Lecture 4: Marketing Strategies for New Market Entries

opportunity, redeployment, disinvestment

2 Challenges to business in Decline Stage? 1) ____ identification 2) _____ and _____

internal organizational, external issues

2 Challenges to business in Shakeout stage? 1) ___ ____ issues related to rapid growth 2) ___ ____ related to competition, channel partners and the supply chain

growth, profits, industry standard

3 Challenges to business in growth stage? 1) Business____ 2) Increased ____ 3) Create and own the ___ ____

opportunity, objective, development, commercialization

3 Challenges to business in introductory stage? 1) ___ identification 2) ____ opportunity definition 3) ___ and ____

New to the firm products

—A product category that is new for the company introducing it, but not new to customers in the target market because of the existence of one or more competitive brands (20 percent). (20%): Products that take a firm into a category new to it. Ex.: P&G brand shampoo or coffee, Hallmark gift items, AT&T Universal credit card, Canon laser printer.

maximization, innovation

2 Challenges to business Mature Stage? 1) ____ of profit from "mature market" 2) Overcome internal process to drive ___

New-to-the-world products

(really-new) products (10% of new products): Inventions new to the firm that create a whole new market. Ex.: Polaroid camera, Sony Walkman, Palm Pilot, Rollerblade skates, P&G Febreze and Dryel.

New-to-the-world products New product lines Additions to existing product lines Improvements in existing products Repositionings Cost reductions

Categories of new products ?

Mature Stage Marketing Mix Changes

Because of technical maturity, the various brands in the marketplace become more similar; therefore, any significant breakthroughs by R&D or engineering that help to differentiate the product or reduce its cost can have a substantial payout. One option is to add value to the product that benefits the customer by improving the ease of use (voice-activated search with smartphones), by incorporating labor-saving features, or by selling systems rather than single products (e.g., by adding extended service contracts). Increasingly, service becomes a way of differentiating the offering. Promotion expenditures and prices tend to remain stable during the mature stage. But the nature of the former is apt to change; media advertising for consumer goods declines and in-store promotions, including price deals, increase. The price premium attainable by the high-quality producer tends to erode. The effect of experience on costs and prices becomes smaller and smaller. Competition may force prices down, especially when the leading competitors hold similar shares. For consumer goods, distribution and in-store displays (shelf facings) become increasingly important, as does effective cost management.

Nonequity arrangements, Licensing, Franchising, Contract manufacturing, Turnkey construction contract, Coproduction, Countertrade, buyback arrangement

Contractual Agreements 1) ____ ____involving transfer of technology to an entity in a foreign country 2) ____ Firm offers the right to use its intangible assets in exchange for royalties 3) ____ Grants the right to use the company's name, trademarks, and technology 4) ___ ____Sourcing a product from a manufacturer located in a foreign country for sale there or elsewhere 5) ___ ___ ___ Requires the contractor to have the project up and operating before releasing it to the owner 6) ____ Involves a company's providing technical know-how and components 7) _____ Includes barter(direct exchange of goods—hams for aircraft) , compensation packages, (cash and local goods) counterpurchase, (delayed sale of bartered goods to enable the local buyer to sell the goods), and a ____ ____in which the products being sold are used to produce other goods.

Skimming

Designed to obtain as much margin per unit as possible. This enables the company to recover its new product investments more quickly. Such a strategy is particularly appropriate in niche markets and where consumers are relatively insensitive to price.

Penetration pricing

Enables the firm to strive for quick market development and lowers costs.development and makes sense when there is a steep experience curve, which lowers costs; a large market; and strong potential competition.

stimulate primary demand, build share, build share, hold share, harvest Improve quality, continue quality improvements, rationalize, concentrate on features, no change narrow, broad, rationalize, hold length of line, reduce length of line Skimming or penetration, reduce, reduce, hold or reduce selectively, reduce Selective, intensive, intensive, intensive, selective High, high, high, high to declining, reduce

Expected Responses by Major life Cycle Stages 1) Strategic marketing objectives 2) Product? 3) Product line? 4) Price? 5) Channels? 6) Communications?

moderate, high, leveling off, insignificant, negative high, moderate, limited, limited, limited Few, few to many, few to many, few to many, few few, many, decreasing, limited, few Negative, high, low, high for market share leaders, low

Expected Stage Characteristics by Major Life Cycle Stages Moderate growth rate? Technical change in product design? Segments? Competitors? Profitability?

Promotion

Expenditures involving advertising and sales force are: A high percentage of sales for a mass-market, small-value product

Simplest, Export merchants, Export agents, Cooperative organizations

Exporting 1) ____ way to enter foreign market 2) ___ ____Buy and sell products overseas for their own account 3) ___ ___Sell on a commission basis 4) ___ ___ Export for several producers

Shakeout

Growth rate decreases resulting in strong price competition

Shakeout stage Marketing Mix Changes

In addition to entering into more direct price competition, firms make every effort to maintain and enhance their distribution system. Channel intermediaries use this downturn in industry sales growth to reduce the number of products carried and, hence, their inventories. Weaker competitors often have to offer their intermediaries substantial inducements to continue stocking all or even part of their line. Promotion costs may increase, particularly for low-share firms, as companies attempt to maintain their distribution by offering customers buying incentives.

environment, qualitative, risks, kill

Leadership across life cycles Intro stage 1) Leaders must create an ___ conducive to new business creation 2) ____ and often subjective decision making 3) Motivation to take ___ and receive rewards 4) Able to ___ a product if its too early for the market

new business

Leadership across lifecycles Decline Stage 1) Promotes risk taking and qualitative __ ___exploration

margina, analytic, fast, customer service, entrepreneurial, discussions, Distributes

Leadership across lifecycles Mature Stage 1) Ability to manage ____ 2) ___ and data oriented 3) ___ and intuitive yet data grounded decision making 4) Focus on ___ ___ and staff development 5) Adds ____ leadership to the team 6) Creates cross business unit ____ 7) ____ power within the organization

operations

Leadership across lifecycles Shakeout 1) Shift from entrepreneurial to mature, ____ focused leadership

high uncertainty, flexibility

Leadership across lifecycles growth stage 1) Ability to live with ___ ____ in planning and forecasting 2) Emphasis on ____ over efficiency 3) Focus on the end objective while remining flexible about how it is attained

Normative approach, Length of the life cycle

Limitations of the Product Life Cycle stage. prescribing strategies based on: Assumptions about the features of each stage It fails to take into account that the product life cycle is, in reality, driven by market forces expressing the evolution of consumer preferences (the market), technology (the product), and competition (the supply side). ___________ and the market and competitive conditions at each stage can vary: Across different product and service offerings . In other words, the length of the life cycle and the market and competitive conditions at each stage can vary substantially across different product and service offerings. As we shall see, then, there's usually more than one viable strategy a marketing manager might pursue at each stage, and the best choice—as always—depends on the specific situation in the marketplace.

willingness, awareness, ability

Marketing Program Components for a Mass-Market Penetration Strategy 1) Firms might also attempt to increase customers' _____ to buy their products by reducing the risk associated with buying something new. This can be done by letting customers try the product without obligation, as when car dealers allow potential customers to test-drive a new model or when software developers allow customers to download a trial version and use it free for 30 days. Liberal return policies and extended warranties can serve the same purpose. 2) Obviously, heavy expenditures on advertising, introductory promotions such as sampling and couponing, and personal selling efforts all can increase _____ of a new product or service among potential customers. This is the critical first step in the adoption process for a new entry. 3) wherewithal

target segment, Internet

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 ___ ___ ___ provides promotional tools that can reach specific segments at relatively low cost

high price, upscale customers

Marketing Program Components for a Skimming Strategy Require relatively ___ ____ to increase margins and revenues Focus on relatively, __ ____ Critical element - Nature of the firm's continuing product development efforts A pioneer that plans to leave a market when competitors enter should not devote much effort to expanding its product line through line extensions or multiple package sizes. Instead, it should concentrate on the next generation of technology or on identifying new application segments, in other words, preparing its avenue of escape from the market.

Decline Stage Marketing Mix changes

Marketing expenditures, especially those associated with promotion, usually decrease as a percentage of sales in the decline stage. Prices tend to remain stable if the rate of decline is slow, there are some enduring profitable segments and low exit barriers, customers are weak and fragmented, and there are few single-product competitors. Conversely, aggressive pricing is apt to occur when decline is fast and erratic, there are no strong unique segments, there are high exit barriers, a number of large single-product competitors are present, and customers have strong bargaining power. For consumer goods, marketing activity centers on distribution—persuading intermediaries to continue to stock the item even though they may not promote it. For industrial products, the problem may center around maintaining the interest of the salesforce in selling the item.

Joint ventures, Sole ownership

Overseas Direct Investment 1) ____ ___ Joint ownership arrangement to produce or market goods in a foreign country Today, joint ventures are commonplace because they avoid quotas and import taxes and satisfy government demands to produce locally. They also have the advantage of sharing investment costs and gaining local marketing expertise. 2)___ ____Setting up a production facility in a foreign country Allows the parent organization to retain total control of the overseas operation

Exporting through agents, Contractual agreements, Direct investment

Mechanisms for Entering Foreign Market

profits, support, transition

Metrics across lifecycles Decline 1) ____ not market share 2) Ability to ___ growth of new opportunities 3) ___ management

segment, time, CAGR

Metrics across lifecycles Growth 1) "____ share" 2) ___ to market to create standard 3) Not ____

growth opportunities, revenues

Metrics across lifecycles Intro Stage 1) Identification and selection of promising ___ ___ 2) Not ____

profits, customer satisfaction, capital investment, incremental, s-curve

Metrics across lifecycles Mature 1) ____ not market share 2) ____ ____ 3) Minimizing of additional ___ ____ 4) ____ innovation 5) Investments to fuel next ___ ____

market, revenues, time, market share

Metrics across lifecycles Shakeout 1) ____ share 2) ____ 3) ___ to market 4) Perceived ___ ____

Mature

Net adoption rate holds steady —that is, when adopters approximate dropouts.

Cost reductions

New products that provide the customer similar performance but at a lower cost. May be more of a "new product" in terms of design or production.

Introductory

People are unaware of existence and Product lacks easy availability

Growth Stage Marketing Mix Changes

Product: Although the product line expands to attract new market segments, the quest for competitive advantage shifts to differentiation from other entrants in the product class. Prices: tend to decline during the growth period, and price differences between brands decrease. The extent of the decline depends on cost-volume relationships, industry concentration, and the volatility of raw material costs. If growth is so strong it outpaces supply, there is little or no pressure on price; indeed, it may enable sellers to charge premium prices. Channel Communications: During this period, sellers of both industrial and consumer goods strive to build a channel or a direct sales system that provides maximum product availability and service at the lowest cost. If this can be accomplished, rivals are placed at a disadvantage, even to the extent of being excluded from some markets. This is particularly the case with some consumer goods for which the number of intermediaries in any one market is limited. A brand must attain some degree of distribution success in advance of the mature stage because channel members then tend to drop less successful brands. Promotion costs (advertising and personal selling) become more concerned with building demand for a company's brand (selective demand) than demand for the product class or type (primary demand). Firms strive to build favorable attitudes toward their brand on the basis of its unique features. Communications are also used to cultivate new segments. Even though promotion costs remain high, they typically decline as a percentage of sales.

Growth

Sales increase at a progressively faster rate

introductory, growth, shakeout, mature, decline

Stages in product life cycle?

Mass-market penetration, Niche penetration, Skimming

Strategic Marketing Programs for Pioneers 1) Capture and maintain a commanding share of the total market for the new product 2) Help the smaller pioneer gain the biggest bang for its limited bucks and avoid direct confrontations with bigger competitors 3) 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

Introductory Stage Marketing Mix Changes

The communications task at the outset is to build awareness of the new product's uniqueness, which is typically an expensive undertaking. Further, the promotional expenditures (such as in-store displays, premiums, coupons, samples, and off-list pricing) required to obtain product availability and trial are substantial. For industrial products, the time required to develop awareness of the product's uniqueness is often extensive due to the number of people in the buying center and the complexity of the buying systems.

Decline

When dropouts begin to exceed new first-time users, the sales rate declines, and the product is said to have reached its final or

Repositionings

—Existing products that are targeted at new applications and new market segments (7 percent). Products that are retargeted for a new use or application. Also includes retargeting to new users or new target markets. Ex.: Arm & Hammer baking soda sold as a refrigerator deodorant; aspirin repositioned as a safeguard against heart attacks; Marlboro re targeted as a man's cigarette.

Improvements in existing products

—Items providing improved performance or greater perceived value brought out to replace existing products. These items may present moderately new marketing and production challenges to the firm, but unless they represent a technologically new generation of products, customers are likely to perceive them as similar to the products they replace (26 percent). (26%): Current products made better. Ex.: P&G's continuing improvements to Tide detergent, Ivory soap.

Additions to existing product lines

—New items that supplement a firm's established product line. These items may be moderately new to both the firm and the customers in its established product-markets. They also may serve to expand the market segments appealed to by the line (26 percent). (26%): Line extensions and flankers that flesh out the product line in current markets. Ex.: Tide Liquid, Bud Light, Apple's iMac, HP LaserJet 7P.