Competitive Advantages

1. Competitive Advantages BMI3C

2. 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)

3. 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

4. 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)

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

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

7. 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

8. 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

9. 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

10. 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)

11. 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

12. 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

13. 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)

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

15. Competitive AdvantagesPart II BMI3C

16. 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?

17. 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

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

19. 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

20. 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

21. 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

22. 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

23. 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

24. 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