Strategic Marketing Lecture 8: Strategies for Mature and Declining Markets PDF

STRATEGIC MARKETING MK42009E - MK42025E Lecture 8:Strategies For Mature and Declining Markets ASST. PROF. ISMAIL ERZURUMLU AGENDA 1.Characteristics of Mature and Declining Markets 2.Strategic Innovators 3.Strategies for Mature and Declining Markets 2 Strategies For Mature and Declining Markets Trans...

STRATEGIC MARKETING MK42009E - MK42025E Lecture 8:Strategies For Mature and Declining Markets ASST. PROF. ISMAIL ERZURUMLU AGENDA 1.Characteristics of Mature and Declining Markets 2.Strategic Innovators 3.Strategies for Mature and Declining Markets 2 Strategies For Mature and Declining Markets Transition From Market Growth to Maturity to Decline 4 The Maturity Stage of the PLC 5 Common Strategic Traps During a Shakeout Period Failure to anticipate transition from growth to maturity Not an easy task: the replacement sales outweigh first-time purchases No clear competitive advantage as growth slows Assumption that an early moving advantage will insulate the firm from price or service competition Sacrificing market share in favor of short-term profit Industry maturity does not imply a lack of opportunity; nor does imply an absence of technological change. But… tends to reduce the #of opportunities for CA and shift these limited opportunities from differentiation-based to costbased factors. 6 Maturity Stage of the PLC Summary of Characteristics, Objectives, & Strategies SALES Peak COSTS Low cost per customer PROFITS High MKTG OBJECTIVES Maximize profits while defending market share Product Diversify brand and models Price Match or beet competitors Distribution Build more intensive distribution Advertising Increase to encourage brand switching 7 7 Examples 8 Key Success Factors in Mature Markets Opportunities for sustainable competitive advantage are limited Technology stable and well diffused International competition: domestic cost advantage vulnerable Ease of entry due to well developed industry infrastructure and powerful distributors Emphasis on economies of scale and differentiation through complementary services. Segmentation and targeting focused on locating profitable segments and wooing good customers Limited opportunity for product and process innovation but considerable opportunity for strategic innovation 9 Innovation over the PLC 10 Strategic Innovators Who are they? New entrants CNN in news broadcasting Existing firms on the periphery Vans in clothing & shoes Firms from adjacent industries Apple in consumer electronics 11 Strategic Innovators 12 Strategies for Mature Markets For maintaining current market share: Fortress defense Add flanker brands Pursue niche strategy (small-share competitors) For extending volume growth Increased penetration Convert current nonusers in target segment into users Extended use Increase frequency of use among current users Market expansion Develop differentiated positioning focused on untapped or underdeveloped segments 13 Marketing Actions for Accomplishing Growth Extension Objectives Increase penetration Convert non-users (you really need a Food Saver) Steal competitor’s customers (Shell gas is better) Extend usage Increase repeat purchase (someone else will buy it if you don’t) Demonstrate new product applications (it dices too) Lead market evolution (oval, crust-less pizza, salad kit) Expand market focus Consider acquiring a small producer Review segmentation scheme (after-school activities) Consider underserved segments (retirees) 14 Strategies for Declining Markets Recover more of the investment sooner and/or achieve higher liquidation Divestment Maximizing short-term cash flow; maintain (increase) margins even at the expense of market share decline Harvesting Strategy Eliminate R&D expenses; reduce marketing/sales budget; reduce production costs (at the expense of slow erosion in product quality) Less number of models or package sizes Maintain market share for the short-term Maintenance Strategy Continue spending on R&D (to maintain/improve product quality), ads, and sales/trade promotions; focus on salesforce efforts; lower prices ( at the expense of reduced margins) Treat as an interim strategy 15 Strategies for Declining Markets Increase share of the market; encourage weaker competitors to exit Profitable survivor Strategy Signal competitors that the firm remains in the market by increasing ads/promotion budgets and distribution coverage, spending R&D, focusing on salesforce efforts; consider line extension and private labels; lower prices. Rivals leave then switch to the harvesting strategy to reap substantial profits over the remaining life of the product Strengthen share position in one or a few segments with potential for continued profit Niche Strategy Spending on R&D to improve (modify) the product; consider private labels; focus on ads/sales promotions, and personal selling; seek unique channels; design service programs. 16