Strategic Marketing: MBA
Marketing Strategies
for New Market Entries
Strategic Marketing
Marketing Strategies for New Market Entries
Sustaining Competitive Advantage over the Product
Life Cycle
The product life cycle is concerned with the sales history of a product
or product class.
The concept holds that a product’s sales change over time in a
predictable way and that products go through a series of five distinct
stages:
introduction, growth, shakeout, maturity, and decline.
Each of these stages provides distinct opportunities and threats,
thereby affecting the firm’s strategy as well as its marketing
Strategic Marketing
Marketing Strategies for New Market Entries
Sustaining Competitive Advantage over the Product
Life Cycle
Strategic Marketing
Marketing Strategies for New Market Entries
Sustaining Competitive Advantage over the PLC
Introductory stage, a new product’s purchase is limited because many
members of the target market are unaware of its existence; also, the product
often lacks easy availability.
As more people learn about the product and it becomes more readily
available, sales increase at a progressively faster rate (the growth stage).
growth becomes largely a function of population growth in the target market
Atthe end of the growth period—just before the advent of maturity—the
shakeout or competitive turbulence stage occurs.
Decreasing growth and strong price competition - Exit
The mature stage is reached when the net adoption rate holds steady—that
is, when adopters approximate dropouts
Some die in infancy - some live forever
Strategic Marketing
Marketing Strategies for New Market Entries
Market and Competitive Implications of PLC Stages
Introductory Stage
– move it through the introductory stage as quickly as possible.
– Research, engineering, and manufacturing capacity are critical to
ensure the availability of quality products.
– Where service is important, the firm must be able to provide it promptly
(as in post-purchase service and spare parts availability)
Marketing Implications
– The length of the product line typically should be relatively short
– reduce production costs and hold down inventories
– focus on differentiating the new product or product line from solutions
customers previously employed
– Pricing: value to the end user; how quickly it can be imitated by
competitors; the presence of close substitutes; and the effect of price
on volume (elasticity) and, in turn, on costs
– Skimming vs penetration
Strategic Marketing
Marketing Strategies for New Market Entries
Market and Competitive Implications of Product
Life-Cycle Stages
Introductory stage: Marketing Implications
Distribution: Product availability; easier if the company uses the
same channels for its other products
Promotion: expenditures involving advertising and sales-force are a
high percentage of sales, especially for a mass-market, small-
value product.
to build awareness
such as in-store displays, premiums, coupons, samples, and off-list
pricing
trial are substantial.
Social media and web offer much cheaper and targeted
promotional opportunities.
Strategic Marketing
Marketing Strategies for New Market Entries
Market and Competitive Implications of PLC Stages
Growth Stage: Marketing Implications
starts with a sharp increase in sales, product features (gradually)
product line expands to attract new segments, offering variants and
different pricing-accessories-
Upselling and cross-selling
the firm—especially the dominant one—makes every effort to extend
growth by adding
– new segments, lowering costs, improving product quality, adding new
features, and trying to
– increase product usage among present users.
– competitive advantage shifts to differentiation from other entrants in the
product class
Strategic Marketing
Marketing Strategies for New Market Entries
Market and Competitive Implications of Product
Life-Cycle Stages
Growth Stage: Marketing Implications
Prices: tend to decline during the growth period, and price
differences between brands decrease
– The extent of the decline depends on cost-volume relationships,
industry concentration, and the volatility of raw material costs.
– If growth is so strong it outpaces supply, there is little or no pressure
on price; indeed, it may enable sellers to charge premium prices
Channels: consumer goods strive to build a channel or a direct sales
system that provides maximum product availability and service at the
lowest cost-distribution success system
Promotion: attitude formation
– Cultivate new segments,
– high costs but decline as percentage of sales
Strategic Marketing
Marketing Strategies for New Market Entries
Market and Competitive Implications of PLC
Shakeout Stage: drop in the overall growth rate, typically marked
by substantial price cuts
– weaker competitors exit the market
– stronger gain the share
– rationalize product line
– creative promotional pricing, and strengthen its channel relationships
Marketing Implications
– direct price competition
– maintain and enhance their distribution system
– Reduce channel members resistance in carrying inventories
– Promotion cost may increase: buying incentives
Strategic Marketing
Marketing Strategies for New Market Entries
Market and Competitive Implications of Product
Life-Cycle Stages
Maturity Stage:
– Sales plateau
– Stability in terms of demand, technology, and competition characterizes
maturity
– Strong market leaders enjoy profits due to lower per unit costs
– Longer the stage stronger are the chances of industry change
Marketing Implications
– technical maturity, the various brands become more similar; any
breakthrough can payoff big time.
– Adding more value to the product, ease of use, bundling etc
– Mass media advertising decreases; in-store promotions increase
– cost effectiveness remains a key factor
– Premium on prices erode gradually; competitive pressures may be
harmful
Strategic Marketing
Marketing Strategies for New Market Entries
Market and Competitive Implications of Product
Life-Cycle Stages
Decline Stage:
– Sales plummet
– Products enter this stage primarily because of technologically superior
substitutes (computers over typewriters) or a shift in consumer tastes,
values, and beliefs-Value Migration
– Costs increase, and radical efforts are needed to reduce costs and the
asset base.
– If exit barriers are low, many firms vacate the market, which increases
the sales of remaining firms
– Stronger firms may even prosper for a time
– Promotion declines; prices remain stable if decline is slow
– Focus on distribution without push promotions
Strategic Marketing
Marketing Strategies for New Market Entries
Strategic Implications of the Product Life Cycle
Introductory and Growth Stages:
– Higher investments required across all facets (plant, machinery, promo)
– sustain a rather sizable short-term loss; profitability is depressed but
sales are supposed to increase
– price decrease may suppress the availability of profits regardless if the
decline in unit cost increase marginal revenue
– Market share increases
Mature and Declining Stages:
– the larger-share sellers should be able to reap the benefits of their
earlier investments
– higher investments are not required
– less competitive pressure in terms of investment and innovation
– Leader enjoys share and profitability but needs investments: product
and efficiency
Strategic Marketing
Marketing Strategies for New Market Entries
Strategic Implications of the Product Life Cycle
NEW MARKET ENTRIES: What is NEW?
Strategic Marketing
Marketing Strategies for New Market Entries
OBJECTIVES OF NEW PRODUCT AND MARKET
DEVELOPMENT
Strategic Marketing
Marketing Strategies for New Market Entries
Pioneer Strategy
– First choice of market segments and positions
– The pioneer defines the rules of the game
– Distribution advantages
– Economies of scale and experience
– High switching costs for early adopters
– Possibility of preempting scarce resources and suppliers
Some research has found that surviving pioneers hold a significantly larger
average market share when their industries reach maturity than firms that were
either fast followers or late entrants in the product category.
On the other hand, some pioneers fail. They either abandon the product
category, go out of business, or get acquired before their industry matures
Strategic Marketing
Marketing Strategies for New Market Entries
Follower Strategy
– Ability to take advantage of the pioneer’s positioning
mistakes
– Ability to take advantage of the pioneer’s product mistakes
– Ability to take advantage of the pioneer’s marketing
mistakes
– Ability to take advantage of the latest technology.
– Ability to take advantage of pioneer’s limited resources
Strategic Marketing
Marketing Strategies for New Market Entries
Strategic Marketing
Marketing Strategies for New Market Entries
STRATEGIC MARKETING PROGRAMS FOR PIONEERS
– Mass-Market Penetration:
– objective of a mass-market penetration strategy is to capture and
maintain a commanding share
– more time to build volume and lower costs if barriers are high
– has competencies or resources that most potential competitors
cannot match
– critical marketing task is to convince as many potential customers as
possible to adopt - loyal customers
Strategic Marketing
Marketing Strategies for New Market Entries
STRATEGIC MARKETING PROGRAMS FOR PIONEERS
– Niche Penetration:
– may be possible for a small firm with limited resources to be a
successful pioneer
– more sense for such firms to focus their efforts on a single
market segment- avoid direct confrontations with bigger
competitors.
– appropriate when the new market is expected to grow quickly
– attractive when there are few barriers to the entry
– pioneer has only limited resources and competencies
Strategic Marketing
Marketing Strategies for New Market Entries
STRATEGIC MARKETING PROGRAMS FOR PIONEERS
– Skimming and Early With drawl
– may be possible for a small firm with limited resources to be a successful
pioneer
– even when a firm has the resources to sustain a leading position in a new
product-market, it may choose not to.
– Competition will come sooner or later so pioneers may choose to get a profit
early and exit
– setting a high price and engaging in only limited advertising and promotion
– may work to develop new applications for its technology or the next
generation of more advanced technology so what when competitors come
they can move to newer segments
Strategic Marketing
Marketing Strategies for New Market Entries
STRATEGIC MARKETING PROGRAMS FOR PIONEERS
Strategic Marketing
Marketing Strategies for New Market Entries
STRATEGIC MARKETING PROGRAMS FOR PIONEERS
