One of the most common forms of competition, and a factor which brings in more and more competition day by day is Product competition or competition on the basis of product portfolio. If you look at it, most companies compete on the basis of product lines and the products on offer. A company wants to cater to a lot of customers. It knows that the more products it has, the more customers it can cater to. As a result, more and more companies are paying attention to their product portfolio, which includes their product line and hence the resultant product line competition in the market.
Within the product portfolio, there are different things such as product line, product length, product depth etc etc. In essence, all these different product types point to the number of SKU’s you have within your arsenal. There are some companies like Samsung, which have a huge line of Smartphones, from low cost phones to the high cost and premium phones. In competition, there is Google or Apple, which has hand selected models, each of which is designed to impress the customers and be outstanding for him or her. One has a fantastic product portfolio and can cater to the whole market, and the other has a hand selected product portfolio and wants to cater to select target markets.
Like these smartphone giants, there are various companies in the Consumer durable sector, in FMCG, in Telecom or in any other sector which are competing on one thing “Who has a superior product”. The superiority of the product is decided based on the consumer they are targeting. For a low range consumer, a smartphone from Micromax or OPPO is also superior. But a high range consumer will scoff at even Apple’s efforts to make a decent phone.
Hence, Beauty is in the eye of the beholder. The success of a product, depends on the customer and the target market. If the acceptance for the product in the target market is huge, the product will immediately be a success. So, to cater to such target markets, companies compete on the basis of products and enter product line competition. There are three ways companies can enter the product competition.
1) Launch a breakthrough product
The likes of Google, Apple, BMW, AUDI or even Siemens have achieved the fame they have because of the breakthrough products they have launched in their own individual segments. Where Google and Apple are known as tech giants, BMW and AUDI are known to revolutionize the auto industry by producing superior products and highly engineered cars. Siemens is known to be the pioneer of multiple technology based segments.
Launching a breakthrough product gives you the lead in your industry as you cater to a demand which even the consumer did not realise he had. When the Ipod launched, consumers threw away their Walkmans. When the laptop launched, since then desktops have been dropping steadily and today Laptops sell more then desktops. The Mobile phone industry had a fantastic growth until Smartphones came along, which catapulted their growth rate and it is the fastest growing consumer durable as on date.
A major advantage of launching a breakthrough product is the skimming price available. You can demand your own premium and therefore get back the money you invested in R&D and awareness creation. A major disadvantage of this type of product competition is the demand that you have to create and the risk you have to take with regards to market acceptance of the product.
2) Product improvements – Launch slightly improved products
A wonderful concept of marketing is the New product development. While New product development initially concentrated on developing a new product altogether, it has successfully been used for relaunching an existing product which received good acceptance in the market. Look at the various types of Home appliances like Mixer grinders, Washing Machines and Refrigerators existing in the market.
The technology is old, but there are continous product improvements. Once in a while there might be breakthrough technologies like water dispensers integrated with refrigerators. But even in those breakthrough models, continous product improvements are necessary to penetrate the market. There are many ways that you can improve a product and these improvements might give an increased product depth (more types of the same product) or it may spawn a new product line itself (same product with many new features and a different target market).
The advantage of Product improvements is that the cost of awareness is low and the cost of R&D is also low. You generally enter the market when the Breakthrough / Existing products are established and you try to improve on those products by listening to your consumers. The disadvantage is that you will always be in a competitive state of pricing and rarely will you be able to demand a skimming price. As a result, the margins are less but so are the cost of launching a new product. There are many companies in the world which have established themselves by launching a huge product portfolio with improved products. Automobiles which have various product lines and different depths of each line of products is an example of product competition on the basis of product improvements.
3) Me – too Products
I have written quite a lot about Me too marketing recently. In general, me too products are products which penetrate the market by having features very similar to the market leader and by having prices far lesser then the market leader for them to be considered as an alternative. Over the years, it is assumed that due to cost constraints and because of the penetrative price, Me too products are always low quality and inferior to other type of products. However, this does not mean that Me too products cannot be considered as a major competitor.
A vast customer base of any company is lost to Me too competitors across the world. Across the world, we have a lot of companies which are not market leaders but which have products just like the market leader has. And because of the low per capita earnings, many people prefer these low priced product over the higher priced ones. Me too products are always penetrative and never breakthrough or innovative. Because they don’t earn much margins, they generally never invest in R&D but just focus on their sourcing. A reason CHINA is such a big nation today is because it targeted the me too market and started mass manufacturing products which were exact copies of the original. To read more about why me too marketing is on the rise, click here.
Overall, above are the three types of products which exist in the market and product competition happens in these kinds of products. Some companies prefer to breakthrough in the market and take away the market by storm. These companies are far and few in between. The other types of companies take existing products, improve the products and establish themselves in a widespread market. And there are yet other companies, which copy other products and supply the products at low costs. These are the ways that companies compete on product levels.