Marketing Strategy
MKT 460
Lecture 5:
Product and Service Management 1
Taufique Hossain
Five Product Levels
Product Classification
Durable products: last for many uses and over a
long period before having to be replaced
Non-durable products: can be used once or a few
times before having to be replaced
Service products: intangible products comprising
activities, benefits or satisfactions that are not
embodied in physical products
User-Based Classifications – Consumer
products
Convenience goods: relatively inexpensive, frequent
purchases which respond to routine response buying
situations
Shopping goods: represent more of a risk and an
adventure to consumers
Speciality goods: high risk, expensive and infrequently
purchases products
Unsought goods: e.g., in an emergency
User-Based Classifications –
Industrial Products
Capital goods: Buildings and fixed equipment that make production
possible
Accessory goods: give peripheral support to production without being
directly involved
Raw materials: non-processed goods
Semi-finished goods: significant level of processing
Components and parts: finished goods in their own right
Supplies and services: minor consumable items
Product Differentiation
Product form
Features
Customization
Performance
Conformance
Durability
Reliability
Repairability
Style
Service Differentiation
Ordering ease
Delivery
Installation
Customer training
Customer consulting
Maintenance and repair
Returns
The Product Mix
Product mix: total sum of all products and variants offered
Product line: group of closely related products
Product item: individual products within lines
Product line length: total number of items in line
Product line depth: number of different variants within line
Product mix width: number of lines offered
Product Mix at Unilever
Line Modifications
Down Market stretch
Up-market stretch
Two-way stretch
Line filling
Deleting
The Product Life-Cycle
Product Life-Cycle Fundamentals
Development
Initial Ideas – Possibly in large numbers
May come from any of the following –
•
Market research – Identifies gaps in market
•
Monitoring competitors
•
Planned R&D
•
Luck of Intuition – stumble across ideas?
•
Creative thinking – inventors, hunches?
•
Future thinking – what will people be using/wanting/needing 5,10,20
years hence?
Product Life-Cycle Fundamentals
Development
•
New ideas/possible invention
•
Market analysis – is it wanted? Can it be produced at a
profit? Who are the likely target customers?
•
Product development and refinement
•
Test Marketing – possibly local/regional
•
Analysis of test marketing results and amendment of
products/production process
•
Preparation for launch – publicity, marketing campaign.
Product Life-Cycle Fundamentals
Introduction & Launch
•
Advertising & promotion campaigns
•
Target campaign at specific audience?
•
Monitor initial sales
•
Maximize publicity
•
High cost/low sales
•
Length of time – type of product.
Product Life-Cycle Fundamentals
Growth
•
Increased customer awareness
•
Sales rise
•
Revenue increase
•
Costs – fixed costs/variable costs, profits may be made
•
Monitor market – competitors reaction?
Product Life-Cycle Fundamentals
Saturation
Too many players – market is ‘flooded’
Urgent necessity to develop new strategies.
•
Seeking new markets
•
•
•
Linking to changing fashions
Seeking new/exploiting market segments.
Linking to joint ventures – media/music et.
•
Develop new uses
•
Re-packaging or format
•
Improving the standard of quality
•
Developing the product range.
•
Build loyalty programs increase stickiness
Product Life-Cycle Fundamentals
Decline & Withdrawal
•
Product outlives/outgrows its usefulness/value
•
Fashion changes
•
Technology changes
•
Sales decline
•
Cost of supporting starts to rise too far
•
Decisions to withdraw may be dependent on availability of new
‘replacement’ products
•
Will fashion/trends will come around again?
PLC Variations
PLC Variations
Wristbands: A Fashion Product
Diffusion of Innovation
The S Technology Curve
• Bell shape curve depicting the adoption rate of customers
• S curve assumes accelerated market growth in conjunction with maturing of
customers until full market saturation
S Telco industry curve for BD
• Contention: Customers ‘jump’ from one Technology Curve to new S curve
• Controversy: Companies will continue to grow in perpetuity with launching new
product/services
The Boston Matrix
A means of analyzing the product portfolio and
informing decision making about possible marketing
strategies
Developed by the Boston Consulting Group – a
business strategy and marketing consultancy in 1968
Links growth rate market share and cash flow
The Boston Matrix
Cash Flow
positive
Relative Market Share
Cash Flow
positive
Potential Market Growth Rate
high
negative
high
Star
Cash
Cow
low
negative
low
Problem
Child
Dogs
The Boston Matrix
Implications - Dogs
Are they worth preserving with?
How much are they costing?
Could they be revived in someway?
How much would it cost to continue to support such
products?
How much would it cost to remove from the market?
The Boston Matrix
Implications – Problem Childs
What are the chances of these products securing a hold
in the market?
How much will it cost to promote them to a stronger
position?
Is it worth it?
Competitors’ products doing better? Analyze.
The Boston Matrix
Implications – Stars
Huge potential
May have been expensive to develop
Worth spending money to promote
Consider the extent of their product life cycle in
decision making
The Boston Matrix
Implications – Cash Cows
Cheap to promote
Generate large amount of cash – use for further R&D?
Costs of developing and promoting have largely gone
Need to monitor their performance – the long term?
At the maturity stage of the PLC?
The PLC and the Boston Matrix
The Ansoff Matrix
Enables strategic consideration of different corporate
growth directions and options
Considers option available for existing products – both
existing and new market opportunities
Consider additional opportunities in existing and new
markets for new products
The Ansoff Matrix
Products
Product Development
• Sell new services or products to
existing customers
• With existing capabilities
• With new capabilities
Market Development
• New segments
• New territories
• New uses
Diversification
• Related
• Unrelated
High
Low
Scope for leverage
Scope for leverage
Market Penetration
• Consolidation
• Market penetration
• Sell more of the same to the
same market
High
New
Low
Existing
New
Markets
Existing
The Ansoff Matrix
Market penetration: sell more of the same to the same market
Market development: seek out new markets for existing
products
Product development: sell new products to existing customers.
Diversification: sell new products to new groups of customers
With all development strategies the question of leverage of core
competencies, or resources is key. The scope for leverage is highest
for a market penetration strategy and lowest for an unrelated
diversification strategy.
Boston & Ansoff Matrixes
Boston Matrix
•
Categorize the ‘health’ of your products.
•
Analyze and make choices
•
Determine next steps
•
Context of PLC
Ansoff Matrix
•
Determine appropriate actions
•
Market focused
•
Enables product planning decisions
•
Proactive portfolio deployment
Managing the Product Mix
1.
Retain and maintain existing products so that they continue
to meet their objectives
2.
Modify and adapt existing products to take advantage of
new technology, emerging opportunities or changing
market conditions
3.
Delete old products that are close to the end of their
working lives and no longer serve their purpose
4.
Introduce a flow of new products to maintain or improve
sales and profit levels
Product Positioning
Product positioning means thinking about the product
in terms of the competitive space it occupies in its
market, defined in terms of the attributes that matter to
the target market
Therefore valid product positioning (developing a
product and associated marketing mix) is one that:
1. Is placed as close as possible in the minds of target
customers to their ideal in terms of important features
and attributes
2. Clearly differentiates it from competition
Positioning Approaches
Attribute or benefit
Use or application
Product or brand user
Product or service class
Competitors
Price & Quality
Attributes and market segment positioning
Market Segments
Toothpaste Attributes
Children
Flavor
✓
Color
✓
Teens, Young
Adults
Whiteness of teeth
✓
Fresh Breath
✓
Family
Decay Prevention
✓
Price
✓
Adults
Plaque
✓
Stain Prevention
✓
Principal brands for each segments
Aim,
Stripe
Ultra Brite,
McCleans
Colgate,
Crest
A check (✓) indicates principal benefits sought by each market segment
Topol,
Rembrandt
Perceptual Map of the
Toilet Tissue Market
Crafting Positioning Statement
Written internally or by others
For (target market & need), the (product, service, brand
name) is a (product/service class or category) that
(statement of unique attributes or benefits provided)
Volvo in North America
For upscale American families who desire a carefree
driving experience, Volvo is a premium-priced automobile
that offers the utmost in safety and dependability.
Repositioning & Making Positioning
Decisions
Repositioning
Decisions:
What position do we want to own?
What competitors must be outperformed if we are to
establish the position?
Do we have the marketing resource to ocupy and hold
the position?