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Strategic Marketing: Growth Markets and Product Life Cycle

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UnboundCloisonnism
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22 Questions

What is the primary marketing objective for a share leader in a growth market?

Maximize market share

In a growth market, what happens to the cost per customer?

It averages out

What is a characteristic of growth markets?

Increasing number of competitors

Why do share gains in a growth market result in higher revenues?

Because the market size is expanding

What is a risk of operating in a growth market?

Firms may not be ready for the mature market

What is a typical pricing strategy for a firm in a growth market?

Penetration pricing strategy

What is the primary objective of the early share leader in a growth market?

To maintain its existing market share

What is one strategy for share leaders to retain current customers?

Expanding production capacity

What is the strategic objective of the challenger in a growth market?

To build its share by expanding sales

What is one marketing objective for share leaders to stimulate selective demand among later adopters?

Head-to-head positioning against competitive offerings

What is the consequence of committing to one technology for a focal firm?

It makes it more difficult to adopt new technology

What is one strategy for share leaders to defend their market share?

Fortress defense

What is one way a challenger can capture a larger share of new customers than the market leader?

By capturing a larger share of new customers than the market leader

What is the primary objective of head-to-head positioning against a competitor’s offering in the primary target market?

To capture repeat/replacement purchases from current customers

What is a strategic choice for challengers that involves attacking the market share leader within its primary target market?

Frontal attack

What is the benefit of being a first mover, according to the text?

It is trumped by followers who are better

What is the goal of differentiated positioning focused on underdeveloped segments?

To stimulate selective demand among late adopters

What is one way a challenger can achieve lower unit costs?

By achieving a lower unit cost through efficient production

What is the primary goal of a flank attack strategy?

To avoid direct attacks on established competitors

What is the purpose of building awareness, performance, and replacement through heavy introductory promotions?

To build a new market for a product

What is the goal of designing service programs to reduce the perceived risks of trial?

To target the unique needs of several smaller segments

What is the objective of a guerilla attack strategy?

To launch a series of small, surprise attacks on competitors

Study Notes

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

Test your knowledge on strategies for growth markets, including characteristics, marketing objectives, and strategic choices for share leaders and challengers. Learn about the generalized product life cycle and its stages, including growth stage.

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