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Child’s Play: Managing Competitive Dynamics

20 January, 2016 - 17:27

The explanation for Barbie’s sales through time hardly seems obvious or easy. The problem of working out exactly what to do about all these customer flows and sales rates is still more complex. The numbers involved in Barbie’s case will be huge. Advertising budgets of millions of dollars will be allocated by both firms, supporting the efforts of many talented and costly people. A daunting list of vital questions faces these executives. For example,

  • How much should we spend on advertising in each geographic market?
  • How much should we spend on in-store promotion?
  • How much sales effort should we devote to winning new stores to stock our products?
  • How should we set the normal price for our dolls and their accessories?
  • How much should we spend on special offers?
  • On which advertising channels should we spend how much money in order to reach which group of potential or already active owners?
Figure 7.5 Sources of Barbie Sales When Children May Own Both Types of Dolls 

And remember that all these decisions, and more, have to recognize that we want to be profitable too, so spending more on everything is not an option.

You could draw up some broad guidelines and hope they will work. But the chance that these guesses will be anywhere near what would be best is small. You will probably spend large sums of money and effort trying to make something change that will not, put too little effort into moving something that can and should be moved, or do both repeatedly.

If you really want to work out what is best to do at any moment and understand how these best decisions develop through time, then you have no alternative but to find the information on customer flows and choices. Then you must identify how your actions and efforts (along with those of your rivals) are constantly altering these behaviors. Only by using continuous market intelligence on these resources and flows will you be able to make sound decisions on the complex questions of customer rivalry.

The decisive case for taking on these questions and doing the work to find out what is happening and why arises from a point we stressed before—strategic management is all about the flow rates! This is why major global companies are switching their strategic marketing planning to a strategy dynamics basis.