George S. Day and Christine Moorman

Are You Really Superior?

Tuesday Feb 15, 2011

A brand loses its customer value position when it is seen as merely OK for everyone. This was the problem for Jeep which used to be “best at off-road” until it was weakened by too many design compromises, and rivals caught up. In short, it became a “parity” player.

Parity is not a pejorative term. Instead it is a brutally honest recognition that most target customers don’t see a meaningful difference among the rivals on the sources of value. It usually means at least a moderate, and often a high level of perceived competence, which most rivals have also reached. Parity is an outside-in concept. The question is not whether there is an actual difference between competitors. It is whether customers perceive a meaningful difference. Inside-out companies often deceive themselves by believing that their carefully managed differentiation efforts matter to, or are even noticed by, customers.

How does a firm judge whether its offerings are at parity? The arbiter is always the customer, including those who buy from the firm now, those who have never bought from the firm, and those who have stopped buying from it. One way to assess parity is to ask a sample of customers to rate the firms or brands on key features and benefits. The rating scale could ask, for example, whether Xerox desktop copiers are ahead of, equal to, or behind competitors on print quality, technical support, price, and so forth. The comparisons could be against the market leader and/or against top competitors for the target segment of customers. A consistent rating of equality across offerings in a category is compelling evidence of parity.

Parity is also a moving target as rivals jockey to establish they are at parity on each of the sources of value (which we call the value vectors). It is not enough for a mid-tier hotel to offer cable TV and room service; to meet the competition it must offer high-speed Internet access and down duvets. From toothpaste to credit cards to orthopedic devices, the degree of perceived differentiation steadily diminishes because of the relentless process of imitation.

Keeping pace with rivals in the served market is a requirement for staying in the game. Falling noticeably behind on any one of the three value vectors erodes the overall customer value position. One effect of everyone keeping pace is that the parity level on each vector steadily moves outward: performance improves, real prices drop, and service is better. But in this challenging environment it is hard to sustain superiority.

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