Lecture 7 r.pdf

STRATEGIC MARKETING MK42009E - MK42025E Lecture 7:Strategies For Growth Markets ASST. PROF. ISMAIL ERZURUMLU AGENDA 1.Characteristics of Growth Markets 2.Marketing Objectives and Strategic Choices for Share Leaders 3.Marketing Objectives and Strategic Choices for Challengers 2 Strategies For Growth...

STRATEGIC MARKETING MK42009E - MK42025E Lecture 7:Strategies For Growth Markets ASST. PROF. ISMAIL ERZURUMLU AGENDA 1.Characteristics of Growth Markets 2.Marketing Objectives and Strategic Choices for Share Leaders 3.Marketing Objectives and Strategic Choices for Challengers 2 Strategies For Growth Markets Generalized Product Life Cycle 4 Growth Stage of the PLC Summary of Characteristics, Objectives, & Strategies SALES Rapidly rising COSTS Avarage cost per customer PROFITS Rising MKTG OBJECTIVES Maximize market share Product Offer extension, service, warranty Price Penetration Strategy Distribution Build intensive distribution Advertising Reduce to take advantage of demand 5 5 Characteristics of Growth Market 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 6 Growing Markets in France 7 Dynamics of Growth Markets: Opportunities and Risks Opportunities Because… Risks… 1 Easier to gain shares …without competitive advantage, firms still gains market share Not get ready for the mature market 2 Share gains are worth more Revenues generated by each share point continue to expand as the market expands Not get ready for the future changes in technology, competitive structure, fragmentation 3 Low price competition Usually demand exceeds supply. What if demand does not exceed supply 4 Stay front/abreast Necessary to maintain technical experts Committing one technology makes focal firms job more difficult to adopt a new tech. 8 Share Maintenance Strategies The primary objective of the early share leader (usually the market pioneer) in a growth market is share maintenance. Retain repeat or replacement business from its existing customers Continue to capture the major portion of sales from the growing number of new customers entering the market for the first time. 9 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 10 Marketing Objectives for Share Leaders Retain current customers by: Maintaining/improving satisfaction and loyalty Increase attention to quality control as output expands Continue product modification and improvement Increase salesforce’s servicing of current accounts Expand post sale service capabilities 11 Marketing Objectives for Share Leaders Retain current customers by: Maintaining/improving satisfaction and loyalty Encouraging/simplifying repeat purchase Expand production capacity in advance Improve inventory control and logistics systems Continue to build distribution channels Consider developing automatic reorder systems 12 Marketing Objectives for Share Leaders Retain current customers by: Maintaining/improving satisfaction and loyalty Encouraging/simplifying repeat purchase Reducing attractiveness of switching Develop a product line with appealing features Develop multiple-line extensions Meet or beat lower prices 13 Marketing Objectives for Share Leaders Stimulate selective demand among later adopters by: Head-to-head positioning against competitive or potential offerings Develop a product line with more features Make product modifications Meet or beat lower prices When resources are limited consider withdrawing from smaller segments 14 Strategies for Share Leaders Fortress defense Flanker defense Confrontation Market expansion Contraction or strategic withdrawal 15 Strategic Choices for Share Leaders 16 Strategic Choices for Share Leaders: Fortress 17 Strategic Choices for Share Leaders: Flanker 18 Strategic Choices for Share Leaders: Confrontation 19 Strategic Choices for Share Leaders : Market expansion 20 Strategic Choices for Share Leaders: Contraction or strategic withdrawal 21 Share Growth Strategies The challenger’s strategic objective in a growth market is usually 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) 22 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 Stimulate selective demand among late adopters by: Head-to-head positioning against target competitor’s offering in established market segments Differentiated positioning focused on underdeveloped segments 23 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 Develop products with features superior to those of the target competitor Achieve lower unit costs Set prices below target competitor’s for comparable quality (only if low-cost position is achieved) Outspend the target competitor on promotion (aimed at selective demand), trade promotion and customer service If resources are limited, engage in one or more of the preceding actions on a sporadic basis in selected territories 24 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 Develop a new generation of products based on new technologies and additional benefits desired by the mass market Build awareness, performance, and replacement through heavy introductory promotions Build adequate distribution through trade promotions and dealer training programs 25 Marketing Actions to Achieve Share-Growth Objectives Stimulate selective demand among late adopters by: Head-to-head positioning against target competitor’s offering in established market segments Differentiated positioning focused on underdeveloped segments Develop a differentiated product line with unique features or price appealing to a major segment whose needs are not met by existing offerings Develop multiple line extensions or broad offerings with features or prices Design promotional campaigns to stimulate selective demand Build unique distribution channels Design service programs to reduce the perceived risks of trial --targeted to the unique needs of several smaller segments 26 Strategies for Followers Frontal attack Leapfrog Flank attack Encirclement Guerilla attack 27 Strategic Choices for Challengers 28 Strategic Choices for Challengers: Frontal attack 29 Strategic Choices for Challengers: Leapfrog 30 Strategic Choices for Challengers: Flanking attack 31 Strategic Choices for Challengers: Encirclement 32 Strategic Choices for Challengers: Guerilla Attack 33 Deciding Who to Attack Attack the market share leader within its primary target market [frontal assault, leapfrog or guerrilla attacks] Attack another follower who has an established position within a major market segment [frontal assault] Attack one or more smaller competitors who have only limited resources [frontal assault] Avoid direct attacks on any established competitor [flanking or encirclement] 34 Advices for Would-be Pioneers First mover advantage is trumped by followers who are better. Best beats first. Concentrate on being best. Being a pioneer without the basis for sustainable competitive advantage is a trap! Differentiation is key for followers Better benefits Better service Better marketing Lower price Beware of competing on price, however, unless your costs really are lower than competitors’ 35