CH17: Driving Growth in Competitive Markets Flashcards
the 4 methods in the Ansoff Growth Framework
- market penetration (current products, current customers)
- market development (current products, new customers)
- product development (new products, current customers)
- diversification (new products, new customers)
market penetration strategy
involves growing sales of the company’s current offerings to its existing customers and is often the easiest to implement
- encourage customers to buy more
- identify new uses for the product
market development strategy
identifying new user groups for existing products
- adding B2B if only B2C
- additional distribution channels
- new locations
product development strategy
develop new products for existing customers
- develop new features
- offer different sets of benefits at different prices
- research alternative technology to develop a viable substitute for current products
diversification strategy
use when good opportunities exist outside the present businesses and the company has the strengths to succeed in those new opportunities; concentric, horizontal, conglomerate
concentric diversification
seek new products that have technological or marketing synergies with existing product lines, even though they may appeal to a different group of customers
horizontal diversification
produce complementary products, even though they might require a different manufacturing process
conglomerate diversification
seek new businesses that have no relation to its current technology, products, or markets
organic growth
increasing output and enhancing revenues internally
merger and acquisition growth
- backward integration; acquire a supplier
- forward integration; acquire a wholesaler or retailer
- horizontal integration; acquire a competitor
product innovation
developing a new product; the innovator bears the expense of developing, getting it into distribution, and informing and educating the market; the reward is market leadership
the 3 main follower strategies
- cloning: emulate the leader’s products, name, and packaging with slight variations
- imitating: copying some things from the leader but differentiating on packaging, advertising, pricing, or location
- adapting: adapting and improving the leader’s products
the 3 types of market position
- share of market
- share of mind
- share of heart
share of market
measured by the company’s sales revenue or the number of company units sold relative to the total revenue or total units sold in a specific market
share of mind
the percentage of customers who regard the company as the first company that comes to mind in a specific industry
share of heart
percentage of customers who name the company as the company from which they would prefer to buy a specific product
market leader
has the largest market share and usually leads in price changes, new product introductions, distribution coverage, and promotional intensity
3 ways to grow sales to current customers
- identify new occasions for usage
- identify new uses
- new packaging or product design
customer specialist
niche marketer that specializes in one type of end-use customer
product or service specialist
niche firm that carries or produces only one product line or product
2 strategies to expand existing markets
- new market segment strategy (those who have never used the product or service)
- geographical expansion
the 3 strategies to satisfy customer needs
- responsive marketing
- anticipative marketing
- creative marketing
responsive marketing
finding a stated need and filling it (most companies are responsive/reactive)
anticipative marketing
looking ahead to needs that customers may have in the future
creative marketing
discovering solutions to customer needs that customers did not ask for but to which they will enthusiastically respond
the 6 defense strategies
- position defense
- flank defense
- pre-emptive defense
- counteroffensive defense
- repositioning defense
- contraction defense
position defense
occupying the most desirable position in consumers’ mind, making the brand almost impregnable
flank defense
the market leader should put up outposts to protect a weak front or support a possible counterattack (e.g. a second brand to protect against competition)
pre-emptive defense
- attack first (can be random), perhaps with guerilla action across the market
- achieve broad market envelopment
- introduce a stream of new products and announce in advance (e.g. launch announcements); we wary of vaporware
counteroffensive defense
the market leader can meet the attacker frontally and hit its flank or launch a pincer movement so that the attacker has to pull back and defend itself
repositioning defense
the leader stretches its domain over new territories through market broadening and market diversification
- shifts focus from current product to underlying generic need
- e.g. BP rebranding from an oil company to an energy company
contraction defense
strategic withdrawal; giving up weaker markets that are no longer tenable and reassigning resources to stronger ones
the 4 stages of the product life cycle
- introduction
- growth
- maturity
- decline
the 4 key assumptions of the product life cycle
- products have a limited life
- product sales pass through distinct stages
- profits rise and fall at different stages of the product life cycle
- products require different strategies in each stage of the life cycle
product life - introduction
a period of slow sales growth as the product is introduced to the market; profits are nonexistent because of the heavy expenses of product introduction
strategy aspects in the introduction stage
- low sales growth
- negative or low profits
- high promotional expenditures
- higher costs and prices
- the focus is on buyers most ready to buy
product life - growth
a period of rapid market acceptance and substantial profit improvement
strategy aspects in the growth stage
- improve product quality and add new features
- add new models and flanker products
- enter new market segments
- increase distribution coverage
- shift from awareness comms to preference comms
- lower prices to attract next layer of price-sensitive buyers
product life - maturity
a slowdown in sales growth because the product has achieved acceptance by most potential buyers; profits peak or decline because of increased competition
the 3 phases of the maturity stage
- growth
- stability
- decaying maturity
the 1st phase of the maturity stage
growth starts to slow; no new distribution channels to fill; and new competitive forces emerge
strategy aspects in the growth phase of the maturity stage
- convert nonusers
- attract competitors’ customers
- increase usage among current users
the 2nd phase of the maturity stage
stability; the market is saturated and sales per capita flatten; future sales growth depends on population growth and replacement demand
the 3rd phase of the maturity stage
decaying maturity; the absolute level of sales starts to decline; customers are switching; and giants dominate the market
product modification strategies in the maturity stage
- quality improvement; “new and improved” product
- feature improvement
- style improvement
product life - decline
sales show a downward drift and profits erode
harvesting
gradually reducing a product or business’s costs while trying to maintain sales
divesting
reducing product portfolio size; exiting smaller segments and weaker trade channels; can often involve selling the unit to another company
growth-slump-maturity pattern life cycle
e.g. with small appliances like toaster ovens
cycle-recycle pattern life cycle
e.g. with drugs
scalloped pattern life cycle
when new uses for products are discovered, e.g. Nylon
fad
comes quickly into public view, is adopted with great zeal, peaks early, and declines very fast; unpredictable, short-lived, and without social, economic, and political significance
trend
a direction or sequence of events with momentum and durability
- more predictable and durable than fads
- can reveal the shape of the future and provide strategic direction
