Page 307 - DMGT408DMGT203_Marketing Management

Marketing Management/Essentials of Marketing

Notes
Example: Compaq computers cost almost the same as IBM but offered customers more
features or better performance levels. Later, Dell computers adopted direct distribution and
offered customised machines at lower prices. The customers could choose components and place
order online.
When a market leader is attacked directly, it may have no recourse but to adopt confrontation
strategy. A confrontation strategy is often reactive in nature. It is not very common to gain
reliable intelligence sufficiently well in time to become proactive and develop suitable marketing
programme before the challenge occurs. The leader often decides to meet or beat the competition
by offering more desirable product features of a competitor. The leader incorporates product
improvements, increases promotional efforts, and sometimes lowers the prices. In case of products
with high purchase rates or where the product diffusion process is long drawn, the leader should
perhaps adopt a penetration pricing strategy right in the first place. This would pre-empt lower-
price competitors from entering the market, and would also ensure competitive advantage of
the leader and obviate the need to adopt confrontation strategy.
This strategy requires investment to accomplish process improvements to reduce unit costs,
improvements in product quality, customer service, or develop more advanced versions that
offer greater value to customers.

Example: Maruti was facing attacks from other manufacturers and share erosion in its
hatchback car segment. The company has introduced a more advanced car in this segment,
Maruti Swift that offers more value to customers.
Market Expansion Strategy: The main objective of this strategy is to capture a large share of new
customer groups who have different needs and preferences than the segment where company
has been operating with initial offer. This is a proactive and more aggressive version of flanker
strategy to defend leader’s market share position by expanding the total market. This protects
the company from future competitive threats. In case the company has abundant resources and
competencies, market expansion strategy is particularly suitable where the market is fragmented.

This strategy calls for product line extensions, new brands, or alternative products at different
price-quality points.

Example: Intel has processors at different price-quality points in its four brands: Pentium
D, Xeon, Pentium, and Celeron for different market segments in a fragmented market with
different set of needs and preferences and leads with the largest share in the global processor
market. Similarly, Nike has sustained leading share of the athletic shoe market. It has developed
a series of several line extensions that offer technical, design, and style features to satisfy customer
preferences covering almost all the sports.
Another approach, a market leader may adopt in certain product categories is to develop a
specialised sales force to deal with different user groups. Yet another approach a leader can
adopt is to retain several customer groups is to retain the basic product but vary other elements
of marketing programme to make the offer attractive and appealing.
Pre-emptive Strategy: This is an offensive strategy to defend leadership position before a
competitor even starts attacking the market-share leader. A company can use pre-emptive strategy
in several ways. A company can introduce several new products and announce it much in
advance before the actual launch in the market. According to R. J. Calantone and K. E. Schatzel,
a market leader’s action of pre-announcing is deliberate to discourage competitors from attacking.
Bayes, Jain, and Rao have called such new-product pre-announcements by high-tech companies,
much in advance of their actual introduction, as “Vapoware.”

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