In my home town, there are two independent cinemas.  One has taken the route of Porter’s niche generic strategy and concentrates on art house cinema.  The other, a family-owned cinema has taken a different strategic route, it shows the same range of films as the big chains but it does so in such a way as to give it a unique market presence.  It thrives by taking its unique attributes and using them to create points of competitive advantage.

The aim of marketing is to create value for customers and, in return to capture value from them.  Companies with effective marketing strategies win and keep customers by understanding their needs, by developing customer-focused marketing programmes and by building relationships with those customers.

There are three stages involved in the creation of competitive advantage:

1. Identifying your competitors,
2. develop competitive strategies,
3. balance your customer orientation against your competitor orientation.

The family owned cinema competes directly against the large multiplex chains. He has analysed the market and regularly looks for changes in the way the big cinema chains present their products and services.  These are his direct competitors.  But he has gone further.

Many smaller firms have competitor myopia.  They carefully monitor their direct competition and they forget about wider latent competitors.  This doesn’t affect only small firms.  Kodak went bankrupt because it concentrated of competitors making 35mm film (such as Fuji and Ilford). Kodak was slow to recognise the rise of digital cameras manufactured by consumer electronics firms (ironic as Kodak effectively invented the digital camera).  Tower Records went bankrupt not because of other discount record stores but because it failed to see the rise of the digital download.  Borders Books went bust because it didn’t anticipate the rise of Amazon and the internet bookshop.

All these firms failed by ignoring the changes in the wider economic environment.  All were killed off by their latent, not their direct competitors.

The owners of the independent cinema didn’t just look at what the multiplex cinema chains were doing.  He recognised that consumers had wider opportunities to use their leisure time.  He wasn’t just competing against other cinemas, he was competing against theatres, bars, sports clubs and music venues.  If he was to survive and thrive he had to create a product which drew consumers away from these other sources of entertainment.

Once you have identified your competitors, you have to assess them.  You need to identify their objectives and their strategy.  You need to identify their strengths and weaknesses and you need to estimate how they will react to your strategy.

The independent cinema saw that the multiplex cinemas were aiming to attract large numbers of consumers simultaneously by offering the same film on multiple screens.  It was effectively the warehousing of entertainment.  Often they offered only the most basic of food options and only offered soft drinks.  The aim was to factory process movie entertainment e.g. consumers were processed through the site, entering the cinema through a large foyer but leaving through a separate exit.  He also found that many multiplexes were located at out of town malls and shopping centres.

Having examined both the direct and latent competition, the cinema owner looked at his business strengths and developed a strategy to use them.  He realised he couldn’t compete head on with the large chains and that he had to do things differently.

His cinema had been built in the 1930sin an art deco style.  It was located in a leafy suburb of the city and there was little off street parking in the vicinity.  His father had carried out some building work to split the large auditorium into three screens; the smallest of which was a fifty seat screening room.

He may have been showing the same product as the multiplexes, mass market blockbusters, but he realised that his venue could do it in a different way.  He installed sofa-like twin seats in his main auditorium.  He opened up a bar at the back of the auditorium so that customers could order drinks at their seats.  He showed double features with an intermission so that consumers could use the bar between films.  The smallest screen could be booked for private parties.  He used the 1930s atmosphere of his venue to build on the image of a golden age of cinema.  Staff would welcome customers to the venue and escort them to their seats.  He offers a wide-range of food and snacks, not just popcorn and nachos.  He was intent on making a visit to the cinema an event, not just an option to take up spare time. Customers are given the ‘red carpet treatment’.

Being in the suburbs, he was also keen to develop his cinema as a community asset.  He runs a cinema club where regular customers can get discounted tickets and the opportunity to see advance screenings.  He runs traditional kid’s Saturday morning film clubs and late night screenings of horror films.  He retains many customers because they see his cinema not just as a commercial venture but as an important community asset.

The family-run cinema also benefits from his competition.  The rise of the multiplex has meant a huge upturn in people going to the cinema.  In the 1970s and 1980s, cinema was in trouble.  Many venues were closing or being converted into bingo halls and nightclubs.  Now more people go to the cinema than in its golden period of the 1930s and 1940s.  The multiplex chains have allowed the development of blockbuster movies often with budgets of over a hundred million dollars.  They have increased total demand for cinemas and have allowed the development of new technologies such as surround sound, high definition and 3D.

When Apple created the Ipad, it was described by some commentators as the ‘Kindle killer’.  They expected Apple’s tablet to destroy the market for Amazon’s e-reader.  Instead, the Ipad increased the demand for tablets hugely.  Apple took the Ipad concept and turned the kindle into a multi use tablet, not just an e-reader and sales rocketed.

The independent cinemas owners worked hard to identify an uncontested market space.  They realised that there is no such thing as a one size fits all marketing strategy.  They also realised that they couldn’t follow a ‘me too’ strategy where they simply copied the strategies of their competitors.  They recognised that they needed to develop different strategies to those of their competitors and to provide a different product option for consumers.