1. Managing Markets Strategically
Managing Markets Strategically
Professor Noel Capon
R.C. Kopf Professor of International Marketing
Columbia Business School
New York, NY

2. Managing Markets Strategically
Section 1: Marketing and the Firm
Section 2: Fundamental Insights for Strategic Marketing
Section 3: Strategic Marketing
Chapter 6: Identifying, Choosing Opportunities
Chapter 7: Market Segmentation, Targeting
Chapter 8: Market Strategy – Integrating Firm Efforts for Marketing Success
Chapter 9: Managing through the Life Cycle
Chapter 10: Managing Brands
Section 4: Implementing the Market Strategy

3. Managing through the Life Cycle
Chapter 9
Managing through the Life Cycle

4. The Fundamental Business Model
Shareholder Value
Organizational Survival, Growth
Current, Potential Profits
Competitors
Attract, Retain, Grow Customers
Competitors
Customer Value
Company

5. Six Marketing Imperatives
• Imperative 1: Determine, recommend which markets to address
• Imperative 2: Identify, target market segments
• Imperative 3: Set strategic direction, positioning
• Imperative 4: Design the market offer
• Imperative 5: Secure support from other functions
• Imperative 6: Monitor, control execution/performance

6. Building Product Life-Cycle Scenarios
Chapter Roadmap
Building Product Life-Cycle Scenarios
Introduction Stage – Pioneers
Early Growth Leaders
Early Growth Followers
Late Growth Stage
Growth in a Mature Market
Leaders in a Concentrated Mature Market
Followers in Concentrated Mature Markets
Fragmented Mature Markets
Markets in Decline

7. Session Roadmap Managing through the Life Cycle
Session Roadmap
• Underlying rationale: preemption
• Product life cycles are shortening
• Life cycle scenarios
• Life cycle scenario 1: Pioneers
• Life cycle scenarios 2 and 3: Early Growth
• Life cycle scenario 4: Late Growth
• Life cycle scenarios 5, 6, 7, and 8: Maturity
• Life cycle scenario 9: Decline
• Life cycle scenarios: summary

8. Session Roadmap Managing through the Life Cycle
Session Roadmap
• Underlying rationale: preemption
• Product life cycles are shortening
• Life cycle scenarios
• Life cycle scenario 1: Pioneers
• Life cycle scenarios 2 and 3: Early Growth
• Life cycle scenario 4: Late Growth
• Life cycle scenarios 5, 6, 7, and 8: Maturity
• Life cycle scenario 9: Decline
• Life cycle scenarios: summary

9. Underlying Rationale: Preemption
• The firm should use the life-cycle framework for making strategic marketing decisions
• Preemptive strategy-making provides differential advantage
• Basis for preemption is multiple scenarios
• Scenarios based on product life cycle framework
• Each scenario generates several strategic options

10. Underlying Rationale: Preemption
Class Discussion
• Discuss the fall of BlackBerry and Nokia versus the rise of Apple in the context of risk and reward. Would you have developed and introduced the iPod in the face of Sony’s dominance in portable music players? How do you assess Spotify? Consider the role of preemption.

11. Session Roadmap Managing through the Life Cycle
Session Roadmap
• Underlying rationale: preemption
• Product life cycles are shortening
• Life cycle scenarios
• Life cycle scenario 1: Pioneers
• Life cycle scenarios 2 and 3: Early Growth
• Life cycle scenario 4: Late Growth
• Life cycle scenarios 5, 6, 7, and 8: Maturity
• Life cycle scenario 9: Decline
• Life cycle scenarios: summary

12. Session Roadmap Managing through the Life Cycle
Session Roadmap
• Underlying rationale: preemption
• Product life cycles are shortening
• Life cycle scenarios
• Life cycle scenario 1: Pioneers
• Life cycle scenarios 2 and 3: Early Growth
• Life cycle scenario 4: Late Growth
• Life cycle scenarios 5, 6, 7, and 8: Maturity
• Life cycle scenario 9: Decline
• Life cycle scenarios: summary

13. Life Cycle Scenarios

14. Life Cycle Scenarios

15. Session Roadmap Managing through the Life Cycle
Session Roadmap
• Underlying rationale: preemption
• Product life cycles are shortening
• Life cycle scenarios
• Life cycle scenario 1: Pioneers
• Life cycle scenarios 2 and 3: Early Growth
• Life cycle scenario 4: Late Growth
• Life cycle scenarios 5, 6, 7, and 8: Maturity
• Life cycle scenario 9: Decline
• Life cycle scenarios: summary

16. Life Cycle Scenario 1: Pioneers

17. Life Cycle Scenario 1: Pioneers
Pioneer Stage – few players; will market take off?
Objectives and Challenges
• Lay foundation for achieving market leadership and profitability
• Slow competitor progress: understand and use barriers
• government-imposed
• product-specific
• firm-driven
• first-mover advantage
• low-cost — penetration pricing

18. Life Cycle Scenario 1: Pioneers
Penetration Pricing and Skim Pricing

19. Life Cycle Class Discussion – LG Electronics Case Study
Class Discussion – LG Electronics Case Study
• Why did Nokia lose its strong position in mobile phones? How could Nokia have better assessed its competitive positioning by using the Lifecycle Framework? What strategic options could Nokia have developed?

20. Session Roadmap Managing through the Life Cycle
Session Roadmap
• Underlying rationale: preemption
• Product life cycles are shortening
• Life cycle scenarios
• Life cycle scenario 1: Pioneers
• Life cycle scenarios 2 and 3: Early Growth
• Life cycle scenario 4: Late Growth
• Life cycle scenarios 5, 6, 7, and 8: Maturity
• Life cycle scenario 9: Decline
• Life cycle scenarios: summary

21. Life Cycle Scenarios 2 and 3: Early Growth

22. Life Cycle Scenario 2: Early Growth Leaders
Early Growth Leaders – customers have accepted the product; rapid market growth, leaders in good position
Strategic Options
• Continue to be leader – enhance position
• Continue to be leader – maintain position
• Surrender leadership – retreat to a market segment(s)
• Surrender leadership – exit the market

23. Life Cycle Scenarios 2 and 3: Early Growth

24. Life Cycle Scenario 3: Early Growth Followers
Early Growth Followers – customers have accepted the product; rapid market growth; followers in weaker position than leaders
Strategic Options
• Seek market leadership
• imitation
• leapfrog
• Settle for second place
• Focus on a market segment(s)
• Exit the market

25. Session Roadmap Managing through the Life Cycle
Session Roadmap
• Underlying rationale: preemption
• Product life cycles are shortening
• Life cycle scenarios
• Life cycle scenario 1: Pioneers
• Life cycle scenarios 2 and 3: Early Growth
• Life cycle scenario 4: Late Growth
• Life cycle scenarios 5, 6, 7, and 8: Maturity
• Life cycle scenario 9: Decline
• Life cycle scenarios: summary

26. Life Cycle Scenario 4: Late Growth

27. Life Cycle Scenario 4: Late Growth
Late Growth – minimal benefit from early leadership; segmentation is key
Key Issues
• How can we segment the market?
• How many segments can we identify?
• How many segments shall we target?
• Which segments shall we target?

28. Session Roadmap Managing through the Life Cycle
Session Roadmap
• Underlying rationale: preemption
• Product life cycles are shortening
• Life cycle scenarios
• Life cycle scenario 1: Pioneers
• Life cycle scenarios 2 and 3: Early Growth
• Life cycle scenario 4: Late Growth
• Life cycle scenarios 5, 6, 7, and 8: Maturity
• Life cycle scenario 9: Decline
• Life cycle scenarios: summary

29. Life Cycle Scenarios 5, 6, 7, and 8: Maturity

30. Life Cycle Scenario 5: Maturity – But Not Really!
Maturity – options for market growth?
Critical Questions
• Are we sure the market is mature?
• What are the possible barriers to growth?
• behavioral
• economic
• governmental
• technological

31. Life Cycle Scenario 5: Maturity – But Not Really!
Growth Options
• Increase product use
• change the model
• design the product to expire
• develop new product uses
• improve packaging for better ease of use
• increase quantity per use occasion
• make the product easier to use
• Improve the product/service
• Improve physical distribution
• Reduce price
• Reposition the brand
• Enter new markets

32. Life Cycle Scenarios 5, 6, 7, and 8: Maturity

33. Life Cycle Scenario 6: Maturity – Concentrated Market Leaders
Maturity – GNP growth; leader among few competitors
Strategic Options
• Maintain leadership over the long run
• Harvest

34. Life Cycle Scenario 6: Maturity – Concentrated Market Leaders
Maintain Leadership
• Leaders often over-invest in mature products
• Few alternative opportunities
• Internally focused funding criteria
• Political power of mature-product champions
• Risk aversion to new opportunities
• Leaders may under-invest in mature markets
• Fear of cannibalization
• Inertia
• Limited view of the competition
• Misunderstanding the challenger’s strategy
• Complacency and arrogance

35. Life Cycle Scenario 6: Maturity – Concentrated Market Leaders
Strategic Options
• Maintain leadership over the long run
• Harvest

36. Life Cycle Scenario 6: Maturity – Concentrated Market Leaders
Harvest Strategies
• Reasons to harvest
• change in firm strategy
• desire to avoid specific competitors
• government regulations
• investment requirements are too high
• new technology
• Critical question for harvesting
• Fast harvesting
• Slow harvesting

37. Life Cycle Scenario 6: Maturity – Concentrated Market Leaders
Harvest Strategies
• Reasons to harvest
• Critical question for harvesting
• fast or slow?
• Fast harvesting
• find someone to acquire the product
• Slow harvesting
• cut costs
• minimize investment
• raise prices

38. Life Cycle Scenarios 5, 6, 7, and 8: Maturity

39. Life Cycle Scenario 7: Maturity – Concentrated Market Followers
Maturity – GNP growth; few competitors; trails leader
Strategic Options
• Improve market position by growing sales
• market segmentation
• kenneling
• direct attack
• Keep on truckin’
• maintain position
• rationalize position
• Exit
• divest
• liquidate

40. Life Cycle Scenarios 5, 6, 7, and 8: Maturity

41. Life Cycle Scenario 8: Maturity – Fragmented Markets
Maturity Fragmented Markets – GNP growth; many competitors, none dominant
Strategic Options
• Acquisition (roll up)
• Standardization and branding

42. Session Roadmap Managing through the Life Cycle
Session Roadmap
• Underlying rationale: preemption
• Product life cycles are shortening
• Life cycle scenarios
• Life cycle scenario 1: Pioneers
• Life cycle scenarios 2 and 3: Early Growth
• Life cycle scenario 4: Late Growth
• Life cycle scenarios 5, 6, 7, and 8: Maturity
• Life cycle scenario 9: Decline
• Life cycle scenarios: summary

43. Life Cycle Scenario 9: Decline

44. Life Cycle Scenario 9: Decline
Decline markets are inhospitable if:
• Decline is rapid and/or uncertain
• The market is commodity-based, with no price-insensitive segments
• Competitors
• are viable and credible
• are evenly balanced and view the market as strategically important
• have high fixed costs and are very sensitive to sales declines
• Customer switching costs are low

45. Life Cycle Scenario 9: Decline
Strategic Framework
Market Hospitable?
Yes A
Harvest D
Leadership No B
Divest C
Harvest or segment
Low
High
Business Strengths

46. Session Roadmap Managing through the Life Cycle
Session Roadmap
• Underlying rationale: preemption
• Product life cycles are shortening
• Life cycle scenarios
• Life cycle scenario 1: Pioneers
• Life cycle scenarios 2 and 3: Early Growth
• Life cycle scenario 4: Late Growth
• Life cycle scenarios 5, 6, 7, and 8: Maturity
• Life cycle scenario 9: Decline
• Life cycle scenarios: summary

47. Life Cycle Scenarios: Summary
Preemption – important dimension of strategy making
Product life-cycle framework generates nine scenarios
• Life cycle scenario 1: Pioneers
• Life cycle scenario 2: Early Growth Leaders
• Life cycle scenario 3: Early Growth Followers
• Life cycle scenario 4: Late Growth
• Life cycle scenario 5: Maturity – But Not Really!
• Life cycle scenario 6: Maturity – Concentrated Market Leaders
• Life cycle scenario 7: Maturity – Concentrated Market Followers
• Life cycle scenario 8: Maturity – Fragmented Markets
• Life cycle scenario 9: Decline
Multiple strategic options per scenario
Best competitive strategies are often contrarian

48. Session Roadmap Managing through the Life Cycle
Session Roadmap
• Underlying rationale: preemption
• Product life cycles are shortening
• Life cycle scenarios
• Life cycle scenario 1: Pioneers
• Life cycle scenarios 2 and 3: Early Growth
• Life cycle scenario 4: Late Growth
• Life cycle scenarios 5, 6, 7, and 8: Maturity
• Life cycle scenario 9: Decline
• Life cycle scenarios: summary

49. Managing through the Life Cycle
Chapter 9
Managing through the Life Cycle