Why Do Competitive Advantage Models Ignore Marketing?

Why Do Competitive Advantage Models Ignore Marketing?

Lately I’ve been mulling over the concept of “competitive advantage.” It seems so simple and straight-forward. It’s whatever gives you a leg up on the competition. And, indeed, that is basically what most of the definitions say.

The problem is not with the concept. The problem is turning the concept into something real and revenue producing.

And the definitions and models don’t help. They essentially look back in time and say that successful companies have a competitive advantage, and the competitive advantage is what made them successful. (You can get quite dizzy trying to follow this circular logic.)

Yes, I know that Michael Porter famously broke down competitive advantage into (1) cost advantage and (2) differentiation advantage. But after saying we should lower costs, increase productivity, and have a market-based differentiation, the models don’t really help a lot in the creation of a competitive advantage, on the ground, in the real world.

Let’s examine some of the assumptions.

(1) Competitive advantage by cost advantage: What viable company is not looking to reduce costs and increase productivity? But let’s assume that your company is particularly adept at doing this. The natural corollary then is that you should now compete on price. This is a dangerous strategy, as I have discussed elsewhere. Beyond that, however, competition by price brings with it the risk of decreasing margins as your competitors try to retain market share by price cutting – or have found that same cost savings you did.

(2) Competitive advantage by differentiation: The model posits “distinctive competencies.” This approach essentially takes a resource-based perspective, including natural resources, skilled and trained personnel, technology, etc. And it can be expanded to include strategies “that lift a firm to superior performance.”

Here’s what interesting about the definitions, models, and approaches. They do not include a role for marketing. There is no discussion of how marketing – branding, corporate identity, messaging, product management, or any other aspect of marketing – can have an effect on a firm’s success in the marketplace.

With all due respect to the modelers and business gurus, this assumption is just plain wrong.

In fact, done correctly, I would argue that marketing is critical to creating a competitive advantage.

Think about it. Why is it so difficult for new companies to gain traction in the marketplace – even if they have cutting edge technology, a committed and skilled workforce, and are willing to sell at a good (competitive) price? Name recognition. People usually go with what they know; and that is branding and corporate identity.

Think about it. Isn’t gaining a competitive advantage dependent, at least in part, on how products/services are positioned in their market space? A great product at a great price can die if it is pitched to the wrong audience – or pitched wrong to the right audience. And that is market segmentation, positioning, and messaging.

In fact, what may seem to be a competitive edge on paper is not a competitive edge until it is accepted as such by the marketplace.  And that is marketing’s role.  With all due respect to flow charts, spreadsheets, and models, there is no “advantage” until it is marketed, i.e. communicated to customers and prospects in a way that resonates with them.
So I would argue that marketing is a significant factor in creating a firm’s competitive advantage in the real world marketplace – and maintaining that competitive advantage.

Marketing, at its best, works with Product Development, helping the engineers and technical people understand customer behavior, why they buy, what is – and is not – important to them. Strategic marketing looks down the road, discerning emerging trends and potential opportunities. Tactical marketing develops messages and product positioning to maximize impact and acceptance in targeted market segments.

All this, together, helps a company develop a competitive edge.  All this, together, is what marketing does everyday.  Marketing takes a conceptual “competitive advantage” and brings it  to life in the battle for customer and prospect mind share.

4 thoughts on “Why Do Competitive Advantage Models Ignore Marketing?

  1. Hi Emily

    Nice, thought provoking article.

    In my service-based business there are a couple of notable agencies that have gained a competitive advantage through clever and persistent marketing when they’re only average (at best) at what they do.

    Conversely, I work with a top rate agency that hasn’t a clue about how to market itself, and is very much under the radar as a result.

    I’d say marketing can be a key to gaining competitive advantage, and I’m setting about helping my under the radar boys to raise their profile. I’ll come back to you on this.

    Thanks,
    Mark.

  2. Dear Emily.

    There is not an iota of doubt or argument on what you have very meticulously scripted.
    The fight or to say the ignorance Marketing gets is more due to the fact that most of the companys and especially the top notch executives still live with the Myth that Marketing is an expense which affects their bottom line and to negate any top line affect the best way forward that is being resorted to is situational tactical promotional activities to have immediate impact without a futuristic perspective in building brands or competetive advantage which will last, very unfortunate and frustrating for Marketeers and the worst part is there is not much that we can do to reverse the mindset since everything in marketing is not tangible on an immediate basis— i wonder if you agree to the above and suggest / help ways to change this… look forward to your valuable advise.
    It was great reading your article.
    Cheers.
    Akbar Khan.

  3. You have identified the elephant in he room that no one seems to recognize. Is it because Marketing IS Strategy? And Marketing + Strategy = Business? Part of an extension from your previous blog on “Marketing’s […] Sin of Omission,” marketers often allow themselves to be positioned as “promotions” people, doing the logo merchandise, ads, trade shows, etc – all costs to the finance people. Decades of this miss-positioning of the profession has taken the function of marketing out of the C-suite leaving strategy and competitive advantage to the least creative roles. Is it any wonder the elephant exists?

    Today, CEOs have exhausted all other options for growth, and the down economy is forcing them to look to creative innovation to prevent failure. Marketing is the only profession that has the skill to connect economic drivers with market trends to create strategies for innovative product development that will satisfy future customers. I think the good CEOs are seeing this, and those companies will survive.

    The rest will lose competitive advantage and wither, as they try to find ways to budget-cut, or make past programs more efficient in sales and operations. Without Marketing’s creative abilities in the C-suite, these companies have a predetermined destiny. Thanks for sparking the critical thought.

    • I’m not sure I agree that “CEOs have exhausted all other options for growth” since I think the possibilities of innovation and creative thought for products and services is pretty hard to exhaust. But the standard business models seem to assign marketing a tangential role is profit development. A shame really…since I do agree with you that creative and strategic marketing can be major drivers of success for an enterprise.

Leave a Reply

Your email address will not be published. Required fields are marked *