June 3, 2014

Competitive Strategies for Followers and Nichers







Marketing Management Revision Article Series



Follower companies do not challenge the market leader. But market followers have to know how to hold on current customers and win a fair share of customers in the growing market. The follower firms have a certain advantages for its target market in terms of location, services offered or financing offered. Followership also involves stategic thinking to be on the growth without inviting competitive retaliation by the leader

Kotler described four follower strategies.



Imitator
The imitator is not an innovator. He provides products that had market acceptance (put into the market by innovators), but maintains differentiation in packaging, advertising, pricing and so on. Market leaders tolerate followers imitating to the extent, there is adequate competition to avoid monopoly market regulation.

Adapter
The adapter takes the leader's products and adapts or improves them. He normally sells in different market than leader to avoid direct confrontation with the leader.

Counterfeiter
The counterfeiter duplicates the leader's product and packaging and sells it through disreputable dealers. But leaders keep making efforts to check counterfeiting.

Cloner
The cloner emulates the leader's products and  distribution and other features. But the brand name will be made slightly different.

The last two strategies have negative connotation.

Nichers



Nichers are small firms that target small markets of little or no interest to larger firms. But, these firms can be highly profitable through smart niching. In a study of hundreds of business units, the Strategic Planning Institute found that return on investment average 27 in small markets, but only 11% in larger markets. (E.R. Linneman and L.J. Stanton, Making Niche Marketing Work, McGraw-Hill, 1991)

The niche specializations include:
(Note: In all cases the segments selected by nicher are ignored by leaders and broad market firms)

End user segments: Specialising on particular end user segments. Example software firms supplying law firm related software.

Vertical segments: Concentrated at a level in the production-distribution value chain

Customer size segments:  Selling either to small, medium size or large customers. Generally, niche firms supply to small customers neglected by large companies.

Specific customer servicing:  Selling to some major customers. Even only one or two customers.

Geographic segments:  Selling only in certain localities not served well by broad market firms

Specific products:  Selling only one product or only one product line, but giving a big choice to choose in that product or product line to the buyers.

Specific product features:  Specializing and offering a particular product feature

Job shop production: Customized manufacture for individual customers.

Quality segment:  Operating at low- or high-  quality segments.

Price segment: Operating at low- or high- price segments

High service segment: Offering features not offered by other firms

Channel segment: Serving only one or two distribution channels



Related Research

Rapid Growth through Niche Marketing - Startup to Fortune 500 Company (16 cases) 2009 paper
http://sbaer.uca.edu/research/icsb/2009/paper1.pdf

1 comment: