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Marketing Management

Fifteenth Edition

Chapter 12

Addressing

Competition and

Driving Growth

Learning Objectives

12.1 Why is it important for companies to grow the

core of their business?

12.2 How can market leaders expand the total

market and defend market share?

12.3 How should market challengers attack market

leaders?

12.4 How can market followers or nichers compete

effectively?

12.5 What marketing strategies are appropriate at

each stage of the product life cycle?

12.6 How should marketers adjust their strategies

and tactics during slow economic growth?

Growth Strategies

• Building your market

• Developing committed

customers and

stakeholders

• Building a powerful brand

• Innovating new products,

services, and experiences

• International expansion

• Acquisitions, mergers,

and alliances

• Building an outstanding

reputation for social

responsibility

• Partnering with

government and NGOs

Growing the Core

• Make the core of the brand as distinctive as possible

• Drive distribution through both existing and new

channels

• Offer the core product in new formats or versions

Competitive Strategies for Market

Leaders

• Expanding total market

demand

• Protecting market share

• Increasing market share

Figure 12.1 Hypothetical

Market Structure

Expanding Total Market Demand

• New customers

• More usage

Protecting Market Share (1 of 2)

• Proactive marketing

– Responsive anticipation

 when IBM changed

from a hardware

producer to a service

business

– Creative anticipation

 devise innovative

solutions

Protecting Market Share (2 of 2)

• Defensive marketing

Figure 12.2 Six Types of Defense Strategies

• Position defense means occupying the most desirable position in consumers’ minds,

making the brand almost impregnable.

• Flank defense. The market leader should erect outposts to protect a weak front or

support a possible counterattack.

• Preemptive defense. A more aggressive maneuver is to attack first, perhaps with

guerrilla action across the market—hitting one competitor here, another there—and

keeping everyone off balance. Another is to achieve broad market envelopment that

signals competitors not to attack.

• Counteroffensive defense. In a counteroffensive, the market leader can meet the

attacker frontally and hit its flank or launch a pincer movement so the attacker will have

to pull back to defend itself. Another form of counteroffensive is the exercise of economic

or political clout.

• Mobile defense. In mobile defense, the leader stretches its domain over new territories

through market broadening and market diversification.

• Contraction defense. Sometimes large companies can no longer defend all their territory.

In planned contraction (also called strategic withdrawal), they give up weaker markets

and reassign resources to stronger ones.

Increasing Market Share

• The cost of buying higher market share through

acquisition may far exceed its revenue value

– Possibility of provoking antitrust action

– Economic cost

– Pursuing wrong marketing activities

– Increased market share effect on quality

 Too many customers can put a strain on the firm’s

resources, hurting product value and service

delivery

Figure 12.3 Optimal Market Share

profitability might fall with market share gains after some level. In the

illustration, the firm’s optimal market share is 50 percent.

Market-Challenger Strategies (1 of 2)

• Defining the strategic objective and opponent(s)

• A market challenger can attack:

‒ The market leader

‒ Underfunded firms its own size

‒ Small local and regional firms

‒ The status quo

Market-Challenger Strategies (2 of 2)

• Choosing a general attack strategy

Figure 12.4 General Attack Strategies

• Frontal, flank, encirclement, bypass, and guerilla attacks.

• In a pure frontal attack, the attacker matches its opponent’s product, advertising, price,

and distribution. The principle of force says the side with the greater resources will win.

• A flanking strategy is another name for identifying shifts that cause gaps to develop in

the market, then rushing to fill the gaps. Flanking is particularly attractive to a challenger

with fewer resources and can be more likely to succeed than frontal attacks.

• Encirclement attempts to capture a wide slice of territory by launching a grand offensive

on several fronts. It makes sense when the challenger commands superior resources.

• Bypassing the enemy altogether to attack easier markets instead offers three lines of

approach: diversifying into unrelated products, diversifying into new geographical

markets, and leapfrogging into new technologies.

• Guerrilla attacks consist of small, intermittent attacks, conventional and unconventional,

including selective price cuts, intense promotional blitzes, and occasional legal action, to

harass the opponent and eventually secure permanent footholds. A guerrilla campaign

can be expensive, though less so than a frontal, encirclement, or flank attack, but it

typically must be backed by a stronger attack to beat the opponent.

Market-Follower Strategies

• Cloner

– The cloner emulates the leader’s products, name, and packaging

with slight variations.

• Imitator

– The imitator copies some things from the leader but differentiates

on packaging, advertising, pricing, or location. The leader doesn’t

mind as long as the imitator doesn’t attack aggressively.

• Adapter

– The adapter takes the leader’s products and adapts or improves

them. The adapter may choose to sell to different markets, but

often it grows into a future challenger, as many Japanese firms

have done after improving products developed elsewhere.

Market-Nicher Strategies

• To be a leader in a small market

– Firms with low shares of the

total market can become

highly profitable through smart

niching

Niche Specialist Roles

• End-user specialist

• Vertical-level specialist

• Channel specialist

• Customer-size specialist

• Job-shop specialist

• Geographic specialist

Product Life-Cycle Marketing

Strategies

• A company’s positioning and differentiation strategy must change as its product, market,

and competitors change over the PLC

– 1. Introduction—A period of slow sales growth as the product is introduced in the

market. Profits are nonexistent because of the heavy expenses of product

introduction.

– 2. Growth—A period of rapid market acceptance and substantial profit improvement.

– 3. Maturity—A slowdown in sales growth because the product has achieved

acceptance by most potential

– buyers. Profits stabilize or decline because of increased competition.

– 4. Decline—Sales show a downward drift and profits erode.

Figure 12.5 Sales and Profit Life

Cycles

Figure 12.7 Style, Fashion, And Fad

Life Cycles

A style is a basic and distinctive mode of expression appearing in a field of human

endeavor. A fashion is a currently accepted or popular style in a given field. Fashions

pass through four stages: distinctiveness, emulation, mass fashion, and decline. Fads

are fashions that come quickly into public view, are adopted with great zeal, peak early,

and decline very fast.

Marketing Strategies: Introduction

Stage

• Pioneering advantages

– Recall of brand name

– Establishes product class attributes

– Captures more uses in middle of market

• Pioneering drawbacks

– Imitators can surpass innovators

– Once leadership is lost, it’s rarely regained

Figure 12.8 Long-Range Product

Market Expansion Strategy

first to enter product market P1M1, then

move into a second market (P1M2), then

surprise the competition by developing a

second product for the second market

(P2M2), then take the second product back

into the first market (P2M1), then launch a

third product for the first market (P3M1). If

this game plan works, the pioneer firm will

own a good part of the first two segments,

serving each with two or three products.

Marketing Strategies: Growth Stage

• To sustain rapid market share growth now:

1. Improve product quality and add new features

2. Add new models and flanker products

3. Enter new market segments

4. Increase distribution coverage and enter new

distribution channels

5. Shift from awareness and trial communications to

preference and loyalty communications

6. Lower prices to attract the next layer of price-sensitive

buyers

Marketing Strategies: Maturity Stage

• Market modification

– number of brand users and usage rate per

customer

• Product modification

• Marketing program modification

Market Modification

Table 12.1 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 air freight service was the

constant search for new users to

whom air carriers could demonstrate

the benefits of using air freight rather

than ground transportation.

• Have consumers use the product on

more occasions. Serve Campbell’s soup

for a snack. Use Heinz vinegar to clean

windows.

• Enter new market segments. When

Goodyear decided to sell its tires in

Walmart, Sears, and Discount Tire, it

immediately boosted its market

share.

• Have consumers use more of the

product on each occasion. Drink a larger

glass of orange juice.

• Attract competitors’ customers.

Marketers of Puffs facial tissues are

always wooing Kleenex customers.

• Have consumers use the product in

new ways. Use Tums antacid as a calcium

supplement.

Marketing Strategies: Decline Stage

• Eliminating Weak Products

• Harvesting and Divesting

– Harvesting calls for

gradually reducing a

product or business’s costs

while trying to maintain

sales. When a company

decides to divest a product

with strong distribution and

residual goodwill, it can

probably sell it to another

firm

Marketing in a Slow-Growth Economy

• Explore upside of increasing investment

• like an appealing new product, a weakened rival, or

a neglected target market to develop

• Get closer to customers

• Review budget allocations

• Put forth compelling value proposition

• Fine-tune brand and product offerings

– Marketers can review product portfolios and brand

architecture to confirm that brands and sub-brands

are clearly differentiated,