Part IV--Competitive Analysis
Free Book Preview Ultimate Guide to Social Media Marketing
The first thing you should do when forming a marketing plan is define the structure in which it will be presented. The structure of the plan should allow the presentation of strategic information in a logical and progressive manner. This structure should be prepared in a written outline detailing the progression of topics and how they will appear in the marketing plan.
The structure of a marketing plan will usually vary according to the business, its product or service, and the objectives of the marketing plan. Generally, however, each marketing plan will include the following information:
Goals & objectives
The purpose of the competitive analysis section is to identify your competitors and to evaluate their strategies to determine their strengths and weaknesses in comparison to your business. By performing this evaluation of your competitors and their products, you will be able to develop an idea of what makes your product unique. This is important because in this section of the marketing plan, you want to illustrate the distinct competitive advantage your product will have over the competitors you have identified.
You can evaluate your competitors by placing them in strategic groups according to how directly they compete against you for a share of the customer's dollar. Under each competitor or strategic group, list their product or service, size, profitability, growth pattern, objectives, assumptions of the market, current and past strategies, organizational and cost structure, and their strengths and weaknesses.
Once again, it may be helpful to ask a series of questions that will serve to further define your competitors. These questions are:
1. What type of media are used to market the product or service?
2. How many hours per week are purchased to advertise through the media used in this market?
3. Who are your competitors?
4. What products do they sell?
5. What is the market share of your competitors?
6. What are their past strategies?
7. What are their current strategies?
8. What are your competitors' strengths and weaknesses?
9.What are the potential problems with the marketing of the product or service?
10. What potential threats do your competitors pose to the marketing of your product or service?
11. What are the potential opportunities available for marketing your product or service?
You may even want to chart the strengths and weaknesses of your competitors' products against your product by weighing specific product and organizational factors within the context of a competitor strength grid as detailed in the "Business Plan" chapter.
Using the biodegradable diaper example, the competitive analysis section would look like the following:
The disposable diaper market can be divided into several strategic groups starting with the primary competitors that make up the bulk of the market. These primary competitors include Pampers, Huggies and Luvs. These three companies control 70 percent of the entire disposable-diaper industry and target the middle- to upper-income markets. The second strategic group is made up of secondary competitors such as private-label marketers and smaller brand-name manufacturers who control 25 percent of the market and target the discount shopper. The last group of competitors in the disposable diaper industry consists of generic-brand marketers, who control 5 percent of the market and who primarily target lower-income consumers.
Peripheral strategic groups consist of cloth-diaper marketers and diaper services. The cloth-diaper marketers are important because, as sales increase in this sector of the industry, volume in the disposable-diaper sector may be affected. Cloth-diaper marketers are geared mainly toward budget-conscious households in which the head of the household and the only wage earner in the family is male. Diaper services, on the other hand, directly encroach upon the disposable-diaper market because they offer convenience as well as the benefit of non-polluting cloth diapers. They target middle- to upper-income families with working mothers and a preference for an environmentally safe diaper.
By far, the companies with the greatest market share in the industry are Pampers, Huggies and Luvs. All three target a more affluent customer and their price structure reflects this strategy. In a survey of five major supermarket chains in the Southern California area, the price differentiation between the three is very minimal.
These companies also distribute their products through the same channels, with supermarkets and specialty stores being the most prominent. All three attack the market very aggressively through their promotional campaigns by placing a large portion of their advertising dollars in television and magazines. Direct-mail campaigns featuring coupons and giveaways and cooperative advertising programs with hospitals that sponsor Lamaze programs offer additional marketing support.
This strategic group consists of smaller disposable-diaper marketers as well as store-brand product lines. This group appeals to the discount shopper who doesn't care about decorative designs on the diapers or the packaging. Competitors in this strategic group offer consumers good, quality diapers at a price significantly below those of the major competitors.
Store-brand diapers are of course distributed through the chains of stores that produce them. For instance, Toys R Us produces its own private-label disposable diapers, which are sold exclusively through Toys R Us. The major advertising for these diapers is through weekly flyers in the local newspaper featuring items that are currently on sale at those stores.
Smaller manufacturers differ in their distribution strategies and promotional campaigns. These brands are sold mainly through specialty stores and selected supermarkets. They generally rely on point-of-purchase displays and coupon offerings in the local newspapers. Rarely will you see them advertise on television or in magazines.
Geared toward the lower-income, budget-conscious shopper, generic-brand disposable diapers are the ultimate no-frills diapers. Their price points are very attractive to budget-conscious shoppers because they are often priced 45 percent below name brands and 25 percent below store brands.
The problem with these disposable diapers is their association with poor quality among the more affluent shoppers, and because their advertising support is nonexistent, there are no claims to counteract this assumption. Due to their price points, however, these brands of disposable diapers are often distributed through supermarkets and large discount stores.
Cloth Diapers & Delivery Services
Together, these two strategic groups equal a $300 million segment of the diaper industry. They are significant because both groups offer alternatives to parents and fulfill many of the needs that disposable diapers don't.
For cloth-diaper manufacturers, the major competitive advantage is price. The cost of diapering a baby in disposables for 30 months is $2,000-$2,600 more than the cost of using cloth diapers for the same period. Combine this with the fact that some babies are allergic to materials used in disposable diapers and the objection some people have with the waste generated by disposable diapers, and cloth diapers become a considerable competitive force.
Cloth diapers are distributed through specialty stores, chain stores, membership warehouses, and mail order. Because of their cost advantage, cloth diapers are marketed mainly to a lower-income segment and households with only one working parent. They are also finding ready acceptance among more affluent households that have a deep concern over the environmental problem created by disposable diapers.
In direct competition with disposable diapers are diaper services. These are companies that are very price-competitive with the primary competitor group of disposable-diaper marketers. They deliver freshly laundered cloth diapers on a weekly or bi-weekly basis and collect used diapers. Customers can request more diapers if they choose. Diaper services usually target affluent households in which both parents work, both are very selective about the diapers they put on their babies, and they are very concerned about the environment.
In part V of our Marketing Plan series, we'll be covering Product Development. Tips are updated daily at 5:00a.m. PST.