Marketing Analysis Test 2 Review CH 14
Disadvantages: Free Riding
A later entrant might be able to benefit from the pioneer's resources, including its investments in technology, product design, customer education, regulatory approval, and infrastructure development at a fraction of the pioneer's cost and effort. To illustrate, after spending millions of dollars to develop the technology and educate the American audience about the advantages of a personal digital recorder, TiVo found itself in competition with cable and satellite operators selling similar services to its already educated customers. A later entrant might also reverse-engineer the pioneer's product and improve on it, while investing only a fraction of the resources required to develop the original product. For example, FedEx built on DHL's idea to start overnight deliveries in the United States, IBM launched its personal computer by building on the earlier product introductions from Apple and Atari, and Best Buy launched a rapid expansion of superstores based on the success of the business model introduced by Circuit City.
Benefits: Creating Preference formation
A pioneering company has a unique opportunity to shape customer preferences, creating a close association between its brand and the underlying customer need
Identifying and Closing Usage Gaps
A practical approach to closing usage gaps calls for identifying and eliminating impediments the different stages of product usage. The potential impediments to product usage can be visualized by a series of bars, as shown in Figure 10. Here, the yellow portion of each bar corresponds to the share of customers whose consumption behavior is off target, and the ratio of the yellow portion to the blue portion reflects the effectiveness of the company's actions at each step of the consumption process.
Disadvantages: Market Uncertainty
Another potential disadvantage in being a pioneer is the uncertainty associated with the offering. Thus, the uncertainty associated with designing the offering and anticipating customers' reaction to this offering is one of the main factors responsible for the high degree of failure involved in pioneering a market. Whereas the pioneer has to deal with the uncertainty. surrounding the technology and market demand, al follower can learn from the pioneer's successes and failures and design a superior offering. Because of the uncertainty associated with the introduction of a new offering, companies with strong brands and distribution capabilities might choose to be late-market entrants in order to learn from the pioneer's experience and develop a superior market-entry strategy. These companies use their brand and channel power to gain market share and successfully compete with market pioneers. For example, the first sugar-free soft drink was introduced in the United States by Cott in 1947, and the first sugar free cola was introduced by Royal Crown in 1962, only to be overtaken by Coca-Cola and PepsiCo, which used their branding and distribution muscle to dominate the consumer soft drink market.
Benefits: Creating Switching Costs
As a pioneer, a company has the opportunity to build loyalty by creating switching costs for its customers. These switching costs can be functional (loss of the unique benefits created by the pioneer's offering), monetary (the cost of replacing current equipment or a penalty for breaking a contract), or psychological (the cost of learning the functionality of a competitor's offering).
The adoption funnel
Awareness reflects customers' knowledge of the offering. Awareness can be generated by the company's direct communications with its target customers; by communication initiated by its collaborators; or by third party communication such as press coverage, social media, and personal communication. Attractiveness reflects the benefits associated with a given offering, typically considered in a competitive context. Thus, an offering's attractiveness reflects its ability to satisfy a particular customer need better than the competition. Affordability reflects customers' perceptions of the monetary costs associated with the offering and their ability to cover these costs. Considered together, attractiveness (benefits) and affordability (costs) determine the overall value (utility) of the offering for target customers. Availability reflects customers' ability to acquire the offering. An offering's availability is a function of the proximity of the distribution channels to target customers and the in-stock availability of the offering in these channels on a day-to-day basis.
Pioneering New Markets
Based on the domain in which the company becomes the first. mover, there are several types of pioneers: technology pioneer-the company that first introduces a new technology, product pioneer the company that is first to commercially introduce a new product, and market pioneer-the company that first introduces an offering to a particular market. Recognizing the importance of being a technology and product pioneer, the rest of the discussion focuses on market pioneering. In this context, the term pioneer or first mover refers to the first company to establish its presence in the market. To be a market pioneer, a company does not need to be a technology pioneer or a product pioneer. In fact, it is often the case that the company first to develop a new technology or first to launch a new type of product is not the company that becomes the market pioneer. To pioneer a market, company must be the first to gain a leading share of customers' hearts, minds, and wallets.
Defending Market Position
Because business success inevitably attracts competition, in addition to thinking about how to expand its offerings, a company must develop strategies to defend its market position. There are four basic ways in which a company can react to a competitor's actions aiming to erode its market position: stay the course, enhance its offering (increase its benefits or lower the price), reposition its offering (move upscale or downscale), and launch new offerings. These strategies are illustrated in Figure 6 and discussed in more detail in the following sections.
Disadvantages: Incumbent Inertia
Being a market leader often leads to complacency, thus leaving technological and market opportunities open to competitors. To illustrate, IBM's reliance on mainframes, even when mainframes were being replaced by desktops and networked computers, enabled competitors such as Dell and Hewlett-Packard to gain a foothold in IBM's markets and steal some of its most valuable clients. Incumbent inertia might also be driven by a reluctance to cannibalize existing product lines by adopting a new technology or a new business model. For example, brick-and-mortar booksellers such as Barnes & Noble and Borders failed to recognize the importance of e-commerce, allowing Amazon to establish a dominant presence in online book retailing. Incumbent inertia might also result from a "sunk-cost mentality," whereby managers feel compelled to utilize their large investments in extant technology or markets even when technological advancements and market forces make these investments unfeasible. For example, one of the reasons Ford lost its leading market position to General Motors in the 1930s was its reluctance to make the necessary investments t modify existing manufacturing facilities to diversify i product line.
Benefit Differentiation
Benefit differentiation aims to steal share from the competition by demonstrating the superiority of the company's offering on functional attributes such as performance, reliability, and durability and/or by its ability to create psychological value, such as conveying emotions and enabling customers to express their identity, Based on the offering's price point, there. are three benefit-differentiation strategies: premium positioning (greater benefits at a higher price), price parity positioning (greater benefits at the same price), and dominant positioning (greater benefits at a lower price).
Core Competency 6: Brand Building
Competency in brand building describes a company's ability to build strong brands that deliver superior customer value. This competency typically leads to the strategic benefit of brand leadership, which reflects a company's ability to build and sustain strong brands that capture customers' hearts and minds and engender customer loyalty. Examples of companies with demonstrated competency in this area include Harley Davidson, Lacoste, Hermès, McDonald's, and Coca-Cola.
Core Competency 1: Business Process Management
Competency in business management refers to a company's ability to build and manage a viable and sustainable business model that creates market value for the company, its customers, and its collaborators. This competency typically leads to the strategic benefit of business model leadership. Examples of companies with demonstrated competency in business innovation include Amazon, Uber, Netflix, Facebook, Google, and Airbnb.
Core Competency 2: Operations Management
Competency in managing operations refers to expertise in manufacturing and supply-chain management. Companies with this competency are proficient at optimizing the effectiveness and cost efficiency of their processes, which typically leads to two strategic benefits: logistics leadership and cost leadership. Logistics leadership involves proficiency in supply-chain management that enables a company to excel in sourcing, manufacturing, and distribution. For example, Foxconn-arguably the world's largest electronics contract manufacturer and a supplier for com like Amazon, Apple, Dell, Google, Huawei, companies Intel, Microsoft, Nintendo, Toshiba, and Xiaomi inter, stands out for its dynamic, high-volume production of complex electronics products. Examples of companies with demonstrated competency in logistics include UPS, FedEx, and DHL. Cost leadership reflects the and Dr position as the lowest cost (although not necessarily company's the lowest price) producer in the market. For example, Walmart's competency in operations management is reflected in its dominant position as a low-cost retailer. Other examples of companies with demonstrated cost leadership include Costco, Carrefour, H&M, and Zara.
Core competency 4: Product Development
Competency in product development describes a company's ability to develop products that deliver superior customer value. This competency typically leads to the strategic benefit of product leadership. Product leadership involves proficiency in creating new products that enable the company to excel in gaining and sustaining its market position. Examples of companies with demonstrated competency in this area include Apple, Microsoft, Tesla, Johnson & Johnson, and Merck. Note that competency in product development does not necessarily imply competency in technology development. Technologically inferior products delivering superior customer benefits are often more successful than technologically advanced products that fail to meet customer needs.
Core Competency 5: Service Management
Competency in service management reflects a company's ability to develop services that deliver superior customer value and typically leads to the strategic benefit of service leadership. Service leadership involves proficiency in initiating and growing customer relationships that enable the company to excel in gaining and sustaining a strong market position. Examples of companies with demonstrated competency in this area include The Ritz-Carlton, American Express, Amazon, Zappos, and Nordstrom.
Core competency 3: Technology Development
Competency in technology development refers to a company's ability to devise new technological solutions. This competency typically leads to the strategic benefit of technological leadership. Technological leadership involves proficiency in developing new technologies that enable the company to excel in establishing technological standards in markets in which it operates. Examples of companies that have demonstrated this competency include Motorola, BASF, Google, and Intel. Competency in developing new technologies does not necessarily imply competency in developing commercially successful products. To illustrate, Xerox and its Palo Alto Research Center (PARC) have invented numerous new technologies including photocopying, laser printing, graphical user interface, client-server architecture, and the Ethernet but have been slow in commercializing these technologies.
Market Position as a Business Concept
Depending on the frame of reference, a company's market position can be defined in different ways: as a share of the market in which it competes, as a share of mind among its target customers, and as a share of target customers' hearts.
Downscale repositioning
Downscale repositioning involves modifying the value proposition of an offering by moving it into a lower price tier. Unlike enhancing an offering lowering its price, in this case the company lowers the price of an offering while also decreasing its benefits. Because it typically leads to lower profit margins, downscale repositioning is rarely used as a strategy to defend a company's market position.
Gaining a Market Position
From a competitive standpoint, a company can gain share by using four core strategies: stealing share from competitors already serving the market, growing the market by attracting new customers to the category, growing the market by increasing sales to current customers, and creating new markets. These four strategies are outlined in more detail below.
Understanding the Adoption Process
From a customer's perspective, the adoption of a new offering can be viewed as a process comprising four main stages: awareness, attractiveness, affordability, and availability. Thus, for customers to adopt an offering, they must be aware of the offering, find its benefits attractive, perceive the offering to be affordable, and have access to the offering, meaning that the offering should be available for purchase and use 29 Because the number of potential customers who ultimately purchase the offering tends to decrease with each progressive step, the adoption process is also referred to as an adoption funnel (Figure 7).
Horizontal Extensions
Horizontal extensions are new offerings that are differentiated primarily by functionality and not necessarily by price (e.g., a sedan vs. a minivan). As product categories mature, their user base becomes mor diverse, calling for specialized offerings tailored to needs of different customer segments. Conseque pioneer might preempt the competition by extending its product line with offerings tailored to each strategically important customer segment.
Launch a New Offering
In addition to repositioning its existing offerings, a company can respond to competitive actions by adding new offerings to its product line. A product-line extension is similar to repositioning, with the key distinction that instead of modifying the value proposition of an existing offering, the company launches a new offering with a different value proposition. There are two common product-line extension strategies: vertical and horizontal.
The Drawbacks of being a Pioneer of New Markets
It is far from a sure thing that the pioneer will succeed in becoming the market leader. This is because pioneers face a distinct set of challenges that might impede rather than facilitate. their market success. The three most common challenges include free riding, incumbent inertia, and market uncertainty. The numerous drawbacks of being a market pioneer suggest that when entering new markets, a company should strive not only to gain share but also to create a business model that cannot be easily copied by its current and future competitors. Because market success inevitably attracts competition, creating a sustainable competitive advantage is the key to a successful pioneering strategy.
Identifying and Closing Adoption Gaps
Managing product adoption calls for identifying and eliminating impediments at different stages of the adoption process. These impediments, referred to as adoption gaps, can be illustrated by mapping the dispersion of customers across different stages of the adoption funnel. The goal of this analysis is to provide a better understanding of the dynamics of the adoption process and identify problematic areas that must be addressed. The dispersion of customers across different stages of the adoption process can be represented by a series of bars, as shown in Figure 8. Here, the yellow part of each bar corresponds to the share of potential customers who have not transitioned to the next stage of the adoption process. The ratio of the yellow portion to the blue portion of the bar reflects the effectiveness of the company's actions at each step in acquiring new customers.
Understanding Offering Usage
Many purchases are recurring in nature, whether they are products for daily usage such as food, apparel, and cosmetics, or durable goods such as cars, household appliances, and electronics. In this context, managing recurring consumption can have a significant impact on sales volume, especially in cases of frequently purchased high-ticket items. The total quantity of offerings purchased over time by a given customer depends on several factors, including overall satisfaction with the offering, the frequency with which this customer uses the offering, the quantity used on each usage occasion, and the ease of repurchase. As in the case of customer adoption, these factors can be presented in the form of a funnel illustrating factors influencing repurchase frequency (Figure 9). Satisfaction reflects customers' experience with the offering. Unlike the attractiveness stage in product adoption, which is based on expectations of an offering's value, satisfaction reflects the post-consumption evaluation that takes into account customers' actual use of the offering. Usage frequency reflects the number of occasions on which the offering is used. For example, for cars, usage frequency refers to how often customers drive; for toothpaste, it refers to the number of times people brush their teeth; and for shaving, it indicates how frequently customers shave. Usage quantity reflects the amount customers use on each occasion. For example, usage quantity for toothpaste depends on the amount of toothpaste people use to brush their teeth. In the case of unit-based products such as printer cartridges, water filters, and razor blades, which customers determine when to replace, usage quantity is defined by the replacement frequency. Ease of repurchase reflects the ease with which customers can obtain a replacement for the company's offering once it has been consumed.
The Benefits of Pioneering New Markets
Pioneering a market offers the incumbent a number of advantages that are not available to later entrants. These advantages include shaping consumer preferences, creating switching costs, gaining access to scarce resources, creating technological barriers to entry, and taking advantage of the learning curve.
Price Differentiation
Price differentiation aims to steal share from competitors by virtue of the offering's price advantage. Based on the offering's benefits, there are two price differentiation strategies: a "same-for-less" positioning (lower price for the same benefits) and a "less-for less" positioning (lower price for lower benefits). A particular form of the "same-for-less" strategy is cloning, which involves emulating a competitor's offering, usually with slight variations to avoid patent, trademark, and copyright infringement liability.
Identifying Usage Gaps: Repurchase Gaps
Repurchase gaps call for reamlining the ways in which the offering is replenished after it has been consumed. Closing repurchase gaps can involve enabling customers to monitor the current level of product performance and informing them in a timely manner that the offering needs to be replaced. For example, printers include toner level indicators to alert users that the cartridge will soon need replacement. Gillette cartridges feature colored strips that fade with use, letting the user know that it is time to replace the cartridge. A company might also invest in educating its customers about the optimal frequency of repurchasing its offering. For example, oil change chains such as Jiffy Lube have been successful in promoting the idea that a car's oil must be changed every 3,000 miles to prevent engine wear-a belief that persisted long after technological improvements have made changing oil that frequently unnecessary and wasteful. Another approach to closing purchase gaps involves offering incentives that encourage customers to buy the offering in advance of the need to replace it so that they never run out. Repurchase can also be facilitated by simplifying the process of reordering the offering, such as introducing subscription programs (e.g., Amazon Subscribe and Save) and one-step reordering devices (e.g., Amazon Dash).
Share of Heart
Share of heart reflects the degree to which a company's target customers have a personal connection with the company and its offerings. A high share of heart means that customers have a deep emotional connection with the company's offerings. Brands that have established. leadership in gaining a share of customers' hearts have managed to become lovemarks-a term coined by Kevin Roberts, former CEO Worldwide of the advertising company Saatchi & Saatchi. Brands like Harley-Davidson, Porsche, and Apple have developed a loyal following that includes many customers who have become company evangelists voluntarily advocating on behalf of these brands.
Share of Market
Share of market reflects a company's share of the market in which it competes. Market share can be defined in terms of the number of units sold within a given period of time (usually annually) or in terms of the monetary value of these units. For offerings sold at similar price points, monetary and unit-based measures of market share are likely to coincide. For offerings sold at different price points, unit-based market share can be more informative because it reflects the sales volume independently of the price at which different offerings are sold. At the same time, focusing exclusively on unit share can be dangerous because without a corresponding increase in revenues, increase in sales volume might lead to profit erosion.
Share of Mind
Share of mind reflects the degree to which a company's target customers are aware of its offerings. Share of mind can be thought of as the extent to which a company's products, services, and brands are associated with a particular customer need or category. A high share of mind means that the names of the company's offerings are likely to be the first that comes to customers' minds when they think about a particular need or product category. For example, Kleenex is often the first facial tissue brand that comes to mind, Band-Aid has a leading share of mind in the adhesive bandage category, Rollerblade has top-of-mind awareness in inline skating, and Gillette enjoys the mindshare lead in shaving.
Stay the Course
Staying the course can be a viable response to changes in the market conditions. The decision to ignore a competitor's action(s) reflects a manager's belief that this action either will have no impact on the company's market position or that the competitive threat is not sustainable and will dissipate by itself. For example, a manager might decide that its upscale offering will not be affected by the entry of a low-price, low-quality competitor and, therefore, not consider this action a direct threat. In the same vein, a manager might not react to a competitor's price reduction in the belief that this low price is not sustainable in the longer term. Staying the course can also reflect a manager's belief that there is simply not enough information to decide whether and how to act, and that additional data must be gathered to identify the best course of action. Indeed, without having a clear understanding of the challenges facing the company and their root cause, any action can end up being counterproductive, complicating rather than improving the situation.
Managing Offering Usage
The discussion so far has focused on growing sales volume by increasing product adoption by new customers. An alternative approach to growing an offering's sales volume involves increasing its usage by current customers and identifying and closing usage gaps.
Market Creation Strategy
The market-creation strategy is similar to the market-growth strategy in that a company gains market position by attracting customers who are not using any of the products and services offered in a given category (Figure 5). The key difference is that instead of stead of attracting new customers to an existing market in which the company faces numerous rivals, the company defines an entirely new category in which direct competitors are absent. Companies that have created new markets include eBay (online peer-to-peer marketplace), Netflix (digital streaming), Facebook (social networking), Groupon (group-based discounts), Uber (ride-sharing), and Airbnb (short-term lodging). Because of its focus on uncontested markets, the market creation strategy often leads to high profit margins and rapid growth-a scenario that inevitably attracts new market entrants. Therefore, to sustain its position in the newly created market, a company must begin to fashion a sustainable competitive advantage as soon as it starts creating the new market.
Market Penetration Strategy
The market-penetration strategy aims to grow sales by increasing the quantity purchased by the company's own customers rather than explicitly trying to "steal" competitors' customers or attract new buyers to the product category (Figure 4). For example, Listerine encourages its customers to use its mouthwash twice day rather than once, Starbucks' loyalty programs entice customers to visit its coffee shops more frequently, and Campbell urges its customers to eat soup in the summer. The competitive impact of market penetration varies based on buyers' behavior and, specifically, whether the sales volume stems from substituting competitive offerings for the company's products and services or results from incremental demand that expands the overall category usage. When the market penetration strategy leads to switching behavior, with customers buying larger quantities of the company's offerings instead of buying competitors' offerings, the net effect of this strategy is very similar to that of the steal-share strategy. The only difference is that instead of directly stealing competitors' customers, the company is stealing a share of purchases that its customers would have made from the competition.
Benefits: Creating a Learning Curve
The pioneer can also benefit from learning curve advantages, allowing it to heighten its technological know-how, productivity, and efficiency as it gains experience over time. The rate at which these advantages can be acquired by the competition is defined by the nature of the learning curve, such that a steeper slope means a quick increment of skill over time, making it easier for competitors to catch up with the pioneer. (Although in conversational language steep learning curve means a difficult learning process, a learning curve with a steep start actually represents rapid progress.)
Benefits: Creating Resource Advantage
The pioneer can benefit from securing scarce resources such as raw materials, human resources, geographic locations, and collaborator networks.
Benefits: Creating Technological Barriers
The pioneer can create technological barriers to prevent competitors from entering the market. For example, the pioneer can establish a proprietary technological standard (e.g., operating system, communication protocol, or video compression algorithm) that can give it a leg up by forcing later entrants to make their offerings compatible with this standard.
Steal Share Strategy
The steal-share strategy refers to a company's activities aimed at attracting customers from its competitors rather than trying to attract customers who are new to the product category. Examples of the steal-share strategy include Apple targeting Windows users rather than targeting customers who have never had a computer, Dollar Shave Club targeting Gillette customers rather than those who are just starting to shave, and T-Mobile targeting Verizon k Kindle Cloud Reader and AT&T customers rather than those who are subscribing to a wireless service for the first time. A company's steal-share strategy can vary in breadth: It can narrowly target customers of a specific competitor (e.g., Pepsi targeting Coke customers), or it can broadly focus on the competitor's market as a whole (..-Cola trying to steal share from cola market leaders such as Coke and Pepsi).
Building Core Competencies
To gain and defend market position, a firm needs to develop core competencies that will give it a sustainable competitive advantage. A core competency involves expertise in an area essential to the company's business model, allowing the company to create superior market value. From a marketing standpoint, there are six key areas in which a company can develop a core competency: business process management, operations management, technology development, product development, service management, and brand building.
Managing Offering Adoption
To identify the optimal strategy for increasing sales volume when introducing new market offerings, a company first needs to understand the process by which its target customers adopt new offerings, then identify the impediments to new product adoption in different stages of the process, and, finally, develop an action plan to remove these impediments. These aspects of managing the adoption of new offerings are discussed in more detail below.
Two types of Steal share strategies
To succeed in attracting competitors' customers, a company needs to present these customers with a compelling value proposition. In this context, there are two main steal share strategies: a benefit-differentiation strategy and a cost differentiation strategy.
Reposition the Existing Offering
Unlike enhancing the company's offering, which is usually associated with a relatively minor increase in its benefits or a decrease in price, repositioning involves a more dramatic change in the benefits and the price of the offering. There are two ways in which a company can reposition its offering: move upscale or move downscale. The decision to move upscale or downscale is usually determined by the company's strategic vision and, specifically, whether it is focused on margins, willing to sacrifice sales volume, or aims to compete on volume, albeit at lower profit. margins. To be effective, repositioning must be aligned with the needs of the target customers, the competitive offerings, and the company's goals and resources.
Market Growth Strategy
Unlike the steal-share strategy, which targets competitors' customers, the market-growth strategy aims to attract customers who are new to the category (Figure 2). For example, an advertising campaign promoting the benefits of smart watches builds the entire category by encouraging first-time buyers to purchase a smart watch rather than to switch from another brand of smart watches. Because of its focus on increasing the overall category demand, the market-growth strategy is also referred to as primary demand strategy. Therefore, this strategy is usually adopted in the early stages of an offering's life cycle when the overall mark growth is high and competition is not yet a primary issue addition, because offerings tend to gain share proportionate their current market position, in the case of mature product market-growth strategy is likely to benefit the market leader Because it aims to increase the size of the entire market, the market-growth strategy rarely involves comparative positioning. Instead, to grow the market, a company is likely to relate the benefits of its offering to customers' needs and underscore the ways in which the offering will fulfill these needs.
Upscale Repositioning
Upscale repositioning involves modifying the value proposition of an offering by moving it into a higher price tier. In this case, the company not only increases the benefits of an offering but also increases the offering's price. For example, in the late 1990s the German manufacturer of upscale writing instruments Montblanc repositioned its offerings in the United States. by withdrawing from office supplies stores such as Office Depot and Staples; upgrading its product line to include luxury watches, jewelry, and leather goods; and investing in its own stores and luxury boutiques.
Vertical Extensions
Vertical extensions are new offerings differentiated by both benefits and price, with higher priced offerings delivering a higher level of benefits. A popular strategy to fight low-priced rivals involves launching a fighting brand-a downscale offering introduced to shield the core offering from low-priced competitors. A slightly more complex approach to dealing with low-priced competitors is the sandwich strategy, which involves both the introduction of a downscale offering and upscale repositioning of the core brand. An alternative approach to deal with low-priced rivals is the good-better-best strategy, which involves introducing both an upscale and a downscale offering, resulting in a three-tier product line. These three strategies are discussed in more detail later in this chapter.
Identifying Usage Gaps: Satisfaction Gaps
call for improving customers' experience with the offering. Depending on the cause of the satisfaction gap, closing this gap might involve enhancing the benefits and reducing the costs of the offering to make it more competitive and to better align the offering's value proposition with customer preferences.
Identifying Adoption Gaps: Attractiveness Gaps
call for improving the benefits of the offering. Typically, this is achieved by redesigning the benefit-related aspects of the offering specifically, its product, service, and brand components. Attractiveness gaps do not always imply that the offering lacks the benefits desired by buyers; they can also stem from buyers' failure to comprehend the offering's benefits. Such gaps in customers' understanding of the offering's benefits can be closed by improving communication and providing target customers with an option to experience the offering via product samples and demonstrations.
Identifying Adoption Gaps: Awareness Gaps
call for increasing awareness of the offering among target customers. This type of gap requires improving company communication, which can involve increasing communication spending, streamlining the message, developing a better creative solution, or improving the effectiveness of reaching target customers. In addition to directly communicating the offering to target customers, the company can also partner with collaborators-for example, by engaging in joint (co-op) advertising with its channel partners and by fostering third-party communication such as facilitating publicity about the offering and encouraging media coverage.
Identifying Usage Gaps: Usage Quantity Gaps
call for increasing the amount of product used on each occasion. Usage quantity can be increased by educating customers about the optimal. usage quantity. A classic example of this approach is the "rinse and repeat" shampoo advertising campaign. Another approach involves increasing the size of the packaging in categories where bigger package size typically leads to consuming a larger quantity. Usage volume also can be increased by designing the product in a way that ensures dispensing of the optimal quantity per usage occasion. For example, Heinz introduced a plastic squeeze bottle, increased the size of the opening in the bottle neck, and designed the "upside-down bottle" so ketchup can be poured without having to wait for the contents to slide down to the opening of the bottle. In cases of unit-based products such as printer cartridges, razor blades, and water filters, usage-quantity gaps call for increasing the frequency with which customers replace the product. Replacement frequency can be managed by informing customers about the optimal usage duration and replacement frequency. For example, to encourage customers to replace their toothbrush, the Oral-B toothbrush features blue bristles that fade to alert users that they need a new brush.
Identifying Adoption Gaps: Affordability gaps
call for lowering the costs of the offering. Lowering the monetary cost might involve lowering the offering's price and adding monetary incentives to decrease the offering's cost to customers. As is the case with attractiveness gaps, affordability. gaps do not always imply that the actual cost of the offering is high; they might also result from customers' misperception of the offering's actual costs. Such misperceptions of the offering's cost can be surmounted by communication aimed at correcting customers' erroneous beliefs.
Identifying Usage Gaps: Usage-Frequency Gaps
gaps call for increasing the rate at which customers use the offering. For example, sales of a laundry detergent can be increased if customers wash their ches more often, sales of toothpaste can be increased if customers brush their teeth more frequently, and sales of razors can be increased if customers shave more frequently. Sales volume can also be increased by identifying new ways to use the offering. To illustrate, Campbell promotes the use of its soup (usually consumed in winter time) during the summer, and Arm & Hammer promotes baking soda not only for baking but also as a household cleaner and deodorizer.
Identifying Adoption Gaps: Purchase Gaps
indicate that even though customers are aware of the offering and find it attractive, affordable, and available, they have not yet purchased the offering for example, because of time or budgetary constraints. Closing purchase gaps typically involves introducing time-sensitive incentives such as short-term price discounts, coupons, and financing options.
Identifying Adoption Gaps: Availability Gaps
indicate that target customers do not have access to the offering. For example, an offering might be in short supply because a company underestimated its appeal to target customers or because of inadequate distribution coverage. Depending on the cause of the availability gap, improving an offering's availability can involve ramping up production to meet demand, improving the geographic coverage of distribution channels to give target customers better access to the offering, and improving channel operations to reduce stock-outs.
