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Importance Of Being #1 Or #2 Brand In A Category
Posted By: oscar.ezeiza* on 4/25/2005 5:06 PM (CST) 250 Points
Why companies should build positions to compete in segment with #1 and #2 positions?
If a company is #3 what strategy do you consider they should take?
A big company with leader brands in diferent categories, should consider rationalize those brands that are not #1 or #2? What benefits would obtain?

Posted by: Peter (henna gaijin) Member Response
4/25/2005 5:17 PM (CST)
In general, the leaders compete by saying they own the category. They say that the smaller company can not do it all.

Smaller companies compete by trying to segment the category further and take ownership of that niche. They say that the bigger companies do not have the focus on that niche, so are not as good at servicing that niche.

Does the #3 take the smaller company tact? Maybe. If the market is personal computer operating systems, and the #1 is Microsoft, even #2 is very far behind, so would focus on their niche. This is what both Apple and Linux do.

But if the market is online travel, no one company has a large market share (or even leadership) and the top half dozen or so all compete as if they were the leader. In this case, the strategy for #3 should probably be consolidation (partner or acquire a competitor).
 
Posted by: PiotrD* Accepted Answer
4/25/2005 5:45 PM (CST)
First of all, it is important, what is the market concentration. Then, does the company compete on each segment with the same competitors or absolutely different. The third question (but not least) is: is the product homogenous.
- Remember, you can always use your "#3 product" to strengthen your other product in different segment. (read about BCG matrix and "Gillette, BIC, Wilkinson case")
- What is a difference between competitive #1 product and your #3 product in terms of profitability? Not so huge? You are lucky man.
- If the product is homogenous, you have less tools available: rather price and distribution.

So, (answering your question) don't try to rationalize your #3 product unless it is neither profitable nor helpful within your fight in other segments.

Piotr
 
Posted by: W.M.M.A. Member Response
4/25/2005 6:05 PM (CST)
Remember Avis? "We try harder". In this instance, they clearly took advantage of their position. They knew they were not market leader. Yet, in their advertising, they presented value, pricing, service against the BIG Guys, insinuating that you do not get service, price, value simply because they are too big.

"At Avis, we try harder"...to earn your business.
What would you like for us to do?
You tell us what you want, we will provide it.


Randall
WMMA
 
Posted by: SteveByrneBranding Accepted Answer
4/25/2005 8:49 PM (CST)
To add to what Randall, my esteemed colleague, has stated about the Avis story, here is an excerpt from an article I wrote on the subject:

“Quantifying territorial claims is at the heart of the theories espoused by Reese & Trout (R&T;) in the early eighties. To illustrate, R&T wrote, "An important early success in the positioning era was the famous Avis campaign". Here R&T provided a ladder hierarchy model with the first rung reserved for the first brand territorial claim. In the Avis story the ladder represents the rental car market as a category. Hertz owned the first territory, or top rung on the ladder. In 1962, Avis claimed the number two territory or second rung with its slogan, "We're number two, we try harder". It was the first time a company had declared itself as number two.

R&T wrote, " Many marketing people have misread the Avis story. They assume the company was successful because it tried harder." Any company could claim to be trying harder. National Car Rental, the number three car rental company, could claim to be trying harder. "Trying harder" as a claim harkens back to the "unique benefit" strategy days of marketing.

What was unique about the Avis story was Avis' claim of being number two. Avis staked a claim of territory that no one else could own as long as Avis defended it. National could say, "We're number three, we try even harder", but that wouldn't work in the third spot. It would just be copying Avis with a lesser claim.”

Link to article:
http://www.schraff.com/adv/helpdesk/brand_is.php

hope this helps,

Steve
 
Posted by: mgoodman Accepted Answer
4/25/2005 9:44 PM (CST)
Very often, the #1 and #2 brands do not need to sub-segment their categories. They can appeal to the broadest audience and, to a degree, define the category.

All the other brands need to find a niche and become #1 or #2 in their niche(s).

Read Ries and Trout's book, "Positioning: The battle for your mind." It explains much better than I could in a few dozen, or even a few hundred, words.
 
Posted by: pkemper* Accepted Answer
4/26/2005 12:52 PM (CST)
#1 and 2 usually have two distinct traits that leave segments of the total market underserved:
1. They concentrate on battling each other and their respective customers
2. Because of their size, they are not capable (or willing) to sacrifice their business model to serve clients that need specialties or special attention.

That last point is the opportunity for others to step in.
 
Posted by: oscar.ezeiza* Author Response
4/28/2005 8:23 AM (CST)
Thank you very much to all the people that takle the time to help me in anwering this question.
 


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