Sfeguarding_Competitive_Performance

Introduction Safeguarding competitive performance is a key element of marketing in any business or companydefined as the things one can do or otherwise the strategies that one can put in place to protect his profits and increase one’s margins as well as create value for one’s company.The best way to safeguard competitive performance is by creating a sustainable competitive advantage. A business analogy was once quoted by a prominent businessman Richard Buffet saying that, “no matter the size of the business, one should operate the business like it is a family business–one that you are going to hold onto for over a hundred years, and that the first thing one should think about is how to build and safeguard a competitive performance.Buffet compares the process of building and safeguarding competitive performance to a moat around a castle. This is a great analogy. Looking back to the ancient times, moats were excavated around castles as part of the defensive system–an obstacle immediately outside the walls–and usually they were filled with water. A good moat made it difficult for an enemy to access ones walls with siege weapons and for sure, “the wider your moat, the longer you can protect your profits and the deeper your moat, the more profitable you are”(David ,2000). It is therefore important for any businessman to lay down strategies and methods effective enough to protect his business from being preyed by his competitors.This is not an easy task since it requires both skill, knowledge and understanding of the general business environment.One has to fully understand the business environment including the customers’ needs, competitors and even the population structure of the business environment. Building and safeguarding competitive performance is a long life process that is always dynamic because of the constantly changing demands of customers as well as the constantly changing business ideas. Having a good understanding of ones’ customers apart from other strategies like product differentiation, branding and positioning, pricing strategies, locking in customers and locking out competitors are all useful in safeguarding competitive performance in any business. Safeguarding competitive performance involves establishing a real relationship with your customers, and being responsive to their needs and demands. The strategies are as discussed below. a) Having a good understanding of ones’ customers One of the best ways to protect profits and build higher margins, the key to a successful business, is to continually work to understand and serve a growing customer base. The way you do this is by mastering the fundamentals of acquiring and managing customers. One ought to make his offer relevant to achieve response. It is not wise to have one message for an entire customer base. Using segmentation and analysis, one must take care of the different kinds of customers and will always respond differently to different offers and messages. One also need to establish a relationship with his customer (they’re not a customer until they’ve bought from you three times). The core purpose of business is to win customers followed by getting them to buy more from you until they become multi-buyers. A business person ought to be responsive to his customer’s needs. Ask them what they want, and create periodic customer satisfaction surveys. Ask them if there’s anything else you can do for them. Funnel this information into developing new products to keep you ahead of the completion. Understanding your customer is the equivalent of protecting future revenue streams, and forms the basis of value. It’s the modern-day equivalent of building a good moat and creating a sustainable competitive advantage. b) Product differenciation Product differenciation can be defined as the development or incorporation of attributes (such as benefits, price, quality, styling, service, etc.) that a product's intended customers perceive to be different and desirable. Advertising and promotion of a product is based on its differenciating characteristics. It is a marketing process that showcases the differences between products. Differenciation functions to make a product more attractive by contrasting its unique qualities with other competing products. Successful product differentiation creates a competitive advantage for the seller, as customers view these products as unique or superior. Product differentiation can be achieved in many ways. It may be as simple as packaging the goods in a creative way, or as elaborate as incorporating new functional features. Sometimes differenciation does not involve changing the product at all, but creating a new advertising campaign or other sales promotions instead. Being unique in the marketplace provides distinct advantages.  In fact, if you do not provide something unique, your business will be severely challenged.  There are three elements of product differentiation namely convenience (or timing), customization and cost Recovery. i. Convenience People don't want to wait these days.   In order to differentiate your product from your competitors', consider how you can deliver your goods and services precisely when they are needed.  Often, this means being faster than your competitor — but not always! If I order curtains as part of an office project, for example, I don't necessarily want them immediately.  I may not need them for six weeks.  If I get them too soon, they might get damaged waiting to be hung. However, I do want them when the time is right for me.  The company that can deliever what I need when I need it will certainly be better positioned to earn my continued business. ii. Customization Customization is an element of product differentiation that cannot be over-emphasized.  The more one knows about his customers' needs — and the better one would succeed in serving those needs thus customers' satisfaction .The stronger the competitive position one is in the market depends on how well he understands his customers and inturn satisfy them. Service-based businesses are particularly capable of customization. Even with a product-based business, there are still techniques available for individualizing your firm, such as customizing your billings, or special packaging for your best customers. Product customization is a rapidly growing field for clothing, footwear (ex. sports shoes in school colors), backpacks in the color you want, cosmetics, automobiles, motorcycles, etc. iii. Cost Recovery Cost recovery does not mean paying the cheapest price.  It does mean gaining the highest leverage per dollar spent. Often, in fact, it makes more sense to spend a little more to obtain a product or service that most closely aligns with your needs and brings satisfaction.  Too frequently, "I got it cheap" is the consolation prize when you end up with something that really doesn't properly serve your needs Even though these three elements of product differentiation — convenience, customization, and cost recovery may appear to be simple and obvious, they are far too often missing in businessmemn’s efforts to develop and improve their position in the market.  As a result, companies that focus on providing these three elements and improving them steadily are always in a much better position to gain and keep a competitive advantage over their rivals.  In other words, paying attention to the above element yiels what is called commerce. Commerce happens when the customers' needs equal the businessman’s ability to satisfy them, building a steady flow of continued customer satisfaction and business growth. c) Branding and Positioning Once an entrepreneur or a businessman has identified an appropriate segment of the market to target, the challenge is to position the product so that it meets the needs and wants of the target customers. One way to do this is to use a “market map” to identify where there are “gaps in the market”or where there are customer needs that are not being met. For example, in the catering business ,one may just notice that customers are willing to pay a premium price for very high quality packed and delivered lunch rather than walking all the way to the resataurant.In this case the branding will goo hand in hand with positioning.The entrepreneur must be willing to take task of delivering the food on time while maintaining the quality in order to stand out from the rest. The trick with a market map is to ensure that market research confirms whether or not there is actually any demand for a possible “gap in the market”. There may be very good reasons why consumers do not want to buy a product that might, potentially, fill a gap. The market map illustrates the range of “positions” that a product can take in a market based on several dimensions that are important to customers.Examples of those dimensions might be high price versus low price,basic quality versus high quality,young versus old or simple and complex. A brand is a name, term, sign, symbol or design, or a combination of them intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of other sellers. Therefore it makes sense to understand that branding is not about getting one’s target market to choose him over the competition, but it is about getting one’s prospects to see him as the only one that provides a solution to their problem. The objectives that a good brand will achieve include: • Delivers the message clearly and confirms the availability of the seller • Connects the target prospects emotionally • Motivates the buyer • Concretes user loyalty To succeed in branding the seller must understand the needs and wants of his customers and prospects. This is done by integrating one’s brand strategies through the company at every point of public contact. The brand resides within the hearts and minds of customers, clients, and prospects. It is the sum total of their experiences and perceptions, some of which one can influence, and some that one cannot. A strong brand is invaluable as the battle for customers intensifies day by day. It is important to spend time investing in researching, defining, and building your brand. After a seller’s brand is the source of a promise to his consumer. It's a foundational piece in one’s marketing communication and one does not want to be without. d) Pricing strategies Pricing is one of the most important elements of the marketing mix, as it is the only mix, which generates a turnover for the organisation. It costs to produce and design a product, it costs to distribute a product and costs to promote it. Price must support these elements of the mix. Pricing is difficult and must reflect supply and demand relationship. Pricing a product too high or too low could mean a loss of sales for the organisation. Pricing should take into account the following factors: i. Fixed and variable costs. ii. Competition iii. Company objectives iv. Proposed positioning strategies. v. Target group and willingness to pay. An organisation can adopt a number of pricing strategies. The pricing strategies are based much their objectives and the number of competitors around.The following are some pricing strategies: a) Penetration pricing: Here the organization sets a low price to increase sales and market share. Once the market share has been captured, the firm may well then increase their price. A television satellite company sets a low price to get subscribers then increases the price as their customer base increases. b) Skimming pricing: This is where the organization sets an initial high price and then slowly lowers the price to make the product available to a wider market. The objective is to skim profits of the market layer by layer. A games console company reduces the price of their console over 5 years, charging a premium at launch and lowest price near the end of its life cycle. c) Competition pricing: This involves setting a price in comparison with competitors. Really a firm has three options and these are to price lower, price the same or price higher. Some firms offer a price matching service to match what their competitors are offering. d) Product Line Pricing: This is where an entrepreneur prices different products within the same product range at different price points. An example would be a DVD manufacturer offering different DVD recorders with different features at different prices eg a HD and non HD version. The greater the features and the benefit obtained the greater the consumer will pay. This form of price discrimination assists the company in maximising turnover and profits. e) Bundle Pricing: The organization bundles a group of products at a reduced price. Common methods are buy one and get one free promotions .In Kenya some firms are now moving into the realms of buy one get two free .This strategy is very popular with supermarkets who often offer such strategies. Another example is the Shop 100 in Kenya f) Psychological pricing: The seller here will consider the psychology of price and the positioning of price within the market place .The seller will therefore charge Kshs 99 instead Kshs 100 or Kshs 199 instead of Kshs 200. The reason why this methods work, is because buyers will still say they purchased their product under 200 shillings, even thought it was only a shilling away. g) Premium pricing: The price set is high to reflect the exclusiveness of the product. An example of products using this strategy would be Easy Coach Bus Services. h) Optional pricing: The organization sells optional extras along with the product to maximise its turnover. This strategy is used commonly within the car industry. i) Cost Based Pricing: Here, the firms take into account the cost of production and distribution, they then decide on a mark up which they would like for profit to come to their final pricing decision. If a firm operates in a very volatile industry, where costs are changing regularly no set price can be set, therefore the firm will decide on their mark up to confirm their pricing decision. j) Cost plus pricing: Here the firm adds a percentage to costs as profit margin to come to their final pricing decisions. For example it may cost ksh100 to produce a pair of sandals and the firm adds 20% as a profit margin so the selling price would be kshs120.00 e) Locking in customers and locking out competitors Customer lock-in is simply their cost to switch to another provider. It is an important concept in business. If lock-in is low one is less likely to be able to retain the customer, but if lock-in is thought to be high then the initial sale will be more difficult. Where switching costs are high it's easier to get a new customer than to get a customer to switch from another provider. First-mover advantages are especially powerful in markets with high lock-in. The ability to detect switching costs and predict how they'll change as time passes is an important business skill. Some types of lock-in rise over time .They are also called creeping lock-in. Those that fall over time are called contractual commitments. For example, as a supplier, switching costs are the key to valuing your installed base. As a buyer, show the seller you understand how you'll be locked in with them, and explain what your switching costs would be from your current vendor, and use these factors to negotiate a better deal. Strategies to lock out competitors will depend on how well the entrepreneur has locked –in his customers. Customers will tend to remain where they get satisfaction Conclusion Safeguarding competitive performance is a product of combined efforts and strategies. It is the most important goal of any entrepreneur. It is not a one day ordeal but a product of patience and skillful learning of the business environment as well as the needs and demands of one’s customers. It therefore involves working hard to gain and retain customers in the most challenging competition and thus protecting his profits and increasing his margins as well as creating value for one’s company. In order to safeguard competitive performance, proper pricing methods, branding, positioning, a good understanding of customers and product differentiation are very instrumental. References Reeds B.N (1997) Competitive performance: Australian food producers and processors achieving Success through innovative business strategies Morescope Publishers (on behalf of Dept. of Primary Industries and Energy). Kenneth T. Derr (1996) Competitive performance: master metric for an evolving global economy Johnson Graduate School of Management (Cornell University) Chevron Corporation, Media Relations and Executive Communications. David C. Mowery (2000) U.S. industry in 2000: studies in competitive performance, National Research Council (U.S.). Board on Science,National Academy Press. Touche Ross (1987) Competitive performance: a global perspective on financial services Touche Ross International Publishers. Paulo N. Figueiredo (1995)Technological learning and competitive performance Breeks Publishers.