Video 1
Chapter 2.1: Playing the field (1)
Study goals
- Learn what a company’s playing field or relevant market is
- Understand that the relevant market does not fall from the sky, but needs to be
chosen
- Learn how the segment the relevant market to find a suitable target group
Overview of strategic marketing decisions
Marketing strategy as three clusters:
1. Where do you compete, the playfield
2. What do you compete on, what does your company bring to the playfield that
others don’t
3. What are the explicit and implicit rules for this playfield
The playing field
,Definition of the relevant market and market segmentation
Pick what you are good at
Where and what I'm going to compete on are related to each other. You compete on
something you know you are good at.
There are different markets and what you do can fit several, but you have to choose
where you want to compete. The market you compete in is not set in stone, you have a
choice and you should choose your playing field wisely. But how to do that?
The game field
Where to compete?
They knew they were looking for a playing field and their choice came down to this
points:
- Not yet sold online
- Low effort of stock-keeping
- High margins
- High consumer base
They chose their company field wisely (online) in a time few companies thought about it.
Making them very successful.
How to define your relevant market
,In terms of the people you serve and the competitors. The market has no clear borders.
How to define? It depends. What does it depend on? Your view on the world and how
narrow or wide you want it to be.
- E.g. train -> thought they were a monopoly but have competition with cars and
planes etc.
- E.g. Sony -> said they compete with everything that makes a consumer happy,
but that is a lot
Why is it important?
Because depending on how narrow or wide you are defining your market, you need to
track competition, react to development, target potential customers and so on.
So which way is right, narrow or wide? Lets look at an example:
Where does the 911 Porsche compete?
● Against other luxury sports cars?
● Against any kind of luxury car?
● Against any kind of car?
● Against means of transportation?
Is price the relevant dimension to define competition?
● Against luxury goods?
So what is the right answer, in which market does the 911 compete? It depends on 2
things:
1. Substitutability between offerings, it is out of the company’s hands, and about
what a consumer sees as sub-stable
2. Where the company makes the cut, defining what products are part of your
relevant market, based on the substitutability.
Where to compete?
Substitutability between products
- Everything you would trade of for the Porsche 911 is substitutable
- A subjective decision, different for every consumer
, - Secondly, decide where you make the cut? Are luxury SUVs substitutable to
consider them as competitors?
- Every company can make their own cut
So in conclusion: The relevant market is defined by 2 aspects:
1. The subjective substitutability between products —> determined by the potential
customers and
2. The decision of the cut of —> determined by the company itself
Approach to define your relevant market
- It is not easy to say what a market really is
- Demand-based approaches all circle around the idea of substitutability and
measuring it from the customer's perspective.
- Supply-based approaches try to objectify the measurement by trying to find
similarities in products or companies to define the relevant market.
- A well-informed mix of these ideas is what you should go for to define your
relevant market.
- Also, think about the consequences of going one or the other way
Chapter 2.1: Playing the field (1)
Study goals
- Learn what a company’s playing field or relevant market is
- Understand that the relevant market does not fall from the sky, but needs to be
chosen
- Learn how the segment the relevant market to find a suitable target group
Overview of strategic marketing decisions
Marketing strategy as three clusters:
1. Where do you compete, the playfield
2. What do you compete on, what does your company bring to the playfield that
others don’t
3. What are the explicit and implicit rules for this playfield
The playing field
,Definition of the relevant market and market segmentation
Pick what you are good at
Where and what I'm going to compete on are related to each other. You compete on
something you know you are good at.
There are different markets and what you do can fit several, but you have to choose
where you want to compete. The market you compete in is not set in stone, you have a
choice and you should choose your playing field wisely. But how to do that?
The game field
Where to compete?
They knew they were looking for a playing field and their choice came down to this
points:
- Not yet sold online
- Low effort of stock-keeping
- High margins
- High consumer base
They chose their company field wisely (online) in a time few companies thought about it.
Making them very successful.
How to define your relevant market
,In terms of the people you serve and the competitors. The market has no clear borders.
How to define? It depends. What does it depend on? Your view on the world and how
narrow or wide you want it to be.
- E.g. train -> thought they were a monopoly but have competition with cars and
planes etc.
- E.g. Sony -> said they compete with everything that makes a consumer happy,
but that is a lot
Why is it important?
Because depending on how narrow or wide you are defining your market, you need to
track competition, react to development, target potential customers and so on.
So which way is right, narrow or wide? Lets look at an example:
Where does the 911 Porsche compete?
● Against other luxury sports cars?
● Against any kind of luxury car?
● Against any kind of car?
● Against means of transportation?
Is price the relevant dimension to define competition?
● Against luxury goods?
So what is the right answer, in which market does the 911 compete? It depends on 2
things:
1. Substitutability between offerings, it is out of the company’s hands, and about
what a consumer sees as sub-stable
2. Where the company makes the cut, defining what products are part of your
relevant market, based on the substitutability.
Where to compete?
Substitutability between products
- Everything you would trade of for the Porsche 911 is substitutable
- A subjective decision, different for every consumer
, - Secondly, decide where you make the cut? Are luxury SUVs substitutable to
consider them as competitors?
- Every company can make their own cut
So in conclusion: The relevant market is defined by 2 aspects:
1. The subjective substitutability between products —> determined by the potential
customers and
2. The decision of the cut of —> determined by the company itself
Approach to define your relevant market
- It is not easy to say what a market really is
- Demand-based approaches all circle around the idea of substitutability and
measuring it from the customer's perspective.
- Supply-based approaches try to objectify the measurement by trying to find
similarities in products or companies to define the relevant market.
- A well-informed mix of these ideas is what you should go for to define your
relevant market.
- Also, think about the consequences of going one or the other way
