Competitive Strategies for Marketing and How to Create One

By Indeed Editorial Team

Updated 11 December 2022

Published 27 April 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Competitive strategies are techniques that companies use to position themselves above others in the market. A business's aim may be to influence customers to buy one of its products or services instead of buying from a competitor. If you're a marketer, you might consider the business's potential competitors and develop a competitive strategy that could help it attract customers. In this article, we look at what competitive strategies are, discuss why they're important, list the different types and outline how a business develops and maintains the best strategy for itself.

What are competitive strategies?

Competitive strategies are plans to make a business prominent in the market. By focusing on factors like pricing, product quality, value and unique selling point (USP), it can create a product or service that may appeal to a particular target market. Once marketing managers have created their strategies, they can ensure that all the marketing follows it. For example, if a company's strategy involves cost leadership to offer the lowest price in the market, its marketing material may use phrases like 'lowest price in town' or 'unbelievable deals'.

Why are these strategies important?

Marketers can create competitive techniques to help them increase prominence and visibility in a market. This could result in more sales and increased profits. Whether for an existing business that wants to refine its strategy or for someone starting a brand-new company, focused plans can help marketers reach their target audience.

Related: Why Your Company Needs a Business Strategy (With Examples)

Different types of competitive strategies

There are generally four types of competitive techniques:

Cost leadership strategy

This strategy involves offering the lowest-priced item on the market. Many buyers like low prices, which means there's a market for lower-priced items. For sellers, this strategy can be a bit trickier because they may still want to profit from each item. In a cost leadership strategy, the profit is typically from items being mass produced and sold in bulk. This strategy is most suitable for large businesses, which can mass produce items at low cost. It's not generally appropriate for small businesses, particularly those whose items are handmade.

Differentiation leadership strategy

This strategy focuses on a particular brand's USP and finds a quality that no other business can match. For example, a business may produce a unique design and trademark it. Because customers may pay more for something that's not already on the market, this strategy allows businesses to increase their profit margins by charging more for their unique products or services. It can also help a business to increase brand awareness and customer loyalty.

Cost focus strategy

Like the cost leadership strategy, this plan aims to give customers the lowest possible price. It's slightly more focused, looking at a specific target market and producing items or services tailored to what that market wants. This strategy might define the target market by age, gender, interests or location. For example, a Tasmania-based outdoor company may produce lots of layered clothing and wet-weather gear, but a competitor in the Northern Territory may produce hiking shorts, t-shirts, sun cream and mosquito repellent when targeting hikers in the dry season.

Differentiation focus strategy

Companies adopting a differentiation focus strategy consider the value of its products. Its target customers may not worry about getting the best deals on the market but are happy to pay more for products that are useful and enjoyable. The company usually does this by finding USPs and creating good-quality products. For example, a shampoo company that uses a differentiation focus strategy may spend time creating the perfect formula with various essential oils. They could attract attention in the market for having a great-value product and could advertise themselves as one of the few brands using these oils.

How marketers develop strategies

Here are some steps marketers use to develop a competitive strategy:

1. They choose the right strategy

Some questions they consider when choosing the best strategy for themselves are:

  • How big is the business? Is it a big brand that could use the cost leadership strategy or a more niche company that might benefit from a differentiation focus or cost focus plan?

  • Does the business have a clear niche?

  • Who is the target market and what is their priority? Is it for cheap, good-value products and services or those that are unique?

2. They consider their USP

Next, they consider their USP. All brands typically have something that sets them apart from competitors. Whether this is low prices, an environmentally conscious message or a special way of making something, considering their USP can help them attract their market. For example, a hotel chain could market itself as offering an 'affordable luxury' brand by providing lavish accommodation with a lower price tag. As most luxury brands are expensive, this could be a great USP.

3. They examine their target market

Once marketers identify their USP, they examine their target market. Usually, marketers have a very clear idea about who might buy their products. They might consider an age range, but some brands prefer to leave this open and focus on hobbies and interests. They try to be as specific as possible with these, as a clear idea of the target market may help their marketing team.

Related: 10 Careers in Marketing (With Salaries)

4. They analyse their direct competitors

While their brand could include some unique factors, it may well have direct competitors. This usually isn't a problem, but they may wish to spend some time analysing their competitors' brands. When analysing, they may think about the following:

  • what their competitors don't offer

  • what their competitors are doing right (they could then try to replicate this)

  • what their competitors could improve on (they could then make these improvements on their own brand)

5. They consider branding

Once they have a clear idea of their strategy and USP, they consider branding. They may wish to use specific colours, fonts and images to portray their brand. Someone starting a new business might consider their strategy when they decide on the name. For example, if their strategy is to provide luxury, high-value products, they probably want to avoid using words like 'budget', 'saving' and 'cheap' in their name.

Related: How to Write an Action Plan to Help Achieve Your Goals

6. They brief the marketing team

The next step is to speak to others in the marketing team. They ensure the team is aware of the business's main focus, who to target and what kind of branding to use. This helps the marketing team to create successful campaigns that target the right people using the best language, video and images.

Tips for maintaining business strategies

Below are several tips that marketers use to maintain their business strategies.

They keep up to date with the market

Generally, older companies have an advantage in the market because they have gained some authority and brand loyalty. But it's still important that they keep up to date with any new competitors. When marketers notice a potential competitor, they analyse the competitor's brand carefully, looking for ways that it offers a different service. They also assess whether they and their competitor are advertising to the same target market. They then use their findings to adjust the company accordingly.

They use appropriate advertising

Once marketers have developed their strategy, they consider the platforms where they could advertise their product. For example, if they're a travel brand providing cheap family holidays to global destinations, they could contact social media brands that have a big family audience. Alternatively, they could make deals with other family-orientated businesses, like kid-friendly museums or zoos and advertise these in their lobbies. By ensuring that any advertising is specific to their target audience, they get the best return on investment (ROI).

Related: What Is Positioning in Marketing? (Benefits and Strategies)

They become an environmentally friendly company

Becoming an environmentally friendly company is one of the most important things that a business can do. When a business thinks about the planet and its people, it's not only good practice, but it can also set their brand apart from others. Here are some ways that businesses become environmentally friendly:

  • Environmental policies: A business can have clear policies about reducing plastic usage and energy consumption. They write these down and ensure that they adhere to them as much as possible.

  • Discussions about environmentalism: Businesses that often talk about the importance of being eco-friendly on their website or social media can set themselves as an authority on environmental issues. When customers want to find sustainable alternatives for products, they may automatically think of a particular business.

  • Reusable materials: A business can offer reusable materials for their staff and customers. For example, if they have a café, they try to offer reusable or recyclable takeaway containers.

They value diversity

By having clear policies on diversity, businesses can also show that they're responsible. Making a conscious effort to include people of different races, religions, sexualities and sizes in the workplace and campaigns is something to strive towards. Not only is it an important policy, but it can also make the company seem more accessible to potential customers of these minorities.

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