Chapter 15

Strategies for New and

Growing Markets

McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
How New is New?
● Six categories of new products based on their degree
of newness:
● New-to-the-world products
● New product lines
● Additions to existing product lines
● Improvements in or revisions of existing products
● Repositionings
● Cost reductions
● The marketing challenge here is to build primary
demand
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Exhibit 15.1 - Categories of New Products Defined According
to Their Degree of Newness to the Company and Customers
in the Target Market

Source: New Products Management for the 1980s (New York: Booz, Allen & Hamilton, 1982). Used by permission.
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Pioneer Strategy
● Potential sources of competitive advantage
available to pioneers are:
● First choice of market segments and positions
● The pioneer defines the rules of the game
● Distribution advantages
● Economies of scale and experience
● High switching costs for early adopters
● Possibility of positive network effects

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Not All Pioneers Capitalize on Their
Potential Advantages
● Some pioneers fail:
● They either abandon the product category, go out of
business, or get acquired before their industry matures

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Follower Strategy
● Possible advantages of follower strategy are:
● Ability to take advantage of the pioneer’s positioning
mistakes
● Ability to take advantage of the pioneer’s product
mistakes
● Ability to take advantage of the pioneer’s marketing
mistakes
● Ability to take advantage of the latest technology
● Ability to take advantage of the pioneer’s limited
resources

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Exhibit 15.3 - Marketing Strategy Elements Pursued by
Successful Pioneers, Fast Followers, and Late Entrants

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Strategic Marketing Programs for Pioneers
● A pioneer might choose from one of three different
types of marketing strategies:
● Mass-market penetration: The ultimate objective of a
mass-market penetration strategy is to capture and
maintain a commanding share of the total market for
the new product
● Niche penetration: Can help the smaller pioneer gain
the biggest bang for its limited bucks and avoid direct
confrontations with bigger competitors

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Strategic Marketing Programs for Pioneers
● Skimming and early withdrawal: Involves setting a
high price and engaging in only limited advertising and
promotion to maximize per-unit profits and recover the
product’s development costs as quickly as possible

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Growth-Market Strategies for Market
Leaders
● Two important facts:
● The dynamics of a growth market make maintaining
an early lead in relative market share very difficult
● A firm can maintain its current share position in a
growth market only if its sales volume continues to
grow at a rate equal to that of the overall market,
enabling the firm to stay even in absolute market share

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Marketing Objectives for Share Leaders
● Share maintenance for a market leader involves two
important marketing objectives
● The firm must retain its current customers, ensuring
that those customers remain brand loyal when making
repeat or replacement purchases
● The firm must stimulate selective demand among later
adopters to ensure that it captures a large share of
the continuing growth in industry sales

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Exhibit 15.8 - Strategic Choices for
Share Leaders in Growth Markets

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Fortress, or Position Defense, Strategy
● The most basic defensive strategy is to continually
strengthen a strongly held current position
● This strategy is nearly always part of a leader’s share-
maintenance efforts
● Actions to improve customer satisfaction and loyalty
● Actions to encourage and simplify repeat purchasing

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Flanker Strategy
● A shortcoming of a fortress strategy is that a
challenger might simply choose to bypass the
leader’s fortress and try to capture territory where
the leader has not yet established a strong
presence
● To defend against an attack directed at a weakness in
its current offering, a leader might develop a second
brand to compete directly against the challenger’s
offering

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Flanker Strategy
● Flanker strategy: Involves trading up, where the
leader develops a high-quality brand offered at a
higher price to appeal to the prestige segment of the
market
● A flanker brand is a lower-quality product
designed to appeal to a low-price segment to protect
the leader’s primary brand from direct price
competition
● Always used in conjunction with a position defense
strategy

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Confrontation Strategy
● Often, a leader may have no choice but to
confront the competitive threat directly
● If the leader’s competitive intelligence is good, it may
decide to move proactively and change its marketing
program before a suspected competitive challenge
occurs
● A confrontational strategy is more commonly reactive
● The leader can avoid the problems of a confrontation
strategy by reestablishing the competitive
advantage eroded by challengers’ frontal attacks

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Market Expansion
● A more aggressive and proactive version of the flanker
strategy
● Here the leader defends its relative market share
by expanding into a number of market segments
● Primary objective is to capture a large share of new
customer groups who may prefer something different
from the firm’s initial offering, protecting the firm from
future competitive threats from a number of directions

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Contraction or Strategic Withdrawal
● In some highly fragmented markets, a leader may be
unable to defend itself adequately in all segments
● The firm may have to reduce or abandon its efforts
in some segments to focus on areas where it enjoys
the greatest relative advantages or that have the
greatest potential for future growth

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Share-Growth Strategies for Followers
● Marketing objectives for followers:
● Some competitors may seek to build a small but
profitable business within a specialized segment of
the larger market that earlier entrants have overlooked
● Many followers often seek to displace the leader or at
least to become a powerful competitor within the total
market

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Exhibit 15.11 - Strategic Choices for
Challengers in Growth Markets

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Exhibit 15.12 - Marketing Objectives and
Strategies for Challengers in Growth Markets

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Exhibit 15.12 - Marketing Objectives and
Strategies for Challengers in Growth Markets

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Supporting Evidence
● The marketing programs and activities of businesses
that successfully achieved increased market share
differed from their less-successful counterparts in the
following ways:
● Businesses that increased the quality of their
products relative to those of competitors achieved
greater share increases than businesses whose product
quality remained constant or declined
● Share-gaining businesses typically developed and
added more new products, line extensions, or
product modifications to their line than share-losing
businesses
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Supporting Evidence
● Share-gaining businesses tended to increase their
marketing expenditures faster than the rate of
market growth
● Surprisingly, there was little difference in the
relative prices charged between firms that gained and
those that lost market share
● Regardless of the strategies pursued by market leaders
and challengers during a product-market’s growth
stage, the competitive situation often changes as
the market matures and its growth rate slows

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