SELF TEST #8: Company Volume Index on the Size/Role Matrix
Answer: This is a very strong company, able to meet the needs of virtually any customer in the industry. It is ideally suited to serve customers in the Heart of the Market.
If a company has an index of 50 in the Very Large/Primary segment, what does this mean?
Answer: This company is very weak in this segment. It is probably weak, then, in the Very Large customer segment as a whole. It does not have a product/service package that meets the needs of most Very Large customers. It is probably a second tier company.
What is a tier?
Answer: A tier is the classification of competitors according to their ability to fill roles with different Customer Sizes. Tier I competitors tend to fill Primary and Secondary Roles with Very Large customers and Primary Roles with Large customers. A supplier achieves membership in a tier by proving, through its presence in customer relationships and its mix of business in alternative roles and particular sizes of customers, that it can compete on equal terms with other members of the tier.
What would you expect a strong tier one Standard Leader to have as indices in the Heart of the Market?
Answer: In most segments of the Heart of the Market, a strong Standard Leader will have an index over 100. You would expect that the Standard Leader would have indices above 100 in the Very Large Primary and Secondary and the Large Primary segments on the industry's Size/Role matrix.
Answer: This is probably a tier two company. It has to be careful of its strong position in the Very Large/Tertiary segment. This segment often is the home of companies who offer price leverage in their customer relationship. Price leverage roles are the hallmark of a Price Shaver and often result in relatively low returns. The company should probably tailor its programs specifically for Large customers where its indices tell us it has the product and service package to serve these customers well. It appears that this company should have some opportunity to build its Secondary roles with Large customers and to develop more Primary roles with Medium customers.
Does the tiering of the competitor tell us whether that competitor is a strong or weak competitor?
Answer: A strong competitor gains share in a marketplace, a weak competitor loses share. Usually the source of the share gain or loss is the net volatility position of the competitor. Tiering by itself does not tell us whether we have a strong competitor. You may have a weak tier one competitor, especially one who is in a Leader's Trap position. You may also have a very strong tier two competitor, especially one who concentrates his marketing and performance programs for narrowly defined smaller customer segments.
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