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The marketing concept of building an organization around the profitable satisfaction of customer needs has helped firms to achieve success in high-growth, moderately competitive markets. However, to be successful in markets in which economic growth has leveled and in which there exist many competitors who follow the marketing concept, a well-developed marketing strategy is required. Such a strategy considers a portfolio of products and takes into account the anticipated moves of competitors in the market.
The Case of Barco
In late 1989, Barco N.V.'s projection systems division was faced with Sony's surprise introduction of a better graphics projector. Barco had been perceived as a leader, introducing high quality products first and targeting a niche market that was willing to pay a higher price. Being a smaller company, Barco could not compete on price, so it traditionally pursued a skimming strategy in the graphics projector market, where it had a 55% market share of the small market. Barco's overall market share for all types of projectors was only 4%.
Even though Barco's market was mainly in graphics projectors, the company had not introduced a new graphics projector in over two years. Instead, it was spending a large portion of its R&D budget on video projector products. However, video projectors were not Barco's market.
Barco's engineers had been working long hours on their new projector that would not be as good as Sony's. Some people thought they should not stop work on that product since the engineers' morale would suffer after being told how important it was to work hard to get the product out. However, even considering the morale of the product team, it would not have been a good idea to introduce a product that was inferior to that of Sony. Barco wisely stopped working on the inferior product and put a major effort in developing a projector that outperformed Sony's.
The Barco case illustrates several marketing strategy concepts:
Price / Selling Effort Strategies: A firm that follows a skimming strategy seeks to be the first to introduce a product with very good performance, selling it to the innovator market segment and charging a premium price for it. It makes as much profit as possible, then moves on when the competition arrives. The price is likely to fall over time as competition is encountered. Such a skimming strategy contrasts with a penetrating strategy, which seeks to gain market share by sacrificing short-term profits, and increasing the price over time as market share is gained.
Competitors have certain strengths and abilities. To succeed, a firm must leverage its own unique abilities.
A firm should prepare defensive strategies before potential threats arrive. If the competition surprises a firm with the introduction of a vastly superior product, the firm should resist the temptation to proceed with its mediocre product. A firm never should introduce a product that is obsolete when it hits the market.
The competition's probable response to a firm's actions should be considered carefully.
Marketing Research for Strategic Decision Making
The two most common uses of marketing research are for diagnostic analysis to understand the market and the firm's current performance, and opportunity analysis to define any unexploited opportunities for growth. Marketing research studies include consumer studies, distribution studies, semantic scaling, multidimensional scaling, intelligence studies, projections, and conjoint analysis. A few of these are outlined below.
Semantic scaling: a very simple rating of how consumers perceive the physical attributes of a product, and what the ideal values of those attributes would be. Semantic scaling is not very accurate since the consumers are polled according to an ordinal ranking so mathematical averaging is not possible. For example, 8 is not necessarily twice as much as 4 in an ordinal ranking system. Furthermore, each person uses the scale differently.
Multidimensional scaling (MDS) addresses the problems associated with semantic scaling by polling the consumer for pair-wise comparisons between products or between one product and the ideal. The assumption is that while people cannot report reliably which attributes drive their choices, they can report perceptions of similarities between brands. However, MDS analyses do not indicate the relative importance between attributes.
Conjoint analysis infers the relative importance of attributes by presenting consumers with a set of features of two hypothetical products and asking them which product they prefer. This question is repeated over several sets of attribute values. The results allow one to predict which attributes are the more important, the combination of attribute values that is the most preferred. From this information, the expected market share of a given design can be estimated.
Multi-Product Resource Allocation
The most common resource allocation methods are:
Percentage of sales
Executive judgement
All-you-can-afford
Match competitors
Last year based
Another method is called decision calculus. Managers are asked four questions:
What would sales be with:
no sales force
half the current effort
50% greater effort
a saturation level of effort.
From these answers, one can determine the parameters of the S-curve response function and use linear programming techniques to determine resource allocations.
Decision algorithms that result in extreme solutions, such as allocating most of the sales force to one product while neglecting another product often do not yield practical solutions.
For mature products, sales increase very little as a function of advertising expenditures. For newer products however, there is a very positive correlation.
Portfolio models may be used to allocate resources among major product lines or business units. The BCG growth-share matrix is one such model.
| Product Model | Inside Diameter | Outside Diameter | Thickness |
| NACV40LL/3AS NTN | 19.05 | 63.5 | 39.688 |
| NACV36LL/3AS NTN | 15.875 | 57.15 | 33.338 |