Marketing Strategy for New Market Entries PPT8 Prof. S.Venkat
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!