average profit margin. At this point the exit stage begins. The pioneer may decide to increase its market share as other firms exit. When the pioneer may decide to increase its market share as other firms exit. As the pioneer moves through the different stages of this competitive cycle it must continually re-evaluate and modify its marketing strategies.
3.2. Development stage
The growth stage is marked by rapid growth in sales. Pioneers develop a preference for the product and early adopters begin to buy it. Competitors enter the market, attracted by the opportunities for expansion and high profits. They introduce new product features and develop additional distribution outlets.
Prices remain the same or fall slightly because demand is growing rapidly. Companies maintain their promotional spending at the same level or increase it slightly to cope with competition and continue to educate the market. Consumption increases much more rapidly, lowering the sales promotion ratio.
During this stage profits increase rapidly because promotional costs are spread over a larger volume of sales and unit production costs fall faster than price declines due to the "experience curve" effect.
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Eventually, the pace of growth shifts from accelerating to slowing. Companies must track where the slowdown begins to occur to prepare new strategies.
Marketing Strategy in Development Stage
During this stage, the company uses a number of strategies to prolong the rapid market growth as long as possible.
- The company improves product quality, adds new features to the product and improves design.
- The company adds new designs and side cover products.
- Penetrate new market segments.
- Expand your distribution reach and enter new distribution channels.
- Shift from product awareness advertising to product preference advertising
- Reduce prices to attract the next group of price-sensitive buyers.
A company that pursues these market expansion strategies will strengthen its competitive position. But this result comes with additional costs. In the growth stage, the company must compromise between high market share and high current profits. By spending money on product modification, promotion, and distribution, the company can gain a dominant position. It gives up maximum current profits in the hope of
in the coming period earn even greater profits.
3.3. Maturity stage
At some point, the rate of growth in sales levels off and the product enters a stage of relative maturity. The growth stage lasts longer than the previous stages and poses formidable challenges for marketing management. Most products are in the maturity stage of their life cycle and therefore almost all of marketing management is concerned with the maturity of the product.
The maturity stage can be divided into three periods.
- In the first stage, maturity of growth, the growth rate of consumption begins to decline. There are no new distribution channels to strengthen, although some old-fashioned buyers continue to participate in the market.
- In the second stage, stable maturity, per capita consumption remains constant, because the market is saturated. Most potential consumers have tried the product and future consumption is governed by population growth and replacement demand.
- The third stage, maturity and decline, absolute consumption begins to decline, customers switch to other products and substitutes.
The slowing pace of consumption growth creates excess capacity in the industry. This excess capacity leads to more intense competition. Competitors seek to penetrate unoccupied market corners. They frequently cut prices and change their official price lists. They increase advertising and trade and consumer deals. They increase research and development budgets to improve products and develop flankers. They agree to offer private labels. These moves, to some extent, hurt profits. A shakeout period begins and relatively weaker competitors withdraw. Eventually, the industry is left with entrenched competitors whose primary focus is to gain competitive advantage.
These competitors are of two types. Industry control is held by a few giant firms that produce the bulk of the industry's output. These firms serve the entire market and profit primarily through high volume and lower costs. These volume leaders differ to some extent in their reputations for high quality, full service, and low prices. Surrounding these dominant firms are a number of market nichers. The nichers include market specialists, product specialists, and custom-service firms. The nichers serve and satisfy the market.
The question is whether to strive to be a top three company and profit from high volume or to pursue niche strategies and profit from high prices.
Marketing Strategy in Maturity Stage
During the maturity stage, some companies eliminate their weaker products. They prefer to concentrate their resources on more profitable products and new products. However, they may overlook the enormous potential that many old products still have. Many industries that were thought to be mature, such as automobiles, motorcycles, televisions, watches, and cameras, have been proven by the Japanese to be anything but mature. They have found new ways to create value for customers. Marketers need to systematically review their market and product strategies and to refine their marketing mix.
Market Transformation
A company can attempt to expand the market for its mature brands by using two components of sales volume:
A company can try to increase the number of people using its brand in three ways:
- Change the attitude of non-users
- Penetrate new market segments
- Win customers from competitors
Volume can also be increased by convincing current users of the brand to increase their annual usage using the strategy:
- The company tries to make customers use that product more often.
- The company tries to make the users interested in using more of that product at a time.
- The company tries to discover new uses for the product and convince people to use the product in more different ways.
Product modification
Managers also try to stimulate sales by modifying product features. This can take the following forms:
- Quality improvement strategy to improve product features, such as durability, reliability, speed, taste, etc.
- Feature improvement strategies aim to add new features (such as size, weight, materials, additives, accessories) to increase the product's functionality, safety or convenience.
- The feature improvement strategy has several advantages. New features create a corporate image and spirit of innovation. They win customer loyalty.
certain market segments value these features. They can be adopted or dropped quickly, at the buyer's discretion. They provide opportunities for free publicity, and they excite the sales force and distributors. The main disadvantage is that feature improvements are highly imitable; feature improvements may not be paid for unless there is a long-term benefit to being first.
- Style innovation strategies aim to increase the aesthetic appeal of a product. The periodic introduction of new models of cars is considered style competition, not quality or feature competition. In the case of packaged foods and household products, companies often introduce different colors, textures, or packaging designs and view this as line extensions. The priority of style innovation is to create a unique feature that is recognizable to the market and to win loyal customers. However, style competition is also a problem. First, it is difficult to predict who will like the new style. Second, changing a style often requires discontinuing the old style, and the company risks losing customers who still like the old style.
Marketing mix transformation
Product managers may attempt to stimulate sales by modifying one or more elements of the marketing mix. They need to ask the following questions about the non-product elements of the marketing mix to find ways to stimulate sales of a mature product:
- Price: Can cutting back attract new users and trial users? If so, should the price be reduced formally or not through special pricing, volume or first-time discounts, freight allowances, or easier credit terms? Or should the price be raised to communicate higher quality?
- Distribution: Can the company gain more product support and visibility in existing retail stores? Can the company launch the product through new types of distribution channels?
- Advertising: Do we need to increase advertising costs? Do we need to change advertising information or content? Do we need to change the media? Do we need to change the timing, frequency or size of advertising?
- Stimulating consumption: Does the company need to promote consumption through trade contracts, refunds, discounts, warranties, gifts and competitions?
- Direct selling: Is it necessary to increase the quantity or quality of sales staff? Is it necessary to change the principles of sales force specialization? Is it necessary to review sales locations? Is it necessary to review the system?
Sales force rewards? Can the way sales visits are planned be improved?
- Service: Can the company speed up delivery? Can the company improve technical support for customers? Can the company expand the scope of deferred payment?
The main problem is that marketing mix changes are easily imitated by competitors, especially price cuts and added services. The company may not benefit as expected, and all companies can suffer profits when they intensify their competitive marketing attacks.
3.4. Recession stage
Ultimately, sales of most product types and brands decline. Sales decline for a number of reasons, including technological advances, changing consumer tastes, and increased domestic and foreign competition. All of these lead to excess capacity, further price cuts, and loss of profits.
As targets and profits decline, some companies exit the market. Those that remain may reduce their product offerings. They may withdraw from smaller market segments and relatively weaker trade channels. They may cut their promotional budgets and continue to cut prices.
Marketing Strategy in Recession
The company has to deal with a number of tasks and decisions to deal with aging products.
Detect weak products
The first task is to establish a system for detecting weak products. The company appoints a product review committee composed of representatives from marketing, research and development, production, and finance. The committee develops a system for detecting weak products. The control department provides data on each product showing trends in market size, market share, price, cost, and profit. This information is analyzed by computer to identify suspect products. Criteria include years of sales decline, market share trends, gross profit, and return on investment. Managers responsible for suspect products fill out evaluation forms expressing their opinions about sales and profit trends with and without changes in the marketing strategy. The product review committee studies this information and makes recommendations for each suspect product, whether to leave it alone, change the marketing strategy, or drop it.
Define Marketing Strategy
Some firms leave declining markets earlier than others. This depends largely on the external barriers; the lower the barriers, the easier it is for firms to leave the industry and the more likely it is that firms that remain will be more determined to stay and attract the customers of those that leave. Firms that remain will enjoy higher sales and profits. For example, Procter & Gamble stayed in the declining liquid soap business and increased its profits as other firms withdrew.
Five types of strategies that companies in declining industries have used.
- Increase the company's investment capital (to control or strengthen its competitive position).
- Maintain the company's investment level until the industry uncertainty is resolved.
- Selectively reduce the company's investment level by eliminating unprofitable customer groups, while consolidating the company's investment capital in profitable market models.
- Harvest (or milk) the company's investment capital to quickly cover cash needs.
- Quickly dissolve that business by selling its assets in the most profitable way.
The appropriate strategy during a decline depends on the relative attractiveness of the industry and the competitiveness of the firm in that industry. For example, a firm in an unattractive but competitive industry might consider selective contraction. However, if the firm is in an attractive and competitive industry, it might consider consolidation.
If the firm were faced with a choice between harvesting and liquidation, its strategy would be quite different. Harvesting involves gradually reducing the costs of a product or business in an effort to maintain its sales level. The first costs to cut are research and development, plant and equipment investment. The firm may also reduce product quality, sales force size, ancillary services, and advertising. It will try to cut these costs without letting customers, competitors, and employees know that it is withdrawing from the business. If customers know, they will switch to other suppliers. If competitors know, they will tell customers. If employees know, they will leave and find new jobs elsewhere. Thus, harvesting is an ethically ambiguous strategy and is difficult to implement. However, many mature products justify this strategy. Harvesting can be
significantly increases the company's current cash flow, ensuring that consumption does not decline.
Ultimately, harvesting will render the business worthless. On the other hand, if the company has decided to liquidate the business, it must first find a buyer. It will try to increase the attractiveness of the business, not let it decline. Therefore, the company must think carefully about whether to harvest or liquidate the failing business unit.
4. Product decisions
4.1. Decisions on product branding
Consumers perceive a product brand as an intrinsic part of the product, and branding can add value to the product. However, branding a product is not simply a matter of giving it a name. To make a brand a reputation, there are many other things to do, such as long-term investment, advertising, promotion, etc., which require a lot of money and effort. Therefore, some manufacturers make products for others to brand. For example, Taiwanese companies produce a lot of clothing, consumer electronics, and computers, but they do not brand them, but sell them to others who brand them. Those who buy for branding can eventually switch to Taiwanese suppliers if they find cheaper manufacturers. In contrast, Japanese and Korean manufacturers create their own reputations for their products. They have to invest a lot to make the world know and dream of Sony, Toyota, Goldstar, and Samsung, etc.
4.1.1. Product brand concept
According to the definition of the American Marketing Association, a brand is a name, term, sign, symbol or design, or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors.
Brand Name is the readable part of a brand.
A brand mark is a part of a trademark that is not readable.
A trademark is a brand name or part of a brand that is protected by law to prevent counterfeiting. A trademark protects a seller's legal rights to use the seller's registered name or mark.
A brand is a seller's promise to deliver a specific set of features, benefits, and services to the buyer. Famous brands imply a guarantee of quality. A brand is a complex symbol.
Marketers propose six levels of brand meaning:
Attributes : very unique and outstanding attributes of the product.
Benefits: Customers do not buy attributes, they buy the benefits they provide. Attributes must be able to be converted into benefits.
Value : is what the buyer looks for in the product.
Culture : A manufacturer's brand represents a certain culture.
Mercedes represents German culture: organized, efficient and high quality.
Personality: A brand conveys a certain personality. Mercedes gives us an image of a no-nonsense owner.
User: A brand also represents the customer who buys or uses a product, if the user respects the values, culture and style that the product represents.
Buyers pay varying degrees of attention to brand meaning. They often place more importance on benefits, value, and personality than on product attributes. Furthermore, attributes tend to lose their perceived value over time.
The more prestigious a brand is, the higher its customer loyalty, the higher its perceived quality and the higher its perceived quality. As an asset, a brand needs to be managed carefully. This requires maintaining or continually improving its awareness, perceived quality and utility. This also requires continuous investment in research and development, effective advertising and excellent commercial and consumer services.
4.1.2. Decision on the trademark owner
In deciding on a brand, the manufacturer has three options for who will carry the brand. The product can be launched under the manufacturer's own brand. Or the manufacturer can sell the product to an intermediary who will carry a private label (also known as a distributor's brand). Or the manufacturer can have some of the output carry its own brand and some carry a distributor's private label. However, in recent times in developed countries, large wholesalers and retailers have developed their own private labels.
Distributor-branded goods are often priced lower than manufacturer-branded goods, thus attracting less affluent customers, especially during inflationary times. Intermediaries are very concerned with advertising and displaying their branded goods. As a result, the former advantage of manufacturer-branded goods is eroded.
4.1.3. Deciding on a brand name
When branding a product, manufacturers must also consider how to name the brand. There are four brand naming strategies that can be considered: