Download Market Maturity - Insight Engineers

Market Maturity – Understanding momentum and choice
(A useful frame for offer development)
Building on our recent article (July 2013) around the value of a structured stage-gate process for
launching new propositions, we’d also like to share with you some of our recent work on choice and
momentum around the issue of market maturity.
The company direction & board mandate can rarely be anything other than ‘business growth’ and it
is logical to try to achieve this by targeting specific ‘segments’ with new, differentiated, usually
branded, premium offers. However, it is not uncommon to experience the market maturity paradox
that offering more choice by launching a new targeted offer does not lead to a significant increase in
sales. A brand extension strategy makes a lot of sense when there is a high price spread between
the cheapest and most expensive product and there are relatively few products in-market, but as
choice increases, incremental return generally diminishes – a wide choice/range is generally the
category outcome of increased market maturity and at a certain point, consumers find they are
saturated by the amount of choice available.
Better understanding where you are in terms of saturation and competitive & country specific
market maturity has clear implications on future planning and the type of propositions & future
initiatives to consider, especially if you work/trade across more than one country.
We have created a simple way to provide a quick handle on the maturity of any market to input into
this strategic planning process and possible directions for development & targeting. We look at how
saturated a market is in terms of 3 key components:1.
2.
3.
Penetration (and profile)
Amount of Choice
Momentum (amount of products in category)
The level of these three components allows us to establish quickly if you would be pushing on an
open door with new product & service propositions for your target universe.
1
Market Maturity – Understanding Momentum and Choice – September 2013 | © insight engineers - 2013
1.
Penetration
This helps size your current universe and possibilities – in Example 1 below from Indian Foods,
2/3rds are in-market and 1/3rd are not. The next steps here are to understand any skews in the
type of person buying the category and your brand (heavy; medium; light buyers), the repeat
buying frequency for buyers and barriers/facilitators for non-buyers.
2. Choice & 3. Momentum
Are people open to new product innovations?
What is their perception on the amount of choice (too much; about right; too little)?
And what is their perception about the amount of products in their market at this moment (more
than last year; about the same; less than last year)?
The intersection of the replies to Choice & Momentum allows us to reflect market maturity via the
size of 4 groups – Growth; Mature; Saturated; Shrinking.
Growth is when the perceptions are that there are ‘too little’ products and there are ‘the same’ or
‘more products’ than last year.
2
Market Maturity – Understanding Momentum and Choice – September 2013 | © insight engineers - 2013
Example 2:
Continuing with the Indian Foods example in supermarkets in the UK – a constant fight for space
amongst a wide spread of SKUs, flavours and recipes – our approach has sized that there is
noticeable opportunity for growth with 18% of consumers not finding the current offer on shelf
sufficient – a sizeable segment to target:-
And if we now also look at two neighbouring ethnic food categories with a ‘category champion’
perspective, we have the ability to support a more informed trade marketing discussion in which (if
you are also present in the other categories) you are not arguing for space in one category by
sacrificing another.
3
Market Maturity – Understanding Momentum and Choice – September 2013 | © insight engineers - 2013
We have collected our approach on a spread of 14 different ‘established’ categories in the UK to
date (1) – here they are ranked on % Growth, reflecting clear differences in untapped need. If you’d
like us to cover this for your market, please contact us: [email protected]
(1)
each category base is ca. n=2,000 respondents, data collected on Toluna UK community panel over a 2 month period
Having worked for clients across many countries, our experience would indicate market maturity
tends to build in 4 phases (see below). Our sizing approach provides easy and quick pointers about
where you currently lie in these layers of maturity, and thereby assists relevant business decisions:1. Mass-Market, e.g. supermarkets.
Typically low price differentiation and penetration growth from the introduction of branded quality
offers, actively advertising and promoting themselves and delivering on high common needs.
2. Relationship, e.g. banking.
Having enjoyed growth & behavioural loyalty, this next stage in market maturity sees the beginnings
of more relationship based & more empathic marketing approaches from higher priced, quality
oriented brands/companies wanting to protect their core volumes from lower priced operators &
entrants.
3. Promiscuity/Switching, e.g. utilities, energy/fuel, credit cards.
A wide variety of market offers are now well established and marketing efforts are focussing on
switching in new customers by improving their offer, enhancing the experience or subsidising the
actual cost in a value driven way (e.g. via loyalty schemes). Many look to build attitudinal loyalty
with frequent behavioural hooks and triggers that also aim at enhancing brand differentiation in
commoditised markets.
4. Franchise Extension, e.g. alcoholic drinks
Moving beyond the existing (saturated) market into new income areas and products, thereby
providing new brand growth whilst supporting the brand heritage (2).
Operational excellence around core values combined with entrepreneurial spirit and drive.
(2)
Ian Morrison’s Second Curve from his book – “The Second Curve - Managing the Velocity of Change”
4
Market Maturity – Understanding Momentum and Choice – September 2013 | © insight engineers - 2013
Clearly, our primary research can help client-side research practitioners and marketers here in their
discussions and meetings within their company but as a general guide, our experience of working
with many leading companies would confirm there are opportunities to grow in each of these 4
phases, especially when one fully understands the position of your brand and the specific needs,
desires, wishes and reactions of your target universe in your category/country.
When allied to a drive to clearly position offer(s) and aiming to deliver them operationally to a
better/best level than competitors, this platform of common, contemporary understanding often
helps to ensure your company & its products/services will maintain its position in-market by being
an easier, default choice in complicated times and complex market conditions.
If you would like a specific theme covered in future publications please send your suggestions to
[email protected].
NOTE: All data collected using single question sponsored polls on Toluna’s professionally managed
online research community panel in the UK. Data post weighted to be nationally representative.
insight engineers: Delivering insights since 2003, we continue to answer marketing and business
questions through superior understanding.
5
Market Maturity – Understanding Momentum and Choice – September 2013 | © insight engineers - 2013