It is now a common practice in marketing to follow the leader rather than challenge him. While deciding to follow the leader, the follower should keep in mind that the leader will not let this go unchallenged. If the follower offers a lower price, the leader may cut the price further.
The leader may also diffuse the attack by improving his services further or by offering additional features to his product. The reason for such an assertion is that the leader is likely to be in a stronger position on different fronts compared to the followers.
Therefore, the follower should give serious thought before deciding to go for a battle with the leader because an ill-thought attack may jeopardize the firm.
If the firm is convinced that it cannot sustain an attack against the leader, it is always better to follow the leader than to attack him. To sustain an attack, the firm should launch a preemptive attack.
Reasons for Pursuing Follower-Ship Strategy
The follower-ship strategy is found to be practiced more in industries requiring huge capital and producing a homogeneous product. There are several reasons for such practice.
Firms producing homogeneous or generic products find it difficult to ensure discrimination among their products on the consumers’ part.
Moreover, the quality of the products of different firms is more or less similar, and as a result, customers are likely to generalize the competing offers. In addition, customers in this category are likely to be very price sensitive.
The price activities of firms in such an industry could be suicidal for each of the participating firms in the long run. Though in the short-run, a firm can gain by price cuts, in the long run, it will lose the market share to a similar counterattack by other firms, which is inevitable.
Firms should, therefore, decide not to engage in wars against each other. Rather they go for following the market leader by imitating his offer.
Alternative Follower-ship Strategies
Market followers do not have any option with regard to launching attacks. This is not true. He also has, at his disposal, a number of attack strategies that he may launch.
Before deciding on a particular attack strategy to be launched, the follower should develop mechanisms for retaining existing customers as well as attracting new market segments.
He can ensure these by offering something different to his target customers. He can offer better services, extend distribution networks, offer credit facilities, etc.
He should also keep trying to lower his production costs, improve the quality of his product, and penetrate new and emerging market segments. Though the follower follows the market leader, there is no reason to believe that he always remains passive or follows the leader although.
In order to ensure his long-run survival, he should define his growth path. While defining the growth path, he should be careful about the competitive reaction.
The growth path should be defined in such a way that discourages his competitors from reacting.
In the following few paragraphs, we shall take up a discussion on different alternative follower-ship strategies:
Strategy- 1: Counterfeiter
A counterfeiter strategy is where the firm imitates the leader’s product as well as packaging. The distribution, of course, takes place on different paths.
The firm duplicates the product and sells it either through the black market or through dealers who lack a reputation.
This is a normal practice here in Bangladesh. You will find a lot of companies duplicating and marketing reputable products.
Strategy-2: Cloner
The cloning strategy is one where the firm copies the leader’s product in all respect, from features, varieties, packaging, distribution, and promotion. The only difference may be found in the name though it closely resembles the leader’s name.
Vim, for example, is a well-established washing powder used to clean utensils. But, another product named Vima is marketed imitating the name and packaging.
Strategy- 3: Imitator
Imitation is another strategy pursued by the market follower. This is unlike the first two discussed before. Here the firm partially copies the leader.
He differentiates his product from that of the leader in terms of price, packaging, advertising, and other aspects. Imitation sometimes makes the market environment healthy by creating a situation that checks monopoly.
Strategy-4: Adapter
In this strategy, the market follower adapts his product to the leader’s product. The adaptation may take the line of pricing, design, performance, and so on.
The adapter sometimes tries to improve his product from that of the leader. The adapter also avoids conflict with the leader by taking his product to other parts of the market not served or neglected by the leader.
Pursuing market follower-ship helps the firm save a lot of money on research and development, but it does not always yield a satisfactory level of return/profit. The leader always will try to hold his position and do everything possible to wipe out others from the market.
This may put the follower company in great trouble. It is, therefore, advisable to give a second thought before deciding to pursue a follower-ship strategy.