MARKET NICHE development

1. MARKET NICHEdevelopment Benison Cu, CPM Professor, Marketing Management Department De la Salle University

2. Current Marketing Developments • People are more different • Kids do 5.7 things than compared to 1.7 things by adults (and less for men) • Traditional marketing approaches are under fire • In the US, 54% of consumers have banned telemarketing • In the Philippines, there is a shift from traditional advertising to below-the-line and non-traditional marketing

3. Current Marketing Developments • Purchase decisions are made in an instant • An average time for a consumer to make a decision on a brand is at 2.6 seconds • Markets are much more competitive than ever before • Intensity of competition has tripled in the last ten years

4. Current Marketing Developments • Products are quickly imitated and outdated • Life cycle has been shorter over the same period of time compared to previous year by 70% • 75% still trust personal recommendation when deciding to buy • With the value of marketing • 60% of brand investment impacts the future, and not this year

5. Current Marketing Developments • Businesses are still incredibly short term • Investors are looking at a maximum of 4 years ROI • Marketing talents are essential to business leadership

6. Focusing Marketing Strategy with Segmentation, Targeting and Positioning

7. Finding the Relevant Segmenting Dimensions

8. A Best Practice Approach for Segmenting Product-Markets

9. Marketing Strategy Planning, Competitors, Company, and External Market Environment

10. Simplified Buyer Behavior Model

11. Competitive Stance • Market Leader • A firm that dominates a market • Market Challenger • Runner-up companies that aggressively attack competitors to get more market shares • Market Follower • Seeks stable market shares and profits by following competitors’ product offers, prices, and marketing programs

12. Competitive Stance • Market Nicher • Smaller firms in the market or even large firms that lack established position uses this strategy • Specializes in serving “market niches” that competitors overlook or ignore

13. Competitive Stance • They avoid direct confrontation with the majors by specializing along market, customers, products, or marketing-mix lines • Through smart niching, low-share firms in an industry can be profitable as their large competitors

14. Cash Flows across Businesses in the BCG Portfolio Model High Growth rate (cash use) Low High Low Relative market share Desired direction of business development

15. Product Life Cycle Key Issues

16. Why is Niching profitable? • The company ends up knowing the target market so well that it meets its need better than other firm • The company can charge higher because of the added value • Nichers try to find one or more market niches that are safe and profitable

17. Why is Niching profitable? • An ideal market is one that is big enough to be profitable and has a growth potential • Niche markets are of little interest to big competitors • Companies should build skills and customer goodwill to defend itself from major threats as the niche grows big and becomes attractive to competitors

18. Key Idea to Nichemanship • Specialization! • Different types of specialization • Customer size Nicher • Geographic Nicher • Quality-price Nicher • Service Nicher • Many companies practice  multiple niches • Always watch competitors closely • Find a competitive marketing strategy that positions it effectively

19. Application of strategy • Heavy advertising directed at target segment • Selective media vehicles directed to the market • Use extensive sales force efforts focused on potential customers in target segment • Use incentives to encourage new product sales to target accounts

20. Application of strategy • Advertising and sales appeals stress generic benefits of new product type • Extensive introductory sales promotion to create trial usage, but must be focused on target segment • Additional product development limited to improvements or modifications to increase appeal to target segment

21. Application of strategy • Give free trial of product • Provide liberal return policies • Use penetration pricing technique • Can use market skimming, but must provide an lower end version • Extend credit terms • Provide trade promotion for better push strategy

22. At the end of the Day . . .

23. The Search for Synergy:A Top Management Perspective What do we want? What do our employees, What do our intermediaries, and customers want? other partners want? What can we do?

24. Guidelines for Market-Driven Strategic Management Source: Frederick E. Webster, Jr., “Executing the New Marketing Concept,” Marketing Management 3, no. 1 (1994), p. 10.

25. Bibliography • Boyd, Harper, Jr. et al. Marketing Management. McGraw Hill, 2008 • Harris, Elaine. Customer Service. Prentice Hall, 1996 • Holt, Charles. Market, Games, & Strategic Behavior. Pearson, 2007 • Keller, Kevin. Strategic Brand Management. Pearson, 2008

26. Bibliography • Kotler, Philip. Marketing Management. Pearson, 2008 • Perreault, William, Jr. et al. Basic Marketing. McGraw Hill, 2008 • Walker, Orville, Jr. et al. Marketing Strategy. Irwin, 1996 • Zeithaml, Valerie, et al. Service Marketing. McGraw Hill, 2006

27. Thank you and have a nice day Benison Cu, CPM Professor, Marketing Management Department De la Salle University Consultant, Association of Training Institutions for Foreign Trade in Asia and the Pacific (ATIFTAP)