - the major goal of the company is to aim for top-or-the-mind awareness means that the consumer is most likely to think about one brand of product or service before they thinks of any other

Non-sustainable Competitive Advantages Placement to compete, a product must have a placement in the market, the more placement it has, the more competitive it is if a product has exclusive distribution in a market, it is very competitive (eg. only bottled water in a vending machine) a marketing goal for some companies is to eliminate the competition superstores move in and small retail stores go out of business (eg. Chapters) or large companies buy smaller companies and then discontinue their brands

Non-sustainable Competitive Advantages Quality one way to compete against other products is to be the best of its type (eg. stronger, faster, lighter, easier to open, easier to close) companies are constantly adding features to improve the product and taking away features that are not beneficial the finest quality products are deemed to be top- of-the-line and are sought after by some consumers (eg. Cars: Mercedes; Lexus)

Non-sustainable Competitive Advantages Benefits of use the value of a product is in what the product will do for the person who buys it marketers highlight the benefits that distinguish its’ product from the competition, hoping to appeal to the competition

Non-sustainable Competitive Advantages Price price is only a competitive advantage if the product is less expensive than a competitor’s AND all features of the product are equal if the products are different, then price is not the main competitive advantage

Non-sustainable Competitive Advantages Design features design influences the way a product looks and what it does design features and changes in design have to catch consumers’ interest to have a competitive edge (eg. cars, fashion industry) package design also competes for the consumer’s attention (eg. the shape of the bottle, the pattern of the label, the way it opens, the handle) packages can also be practical and attract attention that way (eg. squeeze bottle, jar that turns into a glass, decorative cookie tin can become a storage container)

Activity With a partner, list 10 products, and their main competitive advantage What are the most sustainable competitive advantages?

Competitive Advantages Part II BMI3C

Competitive Advantage We’ve discussed the competitive advantages that products can have over one another, but what about services? What services does your family use? List on board What would make one service better than another in this category?

Service Competition Factors Service businesses are marketing intangibles, things that cannot be touched They compete with each other by attempting to gain a competitive advantage using: convenience, degree of service, selection, reputation, and price

Service Businesses Set up solely to perform specific services for customers Ex: Parcel delivery service

Value-added service A company that provides activities to support the sale of their product or service Ex: a store that offers free home delivery of the customers’ purchases

Convenience To make something easier or more comfortable Ex: Internet shopping To gain the competitive advantage, some offer value-added services Ex: 30 minute delivery for pizza, drive- through window for fast food Some service companies sell convenience Ex: limo service, cleaning service

Degree of Service Some businesses offer similar services, with the competitive advantage coming from the quality or variety of the services offered Ex: hair salon Some companies cut out services to lower costs Ex: Airlines, Ikea

Selection Some offer a greater selection of services Ex: video store The selection can be wide – meaning a large number of different types of merchandise OR the selection can be deep – meaning a large quantity of one specific type

Reputation Since service is intangible, the business must maintain a good reputation Service evaluation is frequently communicated to consumers through magazines, newspapers, television Word of mouth is more important Good reviews bring more business, bad reviews can ruin it The internet facilitates great sharing of reviews and experiences

Price If the two services are similar, the business with the lower price has the competitive edge Prices depend on supply & demand Ex: Vacations cost more during peak season Specialized services have no standard price – when services are needed, people are willing to pay a great deal of money to get them Ex: lawyers, architects, gourmet chefs, computer consultants