Strategic Marketing: Growth Markets and Product Life Cycle

Characteristics of Growth Markets

• Rapidly rising sales
• Average cost per customer
• Rising profits

Strategies for Growth Markets

• Generalized product life cycle
• Growth stage of the PLC

Summary of Characteristics, Objectives, and Strategies

• Maximize market share
• Product offer extension, service, warranty
• Price penetration strategy
• Distribution: build intensive distribution
• Advertising: reduce to take advantage of demand

Characteristics of Growth Markets

• Increasing number of competitors
• Fragmentation of market segments
• Threat of product innovation from within and outside the industry
• Firm can maintain its current share position in a growth market if its sales volume continues to grow

Dynamics of Growth Markets: Opportunities and Risks

• Opportunities:
  • Easier to gain shares without competitive advantage
  • Share gains are worth more
  • Low price competition
  • Stay front/abreast with necessary technical expertise
• Risks:
  • Not getting ready for the mature market
  • Not getting ready for future changes in technology, competitive structure, and fragmentation

Share Maintenance Strategies

• Primary objective of the early share leader (market pioneer) in a growth market is share maintenance
• Retain repeat or replacement business from existing customers
• Continue to capture the major portion of sales from the growing number of new customers entering the market for the first time

Marketing Objectives for Share Leaders

• Retain current customers by:
  • Maintaining/improving satisfaction and loyalty
  • Encouraging/simplifying repeat purchase
  • Reducing attractiveness of switching
• Stimulate selective demand among later adopters by:
  • Head-to-head positioning against competitive or potential offerings
  • Differentiated positioning against competitive or potential offerings

Marketing Objectives for Share Leaders (continued)

• Retain current customers by:
  • Maintaining/improving satisfaction and loyalty
  • Increasing attention to quality control as output expands
  • Continuously modifying and improving products
  • Increasing salesforce's servicing of current accounts
  • Expanding post-sale service capabilities
• Retain current customers by:
  • Maintaining/improving satisfaction and loyalty
  • Encouraging/simplifying repeat purchase
  • Expanding production capacity in advance
  • Improving inventory control and logistics systems
  • Continuing to build distribution channels
  • Considering developing automatic reorder systems

Marketing Objectives for Share Leaders (continued)

• Retain current customers by:
  • Maintaining/improving satisfaction and loyalty
  • Encouraging/simplifying repeat purchase
  • Reducing attractiveness of switching
  • Developing a product line with appealing features
  • Developing multiple-line extensions
  • Meeting or beating lower prices
• Stimulate selective demand among later adopters by:
  • Head-to-head positioning against competitive or potential offerings
  • Developing a product line with more features
  • Making product modifications
  • Meeting or beating lower prices
  • Withdrawing from smaller segments when resources are limited

Strategic Choices for Share Leaders

• Fortress defense
• Flanker defense
• Confrontation
• Market expansion
• Contraction or strategic withdrawal

Share Growth Strategies

• The challenger's strategic objective in a growth market is to build its share by expanding sales faster than the overall market growth rate
• The challenger does this by:
  • Stealing existing customers away from the leader or other competitors
  • Capturing a larger share of new customers than the market leader (or other competitors)

Marketing Actions to Achieve Share-Growth Objectives

• Capture repeat/replacement purchases from current customers of the leader or other target competitor by:
  • Head-to-head positioning against competitor's offering in primary target market
  • Technological differentiation from target competitor's offering in primary target market
  • Stimulating selective demand among late adopters
• Capture repeat/replacement purchases from current customers of the leader or other target competitor by:
  • Developing products with features superior to those of the target competitor
  • Achieving lower unit costs
  • Setting prices below target competitor's for comparable quality
  • Outspending the target competitor on promotion, trade promotion, and customer service
  • Engaging in one or more of the preceding actions on a sporadic basis in selected territories if resources are limited

Marketing Actions to Achieve Share-Growth Objectives (continued)

• Capture repeat/replacement purchases from current customers of the leader or other target competitor by:
  • Developing a new generation of products based on new technologies and additional benefits desired by the mass market
  • Building awareness, performance, and replacement through heavy introductory promotions
  • Building adequate distribution through trade promotions and dealer training programs
• Stimulate selective demand among late adopters by:
  • Developing a differentiated product line with unique features or price appealing to a major segment whose needs are not met by existing offerings
  • Developing multiple line extensions or broad offerings with features or prices
  • Designing promotional campaigns to stimulate selective demand
  • Building unique distribution channels
  • Designing service programs to reduce the perceived risks of trial

Strategies for Followers

• Frontal attack
• Leapfrog
• Flank attack
• Encirclement
• Guerilla attack

Deciding Who to Attack

• Attack the market share leader within its primary target market
• Attack another follower who has an established position within a major market segment
• Attack one or more smaller competitors who have only limited resources
• Avoid direct attacks on any established competitor