Different companies use different strategies to enter a market that has existing competitors. Obviously, all of them think that they are entering the market with a winning strategy that would help them prevail in the marketplace. Yet, as many studies have shown, the success rate of new launches is not very high. Of course, one could argue that every industry has its own unique dynamics and multiple factors and that the same set of factors are hardly likely to be the elixir for success. However, all marketers know that following a sensible strategy certainly enhances the chances of success.
Many experts have done a lot of empirical work to figure out the elusive success factors. Here is a summary of three such studies:
- The late Ralph Biggadike examined the strategies of 40 companies entering markets. From the successes that he saw, he came out with the following marketing mix with a higher likelihood of success (although brands NOT necessarily following this mix also succeeded):
* Higher prices and higher quality than competition
* Narrower product line
* Narrower market segment
* Similar distribution channels
* Superior service
* Lower expenditure on sales, advertising and promotions
From this study, one would conclude that launching a better product in a narrow segment at a price premium (and with less advertising!) is a good strategy to follow.
- In his study, Steven Schnaars examined 30 companies and his results of companies/brands that established themselves and even gained market leadership (against the innovator companies) are as follows:
* Entering with lower prices!
* Selling an improved product
* Using superior market power and resources
- Gregory Carpenter and Kent Nakamoto, in their study, examined strategies for launching a new product in a market dominated by one brand, such as Jell-O and FedEx. They identified four strategies that could work in such a scenario:
* Differentiation. Offering a product radically different from the dominant brand.
* Challenger. Positioning close to the competitor in terms of offering and price. For example, Pepsi taking on Coke.
* Niche. Looking at a profitable, small segment and occupying it, usually with a differentiated, high priced product.
* Premium. Positioning close to the main competitor but with a higher price to move the top end of the market to itself.
Sufficiently confused? One thing is clear from these three different studies – there is no ‘magic mantra’ to succeed in the market with a new offering. Also, I don’t think the studies could capture the execution excellence or follow through in the studies. Different studies have outlined different factors. But there is some unanimity in that selling a differentiated product or selling a superior product should certainly be at the top of the list of success factors. As if we didn’t know that already!
Visual courtesy : https://www.flickr.com/photos/69214385@N04/
Adapted from Marketing Management, Philip Kotler.