Formulating marketing
strategies: strategies for
mature and declining
markets.
MKTG3016 Strategic Marketing Management
• This chapter will introduce you to:
• strategic challenges for mature and
declining markets
• common strategic traps during shake-
out periods
• strategic choices in mature markets
Topic outline • marketing strategies for mature
markets
• marketing strategies for declining
markets
• marketing actions for declining
markets.
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Challenges in mature markets
• Businesses that survive a shakeout face
new challenges in a mature market
Understand • Holding existing customers and
strategic challenges sustaining a meaningful competitive
for mature and advantage
declining markets
Challenges in declining markets
• Divest or liquidate?
• Maximise cash flow and profit over the
product’s remaining life
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Shake-out: Analyse • Four common strategic traps during a
shake-out period:
the stage between • Failure to anticipate transition from
growth to maturity
market growth and • No clear competitive advantage as
growth slows
maturity • Assumption that an early advantage
will insulate firm from price or
service competition
• Sacrificing market share in favour of
short-run profit
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• Success in mature markets requires two
strategic actions:
Interpret strategic • Development of a well-implemented
business strategy to sustain:
choices in mature • a competitive advantage
markets • customer satisfaction
• loyalty.
• Flexible and creative marketing
programs to pursue growth or profit
opportunities
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Strategies for maintaining competitive advantage
• Analysers and defenders sustain competitive advantage through
differentiation.
• It is difficult for a single business to pursue both low-cost and
differentiation strategies at the same time.
• Pursuit of low-cost strategy does not mean delivery of desirable customer
benefits can be ignored.
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The process
of customer
value
management
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Performance
Brand name Durability
Dimensions of Fit and finish
Conformance with
product quality
specifications
Serviceability Features
Reliability
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Tangibles
Reliability
Dimensions of Responsiveness
service quality
Assurance
Empathy
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See Parasuraman, Zeithaml and Berry’s (1985)
seminal work in the Journal of Marketing. This is
also known as the gap model.
Determinants There are five gaps:
of perceived
service quality 1.Gap between the customer’s expectations and the marketer’s
perceptions.
2.Gap between management perceptions and service quality
specifications.
3.Gap between service quality specifications and service
delivery.
4.Gap between service delivery and external communications
5.Gap between perceived service and expected service.
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Determinants
of perceived
service
quality
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No-frills product
Analyse key Innovative product design
methods of Cheaper raw materials
maintaining
Innovative production processes
a low-cost
position Low-cost distribution
Reductions in overheads
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Customer Financial dimensions of performance are of greater
interest over the remaining life of product markets
satisfaction • Return on investment and cash flow
and loyalty Substantial evidence that businesses with superior quality
goods obtain higher return on investment
are crucial Businesses must understand how satisfied customers are
to maximise by examining
• expectations and preferences
lifetime • perceptions
Businesses must also maintain customer loyalty but
value determine which segments are worth retaining based on
projection of lifetime value
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Identify key marketing strategies for mature
markets
The business should strive during the early years of market maturity to maximise the flow of profits
over the remaining life of the product market.
Thus, the most critical marketing objective is to maintain and protect the business’s market share.
In a mature market where few new customers buy the product for the first time, the business must
continue to win its share of repeat purchases from existing customers.
the fortress defence
There are three main strategies that can be add flanker brands
adopted for maintaining current market share: pursue niche strategy
Continue
14 d
Identify key
marketing
strategies for • Three strategies are available for extending volume growth
• Increased penetration
mature • convert current non-users in target segment into
users
markets • Extended use
Continued • increase frequency of use among current users
• Market expansion
• develop differentiated positioning focused on
untapped or underdeveloped segments
Increased penetration
• Enhance product’s value
Possible • add features, benefits, or services
• include it in the design of integrated systems
actions for • Stimulate additional primary demand
accomplishing Extended use
growth
• Move storage of the product closer to the point
extension of end use
objectives • Encourage larger volume purchases
• Stress basic product benefits for a variety of
usage
• Develop line extensions
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Possible actions for • Market expansion
• Develop differentiated product line or
accomplishing multiple line extensions
growth extension • Design advertising and promotion
tools for specific interests
objectives • Build unique distribution channels
• Design service programs
• Enter overseas markets where the
product category is in the early stage
of its life cycle
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Marketing strategies for declining markets
Assessing the relative attractiveness of the declining product market and the
business’s competitive position within it should dictate the appropriate
strategy.
conditions of demand
Assessment is based around exit barriers
intensity of future competitive rivalry
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Marketing strategies for declining markets
If the market is clearly unattractive or the business is in a weak competitive position it may
be worth divesting or liquidating
Other options for remaining competitors:
• Harvest
• maximise short-term cash flow
• Maintenance
• maintain market share for the short-term
• Profitable survivor
• increase share of the declining market
• Niche
• strengthen share position in one or a few segments
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Harvest
Marketing • eliminate R&D expenditures and capital
investments
actions for • reduce marketing and sales budgets
• reduce production costs
strategies
• raise price if necessary to maintain margins
in declining
Maintenance
• design service programs
markets •
•
continue trade promotion
focus sales force efforts
• lower prices if necessary to maintain share
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Marketing actions for strategies in declining markets
Profitable survivor
• signal competitors
• introduce line extensions
• lower prices if necessary to increase share
• consider agreements to produce replacement parts
Niche strategy
• continued product and process R&D
• produce for private labels
• focus advertising, sales promotion, etc.
• maintain distribution channels
Continue
21 d
Summary
This topic introduced you to:
• strategic challenges for mature and declining markets
• common strategic traps during shake-out periods
• strategic choices in mature markets
• marketing strategies for mature markets
• marketing strategies for declining markets
• marketing actions for declining markets.
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