Chapter 13

Compete Strategically

Sizing up your company's own products or services alongside your competitor's offerings is fundamental to developing a competitive strategy. Social media listening provides businesses with ways to make comparisons. Analyzing online conversations uncovers specifics like the level of interest people express in particular products, their features and benefits; the emotions, likes and dislikes they convey; and how they position them in their minds. Experienced strategists will recognize that these types of data resemble those in a standard SWOT analysis, used for discovering and evaluating company or product strengths, weaknesses, opportunities, and threats.

Winning Plays to Compete Strategically

The following five winning plays for competing strategically emerged from our review of these case studies:

• Use social media listening to find areas of competitive opportunity. Determine where competing will make a difference in performance. In an era of parity products, choosing the basis upon which to compete is critical. Products perceived as essentially similar have a difficult time battling based on features or performance. Advantage often needs to come from elsewhere, such as meeting needs better or some other aspect of the marketing mix. For example, Kraft, whose Tassimo pod coffeemaker is considered on par with market leader Keurig, looked into search trends to gauge interest in its product. Kraft unexpectedly discovered that interest in Tassimo was geographical, concentrated on the East Coast, especially in the Northeast. Marketers at the company realized that they could generate new sales by adopting a listening-inspired strategy to improve distribution and retail marketing in those areas, thereby making it easier for potential customers to find and purchase the product (see “Identify Competitive Strengths” later in the chapter).
• Understand the “people's positioning”. for your product or service. Derive the people's positioning of your product or service from social media listening, and compare it to your product's “official” positioning through a map-and-gap analysis. Mappings between the two indicate that positioning is resonating, whereas gaps reveal areas of disconnect. Evaluate any disparities for opportunities to correct misperceptions or adjust positioning, and to ensure that products remain in tune with customers and prospects. For example, if your product positioning stresses functional superiority, but customers view your product as providing a specific emotional benefit, eliminating that discrepancy helps the product map its perception. Marketers and advertisers who align their strategies with customer positioning are more likely to be successful (Ries and Trout 1981).
• Continually evaluate position in relation to business events, and adjust as necessary. Because competition occurs constantly, the people's positioning of products and services can change at any time, thereby affecting the competitive viability of your offerings. Social media listening offers marketers and advertisers the extraordinary capability to stress testing positioning in near-real time, to gauge its effectiveness. Here's how to do it: First, listen continuously for the people's positioning. Second, track how this positioning changes over time in response to the stress from competitive or marketplace events, such as new product introductions, recalls, or environmental damage. Last, consider whether you need to make listening-inspired adjustments to resync the product with the people's positioning. The Tylenol and Kindle cases, described in this chapter, are examples of two products that experienced bone-rattling events and effectively responded by using social media listening insights.
• Leverage social media listening insights and include multiple viewpoints in competitive response. Incorporate social media insights into competitive strategies. For instance, social media listening enabled one household products manufacturer to evaluate the threat posed by a new competitor from the customer's perspective, and then take action that proved effective for the company's product. In contrast, Scrabble licensees shut down a wildly popular derivative game played on Facebook that it viewed as an infringing competitor. Although the game maker came out with its own replacement, it alienated a passionate fan base and failed to generate much interest, as many people lost interest and just stopped playing (see “Handle Changes to the Core Brand”).

  When planning a competitive response, be open to findings that challenge the corporate mental model and make sure to draw upon multiple viewpoints. In Scrabble's case, legal considerations appeared to trump player concerns revealed through social media listening; apparently, they were strong enough to beat back any challenge to their mind-set and strategic choices. Had the Scrabble licensees abandoned their “command and control” company-first approach and offered solutions that engaged fans, everyone involved might have enjoyed more successful outcomes.

• Consider making a commitment to performing retrospective analyses using historical social media listening data to develop your own competitive playbook. Go back in time and immediately run through the steps just outlined. What events did your company or product experience? How did customers respond? What actions did you take? How effective were they? What did competitors do for their own products, and against yours? Answering questions like these can help compile an invaluable reference that equips your company to handle events and unfolding circumstances more confidently. Coupled with the foresight that social media listening signals provide, your company should be better prepared to anticipate change and compete more effectively. See the discussion of backcasting on p. 6.

We identified five tactics companies used that contributed to their competitive strategy:

• Identify leverageable competitive strengths.
• Understand product positioning in customer terms.
• Keep company and customer product positioning in alignment.
• Interpret competitor risk from the customer's perspective.
• Handle challenges to the core brand.

Identify Leverageable Competitive Strengths

Marketers pit products and services against one another on several dimensions, such as price, superiority, image, or meeting customer needs. Figuring out which of these areas matter most to customers and prospects is both an essential marketing function and a critical challenge. This becomes especially important when prospects perceive competing products as nearly identical or equivalent. Marketers need to know which levers they can push that will improve sales for their brands. Social media listening helps identify those levers, as the Kraft Foods example shows.

Kraft Foods’ Tassimo (single-serving pod coffeemaker) shares the podium with category leader Keurig. Seeking to increase sales and share, Kraft turned to a mix of free and paid tools to discover where a competitive opportunity might lie (Cotignola 2010). The brand's investigation unfolded quite clearly, and answered these questions:

• What are the relative conversation volumes for Tassimo and Keurig?
• What do people like and dislike about each brand?
• What are the behaviors and emotions people express about each brand?
• How interested are people in each brand right now?

If you look at these questions again, you'll probably realize that they are in line with our earlier discussion of analytic strategy (Chapter 3), and that they are some of the most familiar and standardized market research questions asked when analyzing situations and looking for relative strengths and weaknesses. Companies that use social media listening do not need to ask different questions or frame them differently; the only variation lies in the methods and data used to answer them (see Part I for more discussion about research methods).

Kraft used three tools from its box to answer the questions: no-cost Google Insights for Search (an analytic tool for search queries), Twitter Venn (a tool that analyzes the co-occurrence of terms used in tweets), and ConsumerBase, a social media analysis tool from NetBase. (See the entries for Google Insights and NetBase in the Appendix for product details.)

Using these tools, the company's research:

• Searched for terms “Keurig” and “Tassimo” in NetBase's database of social media conversations, and plotted the trends over one year. They found that while people talked actively about both brands, Keurig conversation levels were double those of Tassimo. Finding: Clearly, share of voice reflected Keurig's leadership position. (Note: See Chapter 17 for a full discussion about share of voice and market share.)
• Looked into “likes” and “dislikes” as reported by NetBase and represented in “word clouds.” They discovered that customers liked both brands a lot, as the ratio of dislikes to likes was less than 5 percent. They also found that the features and benefits people liked or disliked for each brand were nearly identical; they saw the convenience and brew quality as positive elements, and considered broken machines or overly expensive prices as drawbacks. Finding: Both brands were well-liked and perceived as parity products.
• Examined behavior and emotions through NetBase reports. They observed that positive behaviors like buying, wanting, or purchasing outweighed negative behaviors such as not using or not wanting. Emotions that supported the behavior clustered around love, like, and need. Finding: People were interested in purchasing Tassimo, and held favorable views. Tassimo was competitive.
• Estimated consumer interest in each brand by running queries and interpreting reports from Twitter Venn and Google Insights for Search. (Twitter Venn analyzes Twitter topics to determine how often they occur individually and how often they overlap, as in a conventional Venn diagram.) After looking at a period of roughly seven years, results showed that search trends exhibited strong seasonal preference for both brands, which peaked in the winter holiday season. Keurig's marketing appeared to be more effective in stimulating search; its search volumes climbed year after year while Tassimo's remained constant. Looking at Twitter updates to learn how often people talked about the brands recently, Keurig conversations occurred seven times as often. People tweeted about one brand or another, but not both.

  Google Insights for Search provides some very valuable ways to slice and dice its search data beyond simple search trend. For retailers, “regional interest” (a breakdown of search volume by states) sheds light on the geography of demand. Here, Kraft discovered something previously unknown: Interest in Tassimo was concentrated on the East Coast, with the top 10 states in the Middle Atlantic and New England regions (see Figure 13.1). Finding: Although Keurig had more consumer interest and word of mouth, people considered the brands separately, and geography played an important role in Tassimo's appeal.

Figure 13.1 Tassimo discovered that product interest centered on the East Coast.

Source: Google Insights for Search, September 30, 2010. Used with permission.

This chain of analysis showed Kraft that Tassimo was well regarded among potential consumers who were open to purchasing it. While Keurig currently dominated, its product did not hold any outright advantages. For that reason, Kraft reasoned that it could derive competitive advantage from leveraging the geography finding—the key insight—and recommended that Tassimo marketing initiatives hit hard in East Coast markets.

Understand Product Positioning in Customer Terms

Products fight it out in the marketplace by adopting and supporting positions believed to give them competitive advantage. Product positioning refers to “consumers’ perceptions of a product's attributes, uses, quality, and advantages and disadvantages relative to competing brands” (Boone and Kurtz 2006). Product positionings are mental models designed to help customers and prospects understand what they are about, what they do, what benefits they provide, and why they should be preferred and purchased. Positioning influences essential marketing decisions, such as communications, packaging, pricing, or sales channel programs.

Marketers and advertisers access an arsenal of research tools for positioning. Several frequently used techniques include perceptual mapping, trade-off analysis (technically known as “conjoint”), focus groups, and surveys. Social media listening offers an alternative approach by revealing how people in target markets position a product, rather than the way a product wants to position itself.

Text analytics company Crimson Hexagon explored the way people talked about two analgesics, Advil and Tylenol, on blogs, forums, and publicly available Facebook and MySpace pages over a five-month period (Crimson Hexagon 2009). Utilizing its software's automated capability to identify conversation themes, Crimson Hexagon discovered that people talked about each product differently: Advil for pain, and Tylenol for safety and children (see Figure 13.2 for details on the conversation themes).

Figure 13.2 People talk about Tylenol and Advil differently: Tylenol for safety and Advil for pain relief.

Source: Crimson Hexagon, (2009). Used with permission.

This research uncovered that people hold nuanced understandings of these products. Most seemed to recognize that each one's active ingredient carries some risk, but only Tylenol sparked conversation about safety, gentleness, and doctors’ recommendations. The key point here is that Crimson Hexagon did not structure its research categories on the basis of brand marketing. Instead, the firm captured the ways people positioned the products in their minds according to their understanding and experiences.

Keep Company Product Positioning and Customer's Product Positioning in Alignment

Marketers and advertisers who understand the ways that people position their products receive valuable signals about how to stay in sync with customers and prospects. That is especially important when events occur that can alter product positioning and its brand health, such as new product introductions, recalls, or product safety issues. The Tylenol and Amazon Kindle cases we'll examine demonstrate how events impact consumer perception, and how insights can shape competitive strategy.

Because Tylenol's active ingredient, acetaminophen, had been linked to liver damage at certain dosages, an FDA advisory committee seeking to protect the public announced restrictions on acetaminophen products (Paddock 2009). Researchers noted a related spike in conversation when this occurred, as people wanted to know what the news was; however, it quickly returned to normal. The reason may be that, while liver damage was a risk, people talking about Tylenol read past the headlines to the facts. The FDA report noted that the risk was “very low” for people who followed product label instructions, and that acetaminophen played an “important role” in treating pain and fever. Tylenol withstood a potential business threat because the news, initially framed as negative, actually reinforced deeply held customer perceptions about Tylenol safety. Consequently, Tylenol did not have to change strategy at all.

It was a different matter for the Amazon Kindle. The company had to change strategy or risk decline. As many people are aware, the Kindle ruled the e-book roost for several years and was beginning to seem invincible…until the Apple iPad came along. Think of the way people perceived the Amazon Kindle before the iPad introduction (“killer”; “must have”) and immediately afterward (doomed, also-ran). Amazon realized that Kindle's strategy needed overhauling if the product's success was to continue. A company known for its customer listening, Amazon is successfully remaking the Kindle in line with a revamped people's positioning, highlighted by the following elements:

• Affordable pricing for travel and gift-giving purchases
• Ability to access a library of unparalleled size
• Improved reading features
• Enhanced connectivity and broader capabilities, like games
• Avoidance of the additional expenses and reading downsides the iPad introduced

The result: Kindle 3 models sold out immediately, making it a bigger success than any of its “predecessors” (Agnello 2010; Hurst 2010).

Interpret Competitor Risk in Customer Terms

Brand strategy bears some similarity to basketball: One team has to defend against another team, which is constantly attacking and adjusting, and success can come from any individual on the floor. How brands assess and counter their competition impacts their brand health. What do they do, for example, when an innovative new team comes into their house?

One particular leading household product faced this situation when a new item with a “distinct, novel form” was about to roll out. Partnering with J.D. Power and Associates Web Intelligence, the company launched a social media listening project to monitor and track conversations. Similar to the Tylenol/Advil case just discussed, they identified and monitored discussions relating to the competitor's form, price, and advertising, and learned that consumers did not think well of the new rival. They expressed beliefs that the product was clumsy and unattractive, and criticized it for its high price point. As a result, the household product maker did not take any direct or defensive actions, like increasing spending on marketing, or reducing price. It simply kept abreast of the situation through continuous social media listening (J.D. Power and Associates, undated). Social media listening insights allowed for a type of expert counsel that gave the company valuable guidance, and credit should be given to the managers in charge for acting prudently and wisely on it. It took excellent judgment—and great confidence in the listening data—to resist the temptation to join the fight and call attention to their opponent's features and benefits. Moreover, the company enhanced its ability to maintain its competitive edge by listening for signals of change that, when strong enough, would bring forth a swift and strategic marketing response.

Companies vary in their capacity to respond to social media listening. Mind-set is a governing factor because it influences the way companies interpret marketplace signals—as shown especially clearly in the Scrabble case, described next.

Handle Challenges to the Core Brand

Brand health is easily affected in the digital world, given the rampant copying, borrowing, and sampling that takes place. How should brands react when their intellectual property and distinguishing features are copied and extended—and then become very popular in someone else's application, program, or product? Business futures can hang in the balance, as this example from Scrabble shows.

Jayant and Rajatj Agarwalla, two software developers from Calcutta, India, developed a Facebook application called Scrabulous that became wildly successful. Modeled on Scrabble, right down to the board colors, the app added all sorts of social networking features and enhanced capabilities.

Scrabble licenses rights to two companies: Hasbro in the United States and Canada, and Mattel everywhere else. Both of these companies took notice of the popularity of Scrabulous, and both filed a copyright infringement suit against the Agarwalla brothers. At the time, Scrabulous had about 600,000 daily players and nearly 4 million active users—a significantly large community of interest (Knowledge@Wharton 2008; Eldon 2009).

Once the legal action was underway, Scrabulous was removed from Facebook, and passionate Scrabulists lit up the site. Determined to fill the void, Hasbro partnered with Electronic Arts to create Scrabble Beta for the United States and Canada. Mattel, together with RealNetworks, released Scrabble Worldwide, excluding the United States and Canada. Later, an Indian court ruled that only the name was in violation, not the game. The Agarwalla brothers released an updated, renamed version of Scrabulous called Wordscraper quickly thereafter.

At the end of September 2010, Scrabble had 907,765 active monthly users; Scrabble Worldwide had 589,491 monthly active users; and Wordscraper clocked in at just 98,875 monthly active users (Allfacebook.com 2010). Both individually and collectively, the number of active users did not come remotely close to that of Scrabulous in its heyday. One reason for the drop: There were now incompatible Scrabble versions, where before, Scrabulous had been a single game. Due to geographic licensing restrictions—and also because Hasbro and Mattel developed their games differently—players using one version could not play with players using a different version. An American could play with a Canadian Scrabble player, but not with a Greek friend, or anyone else in the rest of the world, for that matter. This did not sit well with most gamers, who wanted to play well with others, no matter their location.

Interested observers, like Wharton professors Peter Fader and Kevin Werbach, raised questions about the merits of Hasbro's decisions. Hasbro knew how popular Scrabulous was, based on size alone; even a cursory scan of comments revealed the depth of player passions. But was Scrabulous a threat to Scrabble? After all, people loved Scrabulous because they loved Scrabble. Even with new bells and whistles, Wordscraper's failure to catch on as Scrabulous had was due to the fact that it had shed its Scrabble-ness (Knowledge@Wharton 2008).

This episode reflects the limitations of company mind-sets and their impact on decisions. It is apparent that both Hasbro and Mattel looked at Scrabulous as a competitor and license infringer, capable of devaluing the Scrabble brand, with which they enjoyed success. Both took action, mostly legal, to eliminate the threat—a classic command-and-control response. Yet the community was sending an entirely different signal: We want Scrabulous to stay; please work it out.

Though Hasbro and Mattel may have heard Scrabulists’ pleas, and recognized their passion, we can conclude that they did not, in the end, listen openly and without bias. The companies might have considered other options to address players’ concerns: They might have licensed and modified Scrabulous; worked with Scrabulous to make a universal version, allowing anyone to play with anyone else; or involved the Agarwalla brothers in their Facebook version development.

The irony here is that by failing to incorporate listening insights that brought players into their versions, Hasbro and Mattel created only mildly successful online brands. Their tactics ended up alienating a large, engaged community that should have been a key asset and source for growth.

Summary

Companies can use social media listening insights to inform a wide variety of competitive strategies, ranging from identifying specific product strengths to handling full-frontal assaults. Successful organizations center their strategies on customer and prospect perceptions of their own products, as well as those of their competitors. Companies that fail to bring people's voices into their brands risk alienating their customers and prospects, which can lead to weakened competitive viability and diminished performance.