B4 - Market Competitions

Types of attributes

• Search attributes

  • Easily observable, help consumers make the right choice

• Experience attributes:

  • Only experienced during the use of the product

• Credence attributes

  • Neither observable, nor experienced, consumers should believe that they are there.

Consumption cycle

• Cycle for consumers, consuming a food product.

• Consists of three sages

  • 1. Acquisition: decide, purchase, gather information

  • 2. Usage: Store the product, open the package, use the product.

  • 3. Disposal: Dispose product, recycle the package.

Post-purchase evaluation: satisfied or not?

• Experience < expectations, dissatisfaction

  • Dissatisfaction, do not buy again

• Experience = expectations, satisfaction

  • Dissatisfaction, do not buy again

  • Satisfaction → buy

• Experience > expectations, satisfaction

  • Satisfaction → buy (or even repeat purchase)

The profitability of food business

• Highly dependent on consumer satisfaction

• If consumer is satisfied, they will have more loyal consumers and positive word of mouth.

• Additionally, consumer satisfaction leads to:

  • More sales

  • less sensitive to price

  • Less attention to other brands.

• Additionally, more sales can also lead to lower costs of production = greater profit.

Competitor identification

• Most companies are more internally than externally focussed

• They identify competitors based on location, technological features

• They overlook competitors that offer comparable benefits in different ways

• The average number of competitors that is identified is 7

• Many companies focus on increasing market share through price actions and a like for their product.

Competitive rivalry

Talks about whom the company is up against and consists of four different risks:

• new entry

• Supplier power

• Buyer power

• Substitution

What is competitive rivalry?

Considers:

• Number of competitors

• Quality differences

• Other differences

• Switching costs

• Customer loyalty

• Costs of leaving market

Threat of new entry (competitive rivalry)

How easy is it for new companies to enter the rivalry?

• Time and cost of entry

• Specialist knowledge

• Economies of scale (larger companies = lower production costs)

• Cost advantages

• Technology protection

• Barriers for entry

Threat of substitution (competitive rivalry)

• Definition: The threat of substitution refers to the risk that customers will switch from one product or service to an alternative that serves the same function.

  Key Factors:

  • Substitute Performance: How well alternatives meet customer needs

  • Switching Costs: The expense and effort required to change products

  • Price-Performance Trade-off: Value comparison between original and substitute

Supplier power (competitive rivalry)

• Number & size of suppliers – Fewer or larger suppliers have more control.

• Uniqueness of service – The more unique, the more power they hold.

• Ability to substitute – If you can’t easily switch, suppliers have more power.

• Cost of switching – High switching costs strengthen supplier influence

Buyer power (competitive rivalry)

Buyer power refers to the influence that customers have over a company's pricing, terms, and market behavior, especially in competitive markets. It's shaped by:

1. Price Sensitivity

   • If buyers are very sensitive to price changes, they can demand lower prices or better value.

2. Number of Customers

   • Fewer customers means each one has more power, especially if losing one would significantly hurt sales.

3. Size of Each Order

   • Larger orders give buyers more leverage, as companies will want to secure their business.

4. Differences Between Competitors

   • If competitors offer very similar products, buyers can easily switch, increasing their bargaining power.

5. Ability to Substitute

   • When customers can find alternative products or suppliers easily, their power increases.

Buyer power: role of supermarkets

• Supermarkets are powerful buyers in the food supply chain, especially in the Netherlands (NLs), where they account for nearly 50% of food spending.

• Why food companies struggle with supermarkets:

  1. Market Structure:

     • There are few large buyers (supermarkets) compared to many sellers (food companies).

     • Buying power is further concentrated due to centralized buying desks, making negotiations tougher for suppliers.

  2. Price Competition:

     • Supermarkets aim to cut costs to remain competitive.

     • This drives down the prices they are willing to pay to suppliers.

  3. Assortment Restrictions:

     • Supermarkets limit the variety of products on their shelves, reducing opportunities for smaller brands.

  4. Sales Pressure:

     • Suppliers face strict sales targets per square meter of shelf space, making it hard to maintain product presence.

STP

• Market segmentation

• Market targeting

• Market positioning

Market positioning

• Communicating and delivering value to the consumer that is unique

• Distinguish the product/brand from competitors

• This way a brand can avoid direct competition

• Benefits of their product should be clear to consumers

• These benefits are often multi-dimensional

Positioning statement

To position a brand in a market you have to ask yourself?

• What are the benefits for the customer?

• How are these different from competitors?

This way the uniqueness of a product or brand can set them apart from other competitors.

Possible dimension of consumer benefits (positioning statement)

Low price	High price
Basic quality	High quality
Low volume	High volume
Necessity	Luxury
Light	Heavy
Simple	Complex
Unhealthy	Healthy
Low tech	High-tech

Marketing mix (4P’s)

Shows how a product can be marketed and is a tool for positioning

• Product → customer value

• Place → Convenience

• Promotion → communication

• Price → Cost for the customer

Marketing mix (product, service & brand)

Product	Service	Brand
Variety - different versions of a product	Variety	Knowledge
Quality - can vary	Quality	Positioning
Design - variation in color e.g.	Design
Package - bag or box?

The marketing mix (price & incentives)

Price	Incentives	Distribution
Retail	Loyalty	Distribution
Discount		Personal selling
Bonuses		Retail location
Payment plan		Download
Leasing options		Logistics

The marketing mix (Communication)

• Advertising

• Sponsorship

• Personal selling

• Brochures

• Sales promotion

• Emails

• Public relations

• Sales call

Product life cycle

Marketing channels

• Food companies often use multiple channels to sell their brands and products

• They should be present at times and places where their consumers are likely to purchase or consume their products

• Absence means a loss of market share and a missed opportunity to create associations.

• e.g. placing snacks near the counter at shops.