VOL. 0010 – FLORIDA, THURSDAY, MAR 2, 2023
Juan F. Arjona Harry
President & CEO Strategee
Every day becomes more evident and even critical, the need to find competitive differentiation that supports the margin claims of our offer.
It's not easy; And on a day-to-day basis we see how the lack of competitive differentiation fuels promotional periods and strategies that ultimately result in a significant erosion of margins.
There are two perspectives of competitive differentiation: macro and micro. These are perspectives for their initial understanding and their analysis must be given from the macro perspective (competitive arenas where competitive differentiation is more easily achieved) to the micro [which is the mechanism to activate for its achievement directly in the category against competitors], in order to achieve a true competitive differentiation that the final consumer or customer values and therefore pays for it.
I. Macro Perspective:
From this perspective, it is imperative that we locate ourselves in the market structure that is formed in what has been called each competitive arena -or sector where several companies compete for the same market-; Thus, we find 44 different market structures where each of them has its own competitive dynamics with its different modalities and levels of concentration, which in the end mark how up to the same market investment should be given for each variable of the marketing mix.
One of these characteristics that make up its own dynamic, is the capacity or not of differentiation that exists in that category; So for this there are some differentiation drivers, which, by knowing them and framing them within each competitive environment, we can in a practical and effective way, find the real possibilities of competitive differentiation or not in that particular category. These differentiation drivers are:
Categories oriented to the pleasure (and vice) of the individual.
Categories whose consumption enters through the mouth.
Categories whose products and / or services serve the final consumer to differentiate themselves from others.
Product categories that help increase the individual's ego.
Categories that help elevate the spirit of the individual.
Categories related to the health of the individual.
Categories related to the security and privacy of the individual.
Having this guide of the drivers of differentiation, allow us to notice symptoms of differentiating capacity in the category, which once measured, allows us to know its real possibilities and the scope it can take.
II. Micro Perspective:
From this perspective, it is reviewing the competitive characteristics of the offer and the set of offerings shared in the same sector by all participating brands or companies, specifying what are called points of differentiation of the category and the points of parity of the category.
Under this analysis, it will be the parity points that provide the best and most effective possibilities of competitive differentiation. Points of differentiation are expensive, risky and sometimes complex to execute options, whose contribution to competitive differentiation is rather discreet.
The enhancement of critical parity points makes it possible to obtain greater degrees of freedom in differentiation and therefore in gross margin.
In Strategee -together with our clients- we build the competitive differentiation matrix and the strategies that allow us to build it effectively according to your sector and competitive environment.