Market penetration, market development, and product development are sometimes referred to as intensive strategies because they require intensive efforts if a firm’s competitive position with existing products is to improve.
1. Market Penetration
A market penetration strategy seeks to increase market share for present products or services in present markets through greater marketing efforts. This strategy is widely used alone and in combination with other strategies. Market penetration includes increasing the number of salespersons, increasing advertising expenditures, offering extensive sales promotion items, or increasing publicity efforts. For example, Anheuser annually purchases several $4.5+ million, 30-second advertising slots during the Super Bowl.
Tiffany & Co. recently began using same-sex couples in advertising, preceded by J. Crew casting one of its designers and his boyfriend in a catalogue. Gap uses a handsome couple in a billboard, and Jeremiah Brent and Nate Berkus appear in a Banana Republic advertising campaign. The following five guidelines indicate when market penetration may be an especially effec-tive strategy:
- Current markets are not saturated with a particular product or service.
- The usage rate of present customers could be increased significantly.
- The market shares of major competitors have been declining while total industry sales have been increasing.
- The correlation between dollar sales and dollar marketing expenditures historically has been high.
- Increased economies of scale provide major competitive advantages.
2. Market Development
Market development involves introducing present products or services into new geographic areas. For example, Whirlpool recently acquired Indesit, an Italian company that sells appliances, in order to double Whirlpool’s size in Europe, where the company has struggled to compete against Electrolux AB of Sweden, LG Electronics Inc. of South Korea, and Haier Group of China. Indesit had 13 percent of the major appliance market share in eastern Europe and Whirlpool had 5 percent, so now 18 percent of the major appliances sold in eastern Europe are Whirlpool. In western Europe, the Indesit acquisition gave Whirlpool a 17 percent market share behind the leader, BSH Bosch & Siemens Hausgerate GmbH’s 20 percent.
The largest online video-streaming company, Netflix, recently launched it services into France, Germany, Belgium, and Switzerland, as well as eastern and southern Europe, and expects to be a global service provider by 2018. Netflix’s major rival in Europe is Vivendi SA’s pay-TV unit Canal Plus that offers Netflix-like services through its Canal Play services.
These six guidelines indicate when market development may be an especially effective strategy:9
- New channels of distribution are available that are reliable, inexpensive, and of good quality.
- An organization is successful at what it does.
- New untapped or unsaturated markets exist.
- An organization has the needed capital and human resources to manage expanded operations.
- An organization has excess production capacity.
- An organization’s basic industry is rapidly becoming global in scope.
3. Product Development
Product development is a strategy that seeks increased sales by improving or modifying present products or services. Product development usually entails large research and development expenditures. Walt Disney Company recently developed a Disney Baby line of products and services that it expects to become a powerful baby brand for customers ages 0 to 2. Bob Chapek, president of Disney Consumer Products, stated, “This gives Disney the opportunity to reach out to moms when magical moments begin; there is no more special occasion than the birth of a baby.”
The action camera company, GoPro, recently unveiled new high- and low-end cameras. GoPro is the leading producer of wearable and durable high-definition video cameras used by outdoor enthusiasts such as scuba divers and surfers. Based in San Mateo, California, GoPro’s rival firms include Sony, Canon, Garmin, and Polaroid, but GoPro is doing great by selling products in more than 100 countries and through more than 25,000 retail outlets.
The new Apple Watch is actually a wrist-top computer, and now competes with various Android-powered devices from Motorola and Samsung Electronics. “Wearable computers” are good for the people to monitor their healthiness among countless other things. The firm Sensoria is making smart garments, including smart socks, which yes, are washable. Opportunities for product development strategies are endless, given rapid technological changes occurring daily.
These following five guidelines indicate when product development may be an especially effective strategy to pursue:10
- An organization has successful products that are in the maturity stage of the product life cycle; the idea here is to attract satisfied customers to try new (improved) products as a result of their positive experience with the organization’s present products or services.
- An organization competes in an industry that is characterized by rapid technological developments.
- Major competitors offer better-quality products at comparable prices.
- An organization competes in a high-growth industry.
- An organization has especially strong research and development capabilities.
Source: David Fred, David Forest (2016), Strategic Management: A Competitive Advantage Approach, Concepts and Cases, Pearson (16th Edition).