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McGraw-Hill/Irwin Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.

8

Developing Product Strategy

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A Successful Strategy:

• Helps achieve coordination among functional areas of the organization.

• Defines how resources are to be allocated.

• Leads to a superior market position.

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Elements of a Product Strategy1. Statement of the objective(s) the product should

attain

2. Selection of strategic alternative(s)

3. Selection of customer targets

4. Choice of competitor targets

5. Statement of the core strategy

6. Description of supporting marketing mix.

7. Description of supporting functional programs

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Hierarchy of ObjectivesCompany Mission/Vision

Corporate objectives

Corporate strategies

Divisional objectives

Divisional strategies

Product/brand objectives

Brand strategies

Program objectives

Tactics

Level I

Level 0

Level III

Level II

Level IV

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Strategic AlternativesLong-term

profits

Growth in sales or

market share

New segments

Market development

Convert nonusers

New product development

Competitors’ customers

Efficiency, short-run

profits

Reduce costs

Decrease inputs

Improve asset

utilization

Increase price

Increase outputs

Improve sales mix

Existing customers

Market penetration

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Criteria for Evaluating Strategic Alternative Options

• Size/growth of the segment

• Opportunities for obtaining competitive advantage

• Resources available to penetrate the segment

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Target Segments for Handspring

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Positioning Decision Steps

1. Identify alternative positioning themes by consulting the advertising account team, the product team, and past marketing plans.

2. Screen the alternatives according to whether each is (a) meaningful to customers, (b) feasible given the firm and product resources and customer perceptions, (c) competitively sensible, or (d) helpful for meeting the product objective

3. Select the position that best satisfies these criteria and can be sold to the marketing organization

4. Implement programs (e.g., advertising) consistent with the product position selected

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Total Product Concept

Generic product

Expected product

Augmented product

Potential product

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Five Areas for Differentiation

1. Quality

2. Status and Image

3. Branding

4. Convenience and Service

5. Distribution

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Joint Space for Colas

Diet

Noncola

•Fresca

Diet Pepsi

•

•Tab

Segment 3 •

Pepsi •

RC Cola

•

Segment 2 •

Nondiet

Cola

•Dr

Pepper

•7-Up

•Segment

1

• Coke

Diet Rite •

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Brand EquityReduced marketing costs

Trade leverage

Attracting new customers• Create awareness• Reassurance

Time to respond to competitive threats

Anchor to which other associations can be attached

Familiarity-liking

Signal of substance/ commitment

Brand to be considered

Provides value to customer by enhancing customer’s:

• Interpretation/ processing of information

• Confidence in the purchase decision

• Use satisfaction

Brand loyalty

Brand loyalty

Brand loyalty

Brand awareness

Brand loyalty

Brand equity

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Brand Equity cont.

Reason-to-buy

Differentiate/position

Price

Channel member interest

Extensions

Help process/ retrieve information

Reason-to-buy

Create positive attitude/feelings

Extensions

Provides value to firm by enhancing:

• Efficiency and effectiveness of marketing programs

• Brand loyalty

• Prices/margins

• Brand extensions

• Trade leverage

• Competitive advantage

Brand loyalty

Perceived quality

Brand loyalty

Brand associations

Brand loyalty

Brand equity

Competitive advantage

Brand loyalty

Other proprietary brand assets

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Some Brand Attribute and Image Dimensions

Attributes

•Color•Style•Comfort•Freshness•Construction material

•Availability•Serviceability•Compatibility •Energy efficiency

•Instructions•Automation•Ease of Use

•Flavor/taste•Caffeine content

•Price•Packaging•Size•Calories•Brand name•Sweetness•Weight•Warranty•Durability•Convenience

Image DimensionsReliable—unreliableOld—youngTechnical—nontechnicalSensible—rashInteresting—boringCreative—noncreativeSentimental—nonsentimental

Impulsive—deliberateTrustworthy—untrustworthy

Conforming—rebelliousDaring—cautiousForceful—submissiveBold—timidSociable-unsociable

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Ten Guidelines for Building Strong Brands

1. Brand Identity• Each brand should have an identity, a personality. It can be

modified for different segments.

2. Value Proposition• Each brand should have a unique value proposition.

3. Brand Position• The brand’s position should provide clear guidance to those

implementing a communications program.

4. Execution• The communications program needs to implement the identity

and position, and it should be durable as well.

5. Consistency Over Time• Product managers should have a goal of maintaining a

consistent identity, position, and execution over time. Changes should be resisted.

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Ten Guidelines for Building Strong Brands (cont.)

6. Brand System• The brands in the portfolio should be consistent and synergistic.

7. Brand Leverage• Extend brands and develop co-branding opportunities only if the

brand identity will be both used and reinforced

8. Tracking• The brand’s equity should be tracked over time, including

awareness, perceived quality, brand loyalty, and brand associations.

9. Brand Responsibility• Someone should be in charge of the brand who will create the

identity and positions and coordinate the execution.

10. Invest• Continue investing in brands even when the financial goals are

not being met.

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IBM Notebook Computers: Purchase vs. Positive Opinion

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Basic Customer Strategies

1. Customer acquisition

2. Customer retention

3. Customer expansion

4. Customer deletion

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Strategy Over the Life Cycle

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Linked Strategy Issues

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Illustration: Odwalla Energy BarObjective:

Grow 10 percent faster than the category

Customer Targets:Existing juice customersHealth conscious and on-the-goSports enthusiastsHealth puristsNutrition-seeking families

Clif Bars and Clif LunaKashi Go LeanBalance (Outdoor, Plus, Oasis)

Competitive Targets:

Core Strategy:Increase distribution to 80 percent ACV in mainstream grocery storesFocus on natural healthLeverage brand name, Minute Maid resources

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Illustration: HandspringObjective:To capture 15 percent of the PDA market by the end of year 2Customer Targets:

Price-conscious professionalsNonbusiness professionalsNonprofessionals

PalmSharp

Competitive Targets:

Core Strategy:

Simplicity/convenienceLow priceExpandability (via expansion slot)