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8
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Marketing Strategies
for
New Market Entries

McGraw-Hill/Irwin Copyright 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
Stages in a Product Life Cycle
o Introductory
o Product often lacks easy availability
o Growth
o Sales increase at a progressively faster rate
o Shakeout
o Growth rate decreases resulting in strong price
competition
o Mature
o Net adoption rate holds steady
o Decline
o Sales rate declines

8-2
 Exhibit 8.1

Generalized Product Life Cycle

Product category sales
(real dollars)

Life cycle
extension

Profit/unit
Sales
Profit per unit
(real dollars)

Introduction
Maturity Decline or
extension
Competitive
Growth turbulence
Time (years)

8-3
 Exhibit 8.3
Relationship of Strategic Market Position Objective, Investment Levels,
Profits, and Cash Flow

Stages in the Product Life Cycle

Stage Strategic Market Investments Profits Cash Flow
Objective
Introduction For both innovators Moderate to Highly Highly
and followers, high for negative negative
accelerate overall R&D, capacity,
market growth and working
product capital, and
acceptance through marketing
awareness, trial, and (sales and
product availability advertising)
Growth Increase competitive High to very High Negative
position high
Shakeout Improve/solidify Moderate Low to Low to
competitive moderate moderate
position
Mature Maintain position Low Low Moderate
8-4
Limitations of the Product Life Cycle

o Normative approach to prescribing

strategies
o Strategies are based on assumptions
about the features of each stage

8-5
New Market Entries

o Six categories of new products:

o New-to-the-world products
o New product lines
o Additions to existing product lines
o Improvements in existing products
o Repositionings
o Cost reductions

8-6
Exhibit 8.4
Categories of New Products Defined According to their Degree of
Newness

High
10%
20%
New-to-the world
products
Newness to the company

New product lines

26% 26%

Revisions/
Additions to existing
Improvements to
product lines
existing products

11% 7%
Repositionings

Low Cost reductions

Low High
Newness to the market

Source: New Products Management for the 1980s (New York: Booz, Allen & Hamilton, 1982). Reprinted by permission. 8-7
Objectives of New Product and Market Development

o Maintain position as a product innovator

o Defend a current market-share position
o Establish a foothold in a future new market
o Exploit technology in a new way
o Capitalize on distribution strengths
o Provide a cash generator
o Use excess or off-season capacity
o Preempt market segment

8-8
Pioneer Strategy

o Potential sources of competitive advantage

o First choice of market segments and positions
o Defining the rules of the game
o Distribution advantages
o Economies of scale and experience
o High switching costs for early adopters
o Possibility of positive network effects
o Possibility of preempting scarce resources

8-9
Follower Strategy

o Possible advantages:
o Ability to take advantage of:
o Pioneers positioning mistakes
o Pioneers product mistakes
o Pioneers marketing mistakes
o Latest technology
o Pioneers limited resources

8-10
Exhibit 8.8
Marketing Strategy Elements Pursued by Successful Pioneers, Fast
Followers, and Late Entrants

Successful Large entry scale

pioneers Broad product line
High product quality
Heavy promotional expenditures
Successful fast Larger entry scale than the pioneer
followers Leapfrogging the pioneer with
superior:
Product technology
Product quality
Customer service
Successful late Focus on peripheral target markets
entrants or niches

8-11
Strategic Marketing Programs for Pioneers

o Mass-market penetration
o Niche penetration
o Skimming and early withdrawal

8-12
Marketing Program Components for Pioneers

o Increase customers awareness and

willingness to buy
o Increase customers ability to buy

8-13
Mechanisms for Entering Foreign Market

o Exporting through agents

o Contractual agreements
o Direct investment

8-14
Exporting

o Simplest way to enter foreign market

o Export merchants
o Buy and sell products overseas for their
own account
o Export agents
o Sell on a commission basis
o Cooperative organizations
o Export for several producers

8-15
Contractual Agreements

o Nonequity arrangements involving

transfer of technology to an entity in a
foreign country
o Licensing
o Firm offers the right to use its intangible
assets in exchange for royalties
o Franchising
o Grants the right to use the companys
name, trademarks, and technology
8-16
Contractual Agreements (continued)

o Contract manufacturing
o Sourcing a product from a manufacturer located
in a foreign country for sale there or elsewhere
o Turnkey construction contract
o Requires the contractor to have the project up and
operating before releasing it to the owner
o Coproduction
o Involves a companys providing technical know-how
and components
o Countertrade
o Includes barter, compensation packages,
counterpurchase, and a buyback arrangement
8-17
Direct Investment

o Allows the parent organization to

retain total control of the overseas
operation
o Joint ventures
o Involve a joint ownership arrangement to
produce or market goods in a foreign
country
o Sole ownership
o Involves setting up a production facility in
a foreign country 8-18