a. A company needs two proactive skills:
i. Responsive anticipation to see the writing on the wall
ii. Creative anticipation to devise innovative solutions
b. Characteristics of proactive companies
i. Create new offers to serve unmet—and maybe even unknown—
consumer needs.
ii. Proactive companies may redesign relationships within an industry
iii. Proactive firms are ready to take risks and make mistakes, have a
vision of the future and of investing in it, have the capabilities to
innovate, are flexible and non-bureaucratic, and have many
managers who think proactively
c. The aim of defensive strategy is to reduce the probability of attack, divert
attacks to less-threatened areas, and lessen their intensity.
i. A leader would like to do anything it legally and ethically can to
reduce competitors’ ability to launch a new product, secure
distribution, and gain consumer awareness, trial, and repeat.
ii. In any strategy, speed of response can make an important
difference to profit.
iii. Six defense strategies:
1. Position defense. Position defense means occupying the
most desirable position in consumers’ minds, making the
brand almost impregnable.
2. Flank defense. The market leader should erect outposts to
protect a weak front or support a possible counterattack.
3. Preemptive defense. A more aggressive maneuver is to
attack first, perhaps with guerrilla action across the market
—hitting one competitor here, another there—and keeping
everyone off balance.
4. Counteroffensive defense. In a counteroffensive, the market
leader can meet the attacker frontally and hit its flank or
launch a pincer movement so the attacker will have to pull
back to defend itself.
5. Mobile defense. In mobile defense, the leader stretches its
domain over new territories through market broadening and
market diversification.
6. Contraction defense. Sometimes large companies can no
longer defend all their territory. In planned contraction
(also called strategic withdrawal), they give up weaker
markets and reassign resources to stronger ones.
B. Increasing Market Share: Before buying higher market share through acquisition
may far exceed its revenue value, a company should consider four factors first:
a. The possibility of provoking antitrust action.
b. Economic cost
c. The danger of pursuing the wrong marketing activities
d. The effect of increased market share on actual and perceived quality
I. Other Competitive Strategies
A. Market-Challenger Strategies
a. Defining the Strategic Objective and Opponent(s)
b. Decide whom to attack:
i. Attack the market leader.
1. High-risk but potentially high-payoff strategy and makes
good sense if the leader is not serving the market well.
2. Added benefit of distancing the firm from other
challengers.
ii. Attack firms its own size that are not doing the job and are
underfinanced.
iii. Attack small local and regional firms.
iv. Attack the status quo.
c. Choosing a General Attack Strategy
i. Frontal attack
1. Attacker matches its opponent’s product, advertising, price,
and distribution.
2. The principle of force says the side with the greater
resources will win.
3. A modified frontal attack, such as cutting price, can work if
the market leader doesn’t retaliate and if the competitor
convinces the market its product is equal to the leader’s.
ii. Flank attack
1. Identify shifts that cause gaps to develop in the market,
then rushing to fill the gaps.
2. Flanking is particularly attractive to a challenger with fewer
resources and can be more likely to succeed than frontal
attacks.
3. Another flanking strategy is to serve uncovered market
needs.
4. With a geographic attack, the challenger spots areas where
the opponent is underperforming.
iii. Encirclement attack
1. Attempts to capture a wide slice of territory by launching a
grand offensive on several fronts.
2. Makes sense when the challenger commands superior
resources.
iv. Bypass attack: Bypassing the enemy altogether to attack easier
markets instead offers three lines of approach: diversifying into
unrelated products, diversifying into new geographical markets,
and leapfrogging into new technologies.
v. Guerrilla attack
1. Guerrilla attacks consist of small, intermittent attacks,
conventional and unconventional, including selective price
cuts, intense promotional blitzes, and occasional legal
action, to harass the opponent and eventually secure
permanent footholds.
2. A guerrilla campaign can be expensive, though less so than
a frontal, encirclement, or flank attack, but it typically must
be backed by a stronger attack to beat the opponent.
B. Market-Follower Strategies
a. In “innovative imitation,” the innovator bears the expense of developing
the new product, getting it into distribution, and informing and educating
the market.
b. Patterns of “conscious parallelism” are common in capital-intensive,
homogeneous-product industries such as steel, fertilizers, and chemicals
where opportunities for product differentiation and image differentiation
are low, service quality is comparable, and price sensitivity runs high.
c. Followers must define a growth path, but one that doesn’t invite
competitive retaliation. We distinguish three broad strategies:
i. Cloner—The cloner emulates the leader’s products, name, and
packaging with slight variations.
ii. Imitator—The imitator copies some things from the leader but
differentiates on packaging, advertising, pricing, or location. The
leader doesn’t mind as long as the imitator doesn’t attack
aggressively.
iii. Adapter—The adapter takes the leader’s products and adapts or
improves them.
d. Counterfeiters duplicate the leader’s product and packages and sell them
on the black market or through disreputable dealers.
C. Market-Nicher Strategies—be a leader in a small market, or niche
a. Smaller firms normally avoid competing with larger firms by targeting
small markets of little or no interest to the larger firms.
b. Firms with low shares of the total market can become highly profitable
through smart niching.
i. Know their target customers so well they can meet their needs
better than other firms by offering high value, but they can also
charge a premium price, achieve lower manufacturing costs, and
shape a strong corporate culture and vision.
ii. The nicher achieves high margin, whereas the mass marketer
achieves high volume.
iii. Nichers have three tasks: creating niches, expanding niches, and
protecting niches.
II. Product Life-Cycle Marketing Strategies
A. To say a product has a life cycle is to assert four things:
a. Products have a limited life
b. Product sales pass through distinct stages, each posing different
challenges, opportunities, and problems to the seller
c. Profits rise and fall at different stages of the product life cycle
d. Products require different marketing, financial, manufacturing,
purchasing, and human resource strategies in each life-cycle stage
B. Product Life Cycles
a. Most product life cycles are portrayed as bell-shaped curves, typically
divided into four stages: introduction, growth, maturity, and decline
b. Introduction—A period of slow sales growth as the product is introduced
in the market. Profits are nonexistent because of the heavy expenses of
product introduction
c. Growth—A period of rapid market acceptance and substantial profit
improvement
d. Maturity—A slowdown in sales growth because the product has achieved
acceptance by most potential buyers. Profits stabilize or decline because of
increased competition
e. Decline—Sales show a downward drift and profits erode
f. Growth-slump-maturity pattern characteristic of small kitchen appliances
like bread makers and toaster ovens.
g. Cycle-recycle pattern describes the sales of new drugs.
h. Scalloped PLC is where sales pass through a succession of life cycles
based on the discovery of new product characteristics, uses, or users.
C. Style, Fashion, and Fad Life Cycles
a. A style is a basic and distinctive mode of expression appearing in a field of
human endeavor and can last for generations and go in and out of vogue.
b. A fashion is a currently accepted or popular style in a given field. Fashions
pass through four stages: distinctiveness, emulation, mass fashion, and
decline.
c. Fads are fashions that come quickly into public view, are adopted with
great zeal, peak early, and decline very fast.
D. Pioneering Advantages
a. What are the sources of the pioneer’s advantage?
i. Early users will recall the pioneer’s brand name if the product
satisfies them.
ii. The pioneer’s brand also establishes the attributes the product class
should possess
iii. Customer inertia also plays a role, and there are producer
advantages: economies of scale, technological leadership, patents,
ownership of scarce assets, and the ability to erect other barriers to
entry.
iv. Pioneers can spend marketing dollars more effectively and enjoy
higher rates of repeat purchases.
b. Double Jeopardy: a small-share brand is penalized twice—it has fewer
buyers than a large-share brand, and they buy less frequently.
i. Implicit in the principle of double jeopardy is the assumption that
brands are substitutable and have target segments in common
ii. They see PR efforts, distribution plans, and any means to increase
brand exposure, familiarity, and availability as more important than
persuasive advertising to target switchers or CRM efforts to reward
loyal customers.
c. Successful imitators thrive by offering lower prices, continuously
improving the product, or using brute market power to overtake the
pioneer.
i. They distinguish between an inventor, first to develop patents in a
new-product category, a product pioneer, first to develop a working
model, and a market pioneer, first to sell in the new-product
category.
ii. Leading brands are more likely to persist during academic
slowdowns and when inflation is high and less likely to persist
during economic expansion and when inflation is low.
d. Once brand leadership has been lost, it is rarely regained.
e. Categories with above-average brand leadership persistence are food and
household supplies; those with below-average rates are durables and
clothing.
E. Gaining a Pioneering Advantage
a. Five factors underpinning long-term market leadership: vision of a mass
market, persistence, relentless innovation, financial commitment, and asset
leverage
b. Other research has highlighted the role of genuine product innovation
c. When a pioneer starts a market with a really new product, like the Segway
Human Transporter, surviving can be very challenging.
F. Marketing Strategies: Growth Stage
a. Rapid climb in sales. Early adopters like the product, and additional
consumers start buying it. New competitors enter, attracted by the
opportunities. They introduce new product features and expand
distribution.
b. Prices stabilize or fall slightly, depending on how fast demand increases.
c. Companies maintain marketing expenditures or raise them slightly to meet
competition and continue to educate the market. Sales rise much faster
than marketing expenditures, causing a welcome decline in the
marketing-to-sales ratio.
d. Profits increase as marketing costs are spread over a larger volume, and
unit manufacturing costs fall faster than price declines, owing to the
producer-learning effect.
e. Firms must watch for a change to a decelerating rate of growth in order to
prepare new strategies.
f. To sustain rapid market share growth now, the firm:
i. Improves product quality and adds new features and improved
styling.
ii. Adds new models and flanker products (of different sizes, flavors,
and so forth) to protect the main product
iii. Enters new market segments
iv. Increases its distribution coverage and enters new distribution
channels
v. Shifts from awareness and trial communications to preference and
loyalty communications
vi. Lowers prices to attract the next layer of price-sensitive buyers
G. Marketing Strategies: Maturity Stage
a. Most products are in this stage of the life cycle, which normally lasts
longer than the preceding ones
b. The maturity stage divides into three phases: growth, stable, and decaying
maturity.
i. In the first, sales growth starts to slow. There are no new
distribution channels to fill. New competitive forces emerge.
ii. In the second phase, sales per capita flatten because of market
saturation. Most potential consumers have tried the product, and
future sales depend on population growth and replacement
demand.
iii. In the third phase, decaying maturity, the absolute level of sales
starts to decline, and customers begin switching to other products
iv. This third phase poses the most challenges. The sales slowdown
creates overcapacity in the industry, which intensifies competition.
Weaker competitors withdraw.
1. A few giants dominate—perhaps a quality leader, a service
leader, and a cost leader—and they profit mainly through
high volume and lower costs.
2. Surrounding them is a multitude of market nichers,
including market specialists, product specialists, and
customizing firms
3. The question is whether to struggle to become one of the
big three and achieve profits through high volume and low
cost or to pursue a niching strategy and profit through low
volume and high margins. Sometimes the market will
divide into low- and high-end segments, and market shares
of firms in the middle will steadily erode.
H. Three ways to change the course for a brand are market, product, and marketing
program modifications
a. A company might try to expand the market for its mature brand by
working with the two factors that make up sales volume, number of brand
users and usage rate per customer
b. Managers also try to stimulate sales by improving quality, features, or
style.
i. Quality improvement increases functional performance by
launching a “new and improved” product.
ii. Feature improvement adds size, weight, materials, supplements,
and accessories that expand the product’s performance, versatility,
safety, or convenience.
iii. Style improvement increases the product’s esthetic appeal.
c. Brand managers might also try to stimulate sales by modifying
non-product elements—price, distribution, and communications in
particular
I. Marketing Strategies: Decline Stage
a. Sales decline for a number of reasons, including technological advances,
shifts in consumer tastes, and increased domestic and foreign competition.
b. All can lead to overcapacity, increased price cutting, and profit erosion
c. As sales and profits decline, some firms withdraw.
J. Eliminating Weak Products
a. Besides being unprofitable, weak products consume a disproportionate
amount of management’s time, require frequent price and inventory
adjustments, incur expensive setup for what are usually short production
runs, draw advertising and sales force attention better used to make
healthy products more profitable, and cast a negative shadow on company
image.
b. Maintaining them also delays the aggressive search for replacement
products, creating a lopsided product mix long on yesterday’s
breadwinners and short on tomorrow’s
K. Harvesting and Divesting
a. Harvesting calls for gradually reducing a product or business’s costs while
trying to maintain sales.
i. The first step is to cut R&D costs and plant and equipment
investment.
ii. The company might also reduce product quality, sales force size,
marginal services, and advertising expenditures, ideally without
letting customers, competitors, and employees know what is
happening.
iii. Harvesting is difficult to execute, yet many mature products
warrant this strategy.
b. If the company can’t find any buyers, it must decide whether to liquidate
the brand quickly or slowly. It must also decide how much inventory and
service to maintain for past customers
L. Evidence for the Product Life-Cycle Concept
a. New consumer durables show a distinct takeoff, after which sales increase
by roughly 45 percent a year, but they also show a distinct slowdown,
when sales decline by roughly 15 percent a year
b. Slowdown occurs at 34 percent penetration on average, well before most
households own a new product
c. The growth stage lasts a little more than eight years and does not seem to
shorten over time
d. Informational cascades exist, meaning people are more likely to adopt
over time if others already have, instead of making careful product
evaluations. One implication is that product categories with large sales
increases at takeoff tend to have larger sales declines at slowdown
M. Critique of the Product Life-Cycle Concept
a. Life-cycle patterns are too variable in shape and duration to be generalized
b. Marketers can seldom tell what stage their product is in
N. Market Evolution
a. Affected by new needs, competitors, technology, channels, and other
developments and change product and brand positioning to keep pace
b. Like products, markets evolve through four stages: emergence, growth,
maturity, and decline.
III. Marketing in a slow-growth economy
a. Five guidelines for improving the odds for marketing success in a
slow-growth economy
i. Explore the Upside of Increasing Investment
ii. Get Closer to Customers
iii. Review Budget Allocations
iv. Put Forth the Most Compelling Value Proposition
v. Fine-tune Brand and Product Offerings
b. Brands and sub-brands targeting the lower end of the socioeconomic spectrum
may be particularly important during slow growth.
c. Slow times also are an opportunity to prune products with diminished
prospects.