1. Growth Market Strategies
Chapters Eight & Nine
Growth Market Strategies

2. ‘Typical’ Product Life Cycle
Time (years)
Product category sales
(real dollars)
Profit per unit
Profit/unit
Sales
Life cycle
extension
Growth
Competitive
turbulence
Maturity
Decline or
Introduction
Ask students the following questions:
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 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.
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).
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.
8-3

3. Categories of New Products Defined According to Their Degree of Newness to the Company and Customers in the Target Market
High
10%
20%
New-to-the
world products
New product
lines
Newness to the company
Additions to
existing product
lines
26%
26%
Revisions/
improvements to
existing products
11% 7%
Repositionings
Cost
reductions
Low
Low
High
Newness to the market
Source: New Products Management for the 1980s (New York: Booz, Allen & Hamilton, 1982). 2

4. New Product Development
Key success criteria include:
Product fit with market need
Product fit with capabilities
Product or cost superiority
Clear vision of future market based on customer feedback
Continuous, quality-based process
Ability to create effective awareness

5. Potential Advantages of Pioneer and Follower Strategies
Economies of scale and experience
High switching costs for early adopters
Pioneer defines the rules of the game
Possibility of positive network effects
Distribution advantage
Influence on consumer choice criteria and attitudes
Possibility of preempting scarce resources
Follower
Ability to take advantage of pioneer’s positioning mistakes
Ability to take advantage of pioneer’s product mistakes
Ability to take advantage of pioneer’s marketing mistakes
Ability to take advantage of pioneer’s limited resources 3

6. Marketing Strategy Elements Pursued by Successful Pioneers, Fast Followers, and Late Entrants
These marketers...
Successful pioneers
Successful fast followers
Successful late entrants
are characterized by one or more of these strategy elements:
Large entry scale
Broad product line
High product quality
Heavy promotional expenditures
Larger entry scale than the pioneer
Leapfrogging the pioneer with superior: product technology
product quality
customer service
Focus on peripheral target markets or niches 4

7. Advice for Would-Be Pioneers
First mover advantage is often trumped by followers who are better.
Best beats first. Concentrate on being best.
Best and first is the ideal.
Being a pioneer without the basis for sustainable competitive advantage is a trap!

8. Why Are Growing Markets Attractive?
Usually, but not always:
Gaining share is easier
Share gains are worth more
Price competition may be less intense
Early entry may be necessary to keep pace with technology 4

9. Strategic Choices for Share Leaders in Growth Markets
Flanker strategy - Proactive
Flanker strategy - Reactive
Fortress
or position
defense
strategy
Confrontation
strategy
Proactive
Reactive
COMPETITOR OR POTENTIAL COMPETITOR
Contraction
or strategic
withdrawal
LEADER
Market expansion
Source: Adapted from P. Kotler and R. Singh Achrol, “Marketing Warfare in the 1980’s” Reprinted with permission from Journal of Business Strategy, Winter 1981, pp Copyright © 1981 by Warren, Gorham & Lambert, Inc., 210 South Street, Boston MA All rights reserved. 5

10. Marketing Actions Vary for Different Share-Maintenance Objectives
Retain current customers by:
Maintaining or improving satisfaction and loyalty
Encouraging or simplifying repeat purchase
Reducing the attractiveness of switching
Stimulate selective demand among later adopters by:
Head-to-head positioning against competitors 4

11. Strategic Choices for Challengers in Growth Markets
Leapfrog strategy
Flanking attack
Frontal
attack
TARGET COMPETITOR
CHALLENGER
Encirclement strategy
Source: Adapted from P. Kotler and R. Singh Achrol, “Marketing Warfare in the 1980’s” Reprinted with permission from Journal of Business Strategy, Winter 1981, pp Copyright © 1981 by Warren, Gorham & Lambert, Inc., 210 South Street, Boston MA All rights reserved. 6

12. Marketing Actions to Achieve Share Growth Vary for Different Marketing Objectives
Capture competitors’ customers by
Head-to-head positioning in competitor’s primary target market
Technological differentiation in primary target market
Stimulate selective demand among later adopters by
Head-to-head positioning in competitor’s primary target market (as above)
Differentiated positioning focused on untapped or underdeveloped segments 4

13. Some Advice for Followers
Differentiation is key for followers
Better benefits
Better service
Lower price
Beware of competing on price, however, unless your costs really are lower than competitors’

14. Predicting Pricing Actions
Price of Substitutes Sets the Ceiling
More Pricing Pressure with High Elasticity
Competitive Actions
More Pricing Pressure with High Leverage
Marginal Cost Per Unit Sets the Floor