UNIT – IV

MARKETING STRATEGY PREPARATION

 Marketing strategy
• Marketing strategy is the complete and unbeatable
plan designed specifically for attaining the
marketing objectives of the firm. The marketing
objectives indicate what the firm wants to achieve;
the marketing strategy provides the design for
achieving them. It is the marketing strategy that
decides the success at the business unit level, which
in turn decides the total corporation’s success. The
linkage between marketing strategy and overall
corporate success is indeed direct and vital.
 DIFFERENT MARKETING STRATEGIES:
A. MARKET-LEADER STRATEGIES:
• Many industries contain firm that is the acknowledged
market leader. This firm has the largest market share in the
relevant product market. It usually leads the other firms in
price changes, new-product introductions, distribution
coverage, and promotional intensity. The leader may or may
not be admired or respected, but other firms acknowledge its
dominance. The leader is an orientation point for
competitors, companies to challenge, imitate, or avoid.
Unless a dominant firm enjoys a legal monopoly, its life is not
altogether easy. It must maintain constant vigilance because
other firms keep challenging its strengths or trying to take
advantage of its weaknesses. The market leader can easily
miss a turn in the road and fall into second or third place. A
product innovation may come along and hurt the leader.
Dominant firms want to remain number one.
• 1) EXPANDING THE TOTAL MARKET DEMAND:
• In general, the market leader should look for new users, new uses, and
more usage of its products to expand its market demand.
• · New users:
• Every product class has the potential of attracting buyers who are
unaware of the product or who are resisting it because of its price or lack of
certain features. A manufacturer can search for new users among three
groups: those who might use it but do not use (market-penetration
strategy), those who have never used it (new market segment strategy), or
those who live elsewhere (geographical-expansion strategy).
• · New uses:
• Markets can be expanded through discovering and promoting new
uses for the product. In many cases, customers deserve credit for
discovering new uses. Vaseline petroleum jelly started out as a lubricant in
machine shops. Over the years, consumers have reported many new uses
for the product, including use as a skin ointment, a healing agent, and a hair
dressing. The company’s task is to monitor consumer’s uses of the product.
This applies to industrial products as well as consumer products.
• · More usage:
• A third expansion strategy is to convince people to use more of the
product on every occasion. If a cereal manufacturer convinces consumers
to eat a full bowl of cereal instead of half a bowl, total sales will increase.
• 2) DEFEND THE CURRENT MARKET SHARE:
While trying to expand total market size, the
dominant firm must continuously defend its current
business against rival attacks.
Position Defense:
The most basic idea of defense is to build a secure
fortification around one’s territory. Position
defense involves building superior brand power and
making the brand almost unconquerable.
Flank/side Defense:
The market leader should not only guard its
territory but also stiff outposts to protect a weak
front or possibly serve as an attack base for
counterattacking.
• Preventative Defense:
A more aggressive defense plan is to launch an attack on the
enemy before the enemy starts its offense against the leader.
A company can launch a preventative defense in several
ways. It can take Guerrilla action across the market i.e. hitting
one competitor here another there and keep every one off
balance. State Bank of India’s 13,500 (9,500 its own and
4,000 of associate banks’) nationwide branches and more
than 7,700 ATM’s network along with its aggressive future
expansion plans send strong signals to competitors.
• Marketers can introduce new products, making sure to
precede them with pre-announcements, i.e. deliberate
communication regarding future actions. Pre-announcement
can signal to competitors that they will need to fight to gain
market share. If Microsoft announces plans for a new product
development, smaller firms may choose to concentrate their
development efforts in other directions to avoid head to
head competition.
• Counter Offensive Defense:
• Most market leaders, when attacked, will respond
with a counterattack. The leader cannot remain
passive in the face of a competitor’s price cut,
promotion attack, product improvement, or sales-
territory invasion. An effective counterattack is to
invade the attacker’s main territory so that it will
have to deploy resources to defend it.
• Mobile Defense:
In mobile defense, the leader stretches its domain
over new territories that can serve as future centers
for defense and offense. It spreads to new
territories . Market broadening shifts focus from the
current product to the underlying generic needs.
Thus “petroleum” companies such as BP required to
recast themselves into “energy” companies. This
change demanded that they put their research
fingers into the oil, coal, nuclear, hydroelectric, and
chemical industries.
• Market diversification involves shifting into
unrelated industries. ITC Ltd. faced with growing
concerns over the ill-effects of the smoking and the
ban on smoking cigarettes in many places, moved
quickly into processed food, and garments and so
on.
Contraction Defense:
Large companies sometimes recognize that they
can no longer defend all of their territory. The best
course of action then appears to be planned
contraction (also called strategic withdrawal): giving
up the weaker territories and reassigning resources
to stronger territories. P&G India decided to
withdraw brands like the upper Super Soaker from
the detergent market to improve its focus and
profitability.
• 3) INCREASE THE MARKET SHARE:
Market leaders can improve their profitability by
increasing their market share. increased market
share in their served market will automatically
improve their profitability. Companies Much
depends on their strategy for increased market
share , Because the cost of targeting higher market
share may far exceed its revenue value, the
company should consider three factors before
pursuing increased market share.
• The possibility of provoking anti trust action:
Jealous competitors are likely to cry “monopoly” if
a dominant firm makes further inroads on market
share. This rise in risk would cut down the
attractiveness of pushing market share gains too
far. Microsoft and Intel are examples of companies
that have faced great security for their market
leadership.
• Economic cost:
Profitability might fall with further market share
gains after some level. The cost of gaining further
market share might exceed the value. The
“holdout” customers may dislike the company, be
loyal to competitive suppliers, have unique needs
or prefer dealing with smaller suppliers. And cost of
legal work, public relations and lobbying rises with
market share. Some market leaders have even
increased their profitability by selectively
decreasing their market share.
• The effect of increased market share on actual and
perceived quality:
Too many customers can put a strain on the firm’s
resources, hurting product value and service
delivery. Customers may also infer that “bigger is
not better”. For example, America Online
experienced growing pains when its customer base
expanded, resulting in system outages and access
problems.
• B. MARKET –CHALLENGER STRATEGIES:
Firms that occupy second, third, and lower ranks in
an industry are often called runner-up, or trailing
firms. These runner-up firms can adopt a strategy of
attacking the leader and other competitors in an
aggressive bid for further market share. Thus, such
firms are known as market challengers. We will now
examine the competitive attack strategies available
to market challengers.
• 1) DEFINING THE STRATEGIC OBJECTIVE AND
OPPONENTS:
• A market challenger must first define its strategic
objective. Most aim to increase the market share. The
challenger must decide whom to attack.
Can attack the market leader:
• This is a high risk but potentially high pay off strategy
and makes good sense if the leader is not serving the
market well. An alternative strategy is to out- innovate the
leader across the whole segment. For example, Xerox
squeezed the copy market from 3M by developing a better
copying process. Later, Canon grabbed a large chunk of
Xerox’s market by introducing desk copier.
• Can attack the firms of its own size that are
underfinanced or not doing the job well:
Those firms who have aging products, are charging
excessive prices or are not satisfying customers in
other ways can be attacked by the challenger.
• Can attack small, local or regional firms:
Firms can attack the small, local or regional firms to
increase the size of their own firm. Several major
banks grew to their present size by eating up
smaller regional banks.
• 2) CHOOSING A GENERAL ATTACK STRATEGY:
. Frontal Attack:
In a pure frontal attack, attacker marches its
opponent’s product, advertising, price and
distribution. A modified frontal attack, such as
cutting price, can work if the market leader doesn’t
retaliate and if the competitor convinces the
market that its product is equal to the leader’s
product. Amul is a master at convincing the market
that its brands- such as Amul Kool and Amul Masti
Dahi-are equal in quality than the higher priced
brands.
• Flank Attack:
• An enemy’s weak spots are natural targets. A flank attack
can be directed along two strategic dimensions-
geographical and segmental. In a geographical attack, the
challenger spots areas where the opponent is under
performing. For example, LG has successfully out flanked
earlier market leaders in the cooler-television market in
India by designing and launching small town or rural
specific . Products like Sampoorna. The other flanking
strategy is to serve uncovered market needs not being
served by the leaders. A flanking strategy is another name
for identifying shifts in the market segments
• that are causing gaps and then rushing in to fill
the gap and develop them into a strong segment.
• Encirclement Attack:
• The encirclement plan is an attempt to capture a wide slice
of the enemy’s territory through a bombard. It means
launching a grand offensive on several fronts, so that the
enemy must protect its front, sides, and rear
simultaneously. Encirclement makes sense when the
challenger commands superior resources and believes that
a swift encirclement will break the opponent’s will. In
making a stand against Microsoft, Sun Microsystems
licensed its Java software to hundreds of companies and
million of software developers for all sort of computer
devices. As consumer electronics products began to go
digital, Java started appearing in a wide range of gadgets.
• Bypass Attack:
• The bypass is the most indirect attack strategies. It means bypassing
the enemy altogether and attacking easier markets to broaden firm’s
resources base. This strategy offers three lines of approach:
diversifying into unrelated products, diversifying into geographical
markets, and leapfrogging into new technologies to replace existing
products.
• For example, Pepsi has used a bypass strategy against Coke by: (i)
aggressively rolling out Aquafina bottled water nationally in 1997
before Coke launched its Dasani brand;
• (ii) purchasing orange juice giant Tropicana for $3.3 billion in 1998,
which owned almost twice the market share of Coca Cola’s Minute
Maid, etc. Technological leapfrogging is a bypass strategy practiced in
high-tech industries.
• In this the challenger patiently researches and develops the next
technology and launches an attack. For example, challenger Google
used technological leapfrogging to overtake Yahoo! and become the
market leader in search.
• Guerilla Warfare Attack:
• Guerrilla Warfare /fighting consists of waging small,
irregular attacks on an opponent’s different
territories. The aim is to harass and demoralize the
opponent and eventually secure permanent grip.
The guerrilla challenger uses both conventional and
unconventional means to attack the opponent.
These include selective price cuts, intense
promotional blitzes, and occasional legal actions.
However, Guerrilla marketing must not cross lines
of legality or morality.
• 3) CHOOSING A SPECIFIC ATTACK STRATEGY:
• Price-discount strategy:
The challenger can sell a comparable product at a lower price. This is
the essential strategy of discount retailers, such as Big Bazaar. For a
price-discount strategy to work, three conditions must be fulfilled.
First, the challenger must convince buyers that its product and
service are comparable to the leaders. Second the buyers must be
sensitive to the price difference and feel comfortable about shifting
their suppliers. Third, the market leader must refuse to cut its price
in spite of the competitor’s attack.
• Cheaper- goods strategy:
The challenger can offer an average or low-quality product at a much
lower price. For example, Chinese soft toys and mobiles. This strategy
works when there is a sufficient segment of buyers who are
interested only in price.
• Prestige-goods strategy:
A market challenger can launch a higher-quality product
and charge a higher price than the leader. Mercedes gained
on Cadillac in the U.S. market by offering a car of higher
quality and higher price.
• Product-proliferation strategy:
The challenger can attack the leader by launching a large
variety in products, thus giving buyers more choice.
• Product innovation strategy:
The challenger might pursue product innovation to attack
the leader’s position. The public often gains most from
challenger strategies oriented toward product innovation.
• Improved services strategy:The challenger can try to offer new or
better customer service. For example, Avis’s famous attack on Hertz.
“We’re only second. We try harder,” was based on promising and
delivering cleaner cars and faster service than Hertz.
• Distribution-innovation strategy:
• A challenger might discover or develop a new channel of distribution.
Avon became a major cosmetics company by perfecting door-to-door
selling instead of battling other cosmetic firms in conventional stores.
• Manufacturer cost-reduction strategy:
The challenger might pursue lower manufacturing costs than its
competitors through more efficient purchasing, lower labour costs,
and more modern production equipment. The company can use its
lower costs to price more aggressively to gain market share. This
strategy has been adopted by Japanese invasion of world markets.
• Intensive advertising promotion:
Some challengers attack the leader by increasing
their expenditures on advertising and promotion.
Substantial promotional spending, however, is
usually not a sensible strategy unless the
challenger’s product or advertising message
exhibits superiority over competition.
• C. MARKET-FOLLOWER STRATEGIES:
• Some years ago, Theodore Levitt wrote an article titled
“Innovation Imitation”, in which he argued that a strategy of
product imitation might be as profitable as a strategy of
product innovation. An innovator, such as Sony, bears the
huge expense of developing new products, getting them into
distribution, and informing and educating the market. The
reward for all this work and risk is normally market
leadership. However, other firms can copy or improve on the
new products. For example, Panasonic rarely innovates.
Rather, it copies Sony’s new products and sells them at lower
prices. Panasonic turns a higher profit than Sony because it
did not bear the innovation and education expense. Sony
regards Panasonic as a bitter enemy.
• Four broad follower-ship strategies can be distinguished:
• Counterfeiter:
• The counterfeiter duplicates the leader’s product and
package and sells it on the black market or though
disreputable dealers. Firms such as Apple Computer
and Rolex are infected with the counterfeiter problem,
especially in the Far East and are seeking ways to
defeat counterfeiters.
• Cloner:
• The cloner copies the leader’s products, distribution,
advertising, and so on with slight variations. The
cloner’s product and packaging may resembles the
leader’s while the brand name might be slightly
different, such as “Coke Cola” instead of “Coca Cola”
• Imitator:
The imitator copies some things from the leader but
maintains differentiation in terms of packaging,
advertising, pricing, and so on. The leader doesn’t
mind the imitator as long as the imitator doesn’t
attack the leader aggressively. The imitator even
helps the leader avoid the charge of monopoly.
• Adapter:
The adapter takes the leader’s products and adapts
or improves them. The adapter may choose to sell
to different markets to avoid direct confrontation
with the leader. But often the adapter grows into
the future challengers.
• D. MARKET-NICHER STRATEGIES:
• An alternative to being a follower in a large market is to be
a leader in a small market, or niche. Smaller firms normally
avoid competing with larger firms by targeting small
markets of little or no interest to the larger firms. Firms
with low shares of the total market can be highly
profitable through smart niching. A marketing research
company found that virtually all companies who were
nichers were very profitable. The main reason is that the
market nichers end up knowing the target customers so
well that it meets their needs better than other firms that
are selling to this niche casually. As a result, the nicher
can charge a substantial markup over costs because of the
prescribed added
• NICHE SPECIALIZATION
• The key idea in niche is specialization. The following specialist
roles are open to nichers:
• End-user specialist: The firm specializes in serving one type of
end-use customer. For example, a law firm can specialize in the
criminal, civil, or business law markets.
• Vertical-Level specialist: The firm specializes at some vertical
level of the production-distribution value chain. For example, a
copper firm may concentrate on producing raw copper, copper
components, or finished copper products.
• Customers-size specialist: The firm concentrates on
selling to either small or medium-size or large
customers. Many nichers specialize in serving small
customers who are neglected by the majors.
• Specific-customers specialist: The firm limits its
selling to one or a few major customers. Many firms
sell their entire output to a single company.
• Geographic specialist: The firm sells only in a certain
locality, region, or area of the world.
• Product or product line specialist: The firm carries
or produces only one product or product line. For
example, a firm may specialize in producing lenses
for microscopes. A retailer may carry only ties or
socks.
• Product feature specialist: The firm specializes in
producing a certain type of product feature.
• Quality/price specialist: The firm operates at the low-or-
high quality ends of the market. For example, Hewlett
Packard specializes in the high-quality, high price end of the
market.
• Service Specialist: The firm offers one or more services not
available from other firms. An example would be a bank
that takes loan requests over the phone and hand delivers
the money to the consumers.
• Channel specialist: The firm specializes in serving only one
channel of distribution. For example, a soft-drink company
decides to make a very large-size soft drink available only
at gas stations.
• FORMULATING THE MARKETING STRATEGY :