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Product Strategy. 7. C H A P T E R. Product Strategy. Defines what the organization does and why it exists

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Product Strategy

7

C H A P T E R

product strategy
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
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

Types of Productsin Consumer Markets
types of products in business markets
Raw Materials

Component Parts

Process Materials

MRO Supplies

Accessory Equipment

Installations

Business Services

Types of Productsin Business Markets
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

The Product Portfolio
potential benefits of wide variety deep assortment
Economies of Scale

Package Uniformity

Standardization

Sales and Distribution Efficiency

Equivalent Quality Beliefs

Potential Benefits ofWide Variety & Deep Assortment
discussion question
Discussion Question
  • Consider the number of products available in the U.S. consumer market. In virtually every product category, consumers have many options to fulfill their needs. Are all of these options really necessary? Is having this many choices a good thing for consumers? Why or why not? Is it a good thing for marketers and retailers that have to support and carry all of these product choices? Why or why not?
challenges of service products
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)
unique characteristics of services
Unique Characteristics of Services
  • Intangibility
  • Simultaneous Production and Consumption
  • Perishability
  • Heterogeneity
  • Client-Based Relationships

From Exhibit 7.3

discussion question11
Discussion Question
  • Given the unique characteristics of services, what potential ethical issues could arise in service marketing and delivery? How can a service marketer prevent ethical challenges and convey a sense of trust to the consumer?
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

New Product Development
six strategic options for newness of products
New-to-the-world products (discontinuous innovations)

New product lines

Product line extensions

Improvements or revisions of existing products

Repositioning

Cost reductions

Six Strategic Optionsfor Newness of Products
new product development process
New Product Development Process
  • Idea Generation
  • Screening and Evaluation
  • Development
  • Test Marketing
  • Commercialization
branding strategy
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
strategic issues in branding strategy
Strategic Issuesin 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)
discussion question19
Discussion Question
  • Consider the notion that a truly effective brand is one that succinctly captures the product offering in a way that answers a question in the customer’s mind. Now consider these brands (or choose your own): Coca-Cola, Disney, Marlboro, American Express, and Ford. What questions do these brands answer? Why are these effective brands?
packaging and labeling
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
  • Can have important environmental and legal consequences
differentiating and positioning the product offering
Differentiating and Positioningthe 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
differentiation strategies
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
positioning strategies
Positioning Strategies
  • Strengthen the Current Position
  • Repositioning
  • Reposition the Competition
steinway more than a piano
Steinway: More than a Piano
  • Steinway is the world’s most renowned brand of “concert hall quality” pianos. However, a top of the line Steinway is out of reach for most consumers.
  • How can Steinway address the entry- and mid-level piano market without compromising the overall elite image of a Steinway piano?

Beyond the Pages 7.1

managing products and brands over time
Development Stage

Introduction Stage

Growth Stage

Maturity Stage

Decline Stage

Managing Productsand Brands Over Time
development stage
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
introduction stage
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
growth stage 1 of 2
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
growth stage 2 of 2
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
maturity stage 1 of 2
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
maturity stage 2 of 2
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
decline stage
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
marketing strategy in action
Marketing Strategy in Action
  • Ford has been creative in redesigning the Mustang with retro styling cues to keep the model viable despite decreasing interest in “muscle cars.” What other ways can marketers combat the inevitability of the decline stage of the product life cycle?