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Pirates of the Corporation: Finding Your Competitive
Advantage
By Bob Garrow
Why were pirates so successful?
They certainly didn’t spend millions of doubloons on
marketing. What they did do was plan ahead to give
themselves important tactical advantages over other
ships. Only when perfectly positioned did pirates
fire a shot across the bow of the targeted ship,
using the element of surprise to create such a clear
competitive advantage that the other ship had little
choice but to surrender.
Thinking like a pirate can
help you in the business world. To begin, you need
to position your company in the minds of customers
by learning what customers really want and
determining how you can meet those needs in your
particular market.
Follow these steps to create a
strategy that will give YOU the competitive
advantage.
1 Study the
waters you’re sailing
Bring your marketing team
together to assume the roles of current and
potential customers. As a group, determine how your
customers perceive and value the following factors
in their buying decisions about your product or
service. Assign a percentage to each of these
Marketing Mix Factors to equal 100%.
·
Price – What percentage of a
customer’s buying decision is based on the product’s
price? For example, if you produce computer software
for the mass market, price is an important
consideration. Consumers want to pay as little as
possible for their software, so they place a high
importance on price, while large corporate and
government consumers in a different, more
specialized market don’t care much about price;
other factors are more important to their buying
decision.
·
Product or service – What percentage
of a customer’s buying decision is based on the
quality of the product or service? Are customers in
your market most concerned with product features,
and benefits, such as high functionality?
·
Marketing and Promotion – Including
your corporate profile, sales, advertising, and
promotions, what percentage of importance would
customers assign to promotional efforts for the
product? How much influence do marketing and
advertising have on product sales? What value, for
instance, do consumers in the market for personal
computers place on word-of mouth advice? On TV and
in magazine ads? On a company’s larger reputation in
the marketplace?
·
Place – Location of your business
doesn’t always matter, but it might influence
customer perception of value if, for instance, you
produce heavy machinery that consumers would buy
frequently and therefore routinely needed to pay
high shipping costs.
At the end of this first step
of the process, you will come to a conclusion such
as this: 60% of customers’ decision to buy product X
in your market is based on product quality. 20% of
their choice is based on price, and only 10% each on
promotions and place.
After you have allocated an
overall percentage to each Marketing Mix Factor,
further break down each factor, assigning
percentages of customer perceived value to the
elements that comprise that factor. For example, you
might break down price into levels, quantity
discounts, terms, etc.
Assign a rating on a scale of 1
to 10 (10 being the ideal) to each element within
the Marketing Mix Factors to indicate how your
customers would rate you on each of them. At this
point, you may determine that your product is
outstanding in terms of X and Y but that you are at
a disadvantage in certain areas, like Z. If,
however, you’ve determined that Z doesn’t matter
that much to consumers in your market, you can focus
on beefing up your advantage in the X and Y areas.
The goal is to develop a
picture of your competitive strengths. Repeat this
process using your competitors’ product or service.
This will help you to develop a picture of how you
and your competitors stack up in your customers’
eyes. Determine where your company is superior,
equivalent, and inferior. If you determine that your
product is superior, for instance, that’s the
advantage on which you’ll build to create your
strategies.
2 Draw up
the treasure map
The planning team is now in a
position to create a strategy that will build upon
your competitive advantages while capitalizing on
your competitors’ weaknesses. The earliest pirate
captains found that the key to leading was to
involve their crews in all planning decisions: where
to sail, how to divide treasures, and who their
officers would be. Likewise, as a leader you’ll want
to include as many of your key people as possible to
develop your plan and its implementation, in order
to maximize the level of commitment to the mission.
If you determine a clear
competitive advantage within your market in rapid
product development, for example, your strategy
should plan to grow that further. Similarly, if you
have lost a competitive advantage in customer
service – if your competition is superior to you in
this regard and it’s an important factor in customer
value perception for the product your company
produces – your plan should be to improve in that
area.
3 Steal
market share, ship by ship
Avoid the big ships – the Navy
vessels that can out shoot you – until you’ve
developed a fleet of your own. You can do this by
finding niches within the overall market where you
have competitive advantages. While you increase your
sales, your competitor may or may not recognize your
gains, or their losses.
Repeat this incremental sales
approach in several portions of the market, and you
can generate a substantial lead before your
competitors even know to react. Airlines like
Southwest did this; instead of openly pursuing the
business of the legacy carriers, they developed a
niche for economy fliers and incrementally took away
market share before their competition even realized
it.
Make those
scurvy dogs walk the plank
By following this three-step
strategy, you leave your competitors with only two
choices: 1) engage in an expensive counterattack to
regain market share, or 2) surrender portions of the
market to you. When you have a sustainable
competitive advantage and a flawlessly executed
strategy, competitors often have little choice but
to surrender a portion of the market to you again
and again. And eventually you’ll send them straight
to Davy Jones’ locker!
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