Customer Value Analysis The Key to Competitive Advantage

Marketing

Highlight 12.2

In analyzing competitors and searching for competitive advantage, one of the most important marketing tools is customer value analysis. The aim of a customer value analysis is to determine the benefits that target customers value and how they rate the relative value of various competitors' offers. The main steps in customer value analysis are as follows:

1. Identify the chief attributes that customers value. Various people in the company may have different ideas on what customers value. Thus the company's marketing researchers must ask customers themselves what features and performance levels they look for in choosing a product or seller. Different customers will mention different features and benefits. If the list gets too long, the researcher can remove overlapping attributes.

2. Assess the importance of different attributes. Ask customers to rate or rank the importance of the different factors. If the customers differ very much in their ratings, group them into different customer segments.

3. Assess the company's and the competitors' performance on different customer values against the values' rated importance. Next ask customers where they rate each competitor's performance on each attribute. Ideally, the company's performance will be high on the attributes that customers value most and low on the attributes that customers

value least. Two pieces of bad news would be: (a) the company's performance ranks high on some minor attributes - a ease of 'overkill'; and (b) the company's performance ranks low on some important attributes - a ease of 'under-kill'. The company must also look at how competitors rate on the important attributes.

4. Examine hoiv customers in a specific segment rate the company's performance against a specific large competitor on an attribute-by-attribute basis. The key to gaining competitive advantage is to take each customer segment and examine how the company's offer compares with that of its main competitor. If the company's offer exceeds the competitor's offer on all important attributes, the company can charge a higher price and earn higher profits, or it can charge the same price and gain more market share. If the company is performing at a lower level than its main competitor on some important attributes, it must invest in strengthening those attributes or finding other important attributes where it can build a lead on the competitor.

Monitor customer values over time. Although customer values are fairly stable in the short run, they will probably change us competing technologies and features appear and as customers face different economic climates. A company that assumes that customer values will remain stable flirts with danger. The company must review customer values and competitors' standing periodically if it wants to remain strategically effective.

demand. They share the costs of market and product development, and help to legitimize new technology. They may serve less attractive segments or lead to more product differentiation. Finally, they may improve bargaining power against labour or regulators.

However, a company may not view all of its competitors as beneficial. An industry often contains 'well-behaved' competitors and 'disruptive' competitors/ Well-behaved competitors play by the rules of the industry. They favour a stable and healthy industry, set prices in a reasonable relation to costs, motivate others to lower costs or improve differentiation, and aceept a reasonable level of market share and profits. Disruptive competitors, on the other hand, break the rules. They try to buy share rather than earn it, take large risks, invest in overcapacity and generally shake: up the industry. For example, British Airways finds KLM and United to be well-behaved competitors because they play by the rules and attempt to set their fares sensibly. Conversely, RA finds Air France and Olympic disruptive competitors because they destabilize the airline industry through their overextended networks and dependence on state handouts. A company might be smart to support well-behaved competitors, aiming its attacks at disruptive competitors - as, for instance, in the attempt by several airlines, spearheaded by RA, KLM and SAS, to block the European Commission's approval of a Ffr20 billion package of state aid for Air France.6

The implication is that 'well-behaved' companies should try to shape an industry that consists only of well-behaved competitors. Through careful licensing, selective retaliation and coalitions, they can make competitors behave rationally and harmoniously, follow the rules, try to earn share rather than buy it, and differentiate somewhat to compete less directly.

Continue reading here: Designing the Competitive Intelligence System

Was this article helpful?