STRATEGIES FOR GROWTH MARKETS Lecture Notes Idil Yaveroglu

Product life cycle Life-cycle extension Time (years) Profit per unit (real dollars) Product category sales (real dollars) Introduction Decline or extension Maturity Competitive turbulence Growth Profit/unit Sales Life-cycle extension

Summary of Characteristics, Objectives, & Strategies Growth Stage of the PLC Summary of Characteristics, Objectives, & Strategies SALES Rapidly rising sales COSTS Average Cost per Customer PROFITS Increasing Profits/ Peak Maximize Market Share MKTG OBJECTIVES Product Offer extended product line Price Price differences diminish Distribution Extensive (Maximum product availability) Build secondary demand/ focus on brand differentiation Promotion costs remain high Advertising

Characteristics of growth markets Increasing number of competitors Fragmentation of market segments Threat of product innovation from within and outside the industry Firm can maintain its current share position in a growth market: If its sales volume continues to grow

Growing markets in turkey Medicine: %15 (against the world average 5-6) www.ntvmsnbc.com/id/25071451/ Snacks: %85 -- Frito Lay Tükiye, 4 segment üzerinden üretim gerçekleştiriyor: Patates cipsi, mısır cipsi, extrude, mısır çerezi ve pelet. Frito Lay’in markalarından Lay’s ve Ruffles patates cipsi, Doritos ve A la Turca mısır cipsi, Cheetos mısır çerezi ve Çerezza pelet segmentine giriyor. http://perakende.org/haber.php?hid=1200572436 Energy Drinks: Her yıl ortalama yüzde 30-40 büyüyen Türkiye enerji içeceği pazarında yıllık 50 milyon kutuya yakın enerji içeceği tüketiliyor. 50 milyon dolarlık pazarda, yüzde 60'ın üzerinde payla en büyük payı Redbull alıyor. Coca-Cola'nın enerji içeceği Burn 2'nci, Shark ise 3'üncü sırada. Pazarda yerli-yabancı 40 kadar şirket bulunuyor. Ski material: Türkiye’de aktif spor ürünleri pazarının yıllık hacmi 600 milyon dolar olarak tahmin ediliyor. Bunun önemli bölümünü futbol ürünlerinin oluşturduğu kesin. Aktif spor ürünleri pazarında kayak malzemeleri ve kıyafetlerinin payı ise yüzde 7 civarında. Ancak bu oranın her yıl yüzde 10 civarında arttığı vurgulanıyor. http://www.patronlardunyasi.com/haber/Kartopu-gibi-buyuyen-pazar/79532 Türkiye’de kış sporları pazarının potansiyelini gösteren bir diğer faktör de bu alanda söz sahibi dünya markalarının Türkiye’ye yönelmiş olmaları. Öyle ki birçok marka distribütörleri aracılığıyla pazarda yerlerini almış durumda. Bu markaların önemli bir bölümünü Türkiye’ye Intersport getiriyor. İlk akla gelenler Salomon, Etirel, Firefly, Elan, Nordica, Online, Daysee ve O’Neill. Ancak Intersport özellikle O’Neill’a odaklanmış durumda... Domestic travel: Airbus’ın hazırladığı Küresel Pazar Araştırma Raporu’na göre Türkiye’deki iç hatlar, gelecek 20 yılda en hızlı büyüyen pazar olacak. Sektörün detaylı ve gerçekçi araştırmalarından biri olan raporda, Türk iç hatlarının yıllık ortalama yüzde 10.1’le istikrarlı olarak büyümesini sürdürerek birinciliğini koruyacağı açıklandı. Raporda özellikle 2003’te iç hatların özel sektöre açılmasıyla birlikte önemli bir sinerji yakalandığına dikkat çekildi. http://www.siwep.net/haber/1080-havacilik-turkiye-ic-hatlari-en-hizli-buyuyen-pazar.html?haber=1080&puan=3 Packaging: http://www.capital.com.tr/haber.aspx?HBR_KOD=518

Share Maintenance Strategies The primary objective of the early share leader (usually the market pioneer) in a growth market is share maintenance. Retain repeat or replacement business from its existing customers Continue to capture the major portion of sales from the growing number of new customers entering the market for the first time.

Marketing Objectives for Share Leaders Retain current customers by: Maintaining/improving satisfaction and loyalty Encouraging/simplifying repeat purchase Reducing attractiveness of switching Stimulate selective demand among later adopters by: Head-to-head positioning against competitive or potential offerings Differentiated positioning against competitive or potential offerings See Exhibit 9.3

Marketing Objectives for Share Leaders Maintaining/improving satisfaction and loyalty Increase attention to quality control as output expands Increase salesforce’s servicing of current accounts Continue product modification and improvement Expand postsale service capabilities Encouraging/simplifying repeat purchase Consider developing automatic reorder systems Improve inventory control and logistics systems Expand production capacity in advance Continue to build distribution channels Reducing attractiveness of switching Develop a product line with appealing features Develop multiple-line extensions Meet or beat lower prices Head-to-head positioning against competitive or potential offerings When resources are limited consider withdrawing from smaller segments Develop a product line with more features Make product modifications Differentiated positioning against competitive or potential offerings Build unique distribution channels Design multiple advertising

Strategies for Share Leaders Fortress defense Flanker defense Confrontation Market expansion Contraction or strategic withdrawal Flanker Protect vulnerabilities, especially flagship brands e.g., Soft drinks Confrontation Proactive or Reactive Direct Response e,g, WalMart Market Expansion Attract new customers e.g., Mattel’s Barbie Contraction/Strategic Withdrawal Reduce commitment to the market place e,g, AT&T

Strategic Choices for Share Leaders Flanker strategy – Proactive/ Reactive Fortress or position defense strategy Confrontation strategy Proactive Reactive COMPETITOR OR POTENTIAL COMPETITOR Contraction or strategic withdrawal Instructor: See Exhibit 9.5: Marketing Objectives and Strategies for Share Leaders in Growth Markets Taking Customers from Competitors/Potential Competitors Mkt. Expansion  Honda Insight Strategic Withdrawal  Circuit City Abandons Appliances LEADER Market expansion 5

Strategies for Share Leaders Fortress Defense: Continually strengthen a strongly held current position Flanker Defense: Develop a second brand (a flanker) to compete directly against the challenger’s offering (a flanker strategy is always used in conjunction with a position defense strategy) Has to have resources to support both brands Confrontation: Meet or beat the attractive features of a challenger’s offering by product improvements, promotional efforts, or lowering price. The challenger is attacking the leader head-to- head and is attempting to steal the leader’s main target market. Market Expansion: The leader defends its relative market share by establishing positions in a number of different market segments. The leader is trying to capture a large share of new customer groups who may prefer something different that the firm’s initial offerings (more aggressive and proactive version of the flanker strategy). Contraction or strategic withdrawal: The leader is unable to defend itself adequately in all segments. Hence, the firm reduces or abandons its efforts in some segments to focus on areas where it enjoys the greatest relative advantages or that have the greatest potential for future growth. Borders, Circuit City Instructor: See Exhibit 9.5: Marketing Objectives and Strategies for Share Leaders in Growth Markets Taking Customers from Competitors/Potential Competitors Mkt. Expansion  Honda Insight Strategic Withdrawal  Circuit City Abandons Appliances

Magnum vs. ulker

Share growth strategies The challenger’s strategic objective in a growth market is usually to build its share by expanding sales faster than the overall market growth rate. The challenger does this by: Stealing existing customers away from the leader or other competitors Capturing a larger share of new customers than the market leader (or other competitors)

Marketing Actions to Achieve Share-Growth Objectives Capture repeat/replacement purchases from current customers of the leader or other target competitor by: Head-to head positioning against competitor’s offering in primary target market Technological differentiation from target competitor’s offering in primary target market Stimulate selective demand among later adopters by: Head-to-head positioning against target competitor’s offering in established market segments Differentiated positioning focused on underdeveloped segments Instructor: Refer Exhibit 9.6: Marketing Actions to Achieve Share-Growth Objectives

Strategies for Followers Frontal attack Leapfrog Flank attack Encirclement Guerilla attack Share Growth Attack leader or follower or go after niche Frontal Attack Emphasize superiority in features, price, marketing, etc. e.g., Apple Leapfrog Next generation e.g., Video Game Systems Niche Large: “Flanking” Several Smaller: “Encircling” e.g., microbrews Guerilla Attack Sporadic untraditional attacks e.g., Boston “bombs”

Strategic Choices for Challengers in Growth Markets Leapfrog strategy Flanking attack Frontal attack Guerrilla attacks TARGET COMPETITOR CHALLENGER Instructor: Refer Exhibit 9.8: Marketing Objectives and Strategies for Challengers in Growth Markets Taking Customers from Competitors Leapfrog  Calypso Washing Machine by Whirlpool. Encirclement strategy 6

Strategic Choices for Challengers in Growth Markets Leapfrog strategy Flanking attack Capture substantial repeat/ replacement purchases from target competitor’s current customers Attack new customers among later adopters by offering lower price or more attractive features Frontal attack Guerrilla attacks TARGET COMPETITOR CHALLENGER Instructor: Refer Exhibit 9.8: Marketing Objectives and Strategies for Challengers in Growth Markets Taking Customers from Competitors Leapfrog  Calypso Washing Machine by Whirlpool. Encirclement strategy Source: To come 6

Strategic Choices for Challengers in Growth Markets Induce current customers in mass market to replace their current brand with superior new offering Attract new customers by providing enhanced benefits Leapfrog strategy Flanking attack Frontal attack Guerrilla attacks TARGET COMPETITOR CHALLENGER Instructor: Refer Exhibit 9.8: Marketing Objectives and Strategies for Challengers in Growth Markets Taking Customers from Competitors Leapfrog  Calypso Washing Machine by Whirlpool. Encirclement strategy Source: To come 6

Strategic Choices for Challengers in Growth Markets Leapfrog strategy Capturing a significant share of the total market by concentrating primarily on one large untapped segment and developing product features or services tailored to the segment’s needs and preferences. Flanking attack Frontal attack Guerrilla attacks TARGET COMPETITOR CHALLENGER Instructor: Refer Exhibit 9.8: Marketing Objectives and Strategies for Challengers in Growth Markets Taking Customers from Competitors Leapfrog  Calypso Washing Machine by Whirlpool. Encirclement strategy Source: To come 6

Strategic Choices for Challengers in Growth Markets Leapfrog strategy Flanking attack Frontal attack Guerrilla attacks TARGET COMPETITOR CHALLENGER Instructor: Refer Exhibit 9.8: Marketing Objectives and Strategies for Challengers in Growth Markets Taking Customers from Competitors Leapfrog  Calypso Washing Machine by Whirlpool. Targeting simultaneously several smaller untapped /underdeveloped segments in the market where customer’s needs or preferences differ from those of early adopters in the mass market. Surround the leader’s brand with a variety of offerings aimed at several peripheral segments. Encirclement strategy Source: To come 6

Strategic Choices for Challengers in Growth Markets Leapfrog strategy Making a series of surprise raids against competitors. Use of sales promotions, coupons (drops), advertising blitz, legal action, and short-term price reductions. Flanking attack Frontal attack Guerrilla attacks TARGET COMPETITOR CHALLENGER Instructor: Refer Exhibit 9.8: Marketing Objectives and Strategies for Challengers in Growth Markets Taking Customers from Competitors Leapfrog  Calypso Washing Machine by Whirlpool. Encirclement strategy Source: To come 6

Guerilla marketing

Deciding Who to Attack Attack the market share leader within its primary target market [frontal assault, leapfrog or guerrilla attacks] Attack another follower who has an established position within a major market segment [frontal assault] Attack one or more smaller competitors who have only limited resources [frontal assault] Avoid direct attacks on any established competitor [flanking or encirclement]

Youth mobile wars Throughout the whole world, there are 2.5 billion mobile users and the number of subscribers to mobile networks is on a rise. The current GSM market in Turkey has three main players: Turkcell, Vodafone and Avea. Totally they have 58 million mobile subscribers. In terms of market share, Turkcell has 64% of the market, Vodafone has 21% and Avea has %15 share.   When we focus more on the population in Turkey, %35 is less than 18 years old and %52 is less than 30 years old. This statistics show that in Turkey, a significant percentage of the GSM operator users is young people. It is very crucial for GSM companies to target youth market and to develop different services which aim to capture this segment. Turkcell is reported to have 34.8 million users as of 3rd quarter of 2007. Gnctrkcll is a youth club of Turkcell, established for young people all over Turkey. It has been communicated to the Turkish market starting 1st April 2005, aiming to unite the youth segment under one umbrella service. Gnctrkcll also offers promotions and gifts from brands popular among youth, sponsorships and events for the youth. Turkcell-im services are based on the mobile internet technology meeting many different daily-life informational or communication needs. In addition, Turkcell-imbenim plans to be a big community and a platform for sending messages, sharing videos and photos by the members. Major competitors for the youth market are Avea and Vodafone. To begin with, Vodafone has various online services targeting youth market such as the Youppo online community, is a platform promoting socializing via letting the youth to send & receive messages, share videos, photos through personalized blogs. In addition, event (Winter Cup, Vodafone Cup) based marketing apparently has a major role to keep the brand in touch with the youth market. Besides, Vodafone “look at me” service and promotion aims to drive the motivation in young people to send and receive videos through cell phones and internet. Avea put forward a community called "Patlican which has more or less similar services.

Some Advice for Would-Be Pioneers First mover advantage is trumped by followers who are better. Best beats first. Concentrate on being best. Being a pioneer without the basis for sustainable competitive advantage is a trap! Differentiation is key for followers Better benefits Better service Better marketing Lower price Beware of competing on price, however, unless your costs really are lower than competitors’