Page 337 - Marketing Management

314 PART 4 BUILDING STRONG BRANDS

costs. Surrounding them is a multitude of market nichers, including market specialists, product spe-
cialists, and customizing firms.
The question is whether to struggle to become one of the big three and achieve profits through
high volume and low cost, or pursue a niching strategy and profit through low volume and high
margins. Sometimes the market will divide into low- and high-end segments, and market shares of
firms in the middle steadily erode. Here’s how Swedish appliance manufacturer, Electrolux, has
coped with this situation.

Electrolux AB In 2002, Electrolux faced a rapidly polarizing appliance mar-
ket. Low-cost Asian companies such as Haier, LG, and Samsung were applying downward
price pressure, while premium competitors like Bosch, Sub-Zero, and Viking were growing at
the expense of the middle-of-the-road brands. Electrolux’s new CEO Hans Stråberg decided to
escape the middle by rethinking Electrolux customers’ wants and needs. He segmented
the market according to the lifestyle and purchasing patterns of about
20 different types of consumers. Electrolux now successfully markets its
steam ovens to health-oriented consumers, for example, and its compact
dishwashers, originally for smaller kitchens, to a broader consumer seg-
ment that washes dishes more often.To companies stuck in the middle of
a mature market, Stråberg offers this advice: “Start with consumers and
understand what their latent needs are and what problems they experi-
ence... then put the puzzle together yourself to discover what people
really want to have. Henry Ford is supposed to have said, ‘If I had asked
people what they really wanted, I would have made faster horses’ or
something like that. You need to figure out what people really want, al-
though they can’t express it.” 60

Some companies abandon weaker products to concentrate on
new and more profitable ones. Yet they may be ignoring the high
potential many mature markets and old products still have.
Industries widely thought to be mature—autos, motorcycles, tele-
vision, watches, cameras—were proved otherwise by the Japanese,
who found ways to offer customers new value. Three ways to
change the course for a brand are market, product, and marketing
program modifications.
Electrolux uses an elaborate seg-
MARKET MODIFICATION A company might try to expand the market for its mature brand
mentation plan and an expansive by working with the two factors that make up sales volume: Volume = number of brand users ×
product line to make sure its brand
usage rate per user, as in Table 11.1, but may also be matched by competitors.
is not stuck in the middle of a
shrinking market.
PRODUCT MODIFICATION Managers also try to stimulate sales by improving quality,
features, or style. Quality improvement increases functional performance by launching a “new
and improved” product. Feature improvement adds size, weight, materials, supplements, and
accessories that expand the product’s performance, versatility, safety, or convenience. Style
improvement increases the product’s esthetic appeal. Any of these can attract consumer attention.
MARKETING PROGRAM MODIFICATION Finally, brand managers might also try to
stimulate sales by modifying nonproduct elements—price, distribution, and communications in
particular. They should assess the likely success of any changes in terms of effects on new and
existing customers.

Marketing Strategies: Decline Stage
Sales decline for a number of reasons, including technological advances, shifts in consumer tastes,
and increased domestic and foreign competition. All can lead to overcapacity, increased price