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10

TEN

Strategies for
Mature and
Declining Markets
McGraw-Hill/Irwin

Copyright 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

Strategic Challenges
o Challenges in mature markets
o Sustaining a meaningful competitive
advantage

o Challenges in declining markets

o Maximize cash flow and profit over the
products remaining life

10-2

Common Strategic Traps During a Shakeout Period

o Failure to anticipate transition from

growth to maturity
o No clear competitive advantage as
growth slows
o Assumption that an early advantage
will insulate firm from price or service
competition
o Sacrificing market share in favor of
short-run profit
10-3

Success in Mature Markets

o Two strategic actions:
o Development of a well-implemented
business strategy to
o Sustain a competitive advantage
o Customer satisfaction
o Loyalty

o Flexible and creative marketing

programs to
o Pursue growth or profit opportunities
10-4

Exhibit 10.2

The Process of Customer Value Management

Understanding customer needs
in a well-defined market

Effective design
and quality control

Superior quality in areas that

matter to customers
Advertising and other marketing
communications

Low cost of quality

and overall cost leadership

Market-perceived quality

Exceptional customer value

Business results profitability, growth,
and shareholder value
Source: Reprinted with permission of The Free Press, a Division of Simon & Schuster Adult Publishing Group from Managing Customer Value:
Creating Quality and Service That Customers Can See by Bradley T. Gale. Copyright 1994 by Bradley T. Gale. All rights reserved.

10-5

Dimensions of Product Quality

o Performance
o Durability
o Conformance with specifications
o Features
o Reliability
o Serviceability
o Fit and finish
o Brand name
10-6

Dimensions of Service Quality

o Tangibles
o Reliability
o Responsiveness
o Assurance
o Empathy

10-7

Exhibit 10.6

Determinants of Perceived Service Quality

Customer

Word-of-mouth
communications

Personal needs

Past experience

Expected service
Gap 5

Marketer

Perceived service
Service delivery
(including pre and
postcontacts)

Gap 1

Gap 4

External
communication
to consumers

Gap 3

Translation of
perceptions into
service quality
specifications
Gap 2

Management
perceptions of
consumer
expectations
Source: Reprinted with permission from Journal of Marketing, published by the American Marketing Association, A. Parasuraman,
Valerie A. Zeithaml, and Leonard L. Berry, A Conceptual Model of Service Quality and Its Implications for Future Research, Fall
1985, p. 44.

10-8

Methods of Maintaining a Low-Cost Position

o A no-frills product
o Innovative product design
o Cheaper raw materials
o Innovative production processes
o Low-cost distribution
o Reductions in overhead

10-9

Strategies for Maintaining Current Market Share

o Fortress defense
o Add flanker brands
o Pursue niche strategy

10-10

Strategies for Extending Volume Growth

o Increased penetration
o Convert current nonusers in target
segment into users

o Extended use
o Increase frequency of use among current
users

o Market expansion
o Develop differentiated positioning focused
on untapped or underdeveloped
segments
10-11

Marketing Actions for Accomplishing Growth

Extension Objectives
o Increased penetration
o Enhance products value by:
o Adding features, benefits, or services
o Including it in the design of integrated systems

o Stimulate additional primary demand

o Extended use
o Move storage of the product closer to the point of
end use
o Encourage larger volume purchases
o Stress basic product benefits for a variety of
usage
o Develop line extensions
10-12

Marketing Actions for Accomplishing Growth

Extension Objectives (continued)

o Market expansion
o Develop:
o Differentiated product line
o Multiple line extensions

o Build unique distribution channels

o Design service programs

10-13

Factors Affecting the Attractiveness of Declining

Market Environments

o Conditions of demand
o Exit barriers
o Intensity of future competitive rivalry

10-14

Strategies for Declining Markets

o Harvest
o Maximize short-term cash flow

o Maintenance
o Maintain market share for the short-term

o Profitable survivor
o Increase share of the declining market

o Niche
o Strengthen share position in one or a few
segments

10-15

Marketing Actions for Strategies in Declining

Markets
o Harvesting strategy
o Eliminate R&D expenditures and capital
investments
o Reduce marketing and sales budgets
o Reduce production costs
o Raise price if necessary to maintain margins

o Maintenance strategy
o
o
o
o

Design service programs

Continue trade promotion
Focus salesforce efforts
Lower prices if necessary to maintain share
10-16

Marketing Actions for Strategies in Declining

Markets (continued)
o Profitable survivor strategy
o
o
o
o

Signal competitors
Introduce line extensions
Lower prices if necessary to increase share
Consider agreements to produce replacement
parts

o Niche strategy
o
o
o
o

Continued product and process R&D

Produce for private labels
Focus advertising, sales promotion, etc
Maintain distribution channels
10-17