It is a well recognised fact that not all companies operating in a particular market hold equal status. Different players hold different positions.
There are market leaders such as Coca Cola. These companies tend to hold the highest level of market share, the highest level of advertising intensity (share of voice) or the highest level of new product development. In the mobile phone market, Apple are the most likely company to be described as the market leader; a position they took from Nokia. Apple may not be the biggest firm in that particular market in terms of production but few would dispute their ‘leadership of thought’ i.e. where Apple go; others follow.
Then there are market challengers and followers. These are companies with smaller market share or share of voice. Firms in this block have two strategic choices; to challenge the market leader like a young stag trying to depose the alpha male during the annual rut; or to accept the status quo and follow the market leaders. Take the case of Pepsi. Coca Cola has long been the market leader in the soft drinks market. When Pepsi was launched the company accepted Coke’s leadership position and used a ‘strong second’ strategy to maintain their market position. At this point it must be recognised that a market leader may not be the most profitable entity in the particular market.
Finally, there are market nichers. These are usually firms which survive through specialisation and have so small a share of market or too limited a position to threaten the bigger beasts. This is the position held by most independent SME’s in the market place.
Porter described three generic marketing strategies, differentiation, focus and cost leadership. To differentiate you look to exploit differences between your company and your competitors so as to carve out a distinct market identity. A focus strategy is specialisation in a particular market segment. Cost leadership is ensuring that your products are either the cheapest on the market or that they provide the best value for money.
Market leaders tend to develop marketing strategies which either look to expand the market through increased sales or geographically. Leaders can have strategies aimed at protecting their current level of market share or to expand it.
Challengers tend to have aggressive marketing strategies. They will discount or cut prices. They will make cheaper goods. They will advertise heavily or work to promote improved service delivery. In nearly all cases, they will look to reduce costs.
Followers will identify appropriate market segments carefully, invest in research and development and they will continually challenge market assumptions. Pepsi’s strong second strategy does this. For many years they ran promotional taste test campaigns to challenge the assumption that Coca Cola was the best tasting cola on the market. they challenged the value of Coke. Coca Cola used to be sold in 6 fl oz. bottles. Pepsi launched with a 12 fl oz. bottle for similar cost. If you look a bottles of Coke and Pepsi, the Pepsi bottle size is still larger.
Market Nichers need to get smart. They need to identify a market niche which is of suitable size so as to ensure long-term market survival but which is small enough so as to avoid predatory attention from market leaders. Market nichers need to be able to serve their chosen niche and have the resources to defend it.
Specialisation is at the heart of niche marketing. Examples of successful niche marketers are Aga or Bang & Olufsen. In the car market, Porsche; a niche marketer; was, for many years, the most profitable car company.
But beware, if a firm over-specialises, and conditions change, you may be left with lots of product and no market niche within which those products can be sold.
Philmus Consulting Ltd can help your company to develop appropriate strategies for your market position.