Competitive Dynamics
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The document discusses strategies for market leaders to maintain their position, including expanding the total market, protecting current market share, and increasing market share. It also discusses the product life cycle and different strategies companies should employ during each stage, from introduction to growth, maturity, and decline. The growth stage in particular involves improving products, adding new models, entering new segments, increasing advertising and distribution, and lowering prices to attract more customers.
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Competitive Dynamics
- 1. Kotler • Keller Phillip Kevin Lane Marketing Management • 14e
- 3. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 3 of 31 Market Members Market leader Market challenger Market follower Market nichers
- 4. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 4 of 31 Figure 11.1 Hypothetical Market Structure
- 5. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 of 31 Staying Number One 1. Expand total market demand 2. Protect current market share 3. Increase market share
- 6. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 6 of 31 Expanding Total Market Demand New Customers More Usage Replacement rate New product uses
- 7. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 7 of 31 Protect Current Market Share Proactive Marketing Offensive Strategy Defensive Strategy
- 8. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 8 of 31 Increase Market Share Antitrust action Pursue wrong marketing activity Lower overall quality Decreased profitability 2012 2013 “Actual” quality “Perceived” quality
- 9. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 9 of 31 Product Life-Cycle Strategies • Products have a limited life • Sales pass through stages • Profits rise, then fall • Different strategies needed
- 10. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 10 of 31 Figure 11.4 Sales and Profit Life Cycles
- 11. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 11 of 31 Product Life-Cycle Stages Introduction
- 12. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 12 of 31 PLC: Growth Stage Rapid sales growth; New competitors Marketing Strategies: 1.Improve product quality; add new features 2.Add new models and flanker products 3.Enter new market segments 4.Focus advertising on preferences 5.Increase distribution coverage 6.Lower price; Attract price-sensitive buyers
- 13. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 13 of 31 Table 11.2 Characteristics of the PLC Introduction Growth Maturity Decline CHARACTERISTICS Sales Low Rapidly rising Peak Declining Costs/customer High Average Low Low Profits Negative Rising High Declining Customers Innovators Early Adopters Middle majority Laggards Competitors Few Increasing Stable number Declining
Editor's Notes
- Market leaders have the higher market share and usually base-line in terms of price. Leaders also lead the market in new-product introductions, distribution coverage, and promotional intensity. Historic market leaders include: McDonald’s, Microsoft, Visa, Gatorade, Best Buy, and Blue Cross. Other market members include challengers, followers, and niche players. Other firms enter and exit the markets, primarily during the maturity and decline stage of the product life cycle.
- If the size of the market remains constant, market leaders often look to increase share. The payoffs can be rewarding. For example, the Carbonated Soft Drink (CSD) market has about $70 billion in annual sales. A 1% point market share increase by Coke or Pepsi is worth around $700 million. However, firms must exercise caution. Marketers must consider the cost needed to gain share. Market leaders can face issues such as: Antitrust actions Higher economic costs (covered next slide w/figure 11.3)Loss of focus Impact on actual and perceived quality. By serving too many customers, actual quality can decrease. This may result in lower market share over time as customers switch to competitors.
- For products, strategies must change as the product, market, and competitors change over the product life cycle. The PLC can be used to analyze a product category (liquor), a product form (white liquor), a product (vodka), or a brand (Smirnoff).
- The typical PLC is bell-shaped. However, for some products the curve will vastly different.
- Early adopters like the product which helps to bring new customers into the market. Competitors, attracted by the opportunity, enter the market with new product features and further expand distribution. This results in prices stabilizing, or even falling. Promotional expense levels are maintained or increased (to meet competition). The rapid sales growth causes a welcomed decline in the promotion-sales ration. The volume increase results in lower manufacturing costs per unit.