Strategic Marketing Lecture 6 Strategies For New Market Entry PDF
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NEOMA Business School
Ismail Erzurumlu
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Summary
This is a lecture on strategies for entering new markets. It covers topics such as the generalized product life cycle, introduction stage of the PLC, and different market positioning strategies such as pioneer, follower and late entrants. The lecture notes summarize characteristics, objectives, and strategies for successful market entry.
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STRATEGIC MARKETING MK42009E - MK42025E Lecture 6: Strategies For New Market Entry ASST. PROF. ISMAIL ERZURUMLU AGENDA 1.Strategies For New Market Entry 2 Strategies For New Market Entry Generalized Product Life Cycle Shakeout phase 4 MARKETING STRATEGY - MK42082E IERZURUMLU Different cycles 5 Intro...
STRATEGIC MARKETING MK42009E - MK42025E Lecture 6: Strategies For New Market Entry ASST. PROF. ISMAIL ERZURUMLU AGENDA 1.Strategies For New Market Entry 2 Strategies For New Market Entry Generalized Product Life Cycle Shakeout phase 4 MARKETING STRATEGY - MK42082E IERZURUMLU Different cycles 5 Introduction Stage of the PLC Summary of Characteristics, Objectives, & Strategies SALES Low COSTS High Cost per Customer PROFITS Negative MKTG OBJECTIVES Create product awareness (primary demand) Product Narrow product line Price Often introductory i.e. cost-plus Distribution Need to develop your presence Advertising Build awareness among early adopters/dealers 6 6 What is a New Product (Market Entry)? 7 Examples from France 8 What is a New Product? High 10% Newness to the company 20% New-to-the world products New product lines 26% 26% Revisions/ Improvements to existing products Additions to existing product lines 11% Low 7% Repositionings Cost reductions Low High Newness to the market Source: New Products Management for the 1980s (New York: Booz, Allen & Hamilton, 1982). Reprinted by permission. 9 Why a New Market Entry? Objective New Entry Maintain position as a product innovator New-to-the-world products, improvements or revisions of existing products Defend a current market-share position Improvements or revisions, of existing products, additions to existing product line, cost-reductions Establish a foothold in a future new market New-to-the-world products, additions to existing product line, repositiongs Exploit technology in a new way New-to-the-world products, a new product line, additions to or revisions of existing product line Capitalize on distribution New-to-the-world products, new product line, additions strengths to or revisions of existing product line Provide a cash generator Additions to or revisions of existing product line, repositionings, cost reductions Use excess or off-season capacity New-to-the-world products, new product line 10 Turbulent Environment for Innovation “Two things drive this business – technology and paranoia.” --Intel VP 11 The Innovation Imperative “There are no strategies for creating wealth in the long term that are not driven by innovation. The challenge increasingly is not how you create entirely new businesses, but how to use innovation to reinvent the core of your company in a world where strategies die faster than they used to and where any company that’s not constantly renewing itself is simply becoming irrelevant.” --Gary Hamel, Fortune, 09/06/04 33% of product sales were from new products launched in the past 5 years (Source: PDMA) Manufacturers think that 75% of the next 8 years growth will come from additional new products (Source: Booz, Allen, Hamilton) 12 New Product Mortality Rate New product failure rates are high. – Approximately 68% of new products are unsuccessful (Source: Booz, Allen, Hamilton) – 46% of product development and commercialization resources are spent on products that are cancelled or fail to yield an adequate financial return. (Source: PDMA). Many new ideas are needed to create a single successful new product. – It takes seven new product ideas to generate one successful new product.(Source: Booz, Allen, Hamilton). 13 Three Market Positions Pioneer Early Follower Late Follower What are appropriate marketing strategies for each over time? 14 Who is Pioneer? Firms that take an initial competitive action Generally possess the resources and capabilities that enable them to be pioneers in new products, new markets or new technologies Can earn above average profits until competitors respond Gain customer loyalty, helping to create a barrier to entry by competitors Advantage depends upon difficulty of imitation 15 Potential Sources of Pioneering Advantage First choice of market segments and positions Defining the rules of the game Distribution advantages Economies of scale and experience High switching costs for early adopters Possibility of positive network effects 16 A pioneering firm can achieve long-term success when… The new product-market is insulated from the entry of competitors, at least for a while, by: strong patent protection, proprietary technology (such as a unique production process), substantial investment requirements, or positive network effects. The firm has sufficient size, resources, and competencies to take full advantage of its pioneering position and preserve it in the face of later competitive entries. 17 Who is Follower? Firms that respond to a First Mover’s actions Followers frequently imitate First Movers Speed of response often dictates success Should evaluate customers’ response before moving “Fast” Followers can capture some of initial customers and develop some brand loyalty Avoid some of the risks associated with First Move Must possess necessary capabilities to imitate 18 Who is Follower? Innovative imitation (Levitt) can be just as profitable as a product innovation strategy e.g., Product innovation—Sony vs. Product-imitation— Panasonic Four broad follower strategies: Counterfeiter (which is illegal)- e.g.pirated music/ movie CDs Cloner- e.g. the IBM PC clones Imitator- e.g. car manufacturers imitate the style of one another Adapter- e.g. many Japanese firms are excellent adapters initially before developing into challengers and eventually leaders 19 When pioneers lose out 20 Advantages of a Follower Strategy Ability to take advantage of: Pioneer’s positioning mistakes Pioneer’s product mistakes Pioneer’s marketing mistakes Latest technology Pioneer’s limited resources 21 A follower will most likely succeed when… There are few legal, technological, or financial barriers to inhibit entry. It has sufficient resources or competencies to overwhelm the pioneer’s early advantage. 22 What Does It Take To Be Successful? 23 Strategic Marketing Programs for Pioneers Mass-market penetration Niche penetration Skimming and early withdrawal Depends on... Customer Market / Competition Company 24 Strategic Marketing Programs for Pioneers Mass-market penetration Gain large share of total market Requires substantial resources More likely to work when barriers to entry exist 25 Strategic Marketing Programs for Pioneers Mass-market penetration Niche penetration Depends on... Gain large share of one segment (niche) Requires fewer resources Customer More likely to be used when several competitors with Market / Competition substantial resources are likely to enter the market Must have clearly distinguishable segments Company 26 Strategic Marketing Programs for Pioneers Mass-market penetration Niche penetration Skimming and early withdrawal Depends on... Charge high price, withdraw product when substantial Customer price competition appears Must have inelastic demand for product category Market / Competition Must have continuously strong R&D capabilities Company 27 The issue of timing and features 28