In our earlier articles we have stressed the importance of a company's positioning itself competitively as a market leader, challenger, follower, or nicher. Yet a company must not spend all its time focusing on competitors.
1. Competitors-Centered companies
A competitor-centered company sets its course as follows:
Situation
· Competitor W is going all out to crush us in Miami.
· Competitor X is improving its distribution coverage in Houston and hurting our sales.
· Competitor Y has cut its price in Denver, and we lost three share points.
· Competitor Z has introduced a new service feature in New Orleans, and we are losing sales.
· Competitor X is improving its distribution coverage in Houston and hurting our sales.
· Competitor Y has cut its price in Denver, and we lost three share points.
· Competitor Z has introduced a new service feature in New Orleans, and we are losing sales.
Reactions
· We will withdraw from the Miami market because we cannot afford to fight this battle.
· We will increase our advertising expenditure in Houston.
· We will meet competitor Y's price cut in Denver.
· We will increase our sales promotion budget in New Orleans.
· We will increase our advertising expenditure in Houston.
· We will meet competitor Y's price cut in Denver.
· We will increase our sales promotion budget in New Orleans.
This kind of planning has some pluses and minuses. On the positive side, the company develops a fighter orientation. It trains its marketers to be on constant alert, to watch for weakness in its competitors and its own position.
On the negative side, the company is too reactive. Rather than formulating and executing a consistent, customer-oriented strategy, it determines its moves based on its competitors moves. It does not move toward its own goals. It does not know where it will end up, because so much depends on what its competitors.
2. Customer-Centered companies
A customer-centered company focuses more on customer developments in formulating its strategies.
Situation
· The total market is growing at 4% annually.
· The quality-sensitive segment is growing at 8% annually.
· The deal-prone customer segment is also growing fast, but these customers do not stay with any supplier very long.
· A growing number of customers have expressed an interest in a 24-hour hot line, which no one has in the industry.
· The quality-sensitive segment is growing at 8% annually.
· The deal-prone customer segment is also growing fast, but these customers do not stay with any supplier very long.
· A growing number of customers have expressed an interest in a 24-hour hot line, which no one has in the industry.
Reactions
· We will focus more effort on reaching and satisfying the quality segment of the market. We will buy better components, improve quality control, and shift our advertising theme to quality.
· Will avoid cutting prices and making deals because we do not want the kind of customer that buys this way.
· We will install a 24-hour hot line if it looks promising.
· Will avoid cutting prices and making deals because we do not want the kind of customer that buys this way.
· We will install a 24-hour hot line if it looks promising.
Clearly, the customer-centered company is in a better position to identify new opportunities and set a course that promises to deliver long-run profits. By monitoring customer needs, it can decide which customer groups and emerging needs are the most important to serve, given its resources and objectives. Jeff Bezos, founder of Amazon.com, strongly favors a customer-centered orientation: Amazon.com's strategy has been going to obsess over customers and not competitors. They want to watch their competitors, learn from them, see the things that they were doing for customers and copy those things as much as they can. But they never planned to obsess over them.
Source: Citeman
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