Chapters Eight & Nine

Growth Market Strategies

‘Typical’ Product Life Cycle

Source: Reprinted with permission from p. 60 of Analysis for Strategic Marketing Decisions, by George Day. Copyright © 1986 by West Publishing Company. All rights reserved.

Time (years)

Pro

du

ct c

ateg

ory

sal

es(r

eal

do

llar

s)P

rofi

t p

er u

nit

(rea

l d

oll

ars)

Profit/unitSales

Life cycleextension

GrowthCompetitiveturbulence

Maturity Decline orextension

Introduction

8-3

Categories of New Products Defined According to Their Degree of Newness to the

Company and Customers in the Target Market

High

Low

Low HighNewness to the market

Source: New Products Management for the 1980s (New York: Booz, Allen & Hamilton, 1982).

New

nes

s to

th

e co

mp

any

26% 26%

20%New product

lines

Revisions/improvements to existing products

11%Cost

reductions

7%

Additions to existing product

lines

Repositionings

10%New-to-the

world products

New Product Development

Key success criteria include:– Product fit with market need– Product fit with capabilities– Product or cost superiority– Clear vision of future market based on

customer feedback– Continuous, quality-based process– Ability to create effective awareness

Potential Advantages of Pioneer and Follower Strategies

Pioneer• Economies of scale and

experience• High switching costs for early

adopters• Pioneer defines the rules of

the game• Possibility of positive network

effects• Distribution advantage• Influence on consumer choice

criteria and attitudes• Possibility of preempting

scarce resources

Follower• Ability to take advantage of

pioneer’s positioning mistakes• Ability to take advantage of

pioneer’s product mistakes• Ability to take advantage of

pioneer’s marketing mistakes• Ability to take advantage of

pioneer’s limited resources

Marketing Strategy Elements Pursued by Successful Pioneers, Fast Followers,

and Late Entrants

These marketers...

Successful pioneers

Successful fast followers

Successful late entrants

are characterized by one or more of these strategy elements:

• Large entry scale• Broad product line• High product quality• Heavy promotional expenditures

• Larger entry scale than the pioneer• Leapfrogging the pioneer with superior:

product technologyproduct qualitycustomer service

• Focus on peripheral target markets or niches

Advice for Would-Be Pioneers• First mover advantage is often trumped

by followers who are better. – Best beats first. Concentrate on being best.– Best and first is the ideal.

• Being a pioneer without the basis for sustainable competitive advantage is a trap!

Why Are Growing Markets Attractive?

Gaining share is easier Share gains are worth more Price competition may be less intense Early entry may be necessary to keep

pace with technology

Usually, but not always:

Strategic Choices for Share Leaders in Growth Markets

COMPETITOROR

POTENTIALCOMPETITOR

Contractionor strategicwithdrawal

Market expansion

Flanker strategy - ProactiveFlanker strategy - Reactive

LEADER

Fortressor position

defensestrategy

Confrontationstrategy

ProactiveReactive

Source: Adapted from P. Kotler and R. Singh Achrol, “Marketing Warfare in the 1980’s” Reprinted with permission from Journal of Business Strategy, Winter 1981, pp. 30-41. Copyright © 1981 by Warren, Gorham & Lambert, Inc., 210 South Street, Boston MA 02111. All rights reserved.

Marketing Actions Vary for Different Share-Maintenance Objectives

Retain current customers by: Maintaining or improving satisfaction and

loyalty Encouraging or simplifying repeat purchase Reducing the attractiveness of switching

Stimulate selective demand among later adopters by: Head-to-head positioning against

competitors

Strategic Choices for Challengers in Growth Markets

TARGETCOMPETITOR

Flanking attack

Frontalattack

Encirclement strategy

Leapfrog strategy

Source: Adapted from P. Kotler and R. Singh Achrol, “Marketing Warfare in the 1980’s” Reprinted with permission from Journal of Business Strategy, Winter 1981, pp. 30-41. Copyright © 1981 by Warren, Gorham & Lambert, Inc., 210 South Street, Boston MA 02111. All rights reserved.

CHALLENGER

Marketing Actions to Achieve Share Growth Vary for Different Marketing

Objectives Capture competitors’ customers by

Head-to-head positioning in competitor’s primary target market

Technological differentiation in primary target market

Stimulate selective demand among later adopters by Head-to-head positioning in competitor’s primary

target market (as above) Differentiated positioning focused on untapped or

underdeveloped segments

Some Advice for Followers

• Differentiation is key for followers– Better benefits

– Better service

– Lower price

• Beware of competing on price, however, unless your costs really are lower than competitors’

Predicting Pricing ActionsC

ompe

titi

veA

ctio

ns

More Pricing Pressure with High Elasticity

More Pricing Pressurewith High Leverage

Price of Substitutes Sets the Ceiling

Marginal Cost Per Unit Sets the Floor