Ppt8

Marketing Strategy for New Market Entries

PPT8Prof. S.Venkat

How do opportunities evolve over time? [Exhibit. 8.1]

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.

Time (years)

Prod

uct c

ateg

ory

sale

s(r

eal d

olla

rs)

Profi

t per

uni

t(r

eal d

olla

rs)

Profit/unitSales

Life cycleextension

GrowthCompetitiveturbulence

Maturity Decline orextension

Introduction

•Original Uses•A

•D

•C

•B

•#1

•#4

•#3

•#2

•Extensions

•Years

•Sales

SELECTED PROCUCT LIFE CYCLE PATTERNS

Time

TimeTimeTimeTime

Time Time

Sale

s

Sale

s

Sale

s

Sale

s

Sale

s

Sale

s

Sale

s

A. Traditional B. Boom or Classic C. Fad

D. Extended Fad E. Seasonal or Fashion F. Revival or Nostalgia G. Bust

•Total Company Sales

•Total Company

•Individual Products

How do opportunities evolve over time? [Exhibit. 8.1]

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.

Time (years)

Prod

uct c

ateg

ory

sale

s(r

eal d

olla

rs)

Profi

t per

uni

t(r

eal d

olla

rs)

Profit/unitSales

Life cycleextension

GrowthCompetitiveturbulence

Maturity Decline orextension

Introduction

• Introduction– Innovators/early adopters

• Growth– Buyers at a maximum– Repeat sales become more important

• Shakeout– Sales slow down

• Maturity– Adopters = dropouts

• Decline– dropouts > adopters/first time users

• Is the product life cycle concept useful? Why or why not?– 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.

– Each of these stages provides distinct opportunities and threats, thereby affecting the firm’s strategy as well as its marketing programs.

– Despite the fact that many new products do not follow such a prescribed route because of failure, the concept is valuable in helping management look into the future and better anticipate what changes will need to be made in strategic marketing programs.

• What are the product life-cycle limitations?– The product life-cycle model’s major weakness

lies in its normative approach to prescribing strategies based on assumptions about the features or characteristics of each stage. – It fails to take into account that the product life

cycle is driven by market forces expressing the evolution of consumer preferences (the market), technology (the product), and competition (the supply side).

Categories of New Products Defined According to Their Degree of Newness to the Company and Customers in the Target

Market (Exhibit 8.4.)

High

Low

Low HighNewness to the market

Source: New Products Management for the 1980s (New York: Booz, Allen & Hamilton, 1982).

New

ness

to th

e co

mpa

ny

26% 26%

20%New product

lines

Revisions/improvements to existing products

11%Cost

reductions

7%

Additions to existing product

lines

Repositionings

10%New-to-the

world products

Discussion Question

1.Is it better to be a market pioneer, or a follower?

• What are the advantages for pioneers?• First choice of market segments and positions• Defines the rules of the game• Distribution advantages• Economies of scale and experience• High switching costs for early adopters• Possibility of positive network effects• Possibility of preempting scarce resources to

suppliers

• What are the advantages for followers?• Ability to take advantage of pioneer’s positioning

mistakes• Ability to take advantage of pioneer’s product

mistakes• Ability to take advantage of pioneers marketing

mistakes• Ability to take advantage of pioneer’s limited

resources

Discussion Question

2. When, and for whom, does it make sense to pursue a pioneer strategy?

A pioneering firm stands the best chance for long-term success in market-share leadership and profitability when:

• The new product-market is insulated from the entry of competitors, at least for a while, by strong patent protection, by proprietary technology (such as a unique production process), by substantial investment requirements, or by positive network effects.

• The firm has sufficient size, resources, and competencies to take full advantage of its pioneering position and preserve it in the face of later competitive entries.

Discussion Question

3. When, and for whom, does it make sense to pursue a follower strategy?

• A follower will most likely succeed when:• There are few legal, technological, or

financial barriers to inhibit entry. • It has sufficient resources or competencies

to overwhelm the pioneer’s early advantage.

Discussion Question

4. If you want to be a pioneer, what are your strategic options?

• Strategic options for pioneers• Mass-market penetration• Niche penetration• Skimming and early withdrawal

• Mass-market Penetration– Aims at convincing as many potential customers

as possible to adopt the new product quickly to drive down unit costs and build a large contingent of loyal customers before competitors enter the market.

• Niche Penetration– Focus efforts on a single market segment instead

of pursuing the object of capturing and sustaining a leading share of the entire market.

• Skimming; Early Withdrawal– Setting a high price and engaging in limited

advertising and promotion to maximize per unit profits and recover the product’s development costs as quickly as possible.

– At the same time, the firm may work to develop new applications for its technology or the next generation of new technology.

– When competitors enter the market and margins fall, the firm is ready to cannibalize its own product with one based on new technology or move on to new segments.

Discussion Question

5.Under what circumstances might each option be more likely to succeed?

Discussion Question

6. How might introductory marketing plans differ under each of these new market entry strategies?

Pioneer Global Market Strategy• Exporting Export Merchant (reseller)

Export Agent (commission)Cooperative Organizations (for several producers)

• Contractual Entry ModesLicensingFranchisingContract Manufacturing

Turnkey ConstructionCoproductionCounter tradeBuyback Agreement

• Direct InvestmentJoint VentureSole Investment

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!