Marketing I Session 7

18-08-2020
 Step 5: Develop Positioning Strategy

Positioning
The positioning
Methods
strategy can help
communicate the
• Value Proposition firm’s or the
• Salient Attributes products Value
• Symbols proposition .
• Competition
French Retailer Hermes is a luxury brand
which makes its’ customers less price sensitive
 Circles for a Successful Value Proposition
No Overlap with Competition

Competitive
Offering
The
How is this Positioning?. Value
Proposition
Salient attributes and
Customer
competition. Needs Company
And Offering
Wants
 Circles for a Successful Value Proposition
Determining the Value Proposition

#1: Firm’s value proposition.

Competitor #2: Customer’s unmet needs (marketing
opportunity).
benefits
#7 #3: Firm’s benefits that are not required -
educate customer or redesign product.
#5 #6 #4: Key benefits that both the firm and
#4
Firm competitor provide that customers require
Customer benefits - carefully monitor performance relative to
needs #1 competitor on these benefits.
#3
#2 #5: Competitor’s value proposition - monitor
and imitate if needed.
#6: Benefits both firms provide that customers
#7: Competitor benefits that are not required. do not appear to need.
 What Are The Value Proposition for Gatorade and 7-UP?

Main value proposition

components
1. Target market
2. Offering name or
brand
3. Product / Service
category or concept
4. Unique point of
difference/ benefits
Lemon-flavoured non-
Sports Drink caffeinated soft drink
 Value Proposition Statement

Gatorade 7-UP
Target Market To athletes around the world To non-cola consumers
Offering name or brand Gatorade 7-UP
Product/ Service Is the sports drink Is a non-caffeinated soft
category or concept drink
Unique point of Representing the heart, hustle, and soul That is light, refreshing,
difference/ benefits of athleticism and gives the fuel for lemon-lime flavoured
working muscles, fluid for hydration, and has a crisp, bobbly
and electrolytes to help replace what is and clean taste
lost in sweat before, during, and after
activity to get most out of your body
 Potential Value Propositions

⚫Gatorade: To [athletes around the world] [Gatorade] is the [sports

drink] that [represents the heart, hustle, and soul of athleticism
and gives the fuel for working muscles, fluid for hydration, and
electrolytes to help replace what is lost in sweat before, during,
and after activity to get most out of your body]

▪ 7 –UP: To [non cola consumers] [7-UP] is a [Is a non-caffeinated

soft drink] that [is light, refreshing, lemon-lime flavoured and has
a crisp, bobbly and clean taste]
 8

Perceptual
Maps
 TARGETING
l In India, Starbucks follows Focused or Concentrated
targeting strategy

l It focus exclusively on high-end and elite professionals

and customers who want premium coffee and good
ambience.

l This is one of the reasons it has selected number of

outlets at upscale locations to attract its target
audience effectively.
 POSITIONING
Starbucks has positioned itself as a premium coffee
brand based designed to take the coffee experience
to the next level.

Apart from great quality coffee, its value

proposition is also based on providing great
customer experience supported by excellent store
environment.
 POSITIONING METHODS
l Value: It enhances the experiences of the customers
by making them feel special by writing their names
on the coffee.
l Salient Features: It also offers coffee and food
according to tastes and preferences of the Indian
customers. They are also popular for its seasonal
offerings like Toffee Nut Latte during Christmas in
designer Christmas theme cup.
l Symbol: Starbucks logo is one of the most
recognized business logo admired by coffee lovers.
l Competition: Some of its competitors are Cafe
Coffee Day, Costa Coffee, Baarista, Dunkin Donuts,
local coffee shops, etc.
 VALUE PROPOSITION STATEMENT

l Offering Name: Starbucks

l Target Market: Professionals and high end customers

⚫ Product or service concept: Even though Starbucks is a retail

coffee store, the value proposition is not about the coffee exclusively
but about the coffee culture and the experience of drinking coffee
integrating with warm ambience.

l Unique point of benefits and difference: They also have healthier

options in their menu like Green tea, black tea along with wide range
of organic food. Its ambience is distinguish from Cafe Coffee Day.
PERFORMING DIFFERENT ACTIVITIES FROM RIVALS OR
PERFORMING SIMILAR ACTIVITIES IN DIFFERENT WAYS.

“A place between home and work to

hangout with friends”.
Typically 800-1000 sft in area
Position of convenience after acquiring
Coffee Nation.
“Superb coffee quality at reasonable
prices”
“In the old days, you’d take your coffee
to the office – now you take the office to
Starbucks.”
 Are your descriptions consistent
with the way Starbucks is being
promoted (and positioned) in
the overseas?
How is
Starbucks
positioned in
India?

What does
this tell you?
 Starbucks Goes Plush In India
Indian Consumer Pattern
• Coffee is not the primary reason to
visit a café
• Very few order a beverage to take
away with them
• Most use it as a spot to meet
friends and relatives (time spent 45
min)
a) Positioned as ‘aspirational’
b) Opened 174 stores in India as on Jan.2020
c) Following same strategy as China
d) First 50 stores Starbucks would like to make a statement. Followed by
kiosks and routine stores
e) Prices in line with premium stores
Starbucks’ Plan
• Make stores as appealing as possible
(plushy)
• Design each store differently, with
local touches (eg. store in CP has
ropes and chatai on walls and henna
pattern on the floor
• Source some coffee locally, offer
Indianised menu
Positioning Steps
1. Determine consumers’ perceptions and evaluation in relation to competitors’

2. Identify the markets’ ideal points and size

3. Identify competitors’ position

4. Determine consumer preferences

5. Select the position

6. Monitor the positioning strategy

Ask Yourself
Before WHAT IS WHAT IS THE
COMPETITOR’S
WHERE DO
YOU WANT TO
THE
Developing CURRENT
POSITION? BE?

The POSITION?
Positioning

HOW ARE YOU

GOING TO GET
THERE?
 Positioning

How is this What if you ate vegetables

Positioning? just because you liked them?

Green Giant for Business Wire via Getty Images

Positioning - Ikea
Ikea targets young furniture
buyers who want style at low
cost. Meets all their home
furnishing needs
 IBM told people to Apple said “Think
“Think” Different”

Apple &
IBM:
Not
Technically
Superior &
More
‘Easy to use’ operating system Expensive
favoured by right brain types
Computer
Most of the time we are talking about going into
customer’s mind and racking one adjective on to clients
 Safe
Jeep
Fast Rugged
BMW Volvo

 If
you ask most consumers to ‘position’ or rank those
brands in various categories, you’d probably find
some resistance to the rank that BMW is as safe as
Volvo, or that a Jeep can be as fast as a BMW or that a
Volvo can be as rugged as a Jeep. But not universally
believed.
 Once a position is established it takes a lot of effort to
change it.
 Volvos
are safe Porsches
are fast

Apple
computers Jeeps
are are
different rugged
Tata Ace Positioning
Innovation For Rural
Market
• The No 1 mini-truck with 65 per cent
market share, the Ace from the Tata
Motors 2-million-milestone since its
launch 12 years ago.
• The Ace platform since launch in 2005
has so far rolled out 15 variants, based
on engine type, engine power and body
configurations,
• Every third minute, an Ace targeted at
the last mile connectivity/delivery, has
given helped give birth to a new
business, or generated employment
Exercise
▪ Starbucks VIA® instant and micro ground coffee
provides the expertly roasted, uniquely delicious cup
of perfection from Starbucks - in an instant. It’s the
perfect solution to a rushed morning or a quick and
delicious cup when you only want one. Open a
packet, add hot water and right away you’ll be
savouring a cup just as smooth and well-balanced as
a cup of our freshly brewed coffee.

1. If Starbucks was a person, what would that person be

like? Describe his/her characteristics and interests.
 A Positioning Statement
❑ Apple Computers offers …. the best personal
computing experience to students, educators,
creative professionals and consumers around the
world through its innovative hardware, software and
Internet offerings.
❑ Positioning Statement
▪ Target Segment
▪ Point of Difference
▪ Frame of Reference
 Positioning
❑ A positioning statement defines the value proposition of
product to the target market.
❑ Target Market [For Whom]
▪ Point of Difference [Reason to Buy]
▪ Points of Parity [Frame of reference]
❑ Positioning is implemented through all elements of the
marketing mix: product, price, promotion, place.
❑ Should focus on a few key benefits [unique selling
proposition]
❑ Position must be defensible.
❑ Positioning requires making choices.
 Positioning Statement
Indicates how you want customers to think about
your product/ service /brand relative to competitors
(i.e., the position you want your brand to occupy in
the target market’s mind)
Writing a positioning statement :
“Among _[target market]_, _[x]_ is the brand of _[frame
of reference]_, that
_[point of difference]_ because _ [reason to believe]_.”

Example: “Among snackers, Snickers is the brand of

candy bar that satisfies your hunger because it is
packed with peanuts.”
 Positioning Statement
Target market for snackers: Busy people? Hungry people? Five- to 103-year-
olds? Chocolate lovers? The target market decision should be made prior to
developing a positioning statement,
Frame of reference: Reflects how the market in which your product
competes is defined- as a product category, a customer need. Several
options for Snickers. Is it:
▪ A candy bar?
▪ A chocolate candy bar? A chocolate, caramel, and peanut candy bar?
▪ A snack? A source of energy? An indulgence? Food? A meal?

Point of difference: The product must be different from competitors on one

or more dimensions that are meaningful to customers in the target market.
Ideally
▪ Specify the single most compelling and persuasive reason the target
customer would purchase the product over any other product
▪ This reason should be unique to the product
▪ That maintains the distinctiveness meaningful to customers- POP vs POD
 Hypothetical Bar Soap
Perceptual Map Without Labels.
• Brand D
4 • Brand G
7 • Brand H
• Brand E

5 2

• Brand F • Brand I
8
3

1
• Brand A
• Brand C (Dummy)
•Based on similarity judgments of brands. 6
•Bullets define each brand’s relative place in the space. • Brand B
•Numbered circles represent segments of customers with
similar “ideal” bars of soap
•Ideal point is at the center of the circle
•Size of the circle represents the relative size of the segments.
 Hypothetical Bar Soap
Perceptual Map With Labels.
High
• Brand D Moisturizing
4 • Brand G
7 • Brand H
• Brand E

5 2

• Brand F • Brand I
8
No Deodorant 3 Deodorant

(1) Brand A is the closest to the ideal

for the largest segment, 1
• Brand C (Dummy) • Brand A
(2) Segments 7 and 8 are probably 6
• Brand B
not being served well If Brand A targets segment 1 more precisely by
increasing the amount of moisturizer in Brand A,
(3) The competition for customers in segment Low and communicate that to customers, a subsequent
2 is heavier than in other segments, despite its Moisturizing map would reveal whether Brand A had moved
smaller size closer to segment 1.
 THE PITFALLS OF BRAND
POSITIONING
❑Co.’s try to build brand awareness before establishing a clear brand
position
▪ Eg. Fall of dotcom companies
❑Co.’s promote attributes that consumers don’t care about
▪ Eg. Analgesics claimed their brands were long lasting than others.
Consumers wanted faster relief
❑Position needs to keep competitors out, and not draw them in
❑Co.’s think they can reposition their brand, but this is difficult and
many times impossible
▪ Eg. Pepsi’s fresh youthful appeal has been a key branding
difference in its battle against Coke. But it has strayed from this
focus several times in the last 20 yrs
 POSITIONING OF A HOTEL :
Price
Ratio of rooms/ Expensive
employee Higher
service level
Grand
Regency PALACE

Shangri-La
High Moderate
Service Atlantic Service
Sheraton

Palace’s position in business traveler's Italia

mind Castle
1. Room price Alexander IV
Airport Plaza
2. Level of physical luxury Less Expensive
3. Level of personal service
4. Location
 POSITIONING OF A
LOCATION VS. PHYSICAL LUXURY

High Luxury

Most luxurious
Regency
Grand

Shangri-La
Sheraton
PALACE
Financial Shopping District Inner
District and Convention Centre Suburbs

Castle Italia
Alexander IV
Atlantic
Airport Plaza

Moderate Luxury
Positioning - Ikea
Ikea targets young furniture
buyers who want style at low
cost. Meets all their home
furnishing needs
Creating Value
DEVELOPING NEW PRODUCTS
Product Attains Different Levels
1.The Generic Product

2. The Branded
Product

3. The Differentiated
product

4. The Customised
Product

5. The Augmented
Product

6. The Potential Product

Tomorrow’s product carrying all
improvements that is possible under the
prevailing technological, economic and
competitive conditions
Product Attains Different Levels
1. The unbranded and undifferentiated commodity

2. Gets an identity through a name. Atta is a generic product whereas Aashirvad Attaa or Dhaktibhog Atta belong to
specific companies are branded

3. All branded products are supposed to be differentiated, in practice doesn’t happen that way. Some examples
Maggie noodles over other brands and Dettol soap on the basis of total protection against germs

4. Adapting to the requirements/ specifications of an individual customer. Levis is a mass market jeans, it sells
its brands like Signature and Denizen through its own showrooms. These days many companies are
resorting to customization

5. Result of voluntary improvement which enhances the value of the offer

Product Features vs Product Benefits
⚫ The GEL –Lyte 332 features four F.A.S.T (Featherweight, ASICS, Speed,
Technology) innovation to improve speed
Product Features Customer Benefits
F.A.S.T Drop™ Encourages Faster Running
F.A.S.T Heel™ Secure Fit
F.A.S.T Sole™ Enhances Durability
F.A.S.T Ride™ Enhances Platform Feel
Product/ Market

• The marketplace in which a final good or service is bought

and sold described in terms of customers real needs.
• A product market does not include trading in raw or other
intermediate materials
• Instead focuses on finished goods purchased by consumers,
businesses, the public sector and foreign buyers.
• Products are never developed in isolation
• Thus it is not product policy that is needed but product-
market policy
Marketing I Session 8
20-08-2020
Classification of Products
1. Consumer Products
2. Business Products
3. Service Products
PRODUCT TYPE IMPACTS MARKETING STRATEGY
⚫ Nature of buyer
⚫ Nature of use to which the product is put
⚫ Method of purchase
FMCG (Fast Moving Consumer Goods)
1. Hindustan Unilever Ltd.
2. ITC (Indian Tobacco Company)
3. Nestlé India
4. GCMMF (AMUL)
5. Dabur India
6. Asian Paints (India)
7. Cadbury India
8. Britannia Industries
9. Procter & Gamble Hygiene and Health Care
10.Marico Industries
 Consumer Durable Market Is Split Into Two Key
Segments

Consumer
Durables

Consumer Consumer
Electronics Appliances
(Brown Goods) (White Goods)

Audio & Video Washing Machines

Televisions Air conditioners
System Sewing Machines
CD/ DVD Refrigerators
Personal Computers Cleaning Equipment
Laptops Electric Fans
Digital Cameras Other Domestic
Electronic Accessories Microwave Ovens
Camcorders Appliances
PRODUCT MIX

⚫ Larger entity that denotes the complete set of all products offered for ale
by a company

⚫ Manufactured or traded by the same business house to reinforce their

presence in the market, increase market share and increase the turnover
for more profitability.
Product Mix & Product Line

⚫ A product line is a group of products within the product mix that are
closely related.

⚫ Eg., all the courses a university offers constitute its product mix; courses in
the marketing department constitute a product line; and the basic
marketing course is a product item.
 PRODUCT LINE EXTENSION

Product line extension is the use of an established product’s brand name for a new item
in the same product category.
Line Extensions occur when a company introduces additional items in the same product
category under the same brand name such as new flavors, forms, colors, added
ingredients, package sizes.
•Products for new demographic
Examples include •Products for new area
•Products at new price points
• BMW X1, BMW Z4, BMW 3 Series/ 7 Series •Products for new needs
• Surf, Surf Excel, Surf Excel Blue
• Splendour, Splendour Plus
• Coca-Cola, Diet Coke, Vanilla Coke
• Clinic All Clear, Clinic Plus
 Brand Extension
◼ Extending ongoing brand name to more products
◼ Line Extension – same product line
◼ Category Extension – related product line (brand extension)
◼ Outside Category Extension – unrelated product line (brand stretching)
Examples:
1. Titan SKINN Perfumes: Personal life-style segment
2. Parle Café Cuba: carbonated fizz drinks
3. Park Avenue Beer Shampoo
4. MTV Helmets
5. Dove Elixi : Hair oil
6. Woodland Skincare and Equipments
7. Dabur Real Milk Shakes
Product Line HUL
 Product Line & Product Mix of HUL
Product Mix Width
Product Line-1 Product Line-2 Product Line-3 Product Line-4
Bath Soap Fabric Wash Beverages Beauty Products
Dove Surf Bru Glow & Lovely
Lirin Brook Bond Red Label Lakme
Le Sancy Rin Wheel Lipton Green Label
Product Pears Sunlight 3 Roses Vaseline
Line Rexona Ala Taaza Aviance
Length Lifebuoy Deepam Ponds
Hamam
501 Taj Mahal
Breeze Super dust
Jai Ruby Dust
Moti AT
NESTLE
India
Brands
 Product Line And Product Mix Of Nestle

Instant Drink Instant Milk Culinary Chocolates Products for

Food Hotel Industry
Nescafe Cerelac Wheat Maggie Sauce Moulds Cold sauce used
as raw material
Nestea Cerelac Honey Maggie Soup Chocolate Line

Mylo Lactogen Maggie Noodle Kit Kat

Sunrise Ready Made

Masala
Tea bags for
vending machines Line Extension
 Value In Marketing- Few Examples
Rs.7000/-
Rs.40/- per kg
Stretching
Up
Rs.8/- per kg
Stretching
Stretching Down
Down

Rs.10/- per kg
Philips Home Stereo System (Rs.1200/-)
Marketing Strategies for
New Market Entries
KEY DECISION AREAS FOR INTRODUCTION OF A NEW PRODUCT

⚫ INNOVATION

⚫ NEW PRODUCT LINES

⚫ PRODUCT LINE EXTENSION

⚫ IMPROVEMENT OR CHANGES IN EXISTING PRODUCT

⚫ REPOSITIONING

⚫ COST REDUCTION
 New Market Entry – How New is New?
Greatest risk &
New product uncertainty
High lines 10%
Newness to the company

20% New-to-the
world products

Additions to Aids in cash flow

26% existing product
26% generation
Revisions/ lines
improvements to
existing products
11% 7%
Cost
reductions Repositioning
Low
Low High
Products need to be reinvented
from time to time Newness to the market
REPOSITIONING
Existing products that are targeted at new applications. Coca-Cola's position has
shifted to keep up with the changes in the market. The theme has evolved from
⚫ “Things go better with coke”
⚫ “It’s the real thing”
⚫ “Coke is it”
⚫ “Can’t beat the feeling”
⚫ “Catch the wave”
⚫ “Always new, always real, always you, always coke”
⚫ “Open happiness”
⚫ “Taste the feeling”
Current perspective is to reach a generation of young people and those young at
heart.
CORONAVIRUS: COKE, CHANGE
SLOGANS TO PROMOTE SOCIAL
DISTANCING
Image is of the letters
spread apart, with the tag
line saying “Staying apart is
the best way to stay
connected,”
Repositioning Examples
Tanishque - from custom Tata Nano-First time
wedding jewelry to social buyer to Smart city car
issues
 REPOSITIONING BRAND IMAGE

✗
REPLACED WITH

✓
VIBRANT ORANGE SUN RISING COMPETITIVE PRESSURE
FORCED BOB TO BREAK FREE FROM
THE IMAGES OF SLOTHNESS &
ORGINAL INEFFICIENCY WITH PUBLIC SECTOR

✓
BLUE LOGO BANKS

✓ ✓ DEPICTS
RELIABILITY

REPOSITIONS AS
OPEN, 8-to-8
TRANSPARENT & banking
EFFICIENT BANK EMPLOYEE PRESENTATIONS FOR CULTURE CHANGE- FIRST IN PUBLIC SECTOR BANKS
 Additions to existing lines 26%

Improvements/revisions 26%
Objectives
Attained By New product lines 20%
Successful New
Market Entries Cost reductions 11%

New-to-the world 10%

Repositions 7%
 Developing New Products
LEARNING OBJECTIVES

LO1
Identify the reasons firms create new
products.
LO2
Describe the different groups of adopters
articulated by the diffusion of innovation
theory.
LO3
Describe the various stages involved in
developing a new product or service.
LO4
Explain the product life cycle.
 3- D Printing
The 3D printing process builds a three-dimensional
object from a computer-aided design (CAD) model,
by successively adding material layer by layer

Fully 3D printers prices

automated have dropped
3-D Printed Shoe precipitously An eg.
With Custom Fit factories,
of costing in India
 Victoria secret fashion show

3-D Printing
The technology keeps improving, and
the machines seem poised to take
off.

Massive wings represented a creative

innovation, if produced with
traditional methods, the weight
wouldn’t have allowed to carry them
down the runway.
 Changing
Customer
Needs

Improving Market
A new product can be Business WHY DO Saturation
Relationships
anything from a slight FIRMS
redesign to new-to- CREATE NEW
PRODUCTS?
the-world offerings.

Fashion Managing
Risk through
Cycles Diversity
 Why Do Firms Create New Products?
⚫ New market offerings provide value to both
firms and customers

⚫ Completely new-to-the-market product

represents <than 10% of all new products
introduced

⚫ Degree of newness or innovativeness is a

continuum as W-fi was a few years ago- to
slightly repositioned
 Canadian firm
Parents and toddlers
Frogbox rents out
often struggled to
reusable plastic
change nappies.
moving boxes
Slip-on helps make
Delivers and picks
the change a fun
them up from
game
customers

CHANGING CUSTOMER NEEDS

When they add products processes and

services firms can create and deliver value
more effectively
 MANAGING RISK
THROUGH DIVERSITY
MARKET SATURATION

• Through innovation firms create
broader portfolio of products,
helping them diversify their risks
• The longer a product exists in the market,
more likely it will become saturated.
• Value of the firm ultimately declines

Balaji Wafers-
Rs.2000 cr
company. Pepsi
is planning to
buy stakes
• Car makers look for an edge above and
under the hood. Cadillax ATS Sedan, BMW 3
3M demand that a specific %age of sales Series, Toyota Prius, MG Hector- The Internet Car
each year must come from new products
• General Mills-Eliminating Gluten from diets
 IMPROVING BUSINESS
RELATIONSHIPS
FASHION CYCLES

• New products do not always target end • Industries like apparel, arts, books,
consumers: sometimes they function to software markets most sales comes from
improve relationships with suppliers new products
• Kraft maker of Capri Sun lemonade flavor
was selling poorly Keebler is the
second largest
• Market research revealed reason was the cookie and cracker
placement of the packages in pallets manufacturer in
• By changing and innovating the pallet the US offers many
Kraft offered chimney stacks for each flavor variations
• Sales improved 162%

Video games are “fashionable”

because consumers demand new
versions
 Fashion Cycles

Industries that rely on fashion trends and

experience short product life cycles- including
apparel, arts, books, and software markets.
Video games are “fashionable”
because consumers demand new
versions
Fashion Cycles
 Industries that rely on
fashion trends and
experience short product
life cycles- including
apparel, arts, books, and
software markets.
 Eg. Motion pictures
generates most of its
theatre, DVD, cable TV
revenue within one tear of
release
Improving Business Relationships
⚫ New products do not always target end consumers, sometimes they
function to improve relationships with suppliers.

⚫ Kraft maker of Capri Sun found that its lemon flavoured was selling poorly.

⚫ With little market research it realised the reason was the placement of the
packages in pallets. Because it was at the bottom of the stack in pallets.

⚫ By changing and innovation its pallet, Kraft offered chimney stacks for each
flavour enabling the retail stockist to reach whichever flavour they needed.

⚫ Sales improved by 162%

CHECK YOURSELF
1. What are the reasons firms innovate?
 Porters Generic Strategy
STRATEGIC ADVANTAGE
Position of low cost Uniqueness perceived by
the customer

COST LEADERSHIP DIFFERENTIATION

Broad
COMPETITIVE SITUATION

(The whole
sector)

Reduced
(Only one
segment) FOCUS OR NARROW SEGMENTATION
Two basic ways: Porters Generic Strategy
-Productivity.
-Economies of scale & STRATEGIC ADVANTAGE
learning/ experience.
Position of low cost Exclusivity perceived by
-Reducing cost of entire the customer
range of products not just
one product
COST LEADERSHIP DIFFERENTIATION
-Not inferior quality at Where would
cheaper price Broad
(The whole Hidesign, Body Shop,
COMPETITIVE SITUATION

sector) Coke, Hero Honda,

Asian Paints, HUL,
Nike shoes, Apple
Barbie
Doll Computer be?

Reduced FOCUS OR NARROW SEGMENTATION

(Only one
segment)
 A NICHE STRATEGY WITHIN A DECLINING
INDUSTRY

“Cassettes linger long after Leading on-line stores for

expected demise” people with allergies
New Market Entry – How New is New?
Greatest risk &
New product uncertainty
High lines 10%
Newness to the company

20% New-to-the
world products

Additions to Aids in cash flow

26% existing product
26%
lines generation
Revisions/
improvements to
existing products
11% 7%
Cost
reductions Repositioning
Low
Low High
Products need to be reinvented Newness to the market
from time to time
Product Change Options after Competitive Tear Down

No excuse We are
We Closer
•Value more
more examination
engineer expensive
expensive •Reconsider
•Switch to price or
competitor’s promotion
parts •Value-engineer
We areWe are We are
We are
inferior
inferior betterbetter

Cover it up We are Leave it

We are
•Upgrade cheaper alone
cheaper
•No change
 Types of New Market Entries for Different Strategic
Objectives
Objective
Maintain position as a product
innovator
Defend a current market share position
Establish a foothold in a future new
market; preempt a market segment
Exploit technology in a new way
Capitalize on distribution strengths
Provide a cash generator
Use excess or off-season capacity
New Entry
New-to-the world products; improvement or revision to
existing products
Improvement or revision to existing products; (Active
Wheel)additions to existing product line; cost reductions
New-to-the world products; additions to existing product line;
additions to or revision to existing product line
New-to-the world products; new product line; additions to or
revisions of existing product line
New-to-the world products; new product line; additions to or
revision to existing product line
Additions to or revisions of existing product line;
repositioning; cost reductions
New-to-the world product; new product line 8-81
 Discussion Question

Key question: Is it better to be a market pioneer or

follower ?

Microsoft Word, Excel, Power Point was not

Pioneers but Followers of Lotus 123 & Word Perfect
 Potential Competitive Advantage of Pioneer
and Follower Strategies
Pioneer Follower
First choice of market segment and position Ability to take advantage of pioneer’s positioning mistake

Pioneer defines the rule of the game Ability to take advantage of pioneer’s product mistake

Distribution advantage Ability to take advantage of pioneer’s marketing mistake

Economies of scale and experience (price Ability to take advantage of pioneer’s limited resources
advantage by exploiting the experience curve)
High switching cost for early adopters Ability to take advantage of latest technology
(industrial products)
Possibility of preempting scarce resources

8-83
Market Entry Strategy
Market Entry Stage

Late Entrant
Fast Follower
Pioneer

0% 5% 10% 15% 20% 25% 30% 35%

Average Market Share
 Successful Pioneers and Followers
Pioneer
McDonalds
• Aggressively built on the foundation •
of early advantage
• Although it started small, it used the
franchisee distribution system to
rapidly expand the no. of
McDonald’s outlet with minimum
cash investment
• Heavy advertising and product line •
expansion aimed at specific market
segments have helped maintain a
commanding market share
Follower
Proctor & Gamble
Well established brand name, superior
advertising and promotional resources the
company was able to quickly take the
market share lead away from pioneer
Minnetonka Inc in the plaque fighting
toothpaste market with a reformed
version of Crest
Leapfrogged the pioneer with superior
➢ Product technology
➢ Product quality