8cf3cProduct Strategy Development

7/31/2019 8cf3cProduct Strategy Development

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Amity Business School

Product Strategy

Development

Module I

PBM MBASunetra Saha


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Product (or service)is the main

element of the marketing mix

Therefore, need to determine theProduct Strategiesbefore deciding on

the remaining marketing mix

Introduction


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Product Bundle of physical, chemical & intangibleattributes.

Have the potential to satisfy present &potential customer wants


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When an organization introduces aproduct into a market they must askthemselves a number of questions.

Who is the product aimed at?

What benefitwill they expect?

How do they plan to positionthe productwithin the market?

What differential advantagewill theproduct offer over their competitors?

Product Strategies


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Kotler suggested that a product should be viewed in five levels. Level 1: Core Product. What is the core benefit your product

offers?. Customers who purchase a camera are buying morethen just a camera they are purchasing memories.

Level 2 Actual Product: All cameras capture memories. Theaim is to ensure that your potential customers purchase yourone. The strategy at this level involves organizations branding,adding featuresand benefits to ensure that their product offers adifferential advantage from their competitors.

Level 3: Expected product:a set of attributes and conditions

buyers normally expect when they buy a product. Level 4: Augmented product:What additional non-tangible

benefits can you offer? Competition at this level is based aroundafter sales service, warranties, delivery and so on.

Level 5: Potential product:all the possible augmentations &transformations the product may undergo in the future.

Product Hierarchy


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Classification of productsDurability &

tangibility

Consumer Goods

Classification

Industrial goods

classification

Non- durable

goods

Convenience

goods

Materials & parts

Durable Goods Shopping goods Capital items

Services Specialty goods Supplies &

business services

Unsought goods


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Product Differentiation Form

Features

Customization

Performance quality Conformance quality

Durability

Reliability

Repairability Style

Design

Eg Godrej Ergoz


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Product design Will the design be the selling point for theorganisation as we have seen with the Apple iphone, the new VWBeetle or Kent RO Water Purifier.

Product quality:Quality has to consistent with other elements ofthe marketing mix. A premium based pricing strategy has to reflectthe quality a product offers.

Product features: What features will you add that may increase thebenefit offered to your target market? Will the organisation use adiscriminatory pricing policy for offering these additional benefits?

Branding:One of the most important decisions a marketingmanager can make is about branding. The value of brands intodays environment is phenomenal. Brands have the power ofinstant sales, they convey a message of confidence, quality andreliability to their target market.

Product Decisions


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Product needto satisfy a need e.g. Cleaning teeth

Product classa family of products having similar

function e.g. all toothpastes/powders

Product linea group of products with closely related

functions e.g. gel toothpastes

Product typeproducts within a line having similar

form e.g. Fresh breath gel toothpastes

Branda name representing a product or line e.g.

Close-up

Item (Stock Keeping Unit)a unit item e.g. one

100gm pack of Close Up red gel toothpaste

7-Levels of

Product Hierarchy


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Product systems & Mixes Product system: a group of diverse but

related items that function in a compatible

manner Product mix: a set of all products and

items a particular seller offers for sale.

Product width: no of different product linesProduct length: total no of items in the mix

Product depth: no of variants in eachproduct line


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Decisions on the product mix (the number ofproduct lines and items in each line) that thecompany may offer

A single product Most firms started off as a single-product company

Multiple products

e.g. Philips markets sound cards as well as MP3players

A systems of products e.g. Nikon sells camera, lenses, filters & other

options

Product-Mix Decisions


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Amity Business SchoolProduct Line Analysis

Sales & Profits

Core products

Staples

Specialities

Convenience items

Market profile Product Map


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Amity Business SchoolStrategic Business Units

(SBU)

To make planning more effective, a large, diverseorganization may divide itself into smaller

planning units called Strategic Business Units The unit should:

Be a separately identifiable business

Have a distinct mission

Have separate competitors Have a separate group of executives

charged with profit responsibility

Have its own strategic plan


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??? Stars

Dogs Cash Cows

Mkt Share

BCG Matrix


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SBU strategies

Build

Hold Harvest

Divest


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Business Strength

Strong

Medium

Weak

StrongMediumWeak

GE Model


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Current products New products

Current Mkts

New Mkts

Mkt penetrationstrategy

Mkt developmentstrategy

Product development

strategy

Diversificationstrategy

Ansoffs

Product-Market Grid


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Expanding the Product Line1. Product line extension: add an item to the

existing product line

Many FMCG companies introduced various

sizes of the same product e.g.mini-packs for

travelers, extra-large size for hospital

2. Product category extension: add a newitem or line of items for a company e.g.

P&G have Head & Shoulders, Wella and

Pantene in the same category


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3. Brand extension: Product category

extension that uses an existing brand

name e.g.

Horlicks-


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Downward stretch by introducing lower range

of the products e.g.

Ginger hotels of Tata Group Upward stretch by entering the high end

of the market e.g.

Toyota introduced the Lexus and Nissanintroduced the Infiniti

Line stretching


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Two-way stretch by filling the whole

line e.g.

Tata Motors has the Nano at the lowerend; the Indigo in the executive range; the

Aria in the upper-management range and

the Jaguar in the luxury range


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Managing line extensions

Customer segmentations

Consumer desires

Pricing breadth Excess capacity

Short term gain

Competitive intensity Trade pressure

Energising a brand


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Managing line extensions

Exploitation of variety fulfillment

Expanding the brands core promises to

new users

Managing true innovations

Blocking or inhibiting competitors

Managing a dynamic environment

Testing ground for national launch


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Product Strategy

Throughout 5 Life Cycle Stages

Development Stage

Introduction Stage

Growth Stage

Maturity Stage Decline Stage


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5 Stages of the Product Life Cycle


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No sales revenue during this stage

Components of the product concept:

An understanding of desired uses and benefits A description of the product

The potential for creating a complete product line

An analysis of the feasibility of the product concept

Customer needs should be discerned beforedevelopingmarketing strategy


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Be ready for sustained sales increases

Rapid increase in profitability early in the growth stage

that decreases at the end of this stage Length depends on nature of product and competitive

reactions

Two strategies:

(1) Establish a strong, defensible marketing position

(2) Achieve financial objectives


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Marketing strategy goals in this stage:

Leverage the products perceived differential

advantages Establish a clear product and brand identity

Create unique positioning

Maintain control over product quality

Maintain or enhance the products profitability topartners

Find the ideal balance between price and demand

Keep an eye focused on the competition


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Few, if any, new firms will enter the market

Still an opportunity for new product features and

variations

Typically the longest stage in the product life cycle


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Four general goals in this stage:

(1) Generate Cash Flow

(2) Hold Market Share (3) Steal Market Share

(4) Increase Share of Customers

Four options to achieve these goals:

(1) Develop a new product image (2) Find and attract new users to the product

(3) Discover new applications for the product

(4) Apply new technology to the product


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Two options:

(1) Attempt to postpone the decline

(2) Accept its inevitability

Harvesting

Divesting

Factors to be considered during this stage:

Market segment potential

The market position of the product

The firms price and cost structure

The rate of market deterioration


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New Product Strategy

New products are critical to survival

New-product development (NPD) is

essential for companies seeking growth It should be an on-going, well organizedNPD process having top-management

support

What is a new product? From a firm's perspective, a new product is

a product that it is unfamiliar in any way


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New Products


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Definition of

Product Newness1. Products new to the world: usually

revolutionary products resulting from

product innovation e.g When Apple first introduced the I-Phone

When disposable cameras were firstintroduced

When Seiko introduced the Seiko KineticRelay, a watch that can go into suspendedanimation


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Definition of Product

Newness (contd)

2. Products new to the firm

Improvements to existing products e.g. In 1960 Kaointroduced shampoo liquid and in

1970 introduced KaoMeritshampoo (anti-dandruff)

Additions to existing lines e.g. In 1965 Kaointroduced the Kao Tenderhair

conditioner

Costs reductions and re-positionings


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Product Convergence

First coined by Creatives Sim W H who was

referring to the marriage between the PCand home entertainment

Creative Multi-Speaker Surround (CMSS)

uses seven audio channels

Source: Computer Times, 1997


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Positioning Positioning is a concept in marketing which was first

introduced by Jack Trout ( "Industrial Marketing"Magazine- June/1969) and then popularized by Al Ries

and Jack Trout in their bestseller book "Positioning -The Battle for Your Mind." (McGraw-Hill 1981)

Positioning refers to placing a brand in that part of themarket where it will have a favorable receptioncompared to competing brands Subash Jain

A products position is the place the position occupiesin consumers minds relative to competing products.

Philip Kotler


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Product Positioning Process Defining the market in which the product or brand will compete (who the

relevant buyers are)

Identifying the attributes (also called dimensions) that define the product

'space' Collecting information from a sample of customers about their perceptions

of each product on the relevant attributes

Determine each product's share of mind.

Determine each product's current location in the product space

Determine the target market's preferred combination of attributes (referred

to as an ideal vector) Examine the fit between:

The position of your product

The position of the ideal vector


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Positioning concepts Functional positions

Solve problems

Provide benefits to customers

Get favorable perception by investors and lenders Symbolic positions

Self-image enhancement

Ego identification

Belongingness and social meaningfulness

Affective fulfillment Experiential positions

Provide sensory stimulation

Provide cognitive stimulation


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Generic Positioning Strategies

Our product is unique

e.g. Raffles Hotel(oldest hotel); Westin Hotel(tallest hotel)

Our product is different

e.g. Maggi Hot & Sweet Sauce

Listerine(kills germs)

Our product is similar

e.g. India Gate Basmati rice


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Approaches to Positioning By attributes

e.g. Singapore Airlines (first class comfort)

By benefits

e.g. Real Active Fruit & Vegatable juice with addedfibre

By price/quality e.g. Proton By usage or application e.g. Vicks Vaporub

By users e.g. Johnson Baby Shampoo; J&J AffinityShampoo (hair conditioner for women)

By product class

e.g. Dove soap (with1/4 moisturising cream- not justsoap)

By competitors e.g. Horlicks against Complan


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Product Positioning Using

Perceptual & Preference Maps

Marketing managersuse a Mapping

technique to help them visualize thecompetitive structure of the market

before they develop differentiation and

positioning strategies


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Positioning StatementCrossing the Chasm (Copyright 1991, by Geoffrey

Moore, HarperCollins Publishers),

The position statement is a phrase so formulated:For (target customer) who (statement of the

need or opportunity), the (product name) is a

(product category) that (statement of key benefit

that is, compelling reason to buy). Unlike(primary competitive alternative), our product

(statement of primary differentiation).


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Amity Business SchoolExample of a 2D Perceptual Map

for Laptop

Brand A

Brand B

Appearance

Performance


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RepositioningWhy reposition?

Competitors position next to you

Consumer preferences changed

New consumer preference cluster

Original mistake


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Repositioning(contd) Repositioning among existing customers

e.g. Cerebos repositioned BRANDS from atraditional therapeutic and recuperative tonic to

one for preventative health maintenance APB repositioned Tiger Beer as a beer for all time

Repositioning among new users Cadburys Bourbon biscuits to young generation.

Repositioning for new uses Repositioning BRANDS as a base for double-boil

cooking


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Product-Overlap StrategyThis strategy refers to a situation in which a

company decides to compete against its

own brand by using: Competing brands e.g. Gillette Atra, Sensor, Mach 3

Private labeling e.g. Sin Sin Chilli Sauce, Watson Vitamins

OEM e.g. IBM selling magneto-resistance (MR) heads to

OEM disk drive developers/manufacturers


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Product-Elimination Strategy When a products performance is falling

short of expectations and continued

support is no longer justified, its time to

pull it out of the marketplace

How?

Harvesting, line-simplification, total-line

divestment


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Value-Marketing Strategy

Value-marketing strategy means delivering real

product performance based on the following

promises

Quality strategy

Customer-service

Time-based

Example: Dell cuts the duration from order to delivery of most

of its products to the minimum


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Product strategy begins with a strategic vision thatstates where a company wants to go, how it willget there, and why it will be successful.

Product strategy is like a roadmap, and like aroadmap its useful only when you know whereyou are and where you want to go.

(McGrath 2001)


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What is

Product

Strategy?

Documents

8cf3cProduct Strategy Development