Product Strategy
Dr. Ananda Sabil Hussein
Product Strategy
 Defines what the organization does and why it
exists
 Involves creating a product offering that is a
bundle of physical (tangible), service (intangible),
and symbolic (perceptual) attributes designed to
satisfy customer’s needs and wants
 Strives to overcome commoditization
7-2
Types of Products
in Consumer Markets
 Convenience Products
 Shopping Products
 Specialty Products
 Unsought Products
 Products of which consumers are unaware
 Products of which consumers did not consider purchasing until a
sudden need or emergency arises
7-3
Types of Products
in Business Markets
 Raw Materials
 Component Parts
 Process Materials
 MRO Supplies
 Accessory Equipment
 Installations
 Business Services
7-4
The Product Portfolio
 Consists of Product Lines and Mixes
 Product Line – closely related product offerings
 Product Mix or Portfolio – total group of products offered by the firm
 Strategic Decisions
 Variety – number of product lines offered
 Assortment – depth of each product line
7-5
Proctor & Gamble’s Portfolio
of House and Home Products
7-6
Exhibit
7.2
Potential Benefits of
Wide Variety & Deep Assortment
 Economies of Scale
 Package Uniformity
 Standardization
 Sales and Distribution Efficiency
 Equivalent Quality Beliefs
7-7
Challenges of Service
Products
 Balancing supply (capacity) with demand
 Time and place dependency of demand
 Difficulty of evaluating service quality prior
to purchase
 Inconsistency of service quality
 Difficulty in tying offerings to customer
needs (i.e., the need is not always apparent
to customers)
7-8
Unique Characteristics of Services
 Intangibility
 Simultaneous Production and Consumption
 Perishability
 Heterogeneity
 Client-Based Relationships
7-9
From Exhibit
7.3
New Product Development
 A vital part of a firm’s effort to sustain growth and profits
 Depends on the firm’s ability to create a differential advantage
for the new product
 Customer perception of newness is critical
7-10
Six Strategic Options
for Newness of Products
1.
New-to-the-world products (discontinuous innovations)
2.
New product lines
3.
Product line extensions
4.
Improvements or revisions of existing products
5.
Repositioning
6.
Cost reductions
7-11
New Product Development Process
 Idea Generation
 Screening and Evaluation
 Development
 Test Marketing
 Commercialization
7-12
Branding Strategy
 Involves selecting the right combination of name,
symbol, term, or design that identifies a product
 Brands have two parts:
 Brand name – words, letters, and numbers
 Brand mark – symbols, figures, or a design
 Critical to product identification and the key factor
in differentiating a product from its competition
 Makes it easier for customers to find and buy
products
 Firms must protect brand names and brand marks
from trademark infringement by other firms
7-13
Strategic Issues
in Branding Strategy
 Manufacturer vs. Private-Label Brands
 Private-label brands are more profitable for the retailer
 Manufacturer brands have built-in demand
 Brand Loyalty
 Positive attitude toward a brand that results in a consistent
preference for that brand. Three levels:
 Brand recognition  Brand preference  Brand insistence
 Brand Equity
 The value of a brand associated with its marketplace position
 Brand Alliances
 Strategies that involve close relationships with other firms
(e.g., cobranding, brand licensing)
7-14
Advantages of Branding
7-15
Exhibit
7.4
The World’s Twenty Five
Most Valuable Brands
7-16
Exhibit
7.5
Packaging and Labeling
 Often goes hand-in-hand in developing a
product, its benefits, its differentiation, and
its image
 Includes issues such as color, shape, size,
convenience
 Often used to reposition the product or give
it new and improved features
 Vital to helping customers make proper
product selections
7-17
Differentiating and Positioning
the Product Offering
 Product Differentiation
 Creating differences in the firm’s offerings that set them
apart from competing offerings
 Positioning
 Creating a mental image of the product offering and its
differentiating features
 Perceptual Mapping
 A visual, spatial display of customer perceptions that
allows monitoring of product positioning relative to other
products
7-18
A Hypothetical Perceptual Map
of the Automotive Market
7-19
Exhibit
7.6
Differentiation Strategies
 Branding is the most important tool. But, there are
other important bases for differentiation:
 Product Descriptors (see Exhibit 7.7)
 Product features – factual descriptors of the product and its
characteristics
 Advantages – performance characteristics of how the product
behaves
 Benefits – positive outcomes or need satisfaction
 Customer Support Services
 Image
 Overall impression that customers have of a product or firm
7-20
Positioning Strategies
 Strengthen the Current Position
 Repositioning
 Reposition the Competition
7-21
Managing Products
and Brands Over Time
 Development Stage
 Introduction Stage
 Growth Stage
 Maturity Stage
 Decline Stage
7-22
Stages of the Product Life Cycle
7-23
Exhibit
7.8
Development Stage
 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 before
developing marketing strategy
7-24
Introduction Stage
 Begins when development is complete
 Ends when customers widely accept the product
 Marketing strategy goals during this stage:






Attract customers by raising awareness and interest
Induce customers to try and buy
Engage in customer education activities
Strengthen or expand channel and supply relationships
Build on availability and visibility
Set pricing objectives
7-25
Growth Stage (1 of 2)
 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:
 Establish a strong, defensible marketing position
 Achieve financial objectives that repay investment
7-26
Growth Stage (2 of 2)
 Marketing strategy goals in this stage:
 Leverage the product’s perceived differential
advantages
 Establish a clear product and brand identity
 Create unique positioning
 Maintain control over product quality
 Maximize availability of the product
 Maintain or enhance the product’s profitability to
partners
 Find the ideal balance between price and demand
 Keep an eye focused on the competition
7-27
Maturity Stage (1 of 2)
 Typically, no more firms will enter the market
 Still an opportunity for new product features and
variations
 Typically the longest stage in the product life cycle
7-28
Maturity Stage (2 of 2)
 Four general goals in this stage:




Generate cash flow
Hold market share
Steal market share
Increase share of customer
 Four options to achieve these goals:




Develop a new product image
Find and attract new users to the product
Discover new applications for the product
Apply new technology to the product
7-29
Decline Stage
 Two options:
 Attempt to postpone the decline
 Accept the inevitability of decline
 Harvesting
 Divesting
 Factors to be considered during this stage:




Market segment potential
The market position of the product
The firm’s price and cost structure
The rate of market deterioration
7-30