Kotler on Marketing; “Watch the product life cycle; but more
importantly, watch the market life cycle.”
For
Topic 8 we would be looking at how can a firm choose and communicate an effective
positioning in the market, what are the major differentiation attributes
available to firms, what marketing strategies are appropriate at each stage of
the product life cycle and what marketing strategies are appropriate at each
stage of the market’s evolution?
Today’s economies are
afflicted with surplus, not shortages. Let us look at some examples. Go into a
supermarket and you will see Colgate brand toothpaste offering a dozen variety
of toothpaste from “Sparkling White” to “Tartar Control” etc. Kleenex Tissue offering different variety,
soft to perfumed tissue etc.
No company can win if its
product and offering resembles every other product & offering. Companies
must pursue meaningful relevant positioning and differentiation.
Companies have to continue
to reformulate their marketing strategies and offerings several times so as to
distinguish itself in the market. New ideas and offerings are short-lived as
competitors are quick to copy and offer similar product offering. Consequently,
strategies appropriate to each stage in the product’s life cycle must be
developed with the aim of extending the product’s life and profitability,
keeping in mind that the product will not last forever.
Developing and
Communicating a Positioning Strategy
All marketing strategy is
built on; Segmentation, Targeting, and Positioning (STP)
A company discovers
different needs and groups in the marketplace, targets those needs and groups
that it can satisfy in a superior way, and then positions it offering so that
the target market recognizes the company’s distinctive offering and image.
Positioning is the act of designing the company’s offering and
image to occupy a distinctive place in the mind of the target market. The end
result of positioning is the successful creation of a customer-focused value
proposition, a cogent reason why the target market should buy the product.
Al Ries and Jack Trout, two
advertising executives popularized the word Positioning by seeing it as
a creative exercise done with an existing product.
Positioning
according to Ries and Trout;
Positioning starts with a Product. (Product, Merchandise,
Service, Company, Institution or even a Person). Positioning is what you
do to the mind of the prospect. Ries and Trout argue that well know products
generally hold a distinctive position in consumers’ mind. Example: Coca
Cola as the world’s largest soft drink company. Porsche as the world’s best
sport car and other well-known brands. . (These brands own the position and it
would be hard for a competitor to claim them.)
A Competitor has three
Strategic Alternatives:
1. The first is to strengthen its own current position in
the consumer’s mind
2. The second strategy is to grab an unoccupied position
3. The third strategy is to de-position or re-position in
the customers mind
Ries and Trout argue that in
an over advertised society, the mind often knows the top brand product not the
second or third so it is best to strategize for the top position. If
competitors cannot position itself against top brands, it should reposition
itself in the consumers mind.
Positioning
according to Treacy and Wiersema
Two consultants, Michael
Treacy and Fred Wiersema proposed a Positioning Framework called Value Disciplines. According to
Treacy and Wiersema, a firm could aspire to be a Product Leader, the Operational
Excellent Firm or the Customer Intimate firm.
The above is based on the
notion that in every market there is a mix of three types of customers.
Some customer favor the firm that is advancing on the technological front (Product
Leadership) others want highly reliable performance (Operational
Excellence) and still others want high responsiveness in meeting individual
needs (Customer Intimacy).
Michael Treacy and Fred
Wiersema propose that a business should follow four rules for success:
1. Become best at one of the three Value Disciplines.
2. Achieve an adequate performance level in the
other two disciplines.
3. Keep improving one’s superior position in the
chosen discipline so as not to lose out to a competitor.
4.
Keep becoming
more adequate in the other two disciplines, because
competitors keep raising customer’s expectation.
Positioning: How
many Ideas to Promote?
A company must decide how
many ideas (benefits, features) it must convey in its positioning to its target
customers. Many marketers advocate promoting only one central benefit – this
makes for easier communication to the target market, it results in employees
being clearer about what counts, and it makes it easier to align the
organization with the central positioning.
A brand should tout itself
as “number one” on the benefit it selects. Number one positioning include “best
quality” “best performance” “best services” “best value” etc. If a company
continues to hammer at the number one positioning and delivers on it, it will
be best known by consumers for these benefits.
As companies increase the
number of claimed benefits for their brand, they risk disbelief and a loss of
clear positioning. In general a company must avoid four major positioning
errors:
1. Under Positioning – Vague idea of brand
2. Over Positioning – Too narrow an image of a brand
3. Confused Position – Confused image of a brand
4. Doubtful Positioning – Hard to believe the brand
Which Positioning
to Promote?
Suppose a company has
identified four alternative positioning platforms: Technology, cost, quality,
and services. It has one major competitor. The competitor has a better standing
on cost, while the company has a better standing on quality than its
competitor. It would seem that the company should go after cost or services to
improve its marketing appeal.
However, other
considerations arise. If the consumers consider both costs and services is of
high importance than how can the company make improvements in these two areas
and how fast can it provide them. The best and most sensible thing for the
company to do is for the company to improve its services and promote this
improvement.
Companies choose which
positioning to promote after carefully analyzing cost and benefits and its
stand against its competitor.
Communicating
the Company’s Positioning
How do we communicate a
company or brand positioning? The Marketing Plan should include a positioning
statement. The Statement should follow the form: “To (target group and needs)
our (brand) is (concept) that (point of difference).
Example:
To busy young professional who need to stay organized, Palm Pilot is an
electronic organizer that allows you to back up files on your PC more easily
and reliably than competitive products”.
When communicating the
Company’s positioning, the product membership is clearly stated first, and then
the product points of difference from other members of the group. The product’s
membership in the category suggests the points-of-parity that it might
have with other products in the category, but the case for the product rest on
its points-of-difference.
Sometimes the marketer will
put the product in a surprisingly different category before indicating the
points of difference Once a company has developed a clear positioning
statement, it must communicate that positioning effectively through all the
elements of the marketing mix.
Suppose a company chooses
the “best quality” positioning, Quality is communicated by choosing those physical
signs and cues that people normally use to judge quality. Example: A
lawnmower manufacturer claims its lawn mower is “powerful” and has a noisy
motor because buyers think noisy lawnmowers are more powerful.
Quality is also communicated
through other marketing elements. A high price usually signals a
premium-quality product. The product’s quality image is also affected by
packaging, distribution, advertising, and promotion. A manufacturer’s reputation
also contributes to the perception of quality. Smart companies communicate
their quality to buyers and guarantee “customer satisfaction or your money
back.”
Adding Further
Differentiation.
The task of positioning is
to deliver a central idea about a company or an offering to the target market.
Positioning simplifies what
we think of the entity.
Differentiation is the
process of adding a set of meaningful and valued differences to distinguish the
company’s offering from competitor’s offering.
A difference
will be stronger to the extent that it satisfies the following criteria:
1. Important
– Difference delivers a highly valued benefit to a sufficient number of buyers.
2. Distinctive
– Difference is delivered in a distinctive way.
3. Superior
– Difference is superior to other ways of obtaining
the benefit
4. Preemptive
– Difference cannot be easily copied by competitors
5. Affordable
– The buyer can afford to pay for the difference.
6. Profitable –
The company will find it profitable to introduce the difference
Differentiation
Tools
The number of
differentiation opportunities varies with the type of industry. The Boston
Consulting Group (BCG) has distinguished four types of industries based on the
number of available competitive advantages and their size.
1. Volume Industry
– Companies can gain only a few, but rather large, competitive advantages.
2. Stalemated Industry – Few potential competitive advantages and each is small.
3. Fragmented Industry – Companies face many opportunities, but each opportunity for
competitive advantage is small.
4. Specialized Industry – Companies face many differentiation opportunities, and each differentiation
can have a high payoff.
Differentiation
Tools (Products)
Physical products vary in
their potential for differentiation. At one extreme we find products that allow
little variation: (chicken, steel, aspirin) and on the other extreme are
products capable of high differentiation: (automobiles, commercial buildings
& furniture).
Form – Many products can be differentiated in form (Size,
Shape, or physical structure of a product)
Features – Many products can be offered with varying features
that supplement the product’s basic features
Performance
Quality – Most products are
established at one of four performance levels: Low, Average, High or Superior. Performance
Quality is the level at which the product’s primary characteristics operate.
The important question one need to ask is; Does offering higher product
performance produce higher profitability.
Conformance
Quality – Buyers expect products to
have a high conformance quality, which is the degree to which all the produced
units are identical and meet the promised specification.
Durability – a measure of the product’s expected operating life
under natural or stressed conditions is a valued attribute for certain
products. Buyers will generally pay more for vehicles and kitchen appliance
that have a reputation for being long lasting.
Reliability – Buyers normally will pay a premium for more
reliable products. Reliability is a measure of the probability that a product
will not malfunction of fall within a specified time period.
Repair ability – Buyers prefer products that are easy to repair.
Repair ability is a measure of the ease of fixing a product when it
malfunctions or fails.
Style – Style describes the product’s look and feel to the
buyer.
Design The
Integrating Force – As
competition intensifies, design offers a potent way to differentiate and
position a company’s product and services.
Differentiation
Tools (Services)
Ordering Ease – Refers to how easy it is for the customer to place
an order with the company.
Delivery – Refers to how well the product or service is
delivered to the customer. It includes speed, accuracy, and case attending the
delivery process.
Installation – Refers to the work done to make a product
operational in its planned location.
Customer
Training – Refers to training the
customer’s employees to use the vendor’s equipment properly and efficiently.
Customer
Consulting – Refers to data,
information systems and advice services that the seller offers to the buyers.
Maintenance and
Repair – Describes the service
program for helping customers keep purchased products in good working order.
Miscellaneous
Services – Companies can find other
ways to differentiate customer service.
When physical product cannot
easily be differentiated, the key to competitive success may lie in adding
valued services and improving their quality. The main service differentiations
are ordering ease, delivery, installation, customer training & consulting,
repairs & maintenance.
Differentiation
Tools (Personnel)
Companies can gain a strong
competitive advantage through having better trained people. Example:
Singapore Airlines enjoys an excellent reputation in large part because of its
flight attendance. Better trained personnel exhibit six characteristics:
1.
Competence,
2.
Courtesy,
3.
Credibility,
4.
Reliability,
5.
Responsiveness,
6. Communication
Differentiation
Tools (Distribution Channel)
Companies can achieve
competitive advantage through the way they design their distribution channels’
coverage, expertise, and performance. Example: Caterpillar’s success in
the construction-equipment industry is based partly on superior channel
development. Its dealers are found in more location than competitors dealers.
Differentiation
Tools (Images)
Image is the way the public
perceives the company or its products. Image is affected by many factors beyond
the company’s control. Companies can build its brand image through creating or
sponsoring various events, such as sports events Identity comprises the ways
that a company aims to identify or position itself or its products. Identity
can be in the form of symbols, Colour, slogans etc.
Product Life
Cycle Marketing Strategies
A company’s positioning and
differentiation strategy must change as the product, market and competitors
change over time. Here we described the concept of the Product Life Cycle (PLC)
and the normal changes as the product passes through each life cycle stage.
Product Life
Cycle:
1. Products have a limited life
2. Product sales pass through distinct stages with
different challenges
3. Profit rise and fall at different stages
4. Product require different marketing stages
Product Life Cycle: - Divided into 4 stages
Introduction
– Slow sales growth as the product is introduced in the market
Growth
– A rapid market acceptance and substantial profit improvement
Maturity
– A period of slowdown in sales growth because product has achieved acceptance
by buyers
Decline
– Sales show a downward drift and profit decline
Marketing
Strategies - Introduction Stage
Sales growth tends to be
slow at this stage. Profits are negative or low at the introduction stage. Promotional
expenditures are at their highest because of the need to inform potential
consumers; induce product trial, and secure distribution in
retail outlets. The Pioneer Advantages & The competitive Cycle
Marketing
Strategies – Growth Stage
The growth stage is marked
by a rapid growth or climb in sales. Early adopters like the product and
additional consumers start buying. Price remains where they are or fall
slightly depending on how fast demand increases and promotional expenses
maintained at the same level or increases.
Marketing
Strategies – Maturity Stage
At some point, the rate of
sales growth will slow, and the product will enter a stage of relative
maturity. This stage normally last longer than the previous stages, and poses
formidable challenges to marketing management. Management starts looking at; Market
modification, Product modification, Marketing Mix modification
Marketing
Strategies – Decline Stage
Sales decline for a number
of reasons, including technological advances, shift in consumers tastes, and
increase domestic and foreign competition. All these leads to overcapacity,
increase price cutting and profit erosion
The Product
Life-cycle Concept critique – Use for
planning and control as a forecasting tool.
Market Evolution
Because Product Life Cycle
(PLC) focuses on what is happening to a particular product or brand rather than
on what is happening to the overall market, it yields a product-oriented
picture rather than a market oriented. Firms need to visualize a market’s
evolutionary path as it is affected by new needs, competitors, technology,
channels, and other developments. In the course of a product’s or brand’s
existence, its positioning must change to keep pace with market development
Stages in Market
Evolution
1. Emergence
– Before a market materializes, it exists as a latent market.
2. Growth –
If new product sells well, new firms will enter the market ushering in a market
growth stage.
3. Maturity –
Eventually the competitors cover and serve all the major market segments and
the market enters the maturity stage
4. Decline –
Eventually demand for the present products will begin to decrease and the
market will enter the decline stage.
Dynamics of
Attribute Competition
Competition produces a
continuous round of new product attributes. If new attributes succeeds several
competitors soon offer it.
Summary and
Conclusion
Many marketers advocate
promoting only one product benefit, thus creating a unique selling proposition
as they position their product. People tend to remember “number one”.
Double-benefit position and triple benefit positioning can also be successful,
but be used carefully.
The key to competitive
advantage is product differentiation. A market offering can be differentiated
along five dimensions: Product (form, features, performance quality,
conformance, quality, durability, reliability,
repairability,style,design);service (order ease, deliver ,installation
,customer training, customer consulting, maintenance and repair, miscellaneous
service) ;personal, channel, or image (symbols, media, atmosphere ,and events)
. A difference is worth establishing to the extent that is important,
distinctive, superior, preemptive, affordable, and profitable.
Because economic condition
change and competitive activity varies, companies normally find it necessary to
reformulate their marketing strategies several times during a Product Life
Cycle.
Technologies, product forms, and brands also exhibit life cycle with
distinct stages. The general sequence of stages in any life cycle is
introduction, growth, maturity, and decline. The majority of products today are
in the maturity stage.
Although many products
exhibit a bell shaped product life cycle (PLC); there are many other patterns,
including the growth-slump-maturity pattern, the cycle–recycle pattern, and the
scalloped pattern. The PLCs of styles, fashions, and fads can be erratic; the
key to successes in these areas lies in creating products with staying power.
Each stage of the PLC calls
for different marketing strategies. The introduction stage is marked by slow
growth and minimal profits. If successful, product enters a growth and
increasing profits. There follows a maturity stage in which sales growth slows
and profits stabilize. Finally, the product enters a decline stage. The company
task is to identify the truly weak products; develop a strategy for each one;
and finally phase out weak products in a way that minimizes the hard ship to
company profits, employees, and customers.
Like products, markets
evolve through four stages: Emergence, Growth, Maturity, and Decline.
Source: Marketing
Management 11th Edition, Philip Kotler (2003) Apprentice Hall
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