Product Strategy Dr Ananda Sabil Hussein Product Strategy

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 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 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