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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