Mma6e Chapter 11 Final 186611

Marketing Management:
An Asian Perspective,
6th Edition
Instructor Supplements
Created by Geoffrey da Silva
Competitive Dynamics
3 Pearson Education South Asia Pte Ltd 2013. All rights reserved
Learning Issues for Chapter Eleven
1. How can market leaders expand the total market and defend
market share?
2. How should market challengers attack market leaders?
3. How can market followers or nichers compete effectively?
4. What marketing strategies are appropriate at each stage of

the product life cycle?
5. How should marketers adjust their strategies and tactics for

an economic downturn or recession?
Chapter Outline
To be a long-term market leader is the goal of any marketer.
Todays challenging marketing circumstances, however, often

dictate that companies reformulate their marketing strategies
and offerings several times.
Economic conditions change, competitors launch new

assaults, and buyer interest and requirements evolve.
Different market positions can suggest different market

strategies.
Chapter Outline
The chapter examines the role competition plays and how

marketers can best manage their brands depending on their market
position and stage of the product life cycle.
Competition grows more intense every yearfrom global

competitors eager to grow sales in new markets, and online
competitors seeking cost-efficient ways to expand distribution, to
private-label and store brands providing low-price alternatives and
brand extensions by mega-brands moving into new categories.
For these reasons and more, product and brand fortunes change
over time, and marketers must respond accordingly.
Competitive Strategies for Market Leaders
A market leader has the largest market share and usually leads in price
changes, new-product introductions, distribution coverage, and promotional
intensity.
We can gain further insight by classifying firms by the roles they play in the
target market (see Figure 11.1):
a. Leader
b. Challenger
c. Follower
d. Nicher
Although marketers assume well-known brands are distinctive in

consumers minds, unless a dominant firm enjoys a legal monopoly, it must
maintain constant vigilance.
Figure 11.1: Hypothetical Market Structure
Maintaining Vigilance in the Competitive
Marketplace
After losing its stronghold in the

portable music and television
markets, Sony hopes to regain
its glory days through its Xperia
smartphone line.
Marketing Insight: When Your Competitor Delivers
More for Less
Too many companies search within the conventional
boundaries of industry competition (do battle) instead of
finding unoccupied market positions that represent real
value innovation.
Companies offering the powerful combination of low prices

and high quality are capturing the hearts and wallets of
consumers all over the world.
See the budget airline example.
More for Less
In the airline industry,
budget airlines have debuted
in Asia and have proven to
give full-service airlines a run
for their money. AirAsia,
Jetstar Asia, Tiger Airways,
and Bangkok Air are
transforming the way
consumers fly.
More for Less
Differentiation
Marketers need to protect areas where their business models

give other companies room to maneuver.
More for Less
Execution
To compete effectively, firms may instead need to downplay

or even abandon some market segments. The low-cost
operation must be designed and launched as a moneymaker
in its own right, not just as a defensive play.
To stay number one, the firm must first find ways to expand
total market demand. Second, it must protect its current
share through good defensive and offensive actions. Third, it
should increase market share, even if market size remains
constant.
Expanding Total Market Demand
When the total market expands, the dominant firm usually gains
the most.
New Customers
Every product class has the potential to attract buyers who are
unaware of the product or are resisting it because of price or
lack of certain features. A company can search for new users
among three groups:
i. those who might use it but do not (market-penetration

strategy),
ii. those who have never used it (new-market segment
strategy),
iii. those who live elsewhere (geographical-expansion
strategy).
Finding New Users
Japans Video-Game
IndustryThe traditionally
male-dominated video-game
market in Japan is seeing
increased patronage from
female gamers who are
interested in otome-romance
games.
More Usage
Marketers can try to increase the amount, level, or frequency

of consumption.
They can sometimes boost the amount through packaging or

product redesign.
Larger package sizes increase the amount of product

consumers use at one time.
Consumers use more of impulse products such as soft drinks

and snacks when the product is made more available.
More Usage
Increasing Frequency
Increasing frequency of consumption, on the other hand,
requires either
a. identifying additional opportunities to use the brand in the same

basic way or
b. identifying completely new and different ways to use the brand.
Additional Opportunities to Use the Brand
A marketing program can communicate the appropriateness

and advantages of using the brand. Example Microsoft
encouraging users to use its application instead of Google.
Another opportunity arises when consumers perceptions of

their usage differs from reality.
What happens when consumers perceptions of their
usage differs from reality?
For many products with relatively short lifespans, consumers may
fail to replace the product in a timely manner because of a tendency
to overestimate the length of productive usage.
One strategy to is to tie the act of replacing the product to a certain

holiday, event, or time of year.
Another strategy might be to provide consumers with better

information on either (1) when the product was first used or would
need to be replaced, or (2) the current level of product
performance.
An Example of Gillette.
New Ways to Use the Brand
The second approach to increasing frequency of consumption

is to identify completely new and different applications.
For example, food product companies have long advertised

new recipes that use their branded products in entirely
different ways.
Lee Kum Kee, a Hong Kong-based manufacturer of Chinese

sauces, provides recipes on what dishes to cook using its
sauces.
Protecting Market Share
While trying to expand total market size, the dominant firm

must actively defend its current business.
The most constructive response is continuous innovation.

The front-runner should lead the industry in developing new
products and customer services, distribution effectiveness,
and cost cutting.
Comprehensive solutions increase its competitive strength

and value to customers.
Proactive Marketing
In satisfying customer needs, we can draw a distinction between

responsive marketing, anticipative marketing, and creative
marketing.
A responsive marketer finds a stated need and fills it.
An anticipative marketer looks ahead to needs customers may

have in the near future.
A creative marketer discovers solutions customers did not ask for

but to which they enthusiastically respond.
Creative marketers are proactive market-driving firms, not just

market-driven ones.
Proactive Marketing
Many companies assume their job is just to adapt to

customer needs.
They are reactive mostly because they are overly faithful to

the customer-orientation paradigm and fall victim to the
tyranny of the served market.
Successful companies instead proactively shape the market

to their own interests. Instead of trying to be the best player,
they change the rules of the game.
Proactive Marketing Skills
A company needs two proactive skills:
1. responsive anticipation to see the writing on the wall, as when

IBM changed from a hardware producer to a service business,
2. creative anticipation to devise innovative solutions, as when

Pepsico introduced H2OH (a soft drink-bottled water hybrid).
Note that responsive anticipation is performed before a given change,

while reactive response happens after the change takes place.
Proactive Marketing Companies
Proactive companies create

new offers to serve unmet
and maybe even unknown
consumer needs.
At one time, Sony engaged in

such proactive marketing.
Sony has introduced many

successful new products that
customers never asked for or
even thought were possible:
Walkmans, VCRs, video
cameras, and CDs. At that time,
Sony was a market-driving
firm, not just a market-driven
firm.
Proactive companies may redesign relationships within an industry,

like Toyota and its relationship to its suppliers.
Or they may educate customers, as Body Shop does in stimulating

the choice of environmental friendly products.
Uncertainty Management
Companies need to practice uncertainty management.

Proactive firms:
i. Are ready to take risks and make mistakes
ii. Have a vision of the future and of investing in it
iii. Have the capabilities to innovate
iv. Are flexible and non-bureaucratic
v. Have many managers who think proactively
Marketing Insight
See Marketing Insight: Sun Tzu Bing Fa: Modern Strategy

Insights from Ancient China
His military strategies have been applied to marketing.
The leader of continuous innovation applies the military

principle of the offensive: the commander exercises
initiative, sets the pace, and exploits enemy weaknesses.
Defensive Marketing
Even when it does not launch offensives, the market leader

must not leave any major flanks exposed.
The aim of defensive strategy is to reduce the probability of

attack, divert attacks to less-threatened areas, and lessen
their intensity.
Speed of response can make an important difference to

profit.
Figure 11.2: Six Types of Defense Strategies
Six Defensive Strategies
1. Position DefensePosition defense means occupying the

most desirable market space in consumers minds, making
the brand almost impregnable.
2. Flank DefenseThe market leader should erect outposts to

protect a weak front or support a possible counterattack.
3. Preemptive DefenseA more aggressive maneuver is to

attack first, perhaps with guerrilla action across the
markethitting one competitor here, another thereand
keeping everyone off balance.
Six Defensive Strategies
4. Counteroffensive DefenseIn counteroffensive defense

the market leader can meet the attacker frontally, hit its
flank, or launch a pincer movement so it will have to pull
back to defend itself.
5. Mobile DefenseIn mobile defense, the leader stretches its

domain over new territories through market broadening and
market diversification.
6. Contraction DefenseSometimes large companies can no

longer defend all of their territory.
Example of Position Defense Strategy
Uni-President Taiwanese
leading retail company, Uni-
President, through its chain of
7-Eleven convenience stores,
sells its own brand of frozen
foods, milk, hot dogs, cooking
oil, and just about every major
food group to make itself a
complete food retailer. Further,
it regularly introduces new
products.
Example of Flank Defense Strategy
Shiseidos main focus in China

is to make over its upmarket
Auprs brand specifically for the
Chinese market. To cater to
rising purchasing power among
Chinese consumers, it
repackaged the Auprs line by
adding a deluxe version and a
mens skincare line called JS.
Example of Pre-emptive Defense Strategy
Singapore Airlines To fortify its position as the premier Asian airline, SIA was the first airline to fly
the double-decker super-jumbo Airbus aircraft known as A380. The 555-seat juggernaut jet enables
the airline to take a larger number of passengers on long-haul routes at a lower operating cost per
seat. The services that SIA offers on these jets are aimed to give an unprecedented flying
experience, setting new standards for the airline industry.
Pre-emptive Defense Strategy
A company can launch a pre-emptive defense in several ways.
It can wage guerrilla action across the markethitting one

competitor here, another thereand keep everyone off balance; or
it can try to achieve a grand market envelopment.
It can introduce a stream of new products, making sure to precede

them with preannouncementsdeliberate communications
regarding future actions.
Preannouncements can signal to competitors that they will have to

fight to gain market share.
Counteroffensive Defense Strategy
In a counteroffensive, the leader can meet the attacker

frontally or hit its flank or launch a pincer movement.
An effective counterattack is to invade the attackers main

territory so that it will have to pull back to defend the
territory.
Another common form of counteroffensive is the exercise of

economic or political clout.
Mobile Defense Strategy
In mobile defense, the leader stretches its domain over new

territories that can serve as future centers for defense and
offense through market broadening and market
diversification.
Market broadening involves shifting focus from the current

product to the underlying generic need. The company gets
involved in R&D across the whole range of technology
associated with that need.
Market Diversification
Market diversification involves shifting into unrelated

industries.
When tobacco companies like Reynolds and Philip Morris

acknowledged the growing curbs on cigarette smoking, they
were not content with position defense or even with looking
for cigarette substitutes.
Instead they moved quickly into new industries, such as beer,

liquor, soft drinks, and frozen foods.
Contraction Defense Strategy
Large companies sometimes recognize that they can no

longer defend all of their territory.
The best course of action then appears to be planned

contraction (also called strategic withdrawal): giving up
weaker territories and reassigning resources to stronger
territories.
Increasing Market Share
Market leaders can improve their profitability by increasing their

market share.
Gaining increased share, does not automatically produce higher

profits, especially for labor-intensive service companies that may not
experience many economies of scale.
Because the cost of buying higher market share through acquisition

may far exceed its revenue value, a company
should consider four factors first.
Factors Involved in Increasing Market Share
1. The possibility of provoking antitrust action. Frustrated

competitors are likely to cry monopoly and seek legal
action if a dominant firm makes further inroads.
2. Economic cost. Figure 11.3 shows that profitability might fall

with market share gains after some level. In the illustration,
the firms optimal market share is 50%. The cost of gaining
further market share might exceed the value if holdout
customers dislike the company, are loyal to competitors,
have unique needs, or prefer dealing with smaller firms.
Factors Involved in Increasing Market Share
3. The danger of pursuing the wrong marketing activities.

Companies successfully gaining share typically outperform
competitors in three areas: new-product activity, relative
product quality, and marketing expenditures.
4. The effect of increased market share on actual and perceived

quality. Too many customers can put a strain on the firms
resources, hurting product value and service delivery.
Figure 11.3: The Concept of Optimal Market Share
Other Competitive Strategies
Firms that occupy second, third, and lower ranks in an

industry are often called runner-up, or trailing firms.
These firms can adopt one of two postures.
Each can attack the leader and others in an aggressive bid for
further market share (market challengers), or they can play
ball and not rock the boat (market followers).
Market Challenger Strategy
Many market challengers have gained ground or even

overtaken the leader.
Toyota today produces more cars than General Motors.
Challengers set high aspirations, leveraging their resources

while the market leader often runs the business as usual.
Defining the Strategic Objective and Opponents(s)
A market challenger must first define its strategic objective. The

challenger must decide whom to attack:
a. It can attack the market leader
b. It can attack firms of its own size that are not doing the job and
are underfinanced
c. It can attack small local and regional firms
Choosing a General Attack Strategy
We can distinguish among five attack strategies:
1. Frontal
2. Flank
3. Encirclement
4. Bypass
a. Diversifying into unrelated products.
b. Diversifying into new geographical markets.
c. Technological leapfrogging into new technologies.
5. Guerrilla Warfare
Attack Strategies in Marketing
Frontal Attack Strategy
In a pure frontal attack, the attacker matches its opponents

product, advertising, price, and distribution.
The principle of force says that the side with the greater
manpower (resources) will win.
A modified frontal attack, such as cutting price vis--vis the

opponents, can work if the market leader does not retaliate
and if the competitor convinces the market that its product is
equal to the leaders.
Example of Frontal Attack Marketing Strategies
Chinese Sports Brand:
After tasting some success in

Tier 1 cities, Nike and adidas
are muscling their way into
Chinas smaller cities by
lowering prices to compete
with local brands.
Example of Frontal Attack Marketing Strategies
Chinese Sports Brand:
However, local sportswear

companies such as Li Ning
and Peak are not taking it
lying down.
They have taken the

offensive by stepping up their
overseas presence, especially
in the U.S. basketball turf.
Flanking Attack Strategy
A flank attack can be directed along two strategic

dimensionssegmental and geographic.
The segmental attack involves serving uncovered market

needs, as Japanese automakers did when they developed
more fuel-efficient cars.
In a geographic attack, the challenger spots areas where the

opponent is underperforming.
Example of Flanking Attack Strategy
Very often market leaders

were attacked by flanking
competitors because they
were unwilling to improve on
areas beyond their expertise.
Holding on to its laurels in

the photographic film market,
and not pressing on in the
digital photography business,
led to Kodaks bankruptcy.
Flanking Strategy
A flanking strategy is another name for identifying shifts in

market segments that are causing gaps to develop, then
rushing in to fill the gaps and develop them into strong
segments.
Flanking is in the best tradition of modern marketing, which

holds that the purpose of marketing is to discover needs and
satisfy them.
Flank attacks are particularly attractive to a challenger with

fewer resources than its opponent and are much more likely
to be successful than frontal attacks.
Encirclement Attack
The encirclement maneuver is an attempt to capture a wide

slice of the enemys territory by launching a grand offensive
on several fronts.
It makes sense when the challenger commands superior

resources and believes a swift encirclement will break the
opponents will, in making a stand against an arch rival.
Bypass Attack
The most indirect assault strategy is the bypass.
It means bypassing the enemy and attacking easier markets

to broaden ones resource base.
This strategy offers three lines of approach: diversifying into

unrelated products, diversifying into new geographical
markets, and leapfrogging into new technologies to
supplant existing products.
Haier Marketing Strategy in the US
When Haier, Chinas home

appliance company, entered
the U.S., it knew it could not
compete head on with
General Electric and
Whirlpool for the large-sized
white goods market.
Instead, Haier entered the

U.S. market through the
backdoor by catering to
college students with small-
sized refrigerators that can
be fitted into crammed
college dorm rooms.
This bypass strategy worked

as it allowed Haier to
leverage its market
leadership in the small- and
medium-sized refrigerators
market to slowly establish a
foothold in the large
refrigerator market.
Bypass Attack Strategy Technological
Leapfrogging
In technological leapfrogging, a challenger patiently researches
and develops the next technology and launches an attack, shifting
the battleground to its territory, where it has an advantage.
Nintendos successful attack in the video-game market with the Wii

was precisely about wresting market share by introducing a
superior technology and redefining the competitive space.
Challenger Google used technological leapfrogging to overtake

Yahoo! and become the market leader in search engines.
Guerrilla Attacks
Guerrilla attacks consist of small, intermittent attacks to harass and

demoralize the opponent and eventually secure permanent footholds.
The guerrilla challenger uses both conventional and unconventional means

of attack.
These include selective price cuts, intense promotional blitzes, and

occasional legal action, to harass the opponent and eventually secure
permanent footholds.
A guerrilla campaign can be expensive, although admittedly less expensive

than a frontal, encirclement, or flank attack, but it typically must be backed
by a stronger attack if the challenger hopes to beat the opponent.
Choosing a Specific Attack Strategy
Any aspect of the marketing program can serve as the basis

for attack, such as lower-priced or disconnected products,
new or improved products and services, a wider variety of
offerings, and innovative distribution strategies.
A challengers success depends on combining several

strategies to improve its position over time.
Market- Follower Strategies
Product imitation might be as profitable as product

innovation.
Many companies prefer to follow rather than challenge the

market leader.
The innovator bears the expense of developing the new

product, getting it into distribution, and informing and
educating the market.
The reward for all this work and risk is normally market
leadership.
However, another firm can come along and copy or improve

on the new product.
Although it probably will not overtake the leader, the follower

can achieve high profits because it did not bear any of the
innovation expense.
There are patterns of conscious parallelism.
A market follower must know how to hold current customers

and win a fair share of new customers.
Each follower tries to bring distinctive advantages to its

target marketlocation, services, and/or financing.
Strategies Used by Market-Followers
A market follower must know how to hold current customers and

win a fair share of new customers.
Each follower tries to bring distinctive advantages to its target

marketlocation, services, financing.
Because the follower is often a major target of attack by

challengers, it must keep its manufacturing costs low and its
product quality and services high.
It must also enter new markets as they open up.
The follower has to define a growth path, but one that does not
invite competitive retaliation.
Four Broad Strategies
1. Counterfeiter:
The counterfeiter duplicates the leaders product and package
and sells it on the black market or through disreputable dealers.
2. Cloner:
The cloner emulates the leaders products, name, and
packaging, with slight variations.
Four Broad Strategies
3. Imitator:
The imitator copies some things from the leader but maintains
differentiation in terms of packaging, advertising, pricing, or
location. The leader does not mind the imitator as long as the
imitator does not attack the leader aggressively.
4. Adapter:
The adapter takes the leaders products and adapts or improves
them. The adapter may choose to sell to different markets, but
often the adapter grows into the future challenger.
Counterfeiting Problems in Asia
Music record firms, Louis

Vuitton, and Rolex have been
plagued with the
counterfeiter problem,
especially in Asia.
See Marketing Insight:

Counteracting
Counterfeiting.
Market-Nicher Strategies
An alternative to being a follower in a large market is to be a

leader in a small market, or niche.
Firms with low shares of the total market can be highly

profitable through smart niching.
Such companies tend to offer high value, charge a premium

price, achieve lower manufacturing costs, and shape a strong
corporate culture and vision.
Why is Niching so Profitable?
The main reason is that the market nicher ends up knowing

the target customers so well that it meets their needs better
than other firms selling to this niche.
The nicher achieves high margin, whereas, the mass

marketer achieves higher volume.
Niche Marketing
Nichers have three tasks: creating niches, expanding niches,

and protecting niches.
Niching carries a major risk in that the market niche might

dry up or be attacked.
The company is then stuck with highly specialized resources

that may not have high-value alternative uses.
Marketing Memo: Niche Specialist Roles
Product Life-Cycle Marketing Strategies
A companys positioning and differentiation strategy must change
as the product, market, and competitors change over the product
life cycle (PLC).
Products have a limited life.
Product sales pass through distinct stages, each posing different

challenges, opportunities, and problems to the seller.
Profits rise and fall at different stages of the product life cycle.
Products require different marketing, financial, manufacturing,

purchasing, and human resource strategies in each life-cycle stage.
Product Life Cycles (PLC)
Most PLC curves are portrayed as bell-shaped (see Figure

11.4). This curve is typically divided into four stages:
introduction, growth, maturity, and decline.
1. IntroductionA period of slow sales growth as the product is
introduced in the market. Profits are nonexistent because of the
heavy expenses of product introduction.
2. GrowthA period of rapid market acceptance and substantial
profit improvement.
3. MaturityA slowdown in sales growth because the product has
achieved acceptance by most potential buyers. Profits stabilize
or decline because of increased competition.
4. DeclineSales show a downward drift and profits erode.
Figure 11.4: Sales and Profit Life Cycles
Product Life Cycles (PLC)
The PLC concept can be used to analyze a product category

(television), a product form (flat screen), a product (plasma),
or a brand (Pioneer).
Not all products exhibit a bell-shaped PLC.
Three common alternate patterns are shown in Figure 11.5.
Figure 11.5: Common Product Life-Cycle Patterns
Growth-Slump-Maturity Pattern
Figure 11.5(a) shows a growth-slump-maturity pattern, often

characteristic of small kitchen appliances such as hand-held
mixers and bread makers. Sales grow rapidly when the product
is first introduced and then fall to a petrified level that is
sustained by late adopters buying the product for the first time
and early adopters replacing the product.
Cycle-Recycle Pattern
The cycle-recycle pattern in Figure 11.5(b) often describes

the sales of new drugs.
The pharmaceutical company aggressively promotes its new

drug, and this produces the first cycle.
Later, sales start declining and the company gives the drug
another promotion push, which produces a second cycle
(usually of smaller magnitude and duration).
The Scalloped Pattern
The scalloped pattern is shown in Figure 11.5(c).
Here sales pass through a succession of life cycles based on

the discovery of new product characteristics, uses, or users.
For example, the sales of nylon show a scalloped pattern

because of the many new usesparachutes, hosiery, shirts,
carpeting, boat sails, automobile tiresthat continue to be
discovered over time.
Styles, Fashions and Fads
We need to distinguish three special categories of PLCsstyles,

fashions, and fads (Figure 11.6).
A style is a basic and distinctive mode of expression appearing

in a field of human endeavor.
A fashion is a currently accepted or popular style in a given

field. Fashions pass through four stages: distinctiveness,
emulation, mass-fashion, and decline. The length of a fashion
cycle is hard to predict.
Styles, Fashions and Fads
Fads are fashions that come quickly into public view, are
adopted with great zeal, peak early, and decline very fast.
Their acceptance cycle is short, and they tend to attract only
a limited following of those who are searching for excitement
or want to distinguish themselves from others.
Figure 11.6: Style, Fashion, and Fad Life Cycles
Fads: Angry Birds
Is the mobile games the mobile

game Angry Birds a fad? People
are crazy over it and both
official and pirated merchandise
are selling like hotcakes.
Marketing Strategies:
Introduction and Pioneering Stage
Marketing Strategies: Introduction Stage and
Pioneer Advantage
Because it takes time to roll out a new product, work out the
technical problems, fill dealer pipelines, and gain consumer
acceptance, sales growth tends to be slow at this stage.
Profits are negative or low in the introduction stage.
Promotional expenditures are at their highest ration to sales

because of the need to:
Inform potential consumers
Induce product trial
Secure distribution in retail outlets
Marketing Strategies: Introduction Stage and
Pioneer Advantage
Companies that plan to introduce a new product must decide when
to enter the market.
To be first can be rewarding, but risky and expensive.
To come in later makes sense if the firm can bring superior

technology, quality, or brand strength.
Speeding up innovation time is essential in an age of shortening

product life cycles.
Most studies indicate that the market pioneer gains the most
advantage.
What are the sources of the pioneers advantage?
i. Early users will recall the pioneers brand name if the product satisfies
them.
ii. The pioneers brand also establishes the attributes the product class
should possess.
iii. The pioneers brand normally aims at the middle of the market and so
captures more users.
iv. Customer inertia also plays a role; and there are producer advantages:
economies of scale, technological leadership, patents, ownership of scarce
assets, and other barriers to entry.
v. Pioneers can have more effective marketing spending and enjoy higher
rates of consumer repeat purchases.
Pioneering Strategy in Asia
Pioneering appears to be advantageous in Asia.
Studies in China suggest that early entrants had superior

sales growth and higher asset turnover but faced greater
operational risks and achieved lower returns on their
investments than later entrants.
These findings imply that pioneers in emerging Asian markets

should exploit first-mover advantages (market expansion and
asset efficiency) while mitigating its disadvantages (risk and
cost effects.
Pioneer Brands in China Automotive Industry
General Motors (GM) and

Volkswagen (VW) were one of
the earliest entrants in the
China.
Producer Advantages
a. Economies of scale
b. Technological leadership
c. Patents
d. Ownership of scarce assets
e. Other barriers to entry
Limitations of Pioneer Advantages
The pioneers advantage is not inevitable.
Steven Schnaars studied industries where imitators surpassed

the innovators. He found several weaknesses among the
failing pioneers:
1. New products were too crude
2. Were improperly positioned
3. Appeared before there was a strong demand
4. Product-development costs were high
5. Lack of resources to compete
6. Managerial incompetence or unhealthy complacency
Limitations of Pioneer Advantages
Golder and Tellis raise further doubts about the pioneer

advantage. They distinguish between:
1. An Inventor: first to develop patents in a new-product category.
2. A product pioneer: first to develop a working model.
3. A market pioneer: first to sell in the new-product category.
They conclude that although pioneers may still have an

advantage, a larger number of market pioneers fail than has
been reported and a larger number of early market leaders
(though not pioneers) succeed.
Factors Affecting Market Leadership
Golder and Telliss five factors underpinning long-term market

leadership:
1. Vision of a mass market
2. Persistence
3. Relentless innovation
4. Financial commitment
5. Asset leverage
Long-Range Product Market Expansion
The pioneer should visualize

the various product markets
it could initially enter,
knowing that it cannot enter
all of them at once.
Suppose market-
segmentation analysis
reveals the product market
segments shown in Figure
11.7.
The pioneer should analyze

the profit potential of each
product market singly and in
combination and decide on a
market expansion path.
Thus, the pioneer in Figure 11.7

plans first to enter product market
P1M1, then move the product into
a second market (P1M2), then
surprise the competition by
developing a second product for
the second market (P2M2), then
take the second product back into
the first market (P2M1), and then
launch a third product for the first
market (P3M1).
If this game plan works, the

pioneer firm will own a good part
of the first two segments and
serve them with two or three
products.
Marketing Strategies Growth Stage
Marketing Strategies: Growth Stage
The growth stage is marked by 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.
Marketing Fast Food in ChinaA Growth Market
With a growing middle-class

Chinese economy, different
types of fast-food chains such
as Krispy Kreme are seizing this
opportunity by establishing a
presence there.
Prices remain where they are or fall slightly.
Companies maintain their promotional expenditures at the

same or at a slightly increased level to meet competition and
to continue to educate the market.
Sales rise much faster than promotional expenditures.
Profits increase.
Manufacturing costs fall faster than price declines owing to

the producer learning effect.
Strategies to Sustain Rapid Market Growth
During this stage, the firm uses several strategies to sustain

rapid market growth:
1. It improves product quality and adds new product features and

improved styling.
2. It adds new models and flanker products.
3. It enters new market segments.
4. It increases its distribution coverage and enters new distribution
channels.
5. It shifts from product-awareness advertising to product-preference
advertising.
6. It lowers prices to attract the next layer of price-sensitive buyers.
A firm in the growth stage faces a trade-off between high

market share and high current profits.
By spending money on product improvement, promotion, and

distribution, it can capture a dominant position.
It forgoes maximum current profit hoping to make even

greater profits in the next stage.
Marketing Strategies Maturity Stage
Marketing Strategies: Maturity Stage
At some point, the rate of sales growth will slow, and the
product will enter a stage of relative maturity.
This stage normally lasts longer than the previous stages and
poses big challenges to marketing management.
Most products are in the maturity stage of the life cycle.
Most marketing managers cope with the problem of

marketing the mature product.
The maturity stage divides into three phases:
1. Growth, where the sales growth rate starts to decline
2. Stable, where sales flatten on a per capita basis because of

market saturation
3. Decaying maturity, where the absolute level of sales starts

to decline, and customers begin switching to other products
The sales slowdown creates overcapacity in the industry that leads

to intensified competition
The industry eventually consists of well-entrenched competitors

whose basic drive is to gain or maintain market share
Dominating the industry are a few giant firms that serve the whole
market and make their profits mainly through high volume
Surrounding these dominant firms is a multitude of market nichers
Marketing in the Maturity Stage
Korean TV Shopping
With the popularity of online

shopping in wired Korea, one
would think that traditional
TV shopping is on the
decline.
Instead, South Koreans are

going big on television home
shopping.
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 achieve profits through
low volume and a high margin.
Sometimes, the market will divide into low- and high-end

segments, and the firms in the middle see their market share
steadily erode.
Electroluxs Targeting Strategy in a Mature Market
Rather than accept the

stratification between low and
high, Electrolux segmented the
market according to the
lifestyle and purchasing
patterns of about 20 different
types of consumers20
product positions.
Some companies abandon weaker products to concentrate on more

profitable and new products.
Yet many mature markets and old products may still have potential.
Industries widely thought to be matureautos, motorcycles, television,

watches, cameraswere proved otherwise by the Japanese, who found
ways to offer new value to customers.
Seemingly moribund brands like Ovaltine have achieved sales revivals

through the exercise of marketing imagination.
The popularity of Tiger Balm in the reemerging traditional Chinese medicine

market is an example.
Tiger Balm
The popularity of Tiger Balm in

the re-emerging traditional
Chinese medicine market
In the early 1990s, Tiger Balm

was revived by new
management at Haw Par
Corporation.
Haw Par aggressively advertised

Tiger Balm in Asia by leveraging
on its heritage.
Tiger Balm
It also introduced Tiger Medical

Plaster, Tiger Muscle Rub, and
Tiger Liniment to expand its
product line.
A new variant, Tiger Balm Soft,

was launched to target active
young consumers.
Market Modification
The company might try to expand the market for its mature
brand by working with the two factors that make up sales
volume:
Volume = number of brand users * usage rate per user.
Market Modification
It can try to expand the number of brands users by converting nonusers.
It can also try to expand the number of brand users by entering new
market segments.
A third way to expand the number of brand users is winning

competitors customers.
Volume can also be increased by convincing current users to increase

their brand usage:
Use the product on more occasions
Use more of the product on each occasion
Use the product in new ways
Table 11.1: Alternate Ways to Increase Sales
Volume
Product Modification
Managers also try to stimulate sales by modifying the

products characteristics through quality improvement,
feature improvement, or style improvement.
Quality improvement aims at increasing the products

functional performance.
Feature improvement aims at adding new features that

expand the products performance, versatility, safety, or
convenience.
Advantages and Limitation of Product Modification
This strategy has several advantages:
i. New features build the companys image as an innovator.
ii. Wins the loyalty of market segments that value these features.
iii. Provide an opportunity for free publicity.
iv. Generate sales force and distributor enthusiasm.
The chief disadvantage is that feature improvements might

not pay off in the long run.
Marketing Program Modification
Product managers might also try to stimulate sales by

modifying other marketing program elementsprice,
distribution, and communications in particular.
They should assess the likely success of any changes in terms

of effects on new and existing customers.
Marketing Strategies Decline Stage
Marketing Strategies: Decline Stage
Sales decline for a number of reasons, including technological

advances, shifts in consumer tastes, and increased domestic
and foreign competition.
All lead to overcapacity, increased price-cutting, and profit

erosion.
As sales and profits decline, some firms withdraw from the

market. Those remaining may reduce the number of products
they offer.
Unless strong reasons for retention exist, carrying a weak

product is very costly to the firmand not just by the amount
of uncovered overhead and profit: there are many hidden
costs.
Weak products often consume a disproportionate amount of

managements time.
The first task is to establish a system for identifying weak

products.
Many companies appoint a product-review committee with

representatives from marketing, R&D, manufacturing, and
finance.
The product-review committee makes a recommendation for

each productleave it alone, modify its marketing strategy,
or drop it.
Harvesting Strategies
If the company were choosing between harvesting and

divesting, its strategies would be quite different.
Harvesting calls for gradually reducing a product or businesss

costs while trying to maintain sales.
It would try to cut these costs without letting customers,

competitors, and employees know what is happening.
Harvesting can substantially increase the companys current

cash flow.
Companies that successfully restage or rejuvenate a
mature product often do so by adding value to the
original product:
Yamaha closely examined the market and found that the
majority of pianos purchased sit around idle and neglected,
without being tuned regularly.
It seemed that many people owned pianos, but few were

playing them.
People did not want to invest the time

that it takes to master the instrument.
Companies that successfully restage or rejuvenate a
mature product often do so by adding value to the
original product:
Yamaha then decided to develop a sophisticated combination
of digital and optical technology that can play performance
pieces just like the way professional pianists do.
The advent of the digital piano has revived the piano industry
and increased the market for piano maintenance as well.
Divesting Decisions
When a company decides to drop a product, it faces further

decisions.
If the product has strong distribution and residual goodwill,

the company can probably sell it to another firm.
If the company cannot find any buyers, it must decide

whether to liquidate the brand quickly or slowly.
It must also decide on how much inventory and service to

maintain for past customers.
Evidence for the Product Life-cycle Concept
The PLC concept helps marketers interpret product and

market dynamics, conduct planning and control, and do
forecasting.
New consumer durables show a distinct take-off, after which

sales increase by roughly 45% a year, but they also show a
distinct slowdown, when sales decline by roughly 15% a year.
Slowdown occurs at 34% penetration on average, well before

most households own a new product.
Evidence for the Product Life-cycle Concept
The growth stage lasts a little over eight years and does not
seem to shorten over time.
Informational cascades exist, meaning people are more likely

to adopt over time if others already have, instead of by
making careful product evaluations.
One implication is that product categories with large sales

increases at take-off tend to have larger sales declines at
slowdown.
Table 11.2: Summary of Product Life-Cycle
Characteristics, Objectives, and Strategies (A)
Table 11.2: Summary of Product Life-Cycle
Characteristics, Objectives, and Strategies (B)
Critique of the Product Life-Cycle Concept
PLC theory has its share of critics, who claim life-cycle

patterns are too variable in shape and duration to be
generalized, and that marketers can seldom tell what stage
their product is in.
A product may appear mature when it has actually reached a

plateau prior to another upsurge.
Critics also charge that, rather than an inevitable course, the

PLC pattern is the self-fulfilling result of marketing strategies,
and that skilful marketing can in fact lead to continued
growth.
Market Evolution
Because the PLC focuses on what is happening to a particular

product or brand rather than on what is happening to the
overall market, it yields a product-oriented rather than a
market-oriented picture.
Firms need to visualize a markets evolutionary path as it is

affected by new needs, competitors, technology, channels,
and other developments and change product and brand
positioning to keep pace.
Like products, markets evolve through four stages:

emergence, growth, maturity, and decline.
Marketing in an Economic Downturn
Given economic cycles there will always be tough times, like

20082010 were in many parts of the world.
Despite reduced funding for marketing programs and intense

pressure to justify them as cost effective, some marketers
survivedor even thrivedin the recession.
Five Guidelines To Improve The Odds For Success
During An Economic Downturn
1. Explore the Upside of Increasing Investment
2. Get Closer to Customers
3. Review Budget Allocations
4. Put Forth the Most Compelling Value Proposition
5. Fine-Tune Brand and Product Offerings
Schema for Chapter Eleven
Thank you

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Marketing Management:

2. How should market challengers attack market leaders?

3. How can market followers or nichers compete effectively?

4. What marketing strategies are appropriate at each stage of

5. How should marketers adjust their strategies and tactics for

To be a long-term market leader is the goal of any marketer.

Todays challenging marketing circumstances, however, often

Economic conditions change, competitors launch new

Different market positions can suggest different market

The chapter examines the role competition plays and how

Competition grows more intense every yearfrom global

Although marketers assume well-known brands are distinctive in

After losing its stronghold in the

Companies offering the powerful combination of low prices

See the budget airline example.

Marketers need to protect areas where their business models

To compete effectively, firms may instead need to downplay

i. those who might use it but do not (market-penetration

Marketers can try to increase the amount, level, or frequency

They can sometimes boost the amount through packaging or

Larger package sizes increase the amount of product

Consumers use more of impulse products such as soft drinks

a. identifying additional opportunities to use the brand in the same

b. identifying completely new and different ways to use the brand.

A marketing program can communicate the appropriateness

Another opportunity arises when consumers perceptions of

One strategy to is to tie the act of replacing the product to a certain

Another strategy might be to provide consumers with better

The second approach to increasing frequency of consumption

For example, food product companies have long advertised

Lee Kum Kee, a Hong Kong-based manufacturer of Chinese

While trying to expand total market size, the dominant firm

The most constructive response is continuous innovation.

Comprehensive solutions increase its competitive strength

In satisfying customer needs, we can draw a distinction between

A responsive marketer finds a stated need and fills it.

An anticipative marketer looks ahead to needs customers may

A creative marketer discovers solutions customers did not ask for

Creative marketers are proactive market-driving firms, not just

Many companies assume their job is just to adapt to

They are reactive mostly because they are overly faithful to

Successful companies instead proactively shape the market

A company needs two proactive skills:

1. responsive anticipation to see the writing on the wall, as when

2. creative anticipation to devise innovative solutions, as when

Note that responsive anticipation is performed before a given change,

Proactive companies create

At one time, Sony engaged in

Sony has introduced many

Proactive companies may redesign relationships within an industry,

Or they may educate customers, as Body Shop does in stimulating

Companies need to practice uncertainty management.

i. Are ready to take risks and make mistakes

ii. Have a vision of the future and of investing in it

iii. Have the capabilities to innovate

iv. Are flexible and non-bureaucratic

v. Have many managers who think proactively

See Marketing Insight: Sun Tzu Bing Fa: Modern Strategy

His military strategies have been applied to marketing.

The leader of continuous innovation applies the military

Even when it does not launch offensives, the market leader

The aim of defensive strategy is to reduce the probability of

Speed of response can make an important difference to

1. Position DefensePosition defense means occupying the