Market follower

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Market follower
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Market follower is a runner-up firm that chooses not to rock the boat, usually from fear that is stands to lose more than it might gain. But the follower is not without a strategy and seeks to use its particular skills to gain market growth. Some followers enjoy a higher rate of return than the leaders in their industry[1].

A follower can gain many advantages. The market leader often bears the huge expenses of developing new products and markets, expanding distribution, and educating the market. By contrast, as with challengers, the market follower can learn from the leader's experience. It can copy or improve on the leader's products and programs, usually with much less investment. Although the follower will probably not over-take the leader, it often can be as profitable[2].

Types of market followers

The market follower may adopt four broad approaches as under[3][4]:

  • counterfeiter strategy involving duplicating the market leader's product and packaging and selling it in the black market (clearly illegal, but extremely prevalent in the entertainment and fashion industries).
  • cloner strategy involving emulating the market leader's products, name and packaging (e.g., makers of the IBM PC clones).
  • imitator strategy involving copying some things from the market leader while retaining some other features such as pricing, packaging or advertising (e.g., many car manufacturers imitate the styles of one another).
  • adapter strategy involving adapting one's own products to those of the market leader and selling them in different markets (many Japanese firms have proved to be excellent adapters initially before developing into challengers and eventually leader).

Effect on the market place

The effect of a new software product on the marketplace will depend on whether the product is a market leader, challenger, follower or nicher:

  • market challenger would be software program that is innovative or well established (e.g., Microsoft Word)
  • market challenger is a non-leader that makes an aggressive bid for market position held by the market leaders
  • market followers do not produce innovative new products; rather they rely on obtaining a portion of the market share of the market leaders
  • market nichers are specialists who concentrate on a small and focused area of the software market

When a market leader introduces a new product, it encourages competitors to improve their product to retain market share. If a market challenger or follower develops a product that is as good as the market leader, it encourages the market leader to continue to innovate or potentially lose market share. As market nicher it is important to have the first product to fill the niche, as niche markets are usually quite small[5].

Footnotes

  1. P. Kotler, G. Armstrong 2010, p.571
  2. P. Kotler, G. Armstrong 2010, p.567
  3. A. Kazmi 2010, p.260
  4. P.K. Venuvinod 2011, p.136
  5. G. Lancaster 2001, p.10

References

Author: Natalia Hajduk