Chapters Eight & Nine
Growth Market Strategies
Profit per unit Product category sales
(real dollars)
(real dollars)
‘Typical’ Product Life Cycle
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.
8-3
Categories of New Products Defined According to
Their Degree of Newness to the Company and
Customers in the Target Market
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).
New Product Development
Key success criteria include:
–
–
–
–
Product fit with market need
Product fit with capabilities
Product or cost superiority
Clear vision of future market based on
customer feedback
– Continuous, quality-based process
– Ability to create effective awareness
Potential Advantages of Pioneer and
Follower Strategies
Pioneer
Follower
• Economies of scale and
experience
• High switching costs for early
adopters
• Pioneer defines the rules of
the game
• Possibility of positive network
effects
• Distribution advantage
• Influence on consumer choice
criteria and attitudes
• Possibility of preempting
scarce resources
• Ability to take advantage of
pioneer’s positioning mistakes
• Ability to take advantage of
pioneer’s product mistakes
• Ability to take advantage of
pioneer’s marketing mistakes
• Ability to take advantage of
pioneer’s limited resources
Marketing Strategy Elements Pursued by
Successful Pioneers, Fast Followers,
and Late Entrants
These marketers...
are characterized by one or more of
these strategy elements:
Successful pioneers
•
•
•
•
Successful fast followers
• Larger entry scale than the pioneer
• Leapfrogging the pioneer with superior:
product technology
product quality
customer service
Successful late entrants
• Focus on peripheral target markets or
niches
Large entry scale
Broad product line
High product quality
Heavy promotional expenditures
Advice for Would-Be Pioneers
• First mover advantage is often trumped
by followers who are better.
– Best beats first. Concentrate on being best.
– Best and first is the ideal.
• Being a pioneer without the basis for
sustainable competitive advantage is a
trap!
Why Are Growing Markets Attractive?
Usually, but not always:
Gaining share is easier
 Share gains are worth more
 Price competition may be less intense
 Early entry may be necessary to keep
pace with technology

Strategic Choices for Share Leaders in Growth
Markets
Flanker strategy - Proactive
Flanker strategy - Reactive
COMPETITOR
OR
POTENTIAL
COMPETITOR
Confrontation
strategy
Proactive
Reactive
Fortress
or position
defense
strategy
Contraction
or strategic
withdrawal
LEADER
Market expansion
Source: Adapted from P. Kotler and R. Singh Achrol, “Marketing Warfare in the 1980’s” Reprinted with permission from Journal of Business Strategy, Winter 1981,
pp. 30-41. Copyright © 1981 by Warren, Gorham & Lambert, Inc., 210 South Street, Boston MA 02111. All rights reserved.
Marketing Actions Vary for Different ShareMaintenance Objectives

Retain current customers by:
Maintaining or improving satisfaction and
loyalty
 Encouraging or simplifying repeat purchase
 Reducing the attractiveness of switching


Stimulate selective demand among
later adopters by:

Head-to-head positioning against
competitors
Strategic Choices for Challengers in Growth
Markets
Leapfrog strategy
Flanking attack
TARGET
COMPETITOR
Frontal
attack
CHALLENGER
Encirclement strategy
Source: Adapted from P. Kotler and R. Singh Achrol, “Marketing Warfare in the 1980’s” Reprinted with permission from Journal of Business Strategy, Winter 1981,
pp. 30-41. Copyright © 1981 by Warren, Gorham & Lambert, Inc., 210 South Street, Boston MA 02111. All rights reserved.
Marketing Actions to Achieve Share Growth
Vary for Different Marketing Objectives


Capture competitors’ customers by
 Head-to-head positioning in competitor’s primary
target market
 Technological differentiation in primary target
market
Stimulate selective demand among later adopters
by
 Head-to-head positioning in competitor’s primary
target market (as above)
 Differentiated positioning focused on untapped or
underdeveloped segments
Some Advice for Followers
• Differentiation is key for followers
– Better benefits
– Better service
– Lower price
• Beware of competing on price, however,
unless your costs really are lower than
competitors’
Predicting Pricing Actions
Price of Substitutes Sets the Ceiling
Competitive
Actions
More Pricing Pressure with High Elasticity
More Pricing Pressure
with High Leverage
Marginal Cost Per Unit Sets the Floor