Chapter Ten Strategies for Growth Markets

Why Are Growing Markets Attractive? n Gaining share is easier n Share gains are worth more n Price competition is likely to be less intense n Early entry may be necessary to keep pace with technology Usually, but not always:

Exhibit 10.4 Strategic Choices for Share Leaders in Growth Markets COMPETITOR OR POTENTIAL COMPETITOR Contraction or strategic withdrawal Market expansion Flanker strategy - Proactive Flanker strategy - Reactive LEADER Fortress or position defense strategy Confrontation strategy Proactive Reactive Source: Adapted from P. Kotler and R. Singh Achrol, “Marketing Warfare in the 1980’s” Reprinted with permission from Journal of Business Strategy, Winter 1981, pp Copyright © 1981 by Warren, Gorham & Lambert, Inc., 210 South Street, Boston MA All rights reserved.

Exhibit 10.3 Marketing Actions Vary for Different Share- Maintenance Objectives n Retain current customers by: n Maintaining or improving satisfaction and loyalty n Encouraging or simplifying repeat purchase n Reducing the attractiveness of switching n Stimulate selective demand among later adopters by: n Head-to-head positioning against competitors

Exhibit 10.7 Strategic Choices for Challengers in Growth Markets TARGET COMPETITOR Flanking attack Frontal attack Encirclement strategy Leapfrog strategy Source: Adapted from P. Kotler and R. Singh Achrol, “Marketing Warfare in the 1980’s” Reprinted with permission from Journal of Business Strategy, Winter 1981, pp Copyright © 1981 by Warren, Gorham & Lambert, Inc., 210 South Street, Boston MA All rights reserved. CHALLENGER

Exhibit 10.6 Marketing Actions to Achieve Share Growth Vary for Different Marketing Objectives n Capture competitors’ customers by n Head-to-head positioning in competitor’s primary target market n Technological differentiation in primary target market n Stimulate selective demand among later adopters by n Head-to-head positioning in competitor’s primary target market (as above) n Differentiated positioning focused on untapped or underdeveloped segments

Some Advice for Followers Differentiation is key for followers –Better benefits –Better service –Lower price Beware of competing on price, however, unless your costs really are lower than competitors’

Predicting Pricing Actions Competitive Actions More Pricing Pressure with High Elasticity More Pricing Pressure with High Leverage Price of Substitutes Sets the Ceiling Marginal Cost Per Unit Sets the Floor