Choosing a Competitive Frame of Reference
The competitive frame of reference defines which other brands a brand competes with and which should thus be the focus of competitive analysis. A good starting point in defining a competitive frame of reference for brand positioning is category membership, the products or sets of products with which a brand competes and that function as close substitutes. It would seem a simple task for a company to identify its competitors.
PepsiCo knows Coca-Cola’s Dasani is a major bottled-water competitor for its Aquafina brand; Wells Fargo knows Bank of America is a major banking competitor.
The range of a company’s actual and potential competitors, however, can be much broader. To enter new markets, a brand with growth intentions may need a broader or more aspirational competitive frame. And it may be more likely to be hurt by emerging competitors or new technologies than by current competitors.
We can examine competition from both an industry and a market point of view.
An industry is a group of firms offering a product or class of products that are close substitutes for one another.
Using the market approach, we define competitors as companies that satisfy the same customer need.
Satisfying needs
For example, a customer who buys word-processing software really wants “writing ability”—a need that can also be satisfied by pencils, pens, or, in the past, typewriters.
Marketers must overcome “marketing myopia” and stop defining competition in traditional category and industry terms
Once a company has identified its main competitors, and their strengths and weaknesses, it must ask:
- What is each competitor seeking in the marketplace?
- What drives each competitor’s behavior?
Many factors shape a competitor’s objectives, including size, history, current management, and financial situation. If the competitor is part of a larger company, it’s important to know whether the parent company is running it for growth or for profits or milking it.
Based on all this analysis, marketers formally define the competitive frame of reference to guide positioning. In stable markets where little short-term change is likely, it may be fairly easy to define one, two, or perhaps three key competitors. In dynamic categories where competition may exist or arise in different forms, multiple frames of reference may be present.
Marketers should monitor these three variables when analyzing competitors:
In general, companies that make steady gains in mind share and heart share will inevitably make gains in market share and profitability.
Firms such as Timberland, Jordan’s Furniture, and Wegmans are all reaping the benefits of providing emotional, experiential, social, and financial value to satisfy customers and all their constituents
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