Product Strategy
What is a Product?
 Anything that can be offered to a market for attention,
acquisition, use or consumption that might satisfy a want or
need
 Any activity or benefit that one party can offer to another
that is essentially intangible and does not result in the
ownership of anything
- Kotler
Levels of Product & Services
 The CORE product is NOT the tangible physical product. This cannot be
touched. Its the BENEFIT of the product that makes it valuable to you. E.g
when purchasing a vehicle, the benefit is convenience i.e. the ease at which
you can go where you like, when you want, etc. Another core benefit is
speed since you can travel around relatively quickly.
 The ACTUAL product is the tangible, physical product. This can be touched.
And you can get some use out of it. (It is the vehicle that you test drive and
buy..
 The AUGMENTED product is the non-physical part of the product. It
usually consists of lots of added value, for which you may or may not pay a
premium. (When purchasing a car, part of the augmented product would be
the warranty, the customer service support offered by the car's manufacturer
and any after-sales service). The augmented product is an important way to
tailor the core or actual product to the needs of an individual customer. The
features of augmented products can be converted in to benefits for
individuals.
Product & Service classifications
Consumer Products
 Consumer products- bought by final consumer for personal
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consumption
Convenience products- products bought frequently, immediately
and with minimum comparison and effort
Shopping products- customer will compare based on suitability,
quality, price & style
Specialty products- products with unique characteristics & brand
identification for which buyer will make a significant purchase
effort
Unsought products- product the consumer does not know about
or knows but doesn’t normally think of buying
Industrial Products
 Products bought by individuals and organizations for further
processing of for use in conducting a business
Organizations, Persons, Places and
Ideas
 Organization marketing consists of activities to create,
maintain or change the behaviour and attitude of target
consumers towards the organization
 People marketing consists of activities to create, maintain or
change the behaviour and attitude towards people. Used by
Doctors, lawyers, architects, etc… (Oprah winfrey)
 Social marketing programs include public health campaigns
to reduce smoking, drug abuse, alcoholism, etc
Individual Product & Service decisions
Product/Servi
ce attribute
Branding
Packaging
Labeling
Product
support
services
Product Line decision
 A group of products that are closely related because they
function in a similar manner, are sold to the same customer
groups, are marketed through the same types of outlets or
fall within given price ranges.
Product Mix decision
 The set of all product lines and items that a particular seller
offers for sale.
Services Marketing
Nature and characteristics of Service
 Service inseparability- a major characteristic of services. They are
produced and consumed at the same time and cannot be
separated from their providers
 Service variability- their quality may vary greatly depending on
who provides them and when, where and how
 Service perishability- cannot be stored for later sale or use.
Marketing Strategies for Service firms
 The service profit chain
 Managing service differentiation
 Managing service quality
 Managing service productivity
New Product Development strategy
Idea Generation
 New product development starts with idea generation
 The systematic search for new product ideas
 Internal sources: executives, manufacturing staff, sales people
 Eg :Samsung value innovation program where researcher, designers
and engineers co-mingle to come up with new product ideas
 External sources: customer feedback,
distributors, suppliers, competitors (the
use of reverse engineering)
 LEGO invited 250 train set
enthusiastic to asses new designs
Idea Screening
 Screening new product ideas to spot good ideas and drop
poor ones as soon as possible.
 A company would access the product, the target market,
competition, a rough estimation of the market size, product
price, development time, costs, manufacturing costs
 Due to product development costs companies will only go
ahead with product ideas that will be profitable.
Concept development & testing
 A detailed version of the new product idea
stated in meaningful terms
 E.g: Daimlerchrysler developing their fuel-
cell powered F-cell car.
 Concept testing
involves testing the
new product with a
group of target
customers to see if
the concept has
appeal
Eg: Concept Board
Marketing strategy development
 Part 1 :The planned product positioning including sales,
market share and profit goals for the year
 Eg: DaimlerCrysler, fuel-cell-powered electric car
Target Market :Younger, well educated, moderate to high income
individuals, couples or small families seeking practical environmental
friendly transportation
Positioning :Fun to drive less polluting than hybrid cars, less restricted
than battery powered electric cars
Sales & Profit: Aim to sell 100k at a loss not more than $15M in the first
year ,120k and a profit of $25M in year 2.
Marketing strategy development Cont
 Part 2:An outline of the products' planned price, distribution and
marketing budget
 Eg: DaimlerCrysler, fuel-cell-powered electric car
Price : In 3 colors at $25,000
Distribution : 15% of the list price to the distributor, additional discount of
5% for more than 10 cars a months
Ad Budget: $50M, spilt 50:50 on local and national advertising
 Part 3:Planned and long run sales, profit goals and marketing mix
 Eg: DaimlerCrysler, fuel-cell-powered electric car
Long run sales & Profit : 3% share in the total auto market & 15% ROI
after tax.
Marketing mix: Improve quality, Increase price in year 2&3, 10% increase in
Ad budget YOY.
Business analysis
 A review of the sales, costs, and profit projections for a new
product to find out whether these factors satisfy the
company’s objectives
product development stage
 To estimate sales the company might look at sales history of
similar products and conduct surveys of market opinions
Product development
 Developing the product concept into a physical product
 E.g Gillette- the entire staff get involved in product testing.
 Requires a large investment . R&D develops a prototype
 A new product must have the required functional features
and also convey the psychological characteristics
 Eg: DaimlerCrysler, fuel-cell-powered electric car should strike
as being well built, comforatble and safe. For some consumer it
may mean “solid sounding” doors
Test marketing
 The product and marketing program are tested in more
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realistic market settings
The test market tests the entire marketing programpositioning, advertising, distribution, pricing, branding and
packaging at budget levels
The amount of test marketing varies depending on the
product
A new product that requires a big investment may involve a
lot of test marketing
Test marketing doest guarantee success
Commercialization
 The launch of the product into the market
 Company must decide where to launch; a single location,
region, national market or international market
 The company must decide on introduction timing
Managing New-product development
 Customer centered new-product development: that focus
on finding new ways to solve customer-satisfying experience
 Team based new product development: a approach in
developing new products in which various company
departments work closely together, overlapping the steps in
the product development process to save and increase
effectiveness
 Systematic new product development: new product
development process should be systematic than haphazard.
The company can install a innovation management system
Product life-cycle strategies
Product life-cycle strategies
 Not all products follow the life cycle.
 Some products once introduced die quickly while others
stay in the mature stage for a long time
 Some products are cycled
back to the growth stage
through strong
repositioning and
promotion (American
Express/Gillette/Cocacola)
Introduction stage
 Introduction takes time and sales growth is slow.
 Profits are negative or low because of the high distribution
and promotion cost
 Focus is on buyers who are most ready to buy
 Much money is needed to attract distributors and build
inventories
 Promotion spending is high to inform customers of the new
product
Growth stage
 In this stage early adopters will continue to buy and late
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adopters will start to follow depending on the feedback
New competition will enter the market attracted by profit
potential
The market tends to expand as competitors offer new
features
New market segments and distribution channels
Face a trade-off between high market share and high profits
Maturity stage
 Lasts longer than the previous stages
 There s a slow down in sales as a result of many producers
with many products. This leads to over capacity.
 Competitors begin price cutting
 Need to consider modifying the market, product and
marketing mix
 Look to increase usage among existing customers
Decline stage
 Sales decline may be due to technological advances, shifts in
consumer tastes, increased competition
 Firms may decide to drop the product altogether
 Carrying a weak product can be costly; loss making,
management time, delay the search for replacements