Marketing Management

*

*

*

*

*

*

*

*

*

Figure 12.3 shows that profitability might fall with market share gains after some level. In the illustration, the firm’s optimal market share is 50 percent.

*

A market challenger must first define its strategic objective, which is usually to increase market share. It then must decide whom to attack.

*

Given clear opponents and objectives, what attack options are available? As Figure 12.4 shows, we can distinguish five: 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.

*

Although it may not overtake the leader, the follower can achieve high profits because it did not bear any of the innovation expense. Many companies prefer to follow rather than challenge the market leader. Each follower tries to bring distinctive advantages to its target market—location, services, financing—while defensively keeping its manufacturing costs low and its product quality and services high. It must also enter new markets as they open up. Followers must define a growth path, but one that doesn’t invite competitive retaliation. We distinguish three broad strategies:

• Cloner—The cloner emulates the leader’s products, name, and packaging with slight variations.

2. 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.

3. 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.

*

Smaller firms normally avoid competing with larger firms by targeting small markets of little or no interest to the larger firms. Over time, those markets can sometimes end up being sizable in their own right, as Huy Fong Foods has found.

*

Because niches can weaken, the firm must continually create new ones. “Marketing Memo: Niche Specialist Roles” outlines some options. The firm should “stick to its niching,” but not necessarily to its niche. That is why multiple niching can be preferable to single niching. With strength in two or more niches, the company increases its chances for survival.

*

*

*

*

*

*

By spending money on product improvement, promotion, and distribution, the firm can capture a dominant position. It trades off maximum current profit for high market share and the hope of even greater profits in the next stage.

*

*

A company might try to expand the market for its mature brand by working with the two factors that make up sales volume, number of brand users and usage rate per customer, as in Table 12.1, but competitors may match this strategy.

*

*

Given economic cycles, there will always be tough times, such as the recession of 2008–2009 and the slow recovery that has followed. Despite reduced funding for marketing programs and intense pressure to justify them as cost effective, some marketers have survived—or even thrived—in tough economic times.

Marketers should consider the potential upside of increasing investment to exploit a marketplace advantage like an appealing new product, a weakened rival, or a neglected target market to develop. Consumers with leveling incomes may change what they want and where and how they shop. A downturn or slow-growth period is an opportunity to learn even more about what consumers are thinking, feeling, and doing, especially the loyal base that yields so much profitability. Slowed growth provides an opportunity for marketers to review their spending, opening promising new options and eliminating sacred cows if they don’t yield results. It can be a good time to experiment. Marketers should increase—and clearly communicate—their brands’ value, conveying all the financial, logistical, and psychological benefits. Marketers can review product portfolios and brand architecture to confirm that brands and sub-brands are clearly differentiated, targeted, and supported based on their prospects. Luxury brands can benefit from lower priced brands or sub-brands in their portfolios. Slow times also are an opportunity to prune products with diminished prospects.

*