Chapter 17: Driving Growth in Competitive Markets

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Welcome to the Deep Dive.

Today we're jumping right into something really key for any business trying to make it in today's marketplace.

Driving growth in competitive markets.

It's a huge topic.

Absolutely, and we're drawing our insights from Chapter 17 of Marketing Management to the 16th Global Edition.

You know, the classic by Kotler, Keller and Chernev.

Great source.

Our goal here is pretty straightforward.

Unpack the main strategies companies use.

Not just to get bigger, but well, to adapt, compete and really stay relevant.

You should walk away with a good shortcut to understanding what makes modern marketing tick.

And I think it's super important to stress growth isn't just about scale, right?

It's fundamentally about adapting, innovating, especially when competition is so fierce.

You've got changing economic conditions, new players popping up all the time, customer tastes evolving.

It means companies, they have to constantly rethink their strategy.

Constantly adjusting.

Exactly.

Take a company like GM, General Motors.

They were pioneers, sure.

But after that, well, that 2009 bankruptcy, they really had to push hard on product innovation again.

You know, pivot towards EVs,

self -driving tech.

And the ideas in this chapter, growth, competition, product life cycles, they're foundational.

They really connect to how companies like GM manage to, you know, sustain or maybe even regain their market position.

Okay, so when a company wants to grow, where do they start?

I mean, is it always about finding something new?

Or is knowing when to pull back just as important?

That's a really critical point.

At its core, assessing opportunities, it involves planning new stuff, sure, but also knowing when to downsize, or even, you know, cut older businesses entirely.

You know, that gap.

Right, that sales gap between where they want to be and where they're projected to be.

Fundamentally, it boils down to two things, which products and markets to focus on, and how do you manage that growth?

Okay.

And probably the most famous framework for this is the product market growth framework.

Most people know it as the ANSOFT Matrix.

Yeah.

Ah, yes, ANSOFT Matrix.

Heard of that one.

Yeah, it's really popular.

It helps businesses look at growth opportunities based on, well, current versus new products, and current versus new markets.

It gives you four main strategies.

Okay, let's break those down.

First up, market penetration.

This is all about growing sales of your current products to your existing customers.

So digging deeper where you already are.

Exactly.

Think about Pepto Bismol's campaign, eat, drink, and be covered, encouraging more usage.

Or Arm and Hammer Baking Soda.

First, it was for baking, then, hey, put it in the fridge, then toothpaste.

Right.

Finding new uses.

Finding new uses for the same customers.

It's about making the most of what you've got.

So it's not just doing more of the same, but actually rethinking how current products serve current customers, like an internal pivot almost.

Precisely.

Then number two is market development.

This is about finding or developing new markets for your current products.

Okay.

Taking what you have somewhere else.

Yep.

Could be finding new groups of users, like if you sell to consumers, maybe start selling B2B,

or adding new channels, like

going online if you're mainly retail, or just expanding geographically.

New cities, new countries.

Got it.

What's next?

Third is product development.

So developing new products, but for your current markets.

Okay.

New stuff for the same crowd.

Right.

New features, different price points, maybe different tech, like a car company bringing out a hybrid version of a popular model.

Same basic market, new product offering.

Makes sense.

And the last one.

And finally, diversification.

This is the biggest jump.

Developing new products for totally new markets.

Okay.

That sounds risky.

It generally is the riskiest.

Disney is the classic example here, right?

It started with cartoons, then licensing, TV channels, ABC, ESPN, theme parks, cruises, theater.

I mean, they went everywhere.

Wow.

The Ansoff Matrix is great because it kind of forces you to see where the risks lie.

Diversification might look shiny, but statistically, it's tough.

Needs totally new skills.

That really changes how you look at growth options.

Yeah.

So we've got the what with Ansoff.

What about the how?

Do companies usually build this growth themselves, or are they buying it?

That's often a huge decision point.

Companies can grow organically, increasing output, boosting revenues internally.

Or they can go the mergers and acquisitions route, M &A.

Strategies like market penetration, market development.

They often lean organic.

But product development and diversification.

That can be both.

M &A seems like a faster way sometimes.

It can be.

M &A lets a company grow by integrating within its industry.

You can do backward integration, buying a supplier, forward buying a distributor,

or horizontal buying a competitor.

Merck, the pharma company, they have a long history of using acquisitions to build up their research and market share.

But you know, it's definitely not a guaranteed win.

No.

Oh, no.

Lots of M &A deals fail.

Sometimes spectacularly.

Integrating different companies, different cultures, different systems.

It's hard.

Think Sears and Kmart.

Just didn't mesh.

Right.

I remember that.

So growth isn't always about adding.

Yeah.

Not at all.

Sometimes companies really need to downsize or divest.

Sell off parts of the business.

That sounds like failure, though.

It can feel like it, but often it's really strategic.

It's about pruning older, maybe less profitable businesses to free up resources for the future.

It's like a health check.

Aligning resources.

Exactly.

Like American Express spinning off its financial advisors division to focus on its core card business.

Or Kraft splitting into Mondelez for snacks and Kraft Foods for groceries.

Each could then chase different growth paths.

Okay.

So trimming down can actually fuel future growth.

Interesting.

But what about the products themselves?

Is it always best to be the first one out there with something new?

The innovator.

That's a classic debate.

Is it better to innovate or imitate?

Theodore Levitt, a big marketing thinker, he actually argued for something called innovative imitation.

Innovative imitation.

Sounds like a contradiction.

Sort of.

But his point was that a follower can actually do really well by copying or, importantly, improving on a leader's product.

And they don't have all that initial R &D cost and risk.

Ah.

Learn from the leader's mistakes, maybe.

Exactly.

You see this a lot in industries where products aren't super different, like say basic chemicals.

Companies kind of follow each other.

Conscious parallelism, it's called.

So being a follower isn't just copying.

There are strategies.

Oh yeah.

Definitely strategic.

You can think of maybe three main types.

First, the cloner.

They pretty much emulate the leader product name, packaging, maybe slight tweaks.

Think store brand cereals that look just like the big names.

Right, the knockoffs.

Kind of.

Then there's the imitator.

They copy some things, but they try to differentiate somewhere else.

Packaging, ads, price, maybe where they sell it.

Like Telepizza in Spain, adapting the Domino's model for their market.

Okay.

A bit more distinct.

And third, the adapter.

They take the leader's product, but they adapt it, maybe improve it.

Often they target different markets initially.

Lots of Japanese companies historically did this brilliantly, took Western inventions, improved them, and became leaders themselves.

That's fascinating.

So follower isn't a bad word in marketing.

It can be a smart strategy.

Changes my view on innovation, actually.

It really should.

It's not always about being first.

So okay, a company has its product.

Maybe it's brand new.

Maybe it's an adaptation.

How do they actually stake their claim, get that market position?

It's got to be more than just sales numbers, right?

Oh, much deeper.

Market position, you can think of it having three key parts.

First, share of market.

Simple enough.

Your sales versus the total market sales.

Okay.

Second, share of mind.

This is interesting.

It's the percentage of customers who name your company first when they think about that industry.

Ah, top of mind awareness.

Exactly.

And third, share of heart.

That's the percentage of customers who actually prefer to buy from your company.

The loyalty factor.

Heart share.

I like that.

And what's really key is this.

Companies that consistently gain in mind share and heart share, they almost inevitably gain market share and become more profitable.

So mind and heart lead to market share.

Pretty much.

Think about Apple, Netflix,

Warby Parker, maybe.

They build that connection, emotional, experiential.

It creates real loyalty.

So for the market leaders, the Apples and Netflixes, it seems like a great place to be.

But staying on top must be incredibly hard.

What's the biggest hurdle they face?

And how do they defend that position?

It is a constant, relentless battle.

The single biggest challenge.

Continuous innovation.

They have to lead.

Lead in everything.

Pretty much.

New products, customer service, distribution, cutting costs.

They need to set the pace.

And it's not just about reacting.

They need to anticipate, even create demand.

How?

Well, we talk about three kinds of marketing here.

Responsive marketing just fills a need someone already stated.

Anticipative marketing looks ahead, figures out needs that are just emerging.

But then there's creative marketing.

That's finding solutions.

Customers don't even know they want it, but then they love them.

The classic example is the Sony Walkman.

Engineers apparently said no demand, but well.

History proved them wrong.

Massively.

Those are the really proactive market driving firms.

And to defend their spot, leaders use a bunch of strategies.

We can maybe highlight a few.

Yeah, please do.

Okay, first,

position defense.

Basically, owning the best spot in the customer's mind.

Making the brand feel unbeatable.

Think P &G.

Tide means clean.

Crest means cavity prevention.

Building that mental fortress.

Exactly.

Then there's flank defense.

Protecting weaker areas or having secondary brands ready to counter attack.

P &G does this too.

Gain supports Tide.

Loves supports Pampers.

Covering the bases.

Yep.

Preemptive defense is attacking first.

Maybe announcing new products way in advance to worn off competitors.

Microsoft is known for signaling its development plans.

Discouraging rivals before they start.

Right.

Counter offensive defense is meeting an attack head on or sometimes using your size, your economic or political muscle.

Think of the big tech companies Apple, Samsung constantly fighting patent battles in court.

Aggressive defense.

Very.

And then there's even contraction defense or strategic withdrawal.

Sometimes the best defense is to give up weaker territories and focus your resources on where you're strongest.

GM dropping Saturn and Hummer fits here.

Wow.

So defense is just as complex as offense.

It really shows how dynamic this all is.

Companies are constantly shifting.

And a really crucial way to think about these shifts over time is the product life cycle.

The PLC.

Ah, the PLC curve.

I remember that from basic marketing.

Right.

It's fundamental.

It suggests products go through distinct stages.

Right.

Each stave has different challenges, different opportunities, needs, different strategies.

And the core idea is.

The core idea is products have a limited life.

Sales go through stages.

Profits rise and fall.

And you need different marketing approaches at each point.

Usually shown as that bell -shaped curve.

Four stages.

Okay.

Let's run through them slowly.

Profits are usually negative or low because you're spending a ton on promotion, trying to get people to try it, getting it into stores or online.

Think of Zipcar when they first started with hourly car rentals.

High costs, low sales initially.

Yep.

Stage two.

Growth.

Now sales take off.

Early adopters jump in.

New competitors probably show up.

Prices might stabilize or start to fall a bit.

Profits start climbing nicely.

Things are looking up.

Yeah.

Strategies here.

Improve quality.

Add features.

Maybe launch Flanger products.

Enter new segments.

Boost distribution.

Shift your ads from building awareness to building preference.

Adapting to success.

Then stage three.

Maturity.

This is usually the longest phase.

Sales growth slows way down.

Eventually peaks.

Profits level off or start to decline because competition is intense.

The plateau.

Right.

Big challenge here is often overcapacity.

Lots of players fighting hard.

Companies might try to expand the market, find non -users, steal competitors'

customers, or they modify the product, improve quality, features, style.

Shutterfly did this well, turning digital photos into mugs, books, etc.

Keeping it fresh.

And finally, stage four.

Decline.

Sales drift downwards.

Profits erode.

Maybe technology changed.

Tastes shifted.

Competition just got too tough.

The end is nigh.

Pretty much.

Strategies here are usually harvest costs way back.

Try to milk whatever sales are left.

Or divest, sell it off, liquidate it.

Encyclopedia Britannica stopping the print version is a famous example, but they pivoted successfully to online education.

So they found a new life online.

Exactly.

It shows decline isn't always the absolute end if you're smart, but many products do just get eliminated.

So the PLC isn't like a fixed timeline.

It's more a guide for strategy.

What if a product doesn't fit that neat bell curve?

Exactly.

It's a guide, not rigid law.

And you're right, not everything follows the bell.

Some products have a growth slump maturity pattern.

Think breadmakers, huge growth.

Then sales fall off, but stabilize at a lower level.

Others might have a cycle recycle pattern.

You see this with some drugs.

Big push, sales decline.

Then another marketing push creates a second, smaller cycle.

Ah, a comeback.

Kind of.

And it's also really important here to distinguish fads from trends.

Right.

Fads burn out fast.

Fads are unpredictable, short -lived, no deep meaning,

like certain toy crazes.

Trends though, they have momentum, durability.

They show you the direction things are heading, like the whole health and wellness trend that's forced massive changes in the food industry.

Trends give you strategic direction.

Fads are mostly just noise.

That's a great distinction.

This whole PLC framework, it really gives you a way to understand how products, well, live and die in the market.

It's definitely not static.

Not at all.

And building on all that, it's worth looking quickly at how market challengers operate.

The company's trying to gain ground on the leaders.

Okay.

The underdogs?

Sometimes.

Their main goal is usually to grab more market share.

And they have choices about who to attack.

They could go after the market leader that's high risk, but high payoff if the leader is maybe slacking.

Or attack firms their own size that seem weak, bad products, high prices, unhappy customers.

Or even go after smaller, local firms.

Or just shake everything up.

Exactly.

Disrupt the whole industry.

Think Amazon, Uber, Airbnb.

Changing the rules completely.

Once they pick a target, they've got about five main attack strategies.

Five ways to challenge.

Yep.

First, the frontal attack.

Basically going head to head.

Matching the leader's product, price, ads, distribution.

You need serious resources for this to work.

You have to be stronger or just as strong.

Tough one.

Very.

Second,

flank attack.

Finding the gaps, the shifts in the market the leader isn't covering well.

Like smaller phone carriers grabbing prepaid customers from the giants by offering lower prices.

Smarter for challengers with fewer resources.

Mining the weak spot.

Right.

Third, encirclement attack.

This is a big offensive.

Hitting on multiple fronts at once, trying to grab a big slice of the leader's territory.

Sun Microsystems tried this against Microsoft by getting its Java software into tons of different devices.

Surround them.

Sort of.

Fourth,

bypass attack.

This is avoiding the main fight altogether.

Attack easier markets instead.

Maybe diversify into unrelated products, go into new geographic areas, or leapfrog into completely new technologies.

Pepsi did this against Coke, right?

Rolled out Aquafina water, bought Tropicana, bought Gatorade, bypassed the Cola Wars.

Sidestepping the giant.

And fifth, guerrilla attack.

Small intermittent attacks.

Price cuts here, a promotional blitz there, maybe legal action.

Just enough to harass the opponent, wear them down, grab small footholds.

Keep them off balance.

Exactly.

Little jabs.

You know, what's really interesting is that even if a challenger succeeds and becomes a leader, it feels like they almost have to keep that challenger mindset, always looking for the next disruption.

That's absolutely right.

It's a relentless cycle.

Complacency is death in competitive markets.

So wrapping this up,

what's the big picture for someone learning about marketing from all this?

Well, we've covered a lot of ground.

We really have.

We looked at how companies figure out where to grow using things like the ANSOFT Matrix.

We talked about expanding organically versus M &A, the roles of innovation, and surprisingly, imitation.

How you gain and defend market position, share of mind, share of heart.

Then the whole product life cycle from start to finish, plus those other patterns like fads and trends.

And finally, how challengers try to shake things up.

It's a strategic core.

Exactly.

Understanding this stuff, growth, competition, market dynamics.

It's not just abstract theory.

It's the absolute backbone of any successful business strategy.

Doesn't matter if you're looking at a giant like a GM or, you know, a niche player like Huifang Foods and their sriracha sauce.

Which leads to maybe a final thought for you, the listener to Chihuan.

Considering how fast technology is changing everything, how consumer behavior keeps evolving,

which of these growth strategies or maybe the defense strategies do you think will be even more critical for companies in, say, the next five years?

And why?

That's a great question to keep the gears turning.

Thank you so much for joining us on this Deep Dive.

My pleasure.

And from the whole Last Minute Lecture team, a very warm thank you for listening.

We'll catch you on the next Deep Dive.