C

H
8
A
P
T
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EIGHT
Marketing
Strategies for
New Market
Entries

McGraw-Hill/Irwin
2009 The McGraw-Hill Companies,
1-1
All Rights Reserved
Canon

Cost cutting
New product development
Incremental & Completely new

1-2 8-2
 How do opportunities evolve
over time?
Product category sales
(real dollars)

Life cycle
extension

Profit/unit
Sales
Profit per unit
(real dollars)

Introduction
Maturity Decline or
extension
Competitive
Growth turbulence
Time (years)
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.

1-3 8-3
1-4 8-4
1-5 8-5
1-6 8-6
Categories of New Products Defined
According to Their Degree of Newness to
the Company and Customers in the Target
Market (Exhibit 8.4.)
High
Newness to the company

20% 10%
New product New-to-the
lines world products

Additions to
26% 26% existing product
Revisions/ lines
improvements to
existing products

11% 7% Repositionings
Cost
Low reductions
Low High
Newness to the market
Source: New Products Management for the 1980s (New York: Booz, Allen & Hamilton, 1982).

1-7 8-7
1-8 8-8
1-9 8-9
1-108-10
1-118-11
1-128-12
Discussion Question

1.Is it better to be a market

pioneer, or a follower?

1-138-13
First Movers who failed

Consider that most famous industrial success

story of a century ago, Henry Ford's mass-
produced Model T. By inventing the automated
assembly line, he had a first-mover advantage
that was so great that he scared England's
Charles Stewart Rolls and Sir Frederick Henry
Royce, even though their luxury cars were at
the other end of the spectrum. But Ford
overstayed the Model T. Remember, he
insisted that they all be painted black and in the
late 1920s lost leadership to more innovative
Chevrolet.

1-148-14
In most cases entrepreneurs are
better off building the second
or third version of the better
mousetrap. Visicalc, the first
desktop spreadsheet program,
faded away as Lotus took over
the field with 1-2-3. In time the
Lotus software was itself
crushed by Microsoft's Excel. 1-158-15
For that matter, Microsoft has a
history of succeeding by not being
first. Digital Research developed
the first desktop operating system,
called CP/M. But Bill Gates
upstaged it in the competition to
supply an operating system for
IBM's PC. Gates didn't even
develop the original DOS; he
bought the program from Seattle
Computer Works for $50,000.
1-168-16
Getting in early on Web commerce was
supposed to be a brilliant move. The business
plan was to raise a gargantuan sum in an initial
public offering and use it to construct an
impregnable brand and Web presence. But
roaring out of the starting gate didn't help
many of these dot-coms--or their stockholders.
Lord help you if you bought shares in financial
news site www.TheStreet.com at its $19 initial
offering price in 1999, let alone at the $60 level
to which it leaped. You could have made some
decent money if you had waited. The shares
were available at 99 cents in October 2001;
today they go for $11.
1-178-17
Prodigy Communications was a first
mover in online connections. And it had
powerful backers at its launch in 1984:
IBM for technology, Sears Roebuck for
online retail sales and CBS for news and
ad sales. Prodigy's focus was on
electronic shopping, but two decades
too early. Subscribers back then were
more interested in chat rooms, e-mail
and then Web surfing. The firm was
sold in 1996 to an investor group for
only $250 million
1-188-18
Dumont led the way in selling TV sets when
they were new gadgets, but the company lost
out to latecomers like RCA and Motorola.
Chux was the leading disposable diaper yet
succumbed to Procter & Gamble's Pampers.
Ampex had a commanding position in video
recorders and tapes for two decades until Sony
took over. Rheingold Brewery brought out
Gablinger's low-calorie beer in 1967, a cool
summer with weak beer sales. So Rheingold
lost interest and Miller Lite later mastered the
field.

1-198-19
Thomas Carter was a pioneer in competitive
telecommunications services, one who lent his
name to a famous legal case. He invented the
Carterfone, a device that connected the
telephone handpiece to an amateur radio
transmitter or a mobile phone network. While
only 4,000 Carterfones were ever installed,
AT&T saw the device as a threat to its long-
distance monopoly and its ownership of all
telephone instruments. Then came the legal
struggle. In 1968 the Supreme Court ruled in
favor of Carter Electronics. It was a turning
point in utility history, paving the way for MCI
and other service competitors as well as
hardware manufacturers. Carter didn't get rich.
His firm voluntarily dissolved in 1969.
1-208-20
Discussion Question

2. When, and for whom, does it

make sense to pursue a
pioneer strategy?

1-218-21
Mass Market penetration
Niche Penetration
Skimming Early withdrawal

1-228-22
Primary Objective

1-238-23
Market Characteristics

1-248-24
Product Characteristics

1-258-25
Competitor characteristics

1-268-26
Firm Characteristics

1-278-27
Niche Penetration

1-288-28
Market characteristics

1-298-29
Product characteristics

1-308-30
Competitor characteristics

1-318-31
Firm Characteristics

1-328-32
Skimming: Early Withdrawal

1-338-33
Market characteristics

1-348-34
Product characteristics

1-358-35
Competitor characteristics

1-368-36
Firm characteristics

1-378-37
Marketing program components for
a mass-market penetration strategy
Aggressively building product
awareness
Making it easy to try

Increasing customers awareness and

willingness to buy

Increasing customers ability to buy

1-388-38
Pioneering Global markets
Exporting
Export merchants
Export agents
Cooperative organizations
Contractual entry mode
Licensing
Franchising
Contract manufacturing
Turnkey construction contract
Overseas direct investment
Joint Ventures
Sole ownership

1-398-39
Discussion Question

3. When, and for whom, does it

make sense to pursue a
follower strategy?

1-408-40
Discussion Question

4. If you want to be a pioneer,

what are your strategic
options?

1-418-41
Discussion Question

5.Under what circumstances

might each option be more
likely to succeed?.

1-428-42
Discussion Question

6. How might introductory

marketing plans differ under
each of these new market entry
strategies?

1-438-43
Some Advice for Would-Be
Pioneers

First mover advantage is trumped by

pioneers who are better. Best beats first.
Concentrate on being best.

Being a pioneer without the basis for

sustainable competitive advantage is a trap!

1-448-44
Chapter #9
Nike

1-468-46
Nike
Market leader early product innovator outsource production spend lots
of money on marketing
Puma
European stylish
K-Swiss
Hip image
Vans
Niche market Skate boarders
Sketchers
Cool younger market
New Balance
Older audience endorsed by no one
Adidas
Leader in Soccer, recently acquired Reebok
Starbury One
Low Price endorsed by Stephan Marbury

1-478-47
Early market share leader
Share Maintenance
Repeat business from current customers
Capture new customers
Challenger
Share growth
Growth stage often short (8 years)

1-488-48
Opportunities and risks in a
growth market
It is easier to gain share when a market
is growing
Share gains are worth more in a growth
market than in a mature market
Price competition is likely to be less
intense
Early participation in a growth market is
necessary to make sure that the firm
keeps pace with the technology

1-498-49
Gaining Share is Easier

No established preferences/special
needs not yet identified
Established competitors less likely to act
aggressively as long as their growth rate
is satisfactory (Dell example)

1-508-50
Share Gains are worth more

Can hold share as market grows

The existence of positive network
effects
Future changes in technology (hd TV v
Blue Ray)
Future competitive structure of the
industry
Future fragmentation of the market

1-518-51
Early Entry Is Necessary for
Technical Expertise
Stents 5.3 billion in 2006
Johnson & Johnson 1994
Guidant 1997 (70%)
J&J 2003 (huge demand)
Boston Scientific 2004
(65% market share)

1-528-52
Market Leaders (retain current
customers)
Maintaining/Improving satisfaction and
loyalty
Improve Quality
Selective Product modification
Better service
Encouraging/simplifying repeat
purchases
Distribution
Reducing attractiveness of switching
Functional barriers to switching
Compete on Price

1-538-53
Market Leader (stimulate
selective demand among later
adopters)
Head-to-head positioning
Fighter brand
Match competitor offering (confrontation
strategy)
Strategic withdrawal
Differentiated Positioning
Market expansion
New lines
New channels
New messages

1-548-54
1-558-55
Followers deciding whom to
attack
Attack the market-share leader
Frontal or Leapfrog
Attack another follower
Attack one or more smaller competitors
who have limited resources
Avoid direct attacks
Flanking (Citrus World)

1-568-56
1-578-57
1-588-58
Chapter #10
1-608-60
Johnson Controls Inc

Batteries, seats for autos

Heating and cooling for schools

Acquired weaker companies

Global markets
Good relations with GM, Ford,
DaimlerChrysler, BMW & Toyota
Market intelligence

1-618-61
Mature Markets
Maintaining Market share
Adidas, Johnsons baby shampoo, Arm &
Hammer
Declining Markets
Divest or liquidate, consolidate, harvest

1-628-62
The shake out
Appearance of excess capacity
Difficult to maintain product differentiation
Intensifying of competition
Pressures on costs and profits
Weaker member fail or are acquired

1-638-63
Strategic traps during transition

Failure to anticipate transition from growth to maturity

Overcapacity
Replacement sales outweigh first-time purchases
No clear competitive advantage as growth slows
Getting stuck in the middle

1-648-64
Assumption that an early advantage will
insulate the firm from price or service
competition
Price versus quality (HP vs Dell)

Sacrificing market share in favor of

short-run profit
Not investing in R&D or marketing

1-658-65
Strategic choices for mature
markets
Business strategy to sustain a competitive advantage,
customer satisfaction and loyalty
Flexible and creative marketing programs to pursue
new opportunities as conditions change

1-668-66
Analyzer
Works best in industries that still experiencing some
technological change
Defender
Industries where basic technology is not very complex
Operational excellence
Product leadership
Customer intimacy
Dont get stuck in the middle
Can you purse both a low cost and a differentiator
strategy at the same time?
Quality might be the key six sigma

1-678-67
1-688-68
1-698-69
Dimension of Service Quality

1-708-70
1-718-71
1-728-72
Low-Cost Position

No frills Product
Innovative product design
Cheaper Raw materials
Innovative production Processes
Low-cost distribution
Reductions in Overhead

1-738-73
Measuring customer satisfaction
Improving customer retention and
loyalty
Loyal customers
Concentrate their purchases
Are all customer equally valuable
Fidelity Investments ($13 vs less than $1)
Redlining
Profiles change

1-748-74
Extending volume growth

Increased penetration
# of potential customers
Product penetration of that segment
Average frequency of use
Why are non user uninterested in your
product?
Convert current nonusers in target segment
into users

1-758-75
1-768-76
Extended use

1-778-77
Market expansion

1-788-78
1-798-79
Harvesting Strategy

1-808-80
1-818-81
Maintenance

1-828-82
1-838-83
Profitable survivor strategy

1-848-84
1-858-85
Niche Strategy

1-868-86
1-878-87
1-888-88