1. Chapter 8 Marketing Strategies for New Market Entries

2. Exhibit 8.1 - Generalized Product Life Cycle
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 and that products go through a series of five distinct stages
Introduction, growth, shakeout, maturity, and decline.
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.

3. Stages in a Product Life Cycle
Introductory: Product lacks easy availability
Growth: Sales increase at a progressively faster rate
Shakeout: Growth rate decreases resulting in
strong price competition
Mature: Net adoption rate holds steady
Decline: Sales rate declines
Fad: Products that enter suddenly, experience strong and quick enthusiasm, peak early, and enter the decline stage shortly thereafter.

4. Marketing Mix in the Introductory Stage
Skimming: Designed to obtain as much margin per unit as possible
Penetration pricing: Enables the firm to strive for quick market
development and lowers costs
Promotion: Expenditures involving advertising and salesforce are:
A high percentage of sales for a mass-market, small-value product

5. Exhibit 8.2 - Expected Characteristics and Responses by Major Life Cycle Stages

6. Exhibit 8.2 - Expected Characteristics and Responses by Major Life Cycle Stages

7. Exhibit Relationship of Strategic Market Position Objective, Investment Levels, Profits, and Cash Flow

8. Limitations of the Product Life Cycle
Normative approach to prescribing strategies based on:
Assumptions about the features of each stage
Length of the life cycle and the market and competitive conditions at each stage can vary:
Across different product and service offerings

9. Categories of new products
New Market Entries
Categories of new products
New-to-the-world products
New product lines
Additions to existing product lines
Improvements in existing products
Repositionings
Cost reductions
Challenge with new-to-the-world products—is to build primary demand
Making target customers aware of the product and convincing them to adopt it.

10. Exhibit 8.4 - Categories of New Products Defined According to their Degree of Newness
Source: New Products Management for the 1980s (New York: Booz, Allen & Hamilton, 1982). Reprinted by permission.

11. Exhibit 8.5 – Strategic Objective Attained by Successful New Market Entries
Strategic role
10%
20%
30%
40%
50%
Externally
driven
Internally
Defend market
share position
Establish foothold
in new market
Preempt market
segment
Maintain position as
Product innovator
Exploit technology
In new way
Capitalize on distribution strengths
Provide a cash
generator
Use excess or off-season capacity
Source: New Products Management for the 1980s (New York: Booz, Allen & Hamilton, 1982). Reprinted by permission.

12. Exhibit 8.6 -Types of New Market Entries Appropriate for Different Strategic Objectives

13. Exhibit 8.7 - Potential Advantages of Pioneer and Follower Strategies
Positive network effects: Value of some kinds of goods and services to an individual customer increases as greater numbers of other people adopt the product and the network of users grows larger.

14. Exhibit Marketing Strategy Elements Pursued by Successful Pioneers, Fast Followers, and Late Entrants

15. Strategic Marketing Programs for Pioneers
Mass-market penetration - Capture and maintain a commanding
share of the total market for the new product
Niche penetration: Help the smaller pioneer gain the biggest bang for its limited bucks and avoid direct confrontations with bigger competitors
Instructor: Refer to Exhibit 8.9

16. Strategic Marketing Programs for Pioneers
Skimming: Setting a high price and engaging in only limited
advertising and promotion to:
Maximize per-unit profits
Recover the product’s development costs as quickly as possible
Instructor: Refer to Exhibit 8.9

17. Marketing Program Components for a Mass-Market Penetration Strategy
Increase customers’ awareness and willingness to buy
Increase customers’ ability to buy
Instructor: Refer to Exhibit 8.10

18. Mechanisms for Entering Foreign Market
Exporting through agents
Contractual agreements
Direct investment

19. Exporting
Simplest way to enter foreign market
Export merchants: Buy and sell products overseas for their own account
Export agents: Sell on a commission basis
Cooperative organizations: Export for several producers

20. Contractual Agreements
Nonequity arrangements involving transfer of technology to an entity in a foreign country
Licensing: Firm offers the right to use its intangible assets in exchange for royalties
Franchising: Grants the right to use the company’s name, trademarks, and technology

21. Contractual Agreements
Contract manufacturing: Sourcing a product from a manufacturer located in a foreign country for sale there or elsewhere
Turnkey construction contract: Requires the contractor to have the
project up and operating before releasing it to the owner

22. Contractual Agreements
Coproduction: Involves a company’s providing technical know-how and components
Countertrade: Includes barter, compensation packages, counterpurchase, and a buyback arrangement

23. Overseas Direct Investment
Joint ventures: Joint ownership arrangement to produce or market goods in a foreign country
Sole ownership: Setting up a production facility in a foreign country
Allows the parent organization to retain total control of the overseas operation

24. Marketing Program Components for a Niche Penetration Strategy
Similar to but more narrowly focused than mass-market strategy
Penetrator should keep its marketing efforts clearly focused on the
target segment
Internet provides promotional tools that can reach specific segments at relatively low cost

25. Marketing Program Components for a Skimming Strategy
Require relatively high price to increase margins and revenues
Focus on relatively upscale customers
Critical element - Nature of the firm’s continuing product development efforts