from Marketing and Management - A Strategic Decision Making Approach (5th edition)
Marketing
As a product market enters the growth stage of
its life cycle, the competitor with the leading market share is usually the
pioneer or at least one of the first entrance. Entrepreneurs must set a firm
strategic objective to maintain its leading position in the face of increasing
competitions as the market expands. The
dynamic of growth market including the increasing number of competitors, the
fragmention of the market segment, and the threat of product innovation from within
and outside the industri. Entrepreneurs must maintain its current share
position growth market only if its sales volume continues to grow at rate equal
to that overall market, enabling to stay even in absolute market share.
Share
maintenance for a market leader involves two important marketing objectives.
First, the firm must retain its current customer, ensuring taht those customers
remain brand loyal when making repeat or replacement purchased. Second is
entrepreneurs must stimulate selective demand among later adopters to ensure
that it captures a large share of the continuing growth in the industry sales.
In some cases enterpreneurs might pursue a third objective which is stimulating
primary demand to help speed up overall market growth. The market leader is the
logical one to stimulate market growth in such situation where is has the most
to gain from increase volume, assuming it can maintain it relative share of
that volume.
A
bussiness might take a variety of marketing action to maintain a leading share
position in growing market. Share maintanance involve multiple objective and
their specific marketing objectives and different marketing actions may be
needed to achieve each one, a strategic marketing programme usually integrates
a mix of the actions outlined in exhibit. Not all the ctions are consisted with
one another. For example, for a bussiness to invest heavily in new product
improvements and promotions to enhance its product’s high-quality image and
simultaneously slash prices, unless it was trying to drive out weaker
competitor.
Fortress or Position Defense Strategy
The most basic defensive strategy is to
continually strengthen a strongly held current position to build an impregnable
fortress capable of repelling attacks by current or future competitors. By
shoring up an already strong positions, entrepreneurs can improve the
satisfaction of current customers while increasing the attractiveness of its
offering to new customers with the needs and characteristics similar to those
of earlier adopters.
Entrepreneurs
must retain current customers by maintaining or improving satisfaction and
loyalty. The rapid expansion of output necessary to keep up with a grow market
can often lead to quality control problems for the market leader. As a new
plants, equipment, and personnel are quickly brought on line, bugs can suddenly
appear in the production process. Thus, the leader must pay particular
attention to quality control during this process. Most customers have only
limited, if any, positive past experience with the new brand to offset their
dissappointment when a purchase does not live up expectation.
The
most affective way a leader can strengthen its position is to continue to
modify and improve its product. This can reduce the opportunities for the
competitors to differentiate their product by designing in features or
performance levels the leader does not offer. The leader might also try to
reduce unit cost to discourage low-price competitions.
The
leader should take step to improve not only the physical product but customer’s
perception of its as well. As competitors enter or prepare to enter the market,
the leader’s advertising and sales promotions emphasis should drift from
stimulating primary demand to building selective demand for the company’s
brand. This usually creating appeals that emphasize the brand’s superior
features and benefits. While the leader may continue sales promotion efforts
aimed at stimulating trial among later adopters, some of those efforts might be
shifted toward encouranging repeat purchase among existing customers.
For
industrial goods, some salesforce efforts should shift from prospective for new
accounts to servicing existing customers. Firm that relied on independent
manufacturer’s reps to introduce their new product might consider replacing
them with company salesperson to increase customer service orientation of their
sales effort. Firm whose own salesperson introduced the product might recognize
their salesforce into specialized group focused on major industries or user
segments. Or they might assign key account representatives, or cross-functional
account teams, to service their largest customers.
Finally
a leader can strengthen its positions as market grow by giving increased
attention to postsale service. Rapid growth in demand can not only outstrip a
firm’s ability to produce a high quality product, but it can also overload a
firm’s ability to service customers. This can lead to a loss of existing
customer as well as negative word of mouth that might inhibit the firm’s
abilities to attract new users. Thus, the growth phase often requires increased
investment to expand firm’s part iventory, hire and train service personnel and
dealers, and improve the information contents of firm’s website.
Action
to encourage and simplify repeat purchasing is one of the most critical action
a leader must take to ensure the customers continue buying its product is to
maximize its availibility. It must reduce stockout on retail store shelves or
shorten delivery times for industrial goods. To do this, the firm must invest
in plant and equipment to expand capacity in advance of demand, and its must
implement adequate inventory control and logistic systems to provide a steady
flow of goods through the distribution system. The firm should also continue to
build its distribution channels. In some cases, a firm might even vertically
integrate parts of its distribution system to gain better control over order
fulfillment activities and ensure quick and reliable deliveries.
Some
market leader, particularly in industrial goods markets, can take more
proactive steps to turn their major customers into captives and help guarantee
future purchases. For example, a firm might negotiate requirements contract or
guaranteed price aggrements with its customer to ensure future purchases, or
might tie them into a computerized reorder system or logistic allience.
Flanker Strategy
One shortcoming of fortress strategy is that a
challenger might simply choose to bypass the leader’s fortress and try to
capture territory where the leader has not yet established a strong presence.
This can represent a particular threat when the market is fragmented into major
segment with different needs and preferences and the leader’s current brand
does not meet the needs of one or more of those segments. a competitor with
sufficient resources and competencies can develop a differentiated product
offering to appeal to the segment where the leader is weak and thereby capture
a substancial share of the overall market.
To
defend against an attack directed at the weakness in its current offering, a
leader might develop a second brand to compete directly against the
challenger’s offering. This might involve trading up, where the leader develops
a hight-quality brand offers at a higher price to appeal to prestige segment of
the market.
More
commonly, though, a flanker brand is a lower-quality product designed to appeal
to a low-price segment to protect the leader primary brand from direct price
competiton. Unilever is officially the world’s third largest consumer goods
company with well know product such as Persil, Dove and Lux; however, a
substancial number of customer number of customer prefer to pay less for a
somewhat lower quality product. Rather than conceding that low-price segment to
competitors, or reducing Dove prices and margins in an attempt to attract
price-sensitives consumers, Unilever introduce
OMO, a low price flanker brand.
A
flanker strategy is always used in conjunction with a position defense
strategy. The leader stimultaneously strengthen its primary brand while
introducing a flanker to compete in segment where the primary brand is
vulnerable. This suggest that a flanker to compete appropriate only when the
firm has sufficient resources to develop a fully support two or more entries.
After all, a flanker is of little value if it is so lightly supported that a
competitor can easily wipe it out.
Confrontation Strategy
Supposed a competitor chooses to attack the leader
head-to-head and attemps to steal customers in leader’s main target market. If
the leader has establish a strong position and attained a high level of
preference and loyalty among customer and the trade, it may be able to sit back
and wait for the competitor to fail. In many cases, though, the leader’s brand
is not strong enought to withstand a
frontal assault from a well-funded, competent competitor. If the leader’s
competitive intelligence is good, it may decide to move proactively and chages
its marketing program before a suspected competitive challeges occur. A
confrontal strategy , though, is more commonly reactive. The leader usually
decides to meet or beat the attractive features of a competitor’s offering by
making the product improvement, increasing promotional efforts, or lowering
price only after the challenger’s success has become obvious.
Simply
meeting improved features or lower price of a challenger, however, does nothing
to reestablish a sustained competitive advantage for the leader. And a
confrontation based largely on lowering prices creates an additional problem of
shrinking margin for all concerned. Unless decreased prices generate sustantial
new induatry volume and the leader’s production cost fall with the increasing
volume, the leader may be better off responding to price threat with increased
promotion or product improvement while trying to maintain its rates pr a
protracted diffusion process, the leader may be wise to adopt a penetration
pricing policy in the first place. This would strengthen its share position and
might preempt low-price competitors from entering.
The
leader can avoid the problem of a confrontation strategy by reestablishing the
competitive advanted coded by challenger’s frontal attack. But this typically
requires additional investment in process improvement aimed at reducing unit
cost, improvement in product quality or customer service, or even the
development of the next generation of improved product to offer customer
greater value for their money.
Market Expansion
A
market expansion strategy is a more aggresive and proactive version of a
flanker strategy. Here the leader defense its relative market share by
expanding into a number of market segment. This strategy’s primary objective is
to capture a large share of new customer group who may prefer something
different from the firm’s initial offering, protecting the group from future
competitve threats from a number of directions. Suach a strategy is
particularly appropriate in fragmented market if the leader has the resources
to undertakes multiple product development and marketing efforts.
The
most obvious way a leader can implement a market expandsion strategy is to
develop line extensions, new brands, or even alternative product from utelizing
similar technology to appeal multiple market segments. To expand its total
market, gain increased experince-curve effect, and protectits overall
technological lead.
A
less-expensive way to appeal to a variety of customer segment is to retain the
basic product but vary other elements of the marketing program to make it
relatively more attractive to specific users. Thus, a lead might create
specialized salesforced to deal with the unique concern of different user
groups. Or it might offer different ancillary services to different type of
customers or tailor sales promotion efforts to different segment. Thus,
performing art group often promote reduced ticket prices, transportation
services and aother inducement to attract senior citizens and student to
matinee performance.
Contaction or Strategic Withdrawal
In some highly fragmented markets, a leader
may be unable to defend itself adequately in all segments. This is particularly
likely when newly emerging competitor have more resources than the leader. The
firm may have to reduce or abondon its effort in some segment to focus on areas
where it enjoy the greates relative advantages or that have the greatest
potential for future growth. Even some large firm may decide that certain
segement are not profitable enough to coninue pursuing.
