Marketing Strategy for New Industry Products

Marketing Management Revision Article Series

Pioneer in a Product - Issues

When a product is new in the industry life cycle, the firm starting the production and sale is the pioneer. Normally the growth is slow in the introduction of phase of a new industry product as the technical problems with the product are to corrected, production capacities have to be built up based on market acceptance and growth, distribution capacity is to be built up from scratch when distributors have no familiarity with the product, and customer may have reluctance to change his old behavior. If the product is an expensive high technology one, only small number of buyers can afford it.

Companies have choice to be a pioneer or a follower. A pioneer has to initiate every thing connected with the product. A follower has the benefit using various firms that helped the pioneer for his venture. Also he has the opportunity of studying the pioneer’s product and market response to it. He can examine the distribution channels used by the pioneer and gauge their effectiveness and he can evaluate various marketing strategies employed by the pioneer. Thus an early follower has some extra knowledge about the product and the market.

Is there any Advantage to the

Pioneer?

Some studies indicate that the market pioneer if it can capture the leadership position gains the most advantages. Some studies dispute the finding that pioneers have sustained their leadership.  Robertson and Gatignon give the opinion that an alert pioneer-leader can pursue various strategies to prevent later market entrants from wresting away leadership. Being a pioneer has an advantage that can be capitalized. The pioneer has to dynamically compete in the market place to exploit his pioneering advantage. He needs to have a grand plan for life-cycle of marketing of the product and launch strategy has to be the first step in that grand plan.

The pioneer may start from a specific product-market segment his launch but must have plans to cover the larger part of the market over a period of time by launching appropriate product variations and covering more market segments.

The competitive Cycle – The Pioneer’s Challenge

Initially, the pioneer is the sole supplier with 100% production capacity and market share.

In the second stage, there is competitive penetration as competitors build capacities and enter market.

In the growth phase, capacity tends to be overbuilt and any cyclical downtrends will impact margins for all. After some time share stability may happen.

Then a commodity competition stage will come where returns are average.

The final stage will be a decline for the industry and firms withdraw from the industry. The pioneer needs to steer through all the stages of the industry life cycle.

Pricing and Promotion Strategies for

Pioneers

Pioneer has the alternative of Skimming pricing or Penetration pricing.

Skimming is entering the market layer by layer in the order of value exchange. Initially buyers who are willing to pay a high price are serviced. This strategy is feasible if market is unaware of the product and special efforts are to be done by firms to make the potential buyers aware of the product.

Pioneer will do rapid skimming if the potential competition is imminent. In this strategy he will spend substantial amount on promotion to enlarge the sale quickly. If the potential competition is not imminent, the pioneer can undertake slow skimming. He can expand sales slowly by limiting promotion expenditure.

Penetration is entering a large market with a lower price. It is done for price sensitive products. Rapid penetration is preferred when the market is unaware of the product. The pioneer spends a good deal on launch and advertising. A slow penetration approach is used when market is aware of the product, but potential competition is limited.

Thus price and promotion are the two alternative dimensions which the pioneer has to use in his strategy.

The Marketing Firepower

The Marketing Firepower as a concept was discussed by Kotler in competitive dynamics chapter. But it is relevant to new product marketing strategy. The marketing strategist has to understand the marketing firepower that he has and has to use it appropriately in appropriate target segments, in proper media against proper competitors in proper products. So in marketing battles, right firepower has to be used in right places, against appropriate opponents.

Price discounts: Are you selling a comparable product at a lower price.

Cheaper goods: Are you offering economy goods with lesser number of features. The strategy will succeed when there is significant number of buyers in need of lower priced product.

Prestige goods: Are you launching a higher quality product with more features.

Product proliferation: Are you planning to offer a greater product variety.

Product innovation: Are you offering an improve product.

Service innovation: Improvement in service offered to the buyers.

Distribution innovation: a new distribution outlet that offers additional convenience to buyers.

Process innovations: Is your enterprise based on a process innovation that gives better quality or lower cost?

Advertising innovation: Do you have innovative communications strategy that reaches and motivates larger number of potential customers resulting in higher sales.

You have to develop the marketing fire power that allows you to succeed in the market. Enter the market with adequate marketing firepower to succeed.

References

Kotler, Philip (1997), Marketing Management, 9^th Ed., Prentice Hall, New Jersey.

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News Item - Amazon cuts Kindle Price

Amazom.com has trimmed $40 off the price of its Kindle e-reader. The price cut means the entry level Kindle with a six inch display is now available at $259. It is still higher by $60 when compared to the entry level model offered by Sony Corporation, the principal rival. Amazon accounts for 60% of the US market and Sony has 35% of the market.

The forecast is that three million e-book readers will be sold in US during 2009. According to Amazon, for books available in both digital and physical editions, the company sells 48 kindle editions for every 100 physical copies of the book.

What is to be noted in this news item is the price cuts that pioneer companies have to provide as market expands and competitors emerge. New product marketers have to continuously support value engineering work in their companies and take decisions regarding price cuts made possible by value engineering.

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Article originally posted in
http://knol.google.com/k/ marketing-strategy-for-new-industry-products
Knol number 117

Updates on  3 March 2019,  4 March 2015,  4 June 014, 3 Dec 2011

Recommended reading on 3 March