1. Entrepreneurial Marketing: An Effectual Approach
Prof. Dr. E.J. Nijssen,
Eindhoven University of Technology
Available from Routledge at:
Session 5: Competitive and market considerations

2. Objectives Understand the competition Understand network products
Product vs. need competition
Close vs. distant competitors
Anticipating competitive reactions
Understand network products
Review guidelines for market research
Primary vs. secondary research
Data sources
Interpretation

3. Different levels of competition
Product competition
Product class
Product form vs. brand competition
Need competition (e.g., substitutes)

4. Five forces framework Industry boundaries Suppliers of suppliers
Internal
competitors
Rivalry among
existing firms
Potential entrants
Buyers
SUBSTITUTES
Threat of new entrants, including entrepreneurs
Bargaining power
of buyers
of suppliers
Threat of substitute
products or services
Industry boundaries
=Brand competition
Substitutes
=Need competition
Adapted from Porter (1980)

5. Anticipating competitors’ moves
Your technology may redefine the industry
Will incumbents just wait and see or will they react, retaliate?
Strategic thinking requires anticipating competitive reactions:
To what extent are competitors satisfied with their current market position?
Which possible courses of action are open to these competitors?
Where are these competitors vulnerable?
How can competitive retaliation be reduced? How will you respond if negative reactions do occur?

6. Competitive reactions
Most competition comes from close competitors; ‘Firms with similar goals and approach as your firm’
A true niche position will protect you from meanstream competition
Develop scenarios of competitive action/reaction (if-then)

7. Beachhead approach A niche is to be preferred if
Benefits/reactions differ significantly per segment
New market is anticipated to grow fast
Entry barriers for larger competitors are low
Law of Critical Mass: Don’t spread resources thin; prevent overextending management attention
Build position and consolidate before you expand

8. A special case: Network products
“Products whose value increases as more users adopt the product, or by presence of complementary products” (Lee and O’Conner, 2003)
Three sources
Direct effects (e.g., fax, video conferencing)
Indirect effects (e.g., e-readers  e-books)
Standardization issues (which will become the dominant standard?)
Consequence: Selling more is not just beautiful but necessary! Why?

9. Do you know an example?

10. Importance of building installed base
Future demand
Size of installed base
Network product’s value to customers
Availability of complementary products
Reinforcing mechanism
Adapted from Lee and O’Conner (2003)

11. Launch strategy and performance of network products
Launch strategy – network product’s intrinsic value drivers:
■ Order of entry
■ Relative product advantage
Launch strategy – network product’s extrinsic value drivers:
■ Penetration pricing
■ Bundling
■ Mass targeting
Mid-term result
■ customer satisf’n
■ customer loyalty
■ profitability
■ market share
Superior long-term performance
■ Customer satisfaction
■ Customer loyalty
■ Profitability
■ Market share
■ Absolute size of
installed base
■ Speed of growth of
Adapted from Lee and O’Conner (2003)

12. Importance of market research
Market research concerns “collecting, analyzing and using data concerning the market and industry to derive information about its size, nature and development”
It should faciliate making informed decisions and reduce risk
It is easier for ongoing businesses because market boundaries are stable
Research for new, radical technology will require envisioning, fundamental reconceptualization and ‘guestimation’ (compare changes to Abell’s 3-D market reality)

13. Rosa and Spanjol (2005) and the changing market
Markets can be seen as socio-cognitive realities
These are affected by new, emerging technologies
Providers and potential customers will negotiate the new reality
At first everything is fluid
Later things converge and institutionalize
Stories and marketing actions, etc., play an important role in this process
Central is the objective of sense making

14. A sociocognitive market system
Producer conceptual system
Customers conceptual system
Product
Producer behavior
Customer behavior
Stimulous information
Knowledge retention
J o i n t s e n s e m a k i n g
Producer enactment cycle
Customer enactment cycle
Adapted from Rosa and Spanjol (2005)

15. Market research: Two approaches
Primary data
Secondary data
Specifically collected for your own, unique research question
e.g., market research agency, consultant, student
Collected by someone else for other purpuse
Reliability depends on source
e.g., Census Bureau, industry associations, banks, newpapers, industry magazines
Will help you add numbers to the current but also newly envisioned situation (e.g., number of potential customers in target segment; buying power)
Will help you to envision

16. Lessons Understanding competitive forces is important16
Understanding competitive forces is important
Competing products are customers’ benchmark
Anticipating competitive moves is critical; price reductions should not eliminate your advantage immediately
Parties under attack do not always behave rationally
A niche or beachhead approach is best suited for firms with limited resources; helps to avoid head-on competition
Network products need a special approach and attention
Important information can come from primary and secondary market research
Underpinning for your envision (compare narrative test of business model)
Basis for numbers test and for developing your marketing and sales plan