C
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8
EIGHT
Marketing
Strategies for
New Market
Entries
McGraw-Hill/Irwin
©2009 The McGraw-Hill Companies,
1-1
All Rights Reserved
Canon
Cost cutting
New product development
Incremental & Completely new
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Profit per unit
(real dollars)
Product category sales
(real dollars)
How do opportunities evolve
over time?
Life cycle
extension
Profit/unit
Sales
Introduction
Growth
Maturity
Decline or
extension
Competitive
turbulence
Time (years)
Source: Reprinted with permission from p. 60 of Analysis for Strategic Marketing Decisions, by George Day. Copyright © 1986 by West Publishing
Company. All rights reserved.
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Categories of New Products Defined
According to Their Degree of Newness to
the Company and Customers in the Target
Market (Exhibit 8.4.)
Newness to the company
High
10%
20%
New-to-the
world products
New product
lines
26%
Revisions/
improvements to
existing products
11%
Low
Cost
reductions
Low
Additions to
26% existing product
lines
7% Repositionings
High
Newness to the market
Source: New Products Management for the 1980s (New York: Booz, Allen & Hamilton, 1982).
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Discussion Question
1.Is it better to be a market
pioneer, or a follower?
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First Movers who failed
Consider that most famous industrial success
story of a century ago, Henry Ford's massproduced Model T. By inventing the automated
assembly line, he had a first-mover advantage
that was so great that he scared England's
Charles Stewart Rolls and Sir Frederick Henry
Royce, even though their luxury cars were at
the other end of the spectrum. But Ford
overstayed the Model T. Remember, he
insisted that they all be painted black and in the
late 1920s lost leadership to more innovative
Chevrolet.
1-148-14
In most cases entrepreneurs are
better off building the second
or third version of the better
mousetrap. Visicalc, the first
desktop spreadsheet program,
faded away as Lotus took over
the field with 1-2-3. In time the
Lotus software was itself
crushed by Microsoft's Excel.
1-158-15
For that matter, Microsoft has a
history of succeeding by not being
first. Digital Research developed
the first desktop operating system,
called CP/M. But Bill Gates
upstaged it in the competition to
supply an operating system for
IBM's PC. Gates didn't even
develop the original DOS; he
bought the program from Seattle
Computer Works for $50,000.
1-168-16
Getting in early on Web commerce was
supposed to be a brilliant move. The business
plan was to raise a gargantuan sum in an initial
public offering and use it to construct an
impregnable brand and Web presence. But
roaring out of the starting gate didn't help
many of these dot-coms--or their stockholders.
Lord help you if you bought shares in financial
news site www.TheStreet.com at its $19 initial
offering price in 1999, let alone at the $60 level
to which it leaped. You could have made some
decent money if you had waited. The shares
were available at 99 cents in October 2001;
today they go for $11.
1-178-17
Prodigy Communications was a first
mover in online connections. And it had
powerful backers at its launch in 1984:
IBM for technology, Sears Roebuck for
online retail sales and CBS for news and
ad sales. Prodigy's focus was on
electronic shopping, but two decades
too early. Subscribers back then were
more interested in chat rooms, e-mail
and then Web surfing. The firm was
sold in 1996 to an investor group for
only $250 million
1-188-18
Dumont led the way in selling TV sets when
they were new gadgets, but the company lost
out to latecomers like RCA and Motorola.
Chux was the leading disposable diaper yet
succumbed to Procter & Gamble's Pampers.
Ampex had a commanding position in video
recorders and tapes for two decades until Sony
took over. Rheingold Brewery brought out
Gablinger's low-calorie beer in 1967, a cool
summer with weak beer sales. So Rheingold
lost interest and Miller Lite later mastered the
field.
1-198-19
Thomas Carter was a pioneer in competitive
telecommunications services, one who lent his
name to a famous legal case. He invented the
Carterfone, a device that connected the
telephone handpiece to an amateur radio
transmitter or a mobile phone network. While
only 4,000 Carterfones were ever installed,
AT&T saw the device as a threat to its longdistance monopoly and its ownership of all
telephone instruments. Then came the legal
struggle. In 1968 the Supreme Court ruled in
favor of Carter Electronics. It was a turning
point in utility history, paving the way for MCI
and other service competitors as well as
hardware manufacturers. Carter didn't get rich.
His firm voluntarily dissolved in 1969.
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Discussion Question
2. When, and for whom, does it
make sense to pursue a
pioneer strategy?
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Mass Market penetration
Niche Penetration
Skimming Early withdrawal
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Primary Objective
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Market Characteristics
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Product Characteristics
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Competitor characteristics
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Firm Characteristics
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Niche Penetration
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Market characteristics
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Product characteristics
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Competitor characteristics
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Firm Characteristics
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Skimming: Early Withdrawal
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Market characteristics
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Product characteristics
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Competitor characteristics
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Firm characteristics
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Marketing program components for
a mass-market penetration strategy
Aggressively building product
awareness
Making it easy to try
Increasing customer’s awareness and
willingness to buy
Increasing customer’s ability to buy
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Pioneering Global markets
Exporting
Export merchants
Export agents
Cooperative organizations
Contractual entry mode
Licensing
Franchising
Contract manufacturing
Turnkey construction contract
Overseas direct investment
Joint Ventures
Sole ownership
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Discussion Question
3. When, and for whom, does it
make sense to pursue a
follower strategy?
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Discussion Question
4. If you want to be a pioneer,
what are your strategic
options?
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Discussion Question
5.Under what circumstances
might each option be more
likely to succeed?.
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Discussion Question
6. How might introductory
marketing plans differ under
each of these new market entry
strategies?
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Some Advice for Would-Be
Pioneers
First mover advantage is trumped by
pioneers who are better. Best beats first.
Concentrate on being best.
Being a pioneer without the basis for
sustainable competitive advantage is a trap!
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