chap 16 strategies for mature and declining markets

7/25/2019 Chap 16 Strategies for Mature and Declining Markets

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Strategies forMature and

Declining

Markets

Chapter 16

McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.



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Strategic Choices in Mature Markets

• It is not always easy to tell when a market

has reached maturity.

•ariations in !rands" marketing #rograms"and customer grou#s can mean that

different !rands and market segments

reach maturity at different times.



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• %s the maturity stage #rogresses" a

&ariety of threats and o##ortunities can

disru#t an industry's sta!ility(

) Shifts in customer needs or #references"

) *roduct su!stitutes"

) Increased raw material costs"

) Changes in go&ernment regulations"

) +he entry of low-cost #roducers or

) Mergers and ac,uisitions.



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• Success in mature markets re,uires two

sets of strategic actions(

) +he de&elo#ment of a well-im#lemented

!usiness strategy to sustain a com#etiti&e

ad&antage" customer satisfaction" and loyalty

) /le0i!le and creati&e marketing #rograms

geared to #ursue growth or #rofito##ortunities as conditions change in s#ecific

#roduct-markets.



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• Strategies for maintaining com#etiti&ead&antage ) oth analy3er and defender strategies may !e

a##ro#riate for units with a leading" or at least a#rofita!le" share of one or more ma4or segmentsin a mature industry.

) %naly3er( %##ro#riate for de&elo#ed industriesthat are still e0#eriencing some technological

change and may ha&e o##ortunities for continuedgrowth.

) Defender( 5orks where the !asic technology isnot &ery com#le0 or is unlikely to changedramatically.



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• oth analy3ers and defenders can attem#t

to sustain a com#etiti&e ad&antage in

esta!lished #roduct-markets(

) +hrough differentiation of their #roduct

offering or

) y maintaining a low-cost #osition.


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+he *rocess of Customer alue Management


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• Dimensions of #roduct ,uality( ) *erformance

) Dura!ility

) Conformance with s#ecifications

) /eatures

) 8elia!ility

) Ser&icea!ility ) /it and finish

) rand name

) Make




• Dimensions of ser&ice ,uality

) +angi!les

) 8elia!ility

) 8es#onsi&eness

) %ssurance

) :m#athy


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• %re the dimensions the same for ser&ice

,uality on the Internet<

) 11 dimensions of #ercei&ed e-ser&ice ,uality

are( access" ease of na&igation" efficiency"

fle0i!ility" relia!ility" #ersonali3ation"

security=#ri&acy" res#onsi&eness"

assurance=trust" site aesthetics" and #riceknowledge.




• /i&e ga#s that can lead to dissatisfaction withser&ice deli&ery( ) >a# !etween the customer's e0#ectations and the

marketer's #erce#tions.

) >a# !etween management #erce#tions and ser&ice,uality s#ecifications.

) >a# !etween ser&ice ,uality s#ecifications andser&ice deli&ery.

) >a# !etween ser&ice deli&ery and e0ternalcommunications.

) >a# !etween #ercei&ed ser&ice and e0#ectedser&ice.



Determinants of *ercei&ed Ser&ice ?uality


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• Methods of maintaining a low-cost

#osition(

) % no-frills #roduct

) Inno&ati&e #roduct design

) Chea#er raw materials

) Inno&ati&e #roduction #rocesses

) @ow-cost distri!ution

) 8eductions in o&erhead




• Measuring customer satisfaction

) Measures of customer satisfaction should

e0amine customers' e0#ectations and

#references concerning the &ariousdimensions of #roduct and ser&ice ,uality

#erformance" and their #erce#tions

concerning how well the firm is meeting those

e0#ectations.




• Satisfaction measures need to !e

su##lemented with e0aminations of

customer !eha&ior such as(

) measures of the annual retention rate"

) fre,uency of #urchases" and

) the #ercentage of a customer's total

#urchases ca#tured !y the firm.




• %re all customers e,ually &alua!le<

) +he a!ility of firms to tailor different le&els of

ser&ice and !enefits to different customers

!ased on each #erson's #otential to #roducea #rofit has !een facilitated !y the growing

#o#ularity of the Internet.

) Increased stratification of consumer society. ) :thical and strategic ,uestions.



Marketing Strategies for Mature

Markets

• Marketing strategies to maintain market

share in growth markets(

) /ortress defense

) /lanker !rands

) Aiche strategy



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Markets

• Strategies for e0tending &olume growth

• Increased #enetration strategy ) Disco&ering why nonusers are uninterested.

) De&elo#ing and selling integrated systemsthat hel# im#ro&e the !asic #roduct's#erformance or ease of use.

) Bffering ser&ices that im#ro&e its #erformanceor ease of use for the #otential customer.

) :0#anding distri!ution or de&elo#ing morecon&enient and accessi!le channels.



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Markets

• :0tended use strategy

) Increasing the amount of #roduct used !y the

a&erage customer !y increasing fre,uency of

use or de&elo#ing new and more &aried waysto use the #roduct.



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Markets

• Market e0#ansion strategy ) Strengthening a firm's #osition in new or

underde&elo#ed domestic geogra#hic

markets can lead to e0#erience-cur&e !enefitsand o#erating synergies.

) Smaller regional com#etitors might considerdomestic geogra#hic e0#ansion.

) /irms may identify and de&elo# entirely newcustomer or a##lication segments.

) Domestic market e0#ansion !y #roducing#ri&ate-la!el !rands for large retailers.



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Markets

• >lo!al market e0#ansionse,uential

strategies

) /or firms with leading #ositions in mature

domestic markets" less-de&elo#ed markets in

foreign countries often #resent the most

&ia!le o##ortunities for geogra#hic e0#ansion.

) +he most common e0#ansion route in&ol&esmo&ing from a#an to de&elo#ing countries to

de&elo#ed countries.



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Strategies for Declining Markets

• +hree sets of factors hel# determine the

strategic attracti&eness of declining

#roduct markets(

) Conditions of demand"

) :0it !arriers" and

) /actors affecting the intensity of future

com#etiti&e ri&alry.



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• Conditions of demand

) +echnological ad&ances #roduce su!stitutes

often with higher ,uality or lower cost.

) Demogra#hic shifts.

) Change in needs" tastes" or lifestyles.

) Cost of in#uts or com#lementary #roducts.

• :0it !arriers

) +he higher the e0it !arriers" the less

hos#ita!le a #roduct-market will !e.



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• Intensity of future com#etiti&e ri&alry

) Si3e and !argaining #ower of the customers

who continue to !uy the #roduct"

) Customers' a!ility to switch to su!stitute

#roducts or to alternati&e su##liers" and

) %ny #otential diseconomies of scale in&ol&ed

in ca#turing an increased share of theremaining &olume.



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• Di&estment or li,uidation

) +he firm that di&ests early runs the risk that its

forecast of the industry's future may !e wrong.

) ?uick di&estment may not !e #ossi!le if the

firm faces high e0it !arriers.

) y #lanning early for de#arture" the firm may

!e a!le to reduce some of those !arriers!efore the li,uidation is necessary.



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• Marketing strategies for remainingcom#etitors

• Ear&esting strategy ) +he o!4ecti&e is to generate cash ,uickly !y

ma0imi3ing cash flow o&er a relati&ely shortterm.

) +his ty#ically in&ol&es(• %&oiding any additional in&estment in the !usiness"

• >reatly reducing o#erating e0#enses" and

• 8aising #rices.



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• Maintenance Strategy

) +he !usiness continues to #ursue the same

strategy that !rought it success during the

market's mature stage. ) Bften results in reduced margins and #rofits in

the short term.



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• *rofita!le sur&i&or strategy

) In&esting enough to increase share #osition

and esta!lishing itself as the industry leader

for the remainder of the market's decline. ) +he key to the success is to encourage other

com#etitors to lea&e the market early.



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• Aiche Strategy

) May !e &ia!le if one or more su!stantial

segments will either remain as sta!le #ockets

of demand or decay slowly. ) :&en smaller com#etitors can sometimes

successfully #ursue this strategy.



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+ake-%ways

• Strategic choices in mature" or e&en

declining" markets are !y no means

always !leak. Many of the world's most

#rofita!le com#anies o#erate largely insuch markets.



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+ake-%ways

• % critical marketing o!4ecti&e for allcom#etitors in a mature market is tomaintain the loyalty of e0isting customers.

+o accom#lish that goal" firms must#ursue im#ro&ements in the #ercei&ed&alue those customers recei&e from theirofferingseither !y differentiatingthemsel&es on the !asis of su#erior ,ualityor ser&ice" !y lowering costs and #rices" or!oth.



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+ake-%ways

• %n im#ortant secondary o!4ecti&e for

some firms" #articularly share leaders" in

mature markets is to stimulate further

&olume growth !y taking actions to con&ertnonusers into users" to increase use

fre,uency among current users" or to

e0#and into unta##ed or under-de&elo#edmarkets.



+ake-%ways

• Declining markets can still offer attracti&e

o##ortunities for sales re&enues and

#rofits.

) +heir attracti&enessand the a##ro#riate

marketing strategy to followde#ends on"

among other things" the #ace and certainty of

market decline" the #resence of e0it !arriers"the firm's com#etiti&e strengths" and the likely

intensity of future com#etition.

chap 16 strategies for mature and declining markets

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