Developing Marketing Strategy for undergrad students

Developing Marketing Strategies for business

1. DEVELOPING MARKETING
STRATEGY
Product Life-Cycle Strategies and Designing Marketing Strategies for
Market Leaders, Challengers, Followers and Nichers
Objective: finding and developing new products and managing them successfully over their life
cycle.
CRISTOPHER M. CAHAYON

2. New-Product
Development Strategy
Because of the rapid changes in consumer tastes,
technology, and competition, companies must
develop new products and services. A firm can
obtain new products in two ways;
•acquisition; buying a whole company, a patent,
or a license.
•new-product development; developing original
products, product improvements, product
modification, and new brands

3. New-product
Development Process
In order to find and develop successful products, the
marketers must go through the following stages;
•idea generation
•idea screening
•concept development and testing
•marketing strategy
•business analysis
•product development
•test marketing
•commercialization

4. Idea Generation
•New product development starts with idea generation
-the systematic search for new-product ideas.
•Major sources of new-product ideas include (1)
internal sources -research & development
department, executives, salespeople; (2) customers;
(3) competitors; (4) distributors and suppliers; (5)
others -trade magazines, seminars, government
agencies, new-product consultants, marketing
research firms, universities, inventors.

5. Idea Screening
•Idea screening reduces the number of new ideas by
screening new-product ideas in order to spot good
ideas and drop poor ones as soon as possible.
•In idea screening, market size, product price,
development time and costs, production costs, rate of
return and type of customers are put into
consideration.

6. Concept Development
and Testing
An attractive idea must be developed into a product concept.
•Concept Development; is a detailed version of the
new-product idea stated in meaningful consumer
terms. Several concepts can be developed for a
product idea e.g. the idea of developing an electric
car may be created in the following product concepts
-(1) an inexpensive family car; (2) a medium cost
sporty car for young people; (3) an inexpensive

7. car for conscious people who look for basic
transportation, low fuel cost, and low pollution.
The marketer must test these alternatives.
•Concept Testing; involves testing new-product
concepts with target consumers before turning the
new ideas into actual new products. The concepts
may be presented to consumers symbolically or
physically. After being exposed to the concept,
consumers may be asked to tell their opinions. The
answers will help the company decide which
concept has the strongest appeal.

8. Marketing Strategy
Development
•After all the concepts are tested, the company must develop the
initial marketing strategyto introduce the best concept to the
market.
•At this stage, the marketing strategy consists of three parts;
•the first part; describes the (1) target market, (2) the planned
product positioning, and (3) the sales, market share and profit
goals for the first year.
•the second part; outlines the product’s planned (1) price, (2)
distribution, and (3) marketing budget for the first year.
•the third part; describes the planned long-run (1) sales, (2)
profit goals, and (3) marketing mix strategy.

9. Business Analysis
•Once the product concept and the marketing
strategy is decided, the marketer should evaluate
the business attractiveness of the proposal.
•Business analysisinvolves the projections for the
sales (by looking at the sales history of similar
products and getting the market opinion), costs (by
looking at the forecastedsales figures), and profit
for the new product to find out whether they satisfy
the company’s objectives. If they do, the product
can move to the product-development stage.

10. Product Development
•Here, the product concept is developed into a physical
product (prototype) to understand whether the product
idea can be turned into a workable product.
•Prototypes are tested under laboratory and field
conditions to make sure that the product performs safely
and effectively.

11. Test Marketing
•After the prototype is tested under the laboratory and
field conditions, the next stage is testing the product
under more realistic market settings.
•Test marketing allows the company to test the product
and its marketing program (e.g. positioning strategy,
advertising, pricing, distribution, branding, packaging,
budget) before going into the full introduction.
•When introducing a new product requires a big
investment, or when management is not sure of the
product or marketing program, the companies do a lot
of test marketing.

12. Commercialization
•Commercialization is the introduction of a new product
into the market.
•At this stage, the company may need to spend between
Php10 million and Php100 million for advertising and
sales promotion in the first year.
•Here, the company should decide when and where the
product will be introduced.

13. Product Life-Cycle
Strategies
•After launching a new product, management
wants it to enjoy a long and happy life, although
it does not expect the product to sell forever.
•The product life cycle (PLC) is the course that a
product’s sales and profits take over its lifetime.
It has five stages;
1. Product developmentbegins when the company
develops a new-product idea. During product
development, sales are zero and the company’s
investment costs mount.

14. 2. Introductionis a period of slow sales growth as the
product enters in the market. Profits are nonexistent in
this stage because of the heavy expenses of product
introduction.
3. Growthis a period of rapid market acceptance and
increasing profits.
4. Maturityis a period of slowdown in sales growth
because the product has achieved acceptance by most
potential buyers. Profits level off or decline because of
increased marketing outlays to defend the product
against competition.
5. Declineis the period when sales fall off and profits drop.

15. Product Life-Cycle
Sales and
profits ($)
Sales
Profits
Product Introduction Growth Maturity Decline
Losses/ develop-
invest- ment Time
ment stage

16. •The PLC concept is used by the marketers to forecast
product performance or to develop marketing
strategies.
•But all products do not follow the PLC in the same
way. Some products are introduced and die quickly;
others stay in the maturity stage for a long time. Some
enter the decline stage and are then cycled back into
the growth stage through strong promotion or
repositioning.
•The major drawbacks of this cycle is that it is difficult
(1) to identify which stage of the PLC the product is
in, (2) to determine the factors that affect the product’s
movement through the stages, to forecast the (3) sales
level at each PLC stage, (4) the length of each stage,
(5) the shape of the PLC curve.

17. Introduction Stage
•The introduction stage starts when the new product
is first launched.
•Here, sales growth is slow, profits are negative or
low, because of low sales and high distribution and
promotion expenses.
•Promotion spending is high to inform consumers
of the new product and get them to try it.
•The company and its competitors produce the basic
versions of the product because the market is not
ready for the different versions of the product yet.

18. •The introduction stage strategies are;
•Rapid-skimming strategy(high price/high promotion);
here the company targets the “cream” of the buyers
(buyers with high income) so the price of the new
product or service is set high. When the company wants
to attract these people rapidly (quickly), it heavily
promotes the product.
•Slow-skimming strategy(high price/low promotion);
the difference between slow-and rapid-skimming is in
the amount spent on promotion. Here less money is
spent on promotion.
•Rapid-penetration(low price/high promotion); the
price level is the key difference between penetration and
skimming strategies. When the market is price sensitive,
penetration is a better strategy. In penetration, prices are
set low to capture as many buyers as possible. When
most of the potential buyers

19. are unaware of theproduct, they use heavy promotion.
Here the risk is attracting heavy competition because a
lot of companies may like to copy.
•Slow-penetration strategy(low price/low promotion);
here the new product or service is introduced at a low
price with a low level of promotion. Again, the
potential market is large and price sensitive but aware of
the new service or product that is why, the level of
promotion is low.

20. Growth Stage
•If the new product satisfies the market, it will enter a
growth stage, in which sales climb quickly.
•Early adopters buy the product.
•New competitors enter the market when they are
attracted by the opportunities for profit. They
introduce new product features so the market
expands.
•Sales increase, prices remain the same or fall slightly,
promotional spending stays the same or increase
slightly.

21. •Profits increase as promotion costs are spread over
a large volume (sales) and as unit production costs
fall.
•The growth stage strategies are;
•improving product quality and adding new product
features and models
•entering into the new market segments
•entering into the new distribution channels
•shifting some advertising from building product
awareness to building product conviction and purchase
•lowering prices at the right time to attract more buyers
in order to sustain its rapid growth and meet
competition.

22. •By spending a lot of money on product
improvement, promotion, and distribution, the
company can gain a dominant position in the
market but, as a result of this, it gives up maximum
current profit and hopes to make it in the next
stage.

23. Maturity Stage
•At some point, a product’s sales growth will slow
down, and the product will enter a maturity stage
which lasts longer than the previous stages.
•Here, competition is greater because of the
overcapacity. They drop their prices, increase
advertising and sales promotions, and increase their
R&D budgets to find better products. As a result,
profits decrease, weaker competitors leave the
market and only the well-established competitors
remain.

24. •The product managers should consider modifying
their market, product and marketing mix rather
than defending their product. The maturity stage
strategies are;
•In modifying the market, the company looks for new
users and market segments e.g. Johnson & Johnson Baby
Shampoo is marketed to adults + looks for ways to
increase usage among present customers e.g. “Suticin
Suticirin” campaign of MisSut. Or the company may
want to reposition the brand to appeal to a larger or
faster-growing segment.
•Or the company may try modifying the productby
changing its product’s features, quality or style to attract
new users e.g. Sony adds new styles and features to its
Walkman and Discman lines, Algidaadds new flavors
and ingredients to its current products, Burger King
introduces its new Fish Burgers or car

25. manufacturers restyle their cars to attract buyers who
want a new look.
•Or the company can try modifying the marketing mix
by changing one or more marketing mix elements to
improve sales. They can cut prices to attract new users
and competitors’ customers. They can launch a better
advertising campaign or use heavy sales promotions. The
company can also move into larger market channels -
mass merchandisers. Or the company can offer new or
improved services to buyers.

26. Decline Stage
•Most product forms and brands’ sales decline.
•Here, the sales may become zero suddenly or may
drop to a low level where they continue for many
years.
•As sales and profits decline, firms withdraw from the
market.
•The remaining companies prune their product
offerings, drop smaller segments or channels, cut the
promotion budget or reduce their prices further.

27. •Here,thecompanyshoulddecidewhetherto
maintain,harvest,ordropitsproductinthedecline
stage.
•Managementmaydecidetomaintainitsbrandwithout
changingitinthehopethatthecompetitorswouldleave
themarket.Ormanagementmaydecidetorepositionthe
brandinthehopeofmovingitbackintothegrowthstage
oftheproductlifecycle.
•Managementmaydecidetoharvesttheproductby
reducingcosts(equipment,advertising,salesforce)
hopingthatsaleswillremain.
•Orthemanagementmaydecidetodroptheproduct
fromthelinebysellingittoanotherfirmorsimply
liquidateitatsalvagevalue.

28. Designing Marketing Strategies
for Market Leaders, Challengers,
Followers and Nichers
Market Leader Strategy
Market Challenger Strategy
Market Follower Strategy
Market NicherStrategy

29. Market Leader Strategy
•Amarketleaderhasaconsiderablemarketshare,asignificant
presenceintheindustryandisacknowledgeastheleaderby
otherfirmsintheindustry.
•Amarketleaderhastoconstantlyguarditselffromother
competingfirmsastheywillalwaystrytoattacktheleaderat
itsweakspotorchallengeitinitsstrongarea.
•Themarketleadercanadoptcertainstrategiestoremainin
thatpositionbyexpandingthemarketareawithnewproducts
orbyextendingthecurrentproductsinthenewmarkets.Itcan
alsoshowitscustomersthebenefitsofincreasingtheusageof
theproduct.

30. Market Challenger Strategy
•Themarketchallengerarethosefirmwhichoccupythe
second,thirdorfourthpositionsinthemarket
•Thefirmwhichisinthesecondpositioncanbestadopthe
strategyofoffensiveattackagainstthemarketleadertograba
marketshare.
•Thechallengercanattackfirmsofitsowncapacity;itcanalso
attackvulnerableareasoftheleader,butitshouldhave
sufficientresourcestosustaintheattack,oritcanattackthe
leaderinitsweakspotandtrytoleveragethemaximum
marketsharebysuchanattack.

31. Market Challenger Strategy
•Thereisanotherstrategywherebythechallengercanattackits
competitorsbyofferingthemarketallthebenefitsand
featuresandallotherfacilitiesprovidedbyitscompetitors.
Thisstrategyworkswhenthefirmhassuperiorresourcesto
sustainsuchanattack.
•Thechallengercandirectlyattackitscompetitorsbyentering
intothosemarketswherethecompetitorsdonothavea
presence.

32. Market Follower Strategy
•Marketfollowersprefertofollowtheleaderratherthanattack
it.Mostfollowerfirmsmanufactureproductleveragingonthe
productinnovationsofthemarketleaders.
•Ifthefollowerattacksthemarketleaderwiththesamequality
offeringsandatthesameprice,itmighthavetofacesevere
attacksfromthemarketleader.
•So,unlessthefollowerfirmhassomestrongpointinits
armor,itwillnotdareattackthemarketleader.

33. Market Nicher Strategy
•Companiesfollowingthenichestrategiesdonotliketoattack
themarketleaderandtherefore,operateinasmallsegmentof
themarketinwhichtheleaderisnotinterested.
•Anichemarketerusuallyfocusesallhisresourcesto
efficientlyserveasmallmarketsegmentandthusgainsthe
loyaltyofcustomersinthesegment.
•Thenichemarketerthentriestoensurethatcustomersinthe
segmentremainloyaltoit.Itincreasesitseffortswith
increasedfocusandattention.

34. References
•Colin Gilligan and Richard M.S. Wilson, Copyright ©
1990, Strategic Marketing Planning
•Yodhia Antarksa, August 04, 2007, Creating An Effective
Marketing Plan,
http://www.slideshare.net/nusantara99/marketing-plan-
86963?related=1