1. Product Strategy Dr. Ananda Sabil Hussein

2. Product Strategy Defines what the organization does and why it exists 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 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 Strives to overcome commoditization 7-2

3. Types of Products in Consumer Markets Convenience Products Convenience Products Shopping Products Shopping Products Specialty Products Specialty Products Unsought Products Unsought Products Products of which consumers are unaware Products of which consumers are unaware Products of which consumers did not consider purchasing until a sudden need or emergency arises Products of which consumers did not consider purchasing until a sudden need or emergency arises 7-3

4. Types of Products in Business Markets Raw Materials Raw Materials Component Parts Component Parts Process Materials Process Materials MRO Supplies MRO Supplies Accessory Equipment Accessory Equipment Installations Installations Business Services Business Services 7-4

5. The Product Portfolio Consists of Product Lines and Mixes Consists of Product Lines and Mixes Product Line – closely related product offerings Product Line – closely related product offerings Product Mix or Portfolio – total group of products offered by the firm Product Mix or Portfolio – total group of products offered by the firm Strategic Decisions Strategic Decisions Variety – number of product lines offered Variety – number of product lines offered Assortment – depth of each product line Assortment – depth of each product line 7-5

6. Proctor & Gamble ’ s Portfolio of House and Home Products 7-6 Exhibit 7.2

7. Potential Benefits of Wide Variety & Deep Assortment Economies of Scale Economies of Scale Package Uniformity Package Uniformity Standardization Standardization Sales and Distribution Efficiency Sales and Distribution Efficiency Equivalent Quality Beliefs Equivalent Quality Beliefs 7-7

8. Challenges of Service Products Balancing supply (capacity) with demand Balancing supply (capacity) with demand Time and place dependency of demand Time and place dependency of demand Difficulty of evaluating service quality prior to purchase Difficulty of evaluating service quality prior to purchase Inconsistency of service quality Inconsistency of service quality Difficulty in tying offerings to customer needs (i.e., the need is not always apparent to customers) Difficulty in tying offerings to customer needs (i.e., the need is not always apparent to customers) 7-8

9. Unique Characteristics of Services Intangibility Intangibility Simultaneous Production and Consumption Simultaneous Production and Consumption Perishability Perishability Heterogeneity Heterogeneity Client-Based Relationships Client-Based Relationships 7-9 From Exhibit 7.3

10. New Product Development A vital part of a firm ’ s effort to sustain growth and profits 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 Depends on the firm ’ s ability to create a differential advantage for the new product Customer perception of newness is critical Customer perception of newness is critical 7-10

11. 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

12. New Product Development Process Idea Generation Idea Generation Screening and Evaluation Screening and Evaluation Development Development Test Marketing Test Marketing Commercialization Commercialization 7-12

13. Branding Strategy Involves selecting the right combination of name, symbol, term, or design that identifies a product Involves selecting the right combination of name, symbol, term, or design that identifies a product Brands have two parts: Brands have two parts: Brand name – words, letters, and numbers Brand name – words, letters, and numbers Brand mark – symbols, figures, or a design Brand mark – symbols, figures, or a design Critical to product identification and the key factor in differentiating a product from its competition 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 Makes it easier for customers to find and buy products Firms must protect brand names and brand marks from trademark infringement by other firms Firms must protect brand names and brand marks from trademark infringement by other firms 7-13

14. Strategic Issues in Branding Strategy Manufacturer vs. Private-Label Brands Manufacturer vs. Private-Label Brands Private-label brands are more profitable for the retailer Private-label brands are more profitable for the retailer Manufacturer brands have built-in demand Manufacturer brands have built-in demand Brand Loyalty Brand Loyalty Positive attitude toward a brand that results in a consistent preference for that brand. Three levels: Positive attitude toward a brand that results in a consistent preference for that brand. Three levels: Brand recognition  Brand preference  Brand insistence Brand recognition  Brand preference  Brand insistence Brand Equity Brand Equity The value of a brand associated with its marketplace position The value of a brand associated with its marketplace position Brand Alliances Brand Alliances Strategies that involve close relationships with other firms (e.g., cobranding, brand licensing) Strategies that involve close relationships with other firms (e.g., cobranding, brand licensing) 7-14

15. Advantages of Branding 7-15 Exhibit 7.4

16. The World ’ s Twenty Five Most Valuable Brands 7-16 Exhibit 7.5

17. Packaging and Labeling Often goes hand-in-hand in developing a product, its benefits, its differentiation, and its image Often goes hand-in-hand in developing a product, its benefits, its differentiation, and its image Includes issues such as color, shape, size, convenience Includes issues such as color, shape, size, convenience Often used to reposition the product or give it new and improved features Often used to reposition the product or give it new and improved features Vital to helping customers make proper product selections Vital to helping customers make proper product selections Can have important environmental and legal consequences Can have important environmental and legal consequences 7-17

18. Differentiating and Positioning the Product Offering Product Differentiation Product Differentiation Creating differences in the firm ’ s offerings that set them apart from competing offerings Creating differences in the firm ’ s offerings that set them apart from competing offerings Positioning Positioning Creating a mental image of the product offering and its differentiating features Creating a mental image of the product offering and its differentiating features Perceptual Mapping Perceptual Mapping A visual, spatial display of customer perceptions that allows monitoring of product positioning relative to other products A visual, spatial display of customer perceptions that allows monitoring of product positioning relative to other products 7-18

19. A Hypothetical Perceptual Map of the Automotive Market 7-19 Exhibit 7.6

20. Differentiation Strategies Branding is the most important tool. But, there are other important bases for differentiation: Branding is the most important tool. But, there are other important bases for differentiation: Product Descriptors (see Exhibit 7.7) Product Descriptors (see Exhibit 7.7) Product features – factual descriptors of the product and its characteristics Product features – factual descriptors of the product and its characteristics Advantages – performance characteristics of how the product behaves Advantages – performance characteristics of how the product behaves Benefits – positive outcomes or need satisfaction Benefits – positive outcomes or need satisfaction Customer Support Services Customer Support Services Image Image Overall impression that customers have of a product or firm Overall impression that customers have of a product or firm 7-20

21. Positioning Strategies Strengthen the Current Position Strengthen the Current Position Repositioning Repositioning Reposition the Competition Reposition the Competition 7-21

22. Managing Products and Brands Over Time Development Stage Development Stage Introduction Stage Introduction Stage Growth Stage Growth Stage Maturity Stage Maturity Stage Decline Stage Decline Stage 7-22

23. Stages of the Product Life Cycle 7-23 Exhibit 7.8

24. Development Stage No sales revenue during this stage No sales revenue during this stage Components of the product concept: Components of the product concept: An understanding of desired uses and benefits An understanding of desired uses and benefits A description of the product A description of the product The potential for creating a complete product line The potential for creating a complete product line An analysis of the feasibility of the product concept An analysis of the feasibility of the product concept Customer needs should be discerned before developing marketing strategy Customer needs should be discerned before developing marketing strategy 7-24

25. Introduction Stage Begins when development is complete Begins when development is complete Ends when customers widely accept the product Ends when customers widely accept the product Marketing strategy goals during this stage: Marketing strategy goals during this stage: Attract customers by raising awareness and interest Attract customers by raising awareness and interest Induce customers to try and buy Induce customers to try and buy Engage in customer education activities Engage in customer education activities Strengthen or expand channel and supply relationships Strengthen or expand channel and supply relationships Build on availability and visibility Build on availability and visibility Set pricing objectives Set pricing objectives 7-25

26. Growth Stage (1 of 2) Be ready for sustained sales increases Be ready for sustained sales increases Rapid increase in profitability early in the growth stage that decreases at the end of this stage 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 Length depends on nature of product and competitive reactions Two strategies: Two strategies: Establish a strong, defensible marketing position Establish a strong, defensible marketing position Achieve financial objectives that repay investment Achieve financial objectives that repay investment 7-26

27. Growth Stage (2 of 2) Marketing strategy goals in this stage: Marketing strategy goals in this stage: Leverage the product ’ s perceived differential advantages Leverage the product ’ s perceived differential advantages Establish a clear product and brand identity Establish a clear product and brand identity Create unique positioning Create unique positioning Maintain control over product quality Maintain control over product quality Maximize availability of the product Maximize availability of the product Maintain or enhance the product ’ s profitability to partners Maintain or enhance the product ’ s profitability to partners Find the ideal balance between price and demand Find the ideal balance between price and demand Keep an eye focused on the competition Keep an eye focused on the competition 7-27

28. Maturity Stage (1 of 2) Typically, no more firms will enter the market Typically, no more firms will enter the market Still an opportunity for new product features and variations Still an opportunity for new product features and variations Typically the longest stage in the product life cycle Typically the longest stage in the product life cycle 7-28

29. Maturity Stage (2 of 2) Four general goals in this stage: Four general goals in this stage: Generate cash flow Generate cash flow Hold market share Hold market share Steal market share Steal market share Increase share of customer Increase share of customer Four options to achieve these goals: Four options to achieve these goals: Develop a new product image Develop a new product image Find and attract new users to the product Find and attract new users to the product Discover new applications for the product Discover new applications for the product Apply new technology to the product Apply new technology to the product 7-29

30. Decline Stage Two options: Two options: Attempt to postpone the decline Attempt to postpone the decline Accept the inevitability of decline Accept the inevitability of decline Harvesting Harvesting Divesting Divesting Factors to be considered during this stage: Factors to be considered during this stage: Market segment potential Market segment potential The market position of the product The market position of the product The firm ’ s price and cost structure The firm ’ s price and cost structure The rate of market deterioration The rate of market deterioration 7-30