Chapter 4+ Transient Advantage + Customer Loyalty Is Overreated Flashcards
MP 3
All competitors react -> managing sustainable competitive advantage
A good SCA meets the following criteria’s
- Customer care about what SCA offers
- The firm does it better than competitors
- The SCA must be hard to duplicate or substitute
3 sources of SCA
- Brands: strong brands can create customer loyalty and a unique identity that is difficult to replicate (soft drinks, beer, fashion markets)
- Offerings: innovative products and services that provide superior value are critical to maintain an edge in the market place (technology based businesses, software, electronics)
- Relationships: developing deep customers relationships can create a bond that goes beyond just the product or price, making it more challenging for competitors to lure customers away. (B2B, services,complex products, test equipment, haircut, financial services)
SCA définition
Being able to generate more customer value than competitive firms in the same industry for the same set of product so that competitors are unable to duplicate the firm’s effective strategy
Competitors react in different ways
- Technical innovations that provide competitors with a platform to launch a disruptive offering
- Exploiting changes in customers desire due to cultural, environmental, or other factors
- Individual entrepreneurship that constantly seeks a better way to solve a problem
- Me too copycats that improve the efficiency or effectiveness of an existing execution
Customer equity
Refers to the total of the discounted lifetime values of all its customers
Customer centric accounting process
- BOR equtities (Brand Offerings and Relationships) primary source of SCA
- To make optimal decision, a firm needs a framework that measures, track and reports customer equities
- Effective customer equity systems represent annSCA in their own right
Process for managing SCA
- AER strategies Acquistion, expansion and retention
- Key trends
- BOR equities Brands Offerings and Relationships
Transient advantage
Traditional SCA: Focuses on building unique market position that can be defended and maintained over long periods, relying on stable strategies and enduring strengths
Transient CA: recognises todays fats paced , dynamic business environment, such stability is increasingly rare. Instead, businesses must continuously innovate, create, and rapidly cycle through multiple short term advantage, adapting quickly to changes in the market and customers needs. Defending a position to maintain a flexible, agile approach that allows companies to move from one temporary advantage to the next
Lifecycle of transient Advantage
- Launch
- Ramp up
- Exploitation
- Reconfiguration
- Disengagement
- Launch
Company identifies an opportunity and allocate resources to capitalise on it
- Ramp up
Business idea is scaled up and the organisation begins delivering on its promise
- Exploitation
Company captures profits and market share, often forcing competitors to respond
- Reconfiguration
As competition intensifies, company must adapt its business model or product offering to sustain the advantage
- Disengagement
Once the advantage is eroded, resources are reallocated to new opportunities and the lifecycle begins again
Strategies for embracing transient advantage
- Focus on arenas and not industries
- Foster continuous innovation: leaders must build a culture that support expérimentations, learning from failure and adapting new info quickly
- Create a pipeline of advantage: continuous develop and manage a portfolio of short lived advantages
- Adapt metrics to support growth: use flexible measures such as real options that allow small investments with the potential for greater future commitment
7 traps in transient advantage
- First mover trap : doesn’t last
- Superiority trap: early stage won’t be superior than something that took years of creation
- Quality trap: stick to the level of quality that your customers are willing to pay
- Hostage resource trap: no incentives to shift resources to new ventures
- White space trap: opportunities don’t fit their structure
- Empire building trap: belief the one asset and employees you manage, the better
- Sporadic innovation trap: many companies do not have a pipeline of new advantages
What do you need for long term competitive advantage
Cumulative advantage
Cumulative advantage
Focus on making the company’s product the easiest and most instinctively comfortable choice for the customer. The goal should be to make purchasing decisions a habit rather than an conscious choice.
4 steps to cumulative advantage
- Become popular early: allow companies to build familiarity and develop habits among customers
- Design for habit: create a product that become automatic choice for customers. Familiar packaging and consistent experience
- Innovate inside the brand: when updating the product, companies should retain the cumulative advantage of the original, smooth transition from old to new habit
- Keep communication simple: mind is lazy, simple , clear messages resonates with the subconscious mind and reinforce habits
