Page 336 - Marketing Management

COMPETITIVE DYNAMICS | CHAPTER 11 313

They also include nonsurviving pioneers in their sample. They conclude that although pioneers M 1 M 2 M 3
may still have an advantage, a larger number of market pioneers fail than has been reported, and a
larger number of early market leaders (though not pioneers) succeed. Later entrants overtaking P 1 1 2
market pioneers include IBM over Sperry in mainframe computers, Matsushita over Sony in VCRs,
and GE over EMI in CAT scan equipment.
P 2 4 3
Tellis and Golder more recently identified five factors underpinning long-term market leader-
ship: vision of a mass market, persistence, relentless innovation, financial commitment, and asset
leverage. 58 Other research has highlighted the importance of the novelty of the product innova- P 3 5
tion. 59 When a pioneer starts a market with a really new product, like the Segway Human
Transporter, surviving can be very challenging. In the case of incremental innovation, like MP3
players with video capabilities, survival rates are much higher. |Fig. 11.7|
The pioneer should visualize the product markets it could enter, knowing it cannot enter all of Long-Range Product
them at once. Suppose market-segmentation analysis reveals the product market segments shown
in Figure 11.7. The pioneer should analyze the profit potential of each product market singly Market Expansion
and in combination and decide on a market expansion path. Thus, the pioneer in Figure 11.7 plans Strategy (P = product
i
first to enter product market P 1 M 1 , then move the product into a second market (P 1 M 2 ), then sur- i; M = market j)
prise the competition by developing a second product for the second market (P 2 M 2 ), then take the j
second product back into the first market (P 2 M 1 ), then launch a third product for the first market
(P 3 M 1 ). If this game plan works, the pioneer firm will own a good part of the first two segments
and serve them with two or three products.

Marketing Strategies: Growth Stage
The growth stage is marked by a rapid climb in sales. Early adopters like the product and additional
consumers start buying it. New competitors enter, attracted by the opportunities. They introduce
new product features and expand distribution.
Prices stabilize or fall slightly, depending on how fast demand increases. Companies maintain
promotional expenditures or raise them slightly, to meet competition and continue to educate the
market. Sales rise much faster than promotional expenditures, causing a welcome decline in the
promotion–sales ratio. Profits increase as promotion costs are spread over a larger volume, and unit
manufacturing costs fall faster than price declines, owing to the producer-learning effect. Firms
must watch for a change to a decelerating rate of growth in order to prepare new strategies.
To sustain rapid market share growth now, the firm:
• improves product quality and adds new features and improved styling.
• adds new models and flanker products (of different sizes, flavors, and so forth) to protect the
main product.
• enters new market segments.
• increases its distribution coverage and enters new distribution channels.
• shifts from awareness and trial communications to preference and loyalty communications.
• lowers prices to attract the next layer of price-sensitive buyers.
By spending money on product improvement, promotion, and distribution, the firm can cap-
ture a dominant position. It trades off maximum current profit for high market share and the hope
of even greater profits in the next stage.

Marketing Strategies: Maturity Stage
At some point, the rate of sales growth will slow, and the product will enter a stage of relative maturity.
Most products are in this stage of the life cycle, which normally lasts longer than the preceding ones.
The maturity stage divides into three phases: growth, stable, and decaying maturity. In the first,
sales growth starts to slow. There are no new distribution channels to fill. New competitive forces
emerge. In the second phase, sales per capita flatten because of market saturation. Most potential
consumers have tried the product, and future sales depend on population growth and replacement
demand. In the third phase, decaying maturity, the absolute level of sales starts to decline, and cus-
tomers begin switching to other products.
This third phase poses the most challenges. The sales slowdown creates overcapacity in the indus-
try, which intensifies competition.Weaker competitors withdraw.A few giants dominate—perhaps a
quality leader, a service leader, and a cost leader—and profit mainly through high volume and lower