Page 338 - Marketing Management

COMPETITIVE DYNAMICS | CHAPTER 11 315

TABLE 11.1 Alternate Ways to Increase Sales Volume

Expand the Number of Users Increase the Usage Rates Among Users
• Convert nonusers. The key to the growth of • Have consumers use the product on more
air freight service was the constant search occasions. Serve Campbell’s soup for
for new users to whom air carriers can a snack. Use Heinz vinegar to clean
demonstrate the benefits of using air freight windows.
rather than ground transportation.
• Enter new market segments. When • Have consumers use more of the product
Goodyear decided to sell its tires via Walmart, on each occasion. Drink a larger glass of
Sears, and Discount Tire, it immediately orange juice.
boosted its market share.
• Attract competitors’ customers. Marketers • Have consumers use the product in new
of Puffs facial tissues are always wooing ways. Use Tums antacid as a calcium
Kleenex customers. supplement.

cutting, and profit erosion. The decline might be slow, as for sewing machines and newspapers, or
rapid, as for 5.25 floppy disks and eight-track cartridges. Sales may plunge to zero or petrify at a low
level. These structural changes are different from a short-term decline resulting from a marketing
crisis of some sort.“Marketing Insight: Managing a Brand Crisis,”describes strategies for a brand in
temporary trouble.
As sales and profits decline over a long period of time, some firms withdraw. Those remaining
may reduce the number of products they offer, withdrawing from smaller segments and weaker
trade channels, cutting marketing budgets, and reducing prices further. Unless strong reasons for
retention exist, carrying a weak product is often very costly.
Besides being unprofitable, weak products consume a disproportionate amount of manage-
ment’s time, require frequent price and inventory adjustments, incur expensive setup for short
production runs, draw advertising and sales force attention better used to make healthy products
more profitable, and cast a negative shadow on company image. Failing to eliminate them also
delays the aggressive search for replacement products, creating a lopsided product mix long on
yesterday’s breadwinners and short on tomorrow’s.
Unfortunately, most companies have not developed a policy for handling aging products. The
first task is to establish a system for identifying them. Many companies appoint a product-review
committee with representatives from marketing, R&D, manufacturing, and finance who, based on
all available information, makes a recommendation for each product—leave it alone, modify its
marketing strategy, or drop it. 61
Some firms abandon declining markets earlier than others. Much depends on the height of exit
62
barriers in the industry. The lower the barriers, the easier for firms to leave the industry, and the
more tempting for the remaining firms to stay and attract the withdrawing firms’ customers.
Procter & Gamble stayed in the declining liquid-soap business and improved its profits as others
withdrew.
The appropriate strategy also depends on the industry’s relative attractiveness and the com-
pany’s competitive strength in it. A company in an unattractive industry that possesses competitive
strength should consider shrinking selectively. A company in an attractive industry that has com-
petitive strength should consider strengthening its investment. Companies that successfully restage
or rejuvenate a mature product often do so by adding value to it.
Strategies for harvesting and divesting are quite different. Harvesting calls for gradually reduc-
ing a product or business’s costs while trying to maintain sales. The first step is to cut R&D costs
and plant and equipment investment. The company might also reduce product quality, sales force
size, marginal services, and advertising expenditures, ideally without letting customers, competi-
tors, and employees know what is happening. Harvesting is difficult to execute, yet many mature
products warrant this strategy. It can substantially increase current cash flow. 63
When a company decides to divest a product with strong distribution and residual goodwill, it
can probably sell the product to another firm. Some firms specialize in acquiring and revitalizing