Industry Dynamics

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Industry Dynamics
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Industry Dynamics

• Porters 5 Forces Affecting Industry
  Attractiveness
• Consumer adoption process
• Product life cycle
• Market fragmentation consolidation
• Product development
• High-Tech Marketing

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Porters 5 Forces Affecting Industry
Attractiveness
Potential Entrants
Industry Competition
Supplier Power
Buyer Power
Substitute Products
4
Consumer Adoption Process

• Innovators
• 2.5 of the population (gt2 standard deviations)
• venturesome
• more highly educated than average
• use multiple information sources

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Consumer Adoption Process

• Early Adopters
• 13.5 of the population (1-2 standard deviations)
• leaders in social setting
• slightly above average in education

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Consumer Adoption Process

• Early Majority
• 34 of the population (0-1 standard deviations)
• deliberate
• many informal social contacts

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Consumer Adoption Process

• Late Majority
• 34 of the population (0-1 standard deviations)
• skeptical
• below average social status

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Consumer Adoption Process

• Laggards or Non-Adopters
• 16 of the population (gt1 standard deviation)
• tradition-bound
• friends and neighbors are information sources

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Consumer Adoption Process

• Personal influence greatly affects the rate of
  product adoption

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Consumer Adoption Process

• Characteristics of the innovation affect
  the rate of adoption
• Relative advantage
• Complexity
• Divisibility
• Communicability

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Product life cycle

• Introduction
• Growth
• Shake-out (competitive turbulence)
• Maturity
• Decline

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Product life cycle

• Introduction
• New product
• One or a few prod. Variations
• No or few competitors
• Negative profits
• Slow market growth

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Product life cycle

• Introduction (contd)
• Target markets -- relatively undefined
• Place -- few middlemen/distributors
• Pricing objectives
• skimming
• penetration

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Product life cycle

• Introduction (contd)
• Promotional objectives
• build primary demand
• recruit middlemen/distributors

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Product life cycle

• Growth
• New products coming to market
• Increasing product differentiation
• Product development thrust
• improve quality
• add features
• Increasing competition

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Product life cycle

• Growth (contd)
• Rapid market growth
• Profits -- strong, may peak near end of growth
  stage
• Target markets -- many new segments forming and
  being targeted

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Product life cycle

• Growth (contd)
• Place -- distribution becoming more intense
• Pricing -- driven by product cost and competitive
  strategies
• Promotional objectives
• build selective demand
• solidify distribution channels

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Product life cycle

• Shake-out
• Many products on market
• Multiple product variations
• Weaker competitors leave market, strong
  competitors gain market share
• Profit per unit -- beginning to decrease
• Total industry profit -- strong because many
  units are sold

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Product life cycle

• Shake-Out (contd)
• Rate of market growth beginning to level off
• Target markets -- many
• Place -- intense distribution
• Price -- driven by competitive strategies

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Product life cycle

• Shake-Out (contd)
• Product Promotional objectives
• build selective demand
• steal brand switchers from competitors
• solidify and maintain distribution channels
• convert nonusers

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Product life cycle

• Shake-Out (contd)
• Product Promotional objectives (contd)
• market development (new mkt segments)
• increase usage among current customers
• more frequent use
• more usage per occasion
• new and more varied uses

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Product life cycle

• Maturity
• Market saturated with products
• Many product variations, points of
  differentiation often minor
• High quality products
• Quality, feature, style improvement

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Product life cycle

• Maturity (contd)
• Intense competition
• Profit per unit -- decreasing
• Total industry profit -- decreasing
• Rate of market growth -- flat
• Target markets -- many

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Product life cycle

• Maturity (contd)
• Place -- very intense distribution
• Price -- decreasing, driven by competitive
  strategies

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Product life cycle

• Maturity (contd)
• Product Promotional objectives
• build selective demand
• steal brand switchers from competitors
• solidify and maintain distribution channels
• convert nonusers

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Product life cycle

• Maturity (contd)
• Product Promotional objectives (contd)
• market development (new mkt segments)
• increase usage among current customers
• more frequent use
• more usage per occasion
• new and more varied uses

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Product life cycle

• Maturity (contd)
• Product Promotional objectives (contd)
• aggressive sales promotions (coupons, discounts,
  etc.)

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Product life cycle

• Decline
• Products leaving market
• Fewer product variations
• Products with high brand loyalty tend to survive

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Product life cycle

• Decline (contd)
• Product quality high, but may be decreased
  (harvesting)
• Fewer competitors
• Profit per unit -- may or may not be decreasing

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Product life cycle

• Decline (contd)
• Total industry profit -- decreasing because of
  decreasing sales
• Rate of market growth -- declining
• Target markets -- least profitable segments no
  longer served
• Place -- decreasing distribution

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Product life cycle

• Decline (contd)
• Price -- may or may not decrease, may even
  increase because of less competition
• Promotional objectives
• decrease expenditures (harvesting)
• remind brand loyal customers

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Product life cycle

• Typical PLC Patterns
• Classical (as described)
• Growth-decline-plateau
• Cycle-recycle
• Innovative-maturity

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Product life cycle

• Fad Products
• Very short life-cycle
• Rapid introduction, growth, peak, and decline
• No real maturity stage
• Does not satisfy a basic human need, or does not
  satisfy it well

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Market Fragmentation Consolidation

• Market fragmentation
• market splits into smaller and smaller segments
• Market consolidation
• a new product attribute brings about a
  substantial shift in market shares among
  competitors

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Product development over the PLC

• Product offerings become more similar over time
• Differentiation and positioning decisions become
  more challenging
• Large companies tend to compete for the same
  customers

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Product development over the PLC

• Market nichers may be able to survive profitably
  in a market that is too small for larger rivals
• As a product moves toward maturity RD efforts
  tend to shift from product-oriented to
  process-oriented

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Product development over the PLC

• As a product moves toward maturity, the
  increasing price and competitive pressures
  mandate reductions in product cost
• As a product moves toward maturity RD efforts
  tend to shift from product-oriented to
  process-oriented

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High-Tech Marketing

• Market Preparation
• Develop alliances, licensing arrangements, and
  mini-ecologies
• Sharing technology with OEMs and other
  organizations to gain widespread use of the
  technology and ensure its position in the
  marketplace.
• Provide pre-launch information and educate the
  market

• Source Easingwood, Chris and Anthony Koustelos
  (2000), Marketing High Technology Preparation,
  Targeting, Positioning, Execution, Business
  Horizons, May/June, pp. 27-34.

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High-Tech Marketing (contd)

• Positioning high-tech products
• Emphasize exclusivity
• Emphasize a low price
• Emphasize technological superiority
• Emphasize a safe bet

• Source Easingwood, Chris and Anthony Koustelos
  (2000), Marketing High Technology Preparation,
  Targeting, Positioning, Execution, Business
  Horizons, May/June, pp. 27-34.

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High-Tech Marketing (contd)

• Execution strategies
• Use opinion leaders
• Reduce the risk of adoption
• Cultivate a winner image (phenomenon of
  increasing returns means the winner takes most)
• Form tactical alliances to help put a complete
  product in the marketplace

• Source Easingwood, Chris and Anthony Koustelos
  (2000), Marketing High Technology Preparation,
  Targeting, Positioning, Execution, Business
  Horizons, May/June, pp. 27-34.

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High-Tech Marketing (contd)

• Niche strategy
• Concentrate on a particular application

• Source Easingwood, Chris and Anthony Koustelos
  (2000), Marketing High Technology Preparation,
  Targeting, Positioning, Execution, Business
  Horizons, May/June, pp. 27-34.

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High-Tech Marketing (contd)

• PLC High-Tech
• Is there a maturity stage when technological
  change is rapid?
• Merging of technologies calls the maturity stage
  into question
• Mini-ecologies

• Sources Arthur, W. Brian, Increasing Returns
  and the New World of Business, Harvard Business
  Review, July-August 1996, pp. 100-109
  Easingwood, Chris and Anthony Koustelos (2000),
  Marketing High Technology Preparation,
  Targeting, Positioning, Execution, Business
  Horizons, May/June, pp. 27-34.

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High-Tech Marketing (contd)

• PLC High-Tech (contd)
• Phenomenon of increasing returns (winner take
  most) may change the nature of the maturity stage
  
• Maybe a technology continuum is more relevant
  than a product life cycle???

• Sources Arthur, W. Brian, Increasing Returns
  and the New World of Business, Harvard Business
  Review, July-August 1996, pp. 100-109
  Easingwood, Chris and Anthony Koustelos (2000),
  Marketing High Technology Preparation,
  Targeting, Positioning, Execution, Business
  Horizons, May/June, pp. 27-34.