COM 442
COM 442
CHAPTER TEN
MARKETING STRATEGIES
FOR
GROWTH MARKETS
MARKET STRATEGY - THE RULES
IGNORE AT YOUR PERIL
TO OPTIMIZE ANY STRATEGY
IT MUST BE TAILORED TO EACH SPECIFIC
APPLICATION AND CIRCUMSTANCE.
TURNOVER – RATE OF REPURCHASE
- IT IS LIKE A TIME ACCELERATER –
THE HIGHER THE TURNOVER THE LESS STABLE THE MARKET CONDITIONS BECOME.
ALWAYS FACTOR IN PRODUCT TURNOVER IN ANY MARKET CONSIDERATIONS.
ALWAYS KEEP ‘ONE EYE’ ON BUILDING A LONG-TERM COMPETITIVE ADVANTAGE THAT CAN BE MAINTAINED INTO THE MATURITY STAGE.
In growth markets…
SHARE MAINTENANCE
BECOMES THE PRIMARY OBJECTIVE OF THE SHARE LEADER THRU
▪ RETAINNING REPEAT BUSINESS WITH LOYALTY PROGRAMMES AND ACTIVITIES.
▪ CONTINUE TO CAPTURE THE MAJOR SHARE OF NEW CUSTOMER BUSINESS -SHARE GROWTH-
THE ATTRACTION
1. EASIER TO GAIN SHARE WHEN MARKET IS GROWING
2. SHARE GAINS ARE WORTH MORE IN A GROWTH MARKET THAN A MATURE MARKET
3. PRICE COMPETITION IS USUALLY LESS INTENSE
4. EARLY ENTRY FACILITATES KEEPING UP WITH THE TECHNOLOGY CURVE
1. Easier To Gain Share When Market Is Growing.
▪ HIGH RATIO OF NEW USERS – BRAND LOYALTY LESS OF AN ISSUE.
▪ CONSUMER NEEDS-PREFERENCES MAY SHIFT WITH CHANGE IN ADOPTER CATEGORIES.
▪ COMPETITIVE RESPONSE LESS LIKELY – AS LONG AS THEY STILL HAVE POSITIVE NUMBERS. ~TENUOUS (DON’T COUNT ON IT)
2. Share Gains Are Worth More In A Growth Market Than A Mature Market.
▪ VALUE OF EACH SHARE POINT GROWS WITH THE TOTAL MARKET GROWTH.
UNLESS…
▪ “POSITIVE NETWORK EFFECTS” INITIAL SHARE NUMBERS REFLECT PROPRIETARY USERS WHICH INFLUENCE FUTURE SHARE GROWTH (WINDOWS → WINDOWS)
▪ RULES CHANGE – TECHNOLOGY, OR NECESSARY CORE COMPETENCIES CHANGE.
▪ TOTAL INDUSTRY GROWTH (# OF ENTRANTS / PLAYERS) EXCESSIVE THEN SHARES TOO FRAGMENTED TOO AFFECT ANY LEVERAGE ADVANTAGES.
▪ FUTURE FRAGMENTATION OF SEGMENTS CHANGES ‘IN GOING’ GROWTH CONDITIONS.
3. Price Competition Is Usually Less Intense
▪ USUALLY DEMAND EXCEEDS SUPPLY
▪ IF PIONEER HAS ENTERED WITH A PENETRATION STRATEGY – THERE MAY NOT BE ENOUGH MARGIN TO WORK WITH.
4. Early Entry Facilitates Keeping Up With The Technology Curve
▪ MORE CRITICAL WITH TECHNICALOGICALLY SOPHISTICATED PRODUCTS.
▪ R-D KEY AS TECHNOLOGICAL CHANGE CAN CREATE INSTANT OBSOLESCENCE.
Growth Market Strategies
For MARKET LEADERS
KEEP THE LEAD –
▪ MAINTAIN THE GAP AS COMPETITORS INCREASE IN QUANTITY AND QUALITY
▪ MARKET BEGINS TO FRAGMENT INTO SMALLER SIZED NICHES.
▪ PRODUCT INNOVATION-NEXT GENERATION- INCREASES WITH TIME.
▪ THE LARGER YOUR SHARE THE HARDER THE TASK.
▪ STILL LESS THAN A THIRD LOSE THEIR LEAD.
Marketing Objectives
For SHARE LEADERS
▪ RETAIN CURRENT USER BASE (CUSTOMERS)
▪ STIMULATE MAX. SELECTIVE DEMAND AMONGST LATER ADOPTERS.
Tactics & Strategies To Achieve
SHARE MAINTENANCE OBJECTIVES EXHIBIT 10-3
OPTIONS-
1. FORTRESS or a position defense strategy
2. FLANKER strategy
3. CONFRONTATION strategy
4. MARKET EXPANSION –mobile- strategy
5. CONTRACTION or strategic withdrawal strategy
OR COMBINATIONS THERE OF
CHOICE OF STRATEGY DEPENDS
ON:
1. MARKET SEGMENT SIZE
2. CUSTOMER CHARACTERISTICS
3. NUMBER AND CALIBER OF COMPETITORS
4. YOUR AVAILABLE RESOURCES AND COMPETENCIES.
1. FORTRESS OR POSITION DEFENCE
STRATEGY REINFORCE YOUR CURRENT STRENGTH
CONDITIONS - WORKS WELL WITH RELATIVELY HOMOGENEOUS SEGMENTS AND LEADER ENJOYS HIGH AWARENESS AND PREFERENCE LEVELS.
TACTICS - CONSUMER SATISFACTION AND LOYALTY PROGRAMS.
THRU
▪ CONTINUED PRODUCT IMPROVEMENT
▪ REDUCE PER UNIT COSTS
▪ INITIATE - SELECTIVE DEMAND FOCUSED CONSUMER AND PROMOTIONAL ACTIVITY.
▪ REPEAT PURCHASE ACTIVITY – COUPONS ET AL.
▪ INVEST SALES FORCE AND CUSTOMER SERVICE FUNCTIONS SPECIALIZATION
ENCOURAGE –SIMPLIFY REPEAT PURCHASE BEHAVIOUR
▪ MAXIMIZE AVAILABILITY
▪ MINIMIZE STOCK OUTS.
▪ SHORTEN ORDER – DELIVERY CYCLE.
▪ EXPAND DISTRIBUTION CHANGES.
▪ COMPUTERIZED RE-ORDER SYSTEMS –CURRENTLY = 5 BILLION ANNUALLY
▪ DEVELOP LONG-TERM RELATIONSHIPS
▪ CONTRACTUAL AGREEMENTS
▪ SPECIALIZED CUSTOMER SERVICES – COKE, MR. G-
▪ TRUST – AVOID OPPORTUNIST SHORT TERM SELF INTEREST ACTIVITY AT YOUR PARTNERS EXPENSE.
▪ MAKE CUSTOMER SPECIFIC INVESTMENTS CCMS
▪ DOESNÈT WORK IN VOLATILE MARKETS E.G. HIGH-TECH. RAPID CHANGE.
2. FLANKER STRATEGY
ALWAYS USED INCONJUNCTION WITH A POSITION DEFENCE STRATEGY
▪ CAN BE EITHER PROACTIVE OR REACTIVE
CONDITIONS- WHEN COMPETITION TRIES AN END-RUN
TACTICS-
▪ NEED A FLANKER OR FIGHTING BRAND TO CONFRONT THE ATTACK.
▪ USUALLY A LOWER QUALITY, LOW PRICED BRAND (PRICE NOT ATTRIBUTE FOCUSED)
3. CONFRONTATION STRATEGY
‘HEAD-TO-HEAD’
CONDITIONS- PROACTIVE (TO INITIATE) IS BEST BUT USUALLY REACTIVE IS THE NORM
TACTICS- LOWER PRICE HAS ADVANTAGE OF SPEED BUT COMMODITIZES AT THE EXPENSE OF DIFFERENTIATION INVESTMENT.
- INCREASE PROMO USUALLY THE ACTIVITY BEST ALTERNATIVE
- ADD ATTRIBUTES, BENEFITS –FAST.
4. MARKET EXPANSION OR MOBILE STRATEGY
CONDITIONS - PROACTIVE EXPANSION INTO NEWLY EMERGING SEGMENTS.
TACTICS - LAUNCH PRODUCT-LINE EXTENSIONS, NEW BRANDS, RELATED PRODUCTS TO PREMPT COMPETITIVE ACTIVITY AND IMPROVE UNIT MARGINS FOR BATTLE.
- CREATE SPECIALIZED SALES FORCES (MIT); OFFER ANCILLARY SERVICES (FULL SERVICE VENDING) TO ENHANCE DIFFERENTIATION A LA COMPETITIVE ADVANTAGE.
5. CONTRACTION OR STRATEGIC WITHDRAWAL
CONDITIONS: UNABLE TO ADEQUATELY DEFEND ALL SEGMENTS
TACTICS:
▪ CONSOLIDATE STRONG SEGMENTS -WITH FUTURE GROWTH OPPORTUNITIES.
▪ TEMPORARILY WITHDRAW FROM LEAST TENABLE SEGMENTS.
Share Growth Strategies
For Market FOLLOWERS
Marketing Objectives
For FOLLOWERS
▪ ACHIEVE MARKET DOMINANCE
▪ BUILD PROFITABLE NICHE SEGMENTS.
MARKETING TACTICS AND STRATEGIES TO ACHIEVE SHARE GROWTH
OPTIONS:
1. OBTAIN VOLUME FROM COMPETITORS EXISTING CUSTOMERS
CONDITIONS: LEADER HAS LARGE EXISTING SHARE.
TACTICS: ‘HEAD-TO-HEAD’ WITH IMPROVED, NEW ATTRIBUTES OR PRICING
OPTIONS continued…
2. OUT EXECUTE AND OUT SPEND
CONDITIONS: NUMEROUS HETEROGENEOUS SEGMENTS
▪ LEADER HAS STRENGTH IN ONLY A FEW
TACTICS:
▪ STIMULATE DIFFERENTIATED DEMAND IN LATER ADOPTER CATEGORIES
WHO TO ATTACK?
▪ TARGET SHARE LEADER IN THEIR PRIMARY MARKET SEGMENT –USE FRONTAL OR ‘LEAPFROG’ (YOU HAD BETTER BE BIGGER AND STRONGER).
▪ TARGET ANOTHER FOLLOWER WITH FRONTAL ATTACK – SECURE SEGMENT ‘BEACH HEAD’.
▪ SIMULTANEOUSLY TARGET SMALLER REGIONAL COMPETITORS (WITH LIMITED RESOURCES).
▪ INDIRECT –FLANKING OR ENCIRCLEMENT- ESTABLISH IN MULTIPLE UNCONTESTED NICHE SEGMENTS –DON’T ATTRACT RETALIATION.
STRATEGIC ATTACK ALTERNATIVES
a. FRONTAL ATTACK Strategy
CONDITIONS:
▪ RELATIVELY HOMOGENEOUS SEGMENT
▪ VERY LIMITED OR EARLY DIFFERENTIATION
▪ YOU ARE BIGGER AND STRONGER.
TACTICS: ACHIEVE A SUSTAINABLE ADVANTAGE THRU
▪ LOWER COSTS – MULTIPLE SBU SYNERGY – SHARE PRODUCTION – MARKETING
▪ SUPERIOR PRODUCTION TECHNOLOGY
▪ EXISTING SUPPLIER RELATIONSHIPS
OR A
▪ DIFFERENTIATED POSITION
▪ PROVIDE BETTER VALUE
▪ SUPERIOUR SALES, SERVICE FUNCTION
b. LEAPFROG Strategy
CONDITIONS: YOU HAVE SUPERIOR TECHNOGICAL RESOURCES
TACTICS:
▪ ABLE TO OFFER NEXT GENERATION PRODUCT (DIFFERENTIATION)
▪ MORE DIFFICULT WITH DURABLE GOODS (SWITCHING COSTS PROGRAMMES)
c. FLANK ATTACK Strategy
CONDITIONS – WHEN THE MARKET CAN BE BROKEN INTO TWO OR MORE LARGE SEGMENTS.
TACTICS:
▪ CHOOSE LEAST DEFENDED DEVELOPED SEGMENT.
▪ DIFFERENTIATE PRODUCT OFFERING –OR DISTRIBUTION CHANNELS- TO SPECIFICALLY ADDRESS THIS SEGMENTS NEEDS
▪ DOES NOT HAVE TO BE PURELY PHYSICAL ATTRIBUTES.
d. ENCIRCLEMENT Strategy
CONDITIONS: NUMEROUS UNDERDEVELOPED NICHE SEGMENTS (GEOGRAPHIC OR USER APPLICATION)
TACTICS:
▪ SIMULTANEOUS ENTRY OF TARGETED PRODUCT EXTENSIONS SPECIFICALLY TAILORED FOR EACH NICHE SEGMENT.
e. GUERRILLA ATTACK Strategy
CONDITIONS – LIMITED RESOURCES, COMPETITOR TOO POWERFUL.
TACTICS:
▪ CHOOSE LESS ENTRENCHED SEGMENT
▪ QUICK IN AND OUT –COUPON DROPS, PRICE OFFS, VOLUME DROPS, MERCHANDISING DEALS, COOPS
▪ TAKE’M TO COURT???
SUCCESSFUL FIRMS
Have certain commonalities:
1. Increased product quality relative to the competitors.
2. Had more line extensions, product improvements relative to the competitors.
3. Increased marketing expenditures: sales function and promotions; media advertising utilized primarily in pkg. Goods - faster than the rate of market growth –investment spending-.
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