Review

Although I remain somewhat skeptical about the theory in this book, there’s no denying that there’s some practical discovery advice in here. The author’s generous list of exploratory questions will unlock value for most companies if followed to their conclusion.

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Key Takeaways

The 20% that gave me 80% of the value.

Companies often define themselves by their products, leading to a product-centric focus. Yet customers rarely buy based solely on products. Loyalty emerges instead from downstream factors like trust, reliability, service, and interactions. Firms must therefore strategically shift attention downstream, toward customer experiences, recognising that competitive advantage resides in engagement, acquisition, and retention, rather than merely upstream capabilities such as production or innovation. Executives must consistently ask: "Why do your customers buy from you rather than from your competitors?" This critical question uncovers insights, allowing companies to build sustainable advantages by systematically reducing customer risks and costs, creating value difficult for rivals to replicate.

Traditional upstream business models relying on economies of scale, manufacturing efficiency, and product superiority have increasingly become commoditised. Global outsourcing and flexible manufacturing have transformed historically fixed upstream costs (factories, machinery) into variable ones, shifting strategic emphasis downstream. Activities such as marketing, acquisition, and retention now dominate cost structures and differentiate successful companies. Strategic questions must therefore evolve from "How much more can we sell?" to "What else do customers need?" Companies like Nestlé's Nespresso demonstrate success by prioritising downstream customer convenience, direct relationships, and experiences, significantly reducing consumers' costs and risks.

A crucial yet overlooked strategy involves systematically identifying and reducing the costs and risks customers face when buying, using, and maintaining products. Businesses must uncover these hidden burdens through structured analysis across all customer interaction stages: pre-purchase, purchase, usage, and disposal, to innovate effectively. Addressing customer costs (time, effort, anxiety) and risks (uncertainties, disappointments, failures) creates lasting differentiation. Solutions range from operational enhancements, such as simplified ordering, flexible consumption, and integrated logistics, to informational improvements like clear communication, trust-building, and transparent risk management. By aggregating and relocating customer costs and risks strategically, firms significantly enhance customer value and loyalty.

Competitive advantage itself can exist either upstream (internal assets like proprietary technology or production efficiency) or downstream (external assets like customer relationships, market knowledge, and brand strength). Upstream advantages rapidly erode due to imitation and commoditisation; downstream advantages, deeply embedded in customer interactions, perceptions, and cognitive routines, become cumulative and increasingly resilient over time. Firms that shift innovation efforts outward toward consistently improving customer experiences and reducing their risks and costs, achieve loyalty and price resilience, creating a sustained competitive edge.

Companies uniquely positioned in their marketplace have powerful opportunities to aggregate fragmented customer insights, developing valuable "big-picture" perspectives inaccessible to individual customers. These aggregated insights enable businesses to anticipate problems, identify market trends, and offer superior solutions, transforming them into indispensable strategic partners rather than mere commodity suppliers. Firms strategically capitalise on these market insights through three approaches: relaying and connecting (applying insights across contexts, as Amazon does through tailored recommendations), benchmarking and mirroring (providing comparative performance feedback to influence customer behaviours), and predicting (forecasting future trends to reduce uncertainty, exemplified by Google Flu Trends). Such insights significantly reduce customer costs and risks by closing critical knowledge gaps, enabling superior decisions, and positioning businesses as essential informational partners.

The critical playing field for brands is not merely physical or digital but psychological, residing within customers' minds. Brands simplify decision-making and reduce perceived risks by providing cognitive shortcuts, building loyalty and enabling premium pricing. Successful brand management involves actively shaping the mental criteria customers use to evaluate products. Brands that first influence these criteria gain enduring advantages, reinforcing their positions and continuously shaping customer preferences. Dominant brands maintain advantages by reinforcing market criteria, while late entrants must strategically redefine or introduce new criteria to differentiate effectively.

Competitors are determined by consumer consideration sets - the specific brands customers compare before making purchases. Effective brand strategy means influencing which criteria customers adopt, carefully positioning products to ensure favourable entry into these consideration sets, thus limiting direct competitive threats. Companies must manage contextual cues, memory associations, and strategic communications to consistently enter customers' mental consideration sets and reduce perceived equivalence with rivals. Such deliberate management of decision-making processes dramatically enhances competitive positioning and customer preference.

Several common strategic myths hinder effective downstream competition. The "Better Product Myth" mistakenly suggests competitive advantage comes from superior products alone, overlooking the strategic necessity of shaping customer decision criteria. The "Listening to Customers Myth" emphasises reactively responding to customer wants rather than proactively shaping their criteria, as demonstrated by Apple's introduction of touchscreen devices. Firms can strategically influence who their competitors are by selecting criteria, positioning, and pricing. True innovation involves consistently reducing downstream customer risks and costs, not simply technological advances. Furthermore, marketing-driven competitive advantages are powerful, sustainable, and strategically valuable, not superficial or easily replicable. Companies must thus consciously prioritise strategic downstream innovation, customer criteria management, and comprehensive customer value delivery over incremental product enhancements.

Downstream competitive advantages are notably sustainable because they benefit from network effects and cognitive inertia. Network effects increase product or brand value as more users participate (for instance, Facebook's expanding connections). Cognitive inertia makes customers resistant to switching brands due to deeply ingrained habits, prior beliefs, confirmatory biases, and loss aversion. Customers systematically seek evidence confirming their initial choices, significantly reinforcing incumbent brand positions. This psychological preference creates strong barriers against competitor entry, preserving market leadership and enhancing incumbents' resilience against competitive shocks. Firms must actively foster network effects, provide confirmatory evidence pre and post-purchase, and embed their brands into habitual consumer routines to reinforce these powerful psychological advantages.

To achieve a sustainable downstream competitive advantage, companies must strategically realign their entire organisational structure toward customer interactions and market engagement rather than upstream production activities alone. Competitive advantage increasingly accumulates through deep customer relationships, extensive data insights, and meaningful market interactions, rather than solely through internal efficiencies or product innovations. Organisational shifts include prioritising customer-centric metrics such as acquisition, retention, satisfaction, and lifetime value; integrating downstream strategies systematically across all departments; and continually reducing customer costs and risks.

Marketing departments must lead strategic downstream innovation, positioning brands deeply within customers' mental criteria of purchase and actively shaping customer evaluations and experiences. Firms must anticipate global competition intensifying downstream as emerging markets increasingly prioritise brand-building, customer interactions, and relationships. Successful firms proactively prepare for this strategic shift by deeply embedding customer-focused approaches into their core strategies and organisational culture.

In today's competitive landscape, the strategic centre of gravity has decisively shifted downstream. Companies that successfully tilt their strategies toward deeper customer relationships, systematically reducing customer costs and risks, and leveraging unique market-wide insights, build powerful, cumulative, and sustainable competitive advantages. These downstream strengths embedded within networks, cognitive habits, brand perceptions, and customer interactions are difficult for competitors to replicate, enduring far longer than traditional product or production-based advantages.

Ultimately, sustainable strategic success demands continuously asking and thoroughly understanding the fundamental question: "Why do your customers buy from you rather than from your competitors?"

Deep Summary

Longer form notes, typically condensed, reworded and de-duplicated.

Introduction

Companies often define themselves by their products, leading to product-centric strategies. Yet customers rarely buy based on the product alone. Instead, loyalty stems from downstream factors like trust, reliability, service quality and seamless interactions. This reveals a mismatch: while firms focus resources upstream (production, innovation, scale), customers value downstream interactions involving engagement, acquisition and retention.

Customer touchpoints are vital for value creation. Businesses must ask: "Why do your customers buy from you rather than from your competitors?"

Goals sharpen when defined against competitors, recognising that competitive advantage means offering superior customer value. Innovation becomes crucial as firms build customer value that competitors struggle to copy.

Traditionally, firms built advantage through upstream capabilities like manufacturing scale, quality control and raw materials. Examples include Ford's manufacturing, De Beers' diamond monopoly and Walmart's logistics.

To many managers, the product is the business.

But these advantages have eroded through globalisation, commoditisation and outsourcing. This demands organisations focus shift their strategic focus downstream.

The proprietary access, skills, capabilities, and other assets that were at the heart of the industrial model...are rapidly giving way to a postindustrial downstream model. In this model, value is created in interactions with customers...and the primary costs reside in acquiring, satisfying, and retaining customers.

A downstream tilt recognises that value creation and competitive advantage now lie in customer interactions. The key business dimensions: competitive advantage, value creation and fixed costs have moved downstream.

For successful downstream tilt, executives must consider three questions:

1. Where is the greatest burden of fixed costs? Increasingly in customer acquisition and retention, not production.
2. What activities do customers value most? Typically downstream interactions like service and experience.
3. Where does enduring competitive advantage reside? In superior downstream activities rather than easily copied upstream assets.

Tilt offers a framework shifting firms from upstream thinking to downstream strategies focused on reducing customer costs, leveraging networks and building advantage through interactions.

Part One: Your Center of Gravity

Chapter 1: Finding the New Locus of Competitive Advantage

Markets mature faster than ever, with competitors quickly matching innovations, leading to relentless price wars, shrinking margins, and rapid product obsolescence. Companies find innovation increasingly like a treadmill—each incremental advantage quickly disappears as competitors replicate features. Managers typically respond by cutting upstream costs, but these traditional methods no longer yield sustainable competitive advantages.

The upstream-focused business model pioneered by Richard Arkwright, emphasising economies of scale and mass production, is becoming outdated. His innovations led to mass production, dramatically reducing costs per unit. This created surplus capital which, for the first time, allowed manufacturers to invest in marketing and distribution efforts to find mass markets for the abundant goods they produced.

Arkwright’s legacy positioned businesses around fixed upstream costs (factories and machinery) that drove strategies primarily designed to maximise production volume, leading executives to constantly ask, “How much more of this stuff can we sell?”

However, global outsourcing and flexible production have turned many upstream fixed costs into variable ones, significantly lowering manufacturing costs. Simultaneously, previously variable downstream costs like marketing, sales, customer acquisition, and retention have ballooned and become fixed. Manufacturing might now constitute less than 15% of the price of shoes, while downstream activities like branding, customer relationship management, and distribution dominate overall costs.

As fixed costs tilt downstream, businesses must shift strategic questions from “How much more can we sell?” to “What else do our customers need?”.

“If our fixed costs reside in the downstream, then the question that should govern our strategy is no longer ‘How much more of this stuff can we sell?’ but rather ‘What else do our customers need?’ Our success depends not so much on economies of scale as on economies of scope.”

Downstream value emerges clearly when considering not just the product (what) but the circumstances around purchasing, consumption, and convenience (how), exemplified by customers willingly paying a premium for a chilled Coca-Cola from a vending machine at the point of thirst.

Nestlé’s Nespresso exemplifies downstream success, reshaping the coffee market by focusing on customer convenience, premium experience, and direct customer relationships rather than traditional mass-market approaches. Nespresso’s capsule system and direct distribution model created value by significantly reducing customers' purchase and consumption risks and costs, resulting in sustainable competitive advantage even as patents expire. Nestlé’s shift illustrates the importance of asking, “Why do your customers buy from you rather than from your competitors?”

The strategic implications of this downstream tilt can mean moving away from core competencies to meet broader customer needs. Pharmaceutical firm Janssen exemplifies this with ventures into healthcare-related video games, shifting focus beyond traditional drugs toward addressing holistic patient needs. This underscores that:

“Tilting downstream implies straying from the knitting. It means that the company should pursue customers’ needs regardless of core competences or technology. In a world where the customer is the critical resource and where you can build, buy, or outsource competences, it makes sense to diversify your offering to fit customer needs.”

Initiating a downstream tilt involves proactive shifts rather than waiting for external forces. Businesses need to recognise early opportunities to redefine value creation around customer interactions. Companies must proactively reassess their center of gravity, costs, measures of success, and competitive positioning. A practical checklist for initiating a downstream tilt:

• Where does your business stand on the upstream-downstream spectrum?
• Where do major costs and competitive advantages reside?
• Which activities do customers most value?
• What do you consider critical resources: upstream or downstream?
• What key success metrics are used? Are they customer-focused or production-focused?
• How would your business transform if it became downstream-focused?
• What gaps must be closed to achieve this transformation?
• How will downstream strategies differentiate your business from competitors?
• How will competitors respond, and how will you sustain your advantage?

Arkwright’s upstream-heavy model needs to tilt downstream in the twenty-first century. Here, strategic considerations begin with an understanding of customers and customer value, not with the factory and what it can make. You get to the answer by asking what costs and risks you can reduce for your customers in their search for, purchase of, usage of, and disposal of the kind of value you produce, not how you can generate more economies of scale.

Chapter 2: Slashing Your Customers' Costs and Risks

A crucial yet often overlooked strategy for companies seeking competitive advantage is to identify and systematically reduce the costs and risks their customers incur when interacting with them. "One of the most valuable exercises that companies can engage in is to uncover the costs and risks incurred by their customers." These costs and risks frequently remain hidden from both buyers and sellers, making them prime opportunities for differentiation.

Customers often feel intimidated or confused due to complexity or lack of expertise about a product category. As a shortcut, they rely heavily on brands as proxies for quality and reassurance. Companies, therefore, can significantly boost customer value by simplifying and clarifying the purchasing process. Sainsbury's helped customers understand and categorise wine which reduced consumer anxiety and decision-making burdens.

To systematically uncover hidden customer costs and risks, firms should answer three critical questions:

1. "What are the hidden costs that your customers incur in buying and using your product or service?"
2. "What are the hidden risks that your customers incur in doing business with you?"
3. "Why do potential customers not buy from you (in other words, what are the costs and risks that prevent potential customers from doing business with you)?"

Companies often impose hidden opportunity costs on customers by forcing rigid choices. Solutions involve offering flexibility and reducing constraints (e.g., car-sharing services).

Addressing specific customer risks, such as supply interruptions or integration challenges, can strongly differentiate an otherwise commodity product.

Identifying and directly addressing the primary reasons potential customers hesitate (e.g., economic uncertainty) can unlock substantial demand without resorting to costly price cuts.

Analyse the buying process to uncover costs that customers incur doing business with you:

• Realise they need a product like yours.
• Come to know about your product.
• Obtain more information about your product (and those of your competitors).
• Test or sample your product.
• Compare your product or offer with those of competitors.
• Narrow down the set of alternatives from which to buy. Are you in that smaller set?
• Pick your product from that smaller set. (Or, why does the customer not pick your product?)
• Take delivery of your product and unpack it.
• Dispose of the packaging materials.
• Set up the product for use.
• Use and enjoy the product. (How does the customer use the product beyond its prescribed or anticipated uses?)
• Extract the benefits for which they bought the product.
• Pay for the product.
• Store the product.
• Maintain the product.
• Upgrade the product.
• Discard the spent product.
• Find your product again if they liked it.
• Tell others about your product.

Consider questions the customers might ask themselves about the risks of doing business with you:

• Can I trust the seller's promises?
• Will the product perform as expected? Will it do what is promised?
• What are the side effects?
• Is the product dangerous in any way?
• Will I be able to use it successfully?
• Will I lose money on the purchase price? Can I afford it?
• Will it cost a lot to maintain?
• Is the product compatible with other products I use?
• Will it depreciate? If so, how quickly?
• Will the product become obsolete?
• Will I run out of the product or its refills?
• Will the product still be available when I need it next?
• Will the seller be around for repair and maintenance?
• Is the product socially acceptable? What does my use of the product signal about me to others?
• What are the risks to the environment?
• What are the regulations surrounding the use and disposal of this product?
• Will my bosses in the organisation agree with my decision? Does it fit company policy, history, culture, and implicit agreements?
• Will I look good and be a success by choosing this product?

Without a structured approach, cost and risk reduction strategies often remain ad hoc. Systematic identification involves mapping out detailed customer interactions across touchpoints: pre-purchase, purchase, use, maintenance, disposal—and identifying specific costs and risks at each stage. For example, a company selling computers to businesses would map customer interactions at each touchpoint in a structured table:

When identifying innovative opportunities for reducing customers' costs and risks, companies should begin by systematically mapping customer interactions across all touchpoints: pre-purchase, purchase/delivery, usage, maintenance, and disposal/renewal. At each stage, identify the specific costs (effort, time, financial, emotional) and risks (uncertainties, potential losses, disappointments) customers experience.

Once these costs and risks are clearly mapped, innovative opportunities are found by asking two critical questions:

1. Can we aggregate these costs and risks more efficiently than individual customers can?

• Evaluate if pooling or centralising certain customer costs or risks generates scale efficiencies.
• Example: Dell’s centralised installation of software in just 45 seconds per unit on their assembly line replaces individual customers spending over an hour per machine doing it themselves.

2. Where in the value chain should these costs and risks be located?

• Examine whether shifting responsibility along the supply chain can reduce the overall costs or risks for customers and create additional value.
• Example: A manufacturer, better equipped to handle certain risks, could offer guarantees to retailers, thereby absorbing the retailer’s perceived risk of introducing new products

Companies can address customer needs through two main solution types:

Operational Solutions: Physical and logistical improvements (examples below):

• Convenience: Simplified ordering and flexible consumption options
• Risk Management: Automated replenishment and protection programs
• Process Integration: Customised solutions for specific customer needs

Informational Solutions: Better communication to reduce uncertainty(examples below):

• Clear Communication: Simple labelling and categorisation
• Trust Building: Expert recommendations and strong branding
• Transparency: Clear information about product performance and risks

By systematically mapping customer interactions and strategically positioning costs and risks, companies can uncover powerful opportunities to innovate both operationally and informationally, building deeper customer loyalty and sustainable competitive advantage.

• Map the customer's complete information search and decision-making process.
• Identify primary sources of customer uncertainty or confusion.
• Determine which sources of information customers rely on for trusted advice.
• Adapt communications, branding, and distribution specifically to reduce customer anxiety and friction.

By systematically uncovering and addressing the hidden costs and risks that customers face, businesses can create sustained competitive advantages that competitors find difficult to replicate.

Chapter 3: Seizing the Downstream Advantage

Strategy is how a firm gains an edge over competitors by exploiting unique opportunities in the marketplace. Competitive advantage emerges when a business develops or harnesses something distinctive that allows it to outperform rivals consistently. Firms strive to protect this advantage, but not all advantages are created equal—some fade rapidly, while others deepen over time.

Competitive advantages can be categorised into upstream or downstream. Upstream advantages reside inside the firm—in assets like proprietary technology, efficient production methods, specialised skills, or scale economies. Companies fiercely guard these internal strengths behind protective walls, such as patents or trade secrets. Downstream advantages, by contrast, exist externally—in the firm’s relationships and connections within the marketplace, its deep understanding of customers, and the trust and loyalty it has cultivated. Brands, customer networks, and market information are examples of downstream advantages, and unlike tangible assets, they reside outside the company's walls, embedded in customer perception and behavior.

Upstream companies focus heavily on either product innovation (developing new products or features) or process innovation (streamlining production and reducing costs). These forms of innovation quickly attract imitation and competitors, often leading to commoditization. In contrast, downstream innovation is focused externally—on reducing the costs and risks customers face when interacting with the firm and its offerings. By consistently reducing customers’ risks and costs, downstream-focused firms deepen loyalty and reduce price sensitivity, securing more sustainable competitive advantages.

The ultimate test of any advantage, upstream or downstream, is the market. Upstream innovations must prove their worth to customers through cost savings or product superiority, but these benefits are often short-lived. Downstream innovations, however, directly target customer uncertainty and hassle. Because these customer-focused advantages rely on intangible marketplace assets—such as trusted brands, accumulated customer knowledge, and customer-centric service processes—they become stronger and harder to replicate over time. In this way, downstream advantage becomes cumulative and resilient.

A comparative advantage checklist can clarify a firm’s positioning. Key questions include:

• Is your competitive advantage internal (firm-focused) or external (market-focused)?
• Is your differentiation driven primarily by lower costs, better products, or reducing customer risks and costs?
• Do you define innovation narrowly, as creating new products or features, or broadly, as creating new forms of customer value?
• How easily do competitors replicate your advantage? Does it erode quickly, or is it sustained by deeper market knowledge and stronger customer relationships?

Ultimately, shifting from upstream to downstream means shifting your strategic lens outward, to the customer, the market, and the external relationships that sustain your competitive edge.

Chapter 4: Seeing New Value in Your Customers

Companies possess unique market-wide insights that individual customers lack because customers are confined by their limited experience and knowledge. By assembling information scattered among numerous customers, businesses uncover patterns, anticipate problems, identify solutions, and create innovative, differentiated offerings.

This "big-picture" capability transforms commodity suppliers into indispensable strategic partners. For instance, a commodity seller of explosives reframed its business around producing predictable outcomes, rock broken to customer specifications, rather than simply selling explosives. By aggregating data from numerous customer interactions, the company offered superior solutions that significantly reduced customer risks and costs. Such insights cannot be easily replicated by competitors, as the advantage deepens over time with the accumulation of experience.

Today, technology dramatically accelerates the opportunity to aggregate fragmented customer information, generating new, actionable insights. Companies must overcome internal blind spots that prevent them from recognising the value of the data they already possess. Once acknowledged, this data can revolutionise industry dynamics and shift competition from narrow product-price battles toward broader solutions that truly matter to customers.

The big-picture approach thus fosters customer loyalty, increased pricing flexibility, and sustainable differentiation. Companies succeeding at this approach systematically collect, analyse, and leverage market data to continuously enhance customer value.

Information has value not because it is secret, but because it can be assembled with other pieces of information to reveal something new.

Chapter 5: Extracting Value from the Big Picture

Businesses can systematically extract value from their marketplace insights through three primary strategies:

Relaying and connecting involves taking information from one context and applying it beneficially elsewhere. Companies that do this well become central nodes in information networks, effectively bridging gaps between dispersed customer experiences. Examples include Amazon, which relays reviews and connects consumers through tailored recommendations, enhancing purchase experiences while embedding itself deeply in customer decision-making.

Benchmarking and mirroring provide customers comparative insights, answering the fundamental question "How am I doing relative to others?" By reflecting aggregated performance metrics back to customers, companies shape behaviour and influence decisions. Benchmarking can radically alter industry dynamics, as seen in how business-school rankings redefined competitive priorities and resource allocation. Companies leveraging benchmarking offer customers valuable performance indicators that inform crucial strategic decisions.

Predicting, the most sophisticated approach, involves using aggregated data to forecast future events and behaviours. Companies like Google Flu Trends leverage extensive search data to predict disease outbreaks ahead of official health authorities, providing critical advanced warnings. Predictive analytics harness proprietary datasets and complex modelling, yielding unique competitive advantages difficult for rivals to duplicate. Prediction creates enormous value by reducing uncertainty and enabling proactive responses.

These information strategies substantially reduce customer costs and risks by closing knowledge gaps, enabling better decision-making, and anticipating future developments. Firms that master these strategies gain sustainable differentiation, customer loyalty, and robust competitive advantages rooted deeply in market networks and data-driven insights.

The ability to predict outcomes is one of the most sophisticated uses of the big picture and one of the most valuable.

Implementing these strategies effectively requires disciplined information collection, analysis, and dissemination. Companies must recognise their unique marketplace vantage points and capitalise on them strategically, thereby redefining their roles from mere product providers to essential information partners.

Part Three: The Deep Dive: The Competitive Playing Field Inside the Customer's Mind

Chapter 6: Scoping Out the Playing Field

Brands represent significant downstream competitive advantages as they provide clarity, reduce customer risks, and act as transaction platforms. The brand promise creates trust through consistency, making it easier for customers to repeatedly choose a product, sometimes even at a premium. The key playing field is in the customer's mind, where brands must strategically compete for attention and memory, employing cognitive shortcuts. Brands become invaluable, illustrated by Coca-Cola’s reliance on brand strength rather than physical assets.

The Customer Mind Checklist:

• What do your brand managers manage? Are they more concerned about the physical marketplace than the playing field in the customers' minds? What is the goal of brand management in your organisation?
• How good is your understanding of the playing field inside the customers' mind? What metaphors and vocabulary does your organisation use to talk about the playing field?
• How does your company compete for a piece of the customers' mind? What do you do to increase or improve your share of mind?

Chapter 7: Taking Control of Criteria of Purchase

Brands compete within defined criteria that consumers use to simplify decisions. Successful brands don't just position themselves within these criteria, they actively shape and define them. The first brands to significantly influence customer expectations gain lasting advantages. Later entrants must differentiate by redefining criteria or creating new ones. Dominant brands can leverage their position to consistently reinforce their market leadership.

The Criteria of Purchase Checklist:

• Which criteria does your brand occupy in the customers' minds?
• How strongly is your brand associated with the criteria of purchase?
• How important are these criteria in the marketplace? Does a large proportion of customers use the criteria?
• How much weight do your criteria carry in customers' decisions?
• Are you a first mover on the criteria you occupy, or a follower or me-too company?
• Are there criteria that remain open in your product category? Are there criteria that customers do not yet use but that could be important in their decision making?
• Are you defensively preempting the coverage of criteria by launching line or product extensions?
• If you are a later entrant, are you consciously choosing between a differentiated and a me-too strategy?
• In pursuing a differentiated strategy, are you matching the dominant brand on its criterion before differentiating on yours?
• Is your brand a criterion of purchase in the category? Could it be?
• What are you doing to maintain your downstream competitive advantage of brand associations with criteria of purchase?
• What are the emerging criteria of purchase in your category? Do you have a strategy for covering those criteria through line or brand extensions, or new brands?
• Which emerging meta-criteria could affect your category? Are these threats or opportunities?
• How do your upstream activities contribute to reinforcing your downstream advantage on criteria of purchase?
• How do you use feature and product innovation to reinforce and sustain your position on key criteria of purchase?

Chapter 8: Knowing Who Your Competitors Are

Competitors are determined by which brands consumers consider before making a purchase. Effective brand strategy involves influencing consumer criteria to ensure favourable entry into consideration sets, limiting the number of competitors, and managing the trade-offs consumers make. Contextual cues and memory influence low-involvement decisions, emphasising the importance of strategic brand positioning and repeated exposure.

The Customer Mental Processing Checklist:

• Which cutoff criteria do customers use to consider purchases in your product category?
• What are the cutoff criteria you would like your customers to use?
• Which companies or brands are your principal competitors inside your consumers' consideration set? What would they be if your customers used your preferred cutoff criteria?
• How large a market could you persuade to use your cutoff criteria?
• Can you raise the bar on the cutoff criteria? Will that knock some competitors out of the consideration set, or will you lose some customers? Is it a favourable trade-off?
• Once you are inside the consideration set, which companies or brands are your principal competitors? Which criteria are their strengths?
• In the customer's mind, how important are your criteria? What can you do to increase the exchange rate of your criteria against those of your competitors?

Part Four: The Bottom Line

Chapter 9: Busting Myths in the Marketplace Wars

Better Product Myth: Competition isn't about having the superior product but about influencing customer criteria and positioning strongly around specific criteria.

Listening to Customers Myth: Rather than merely responding to customer wants, successful companies lead by defining and shaping customer purchase criteria (e.g., Apple’s introduction of the touchscreen).

Choosing Competitors: Firms can strategically influence who their competitors are by selecting criteria, positioning, and pricing.

Innovation Beyond Technology: True innovation lies in delivering downstream value by reducing customers' costs and risks, rather than just technological advancement.

Marketing’s Value: Competitive advantage from marketing isn’t trivial but critical, sustainable, and impactful.

Checklist Questions:

• Do you compete by demonstrating product superiority, or by owning consumer evaluation criteria?
• Are resources overly focused on minor product tweaks rather than strategic customer criteria?
• How deliberately do you choose your competitors?
• Is your internal focus on new products or customer criteria?
• Does marketing innovation contribute meaningfully to your competitive position?
• Is marketing valued strategically or seen as just a cost centre?

Chapter 10: Understanding Why Downstream Competitive Advantage Is Sustainable

Sustainability of Downstream Advantage: Lasting advantage derives from network effects and cognitive inertia.

Network Effects: Competitive advantage grows as more users or customers engage with a product or brand, reinforcing value (e.g., Facebook’s user base).

Cognitive Inertia: Customers prefer incumbent brands due to habits, prior beliefs, confirmatory bias, loss aversion, and momentum effects (e.g., dominant brands like Coke or Nike).

Confirmatory Bias: Customers seek evidence supporting their initial beliefs, reinforcing incumbent brand advantage.

Loss Aversion and Habit: Customers resist changing brands due to psychological biases and routines, enhancing incumbents' advantage.

Checklist Questions:

• Does your brand benefit from network effects, and how are you fostering them?
• What hypotheses about your brand do you prompt customers to test?
• How are you saturating the environment with confirmatory evidence?
• Do you provide confirmatory post-purchase information?
• How do you reinforce customers' perceived value after purchase?
• How do you integrate your brand into habitual consumer routines?

Chapter 11: Tilting Your Strategy and Organisation

Downstream Shift: Companies must realign strategy and organisation toward customer interactions and market engagement rather than upstream production.

Accumulative Advantage: Companies with strong downstream positioning accumulate data, insights, and customer relationships, deepening their competitive advantage over time.

Organisational Implications: Firms must refocus on customer retention, acquisition, satisfaction, reducing customer costs/risks, and systematically integrating downstream strategies across functions.

Marketing and Sales Roles: Marketing should drive strategic customer interactions, customer segmentation, and downstream innovation, reinforcing competitive advantages.

Global Competition: Emerging markets will increasingly emphasise downstream strategies, making it a critical competitive battlefield globally.

Checklist Questions:

• Is your firm's primary focus customer-centric, or still centred around product and production?
• Do you leverage interactions and relationships with customers to build competitive advantage?
• Does your marketing department strategically identify and lead customer-focused innovations?
• Are you systematically reducing customers’ purchase and usage costs/risks?
• Are you preparing strategically for the increasingly critical global downstream competitive landscape?