Product Strategy

1. Product Strategy 7 C H A P T E R

2. 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

3. 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

4. Specialty Products

5. Raw Materials Component Parts Process Materials MRO Supplies Accessory Equipment Installations Business Services Types of Productsin Business Markets

6. 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

7. Proctor & Gamble’s Portfolioof House and Home Products Exhibit 7.2

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

9. 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?

10. 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)

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

12. 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?

13. 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

14. 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

15. New Product Development Process • Idea Generation • Screening and Evaluation • Development • Test Marketing • Commercialization

16. 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

17. 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)

18. Advantages of Branding Exhibit 7.4

19. The World’s Twenty FiveMost Valuable Brands Exhibit 7.5

20. The Number One Brand

21. 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?

22. 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

23. 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

24. A Hypothetical Perceptual Mapof the Automotive Market Exhibit 7.6

25. 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

26. Positioning Strategies • Strengthen the Current Position • Repositioning • Reposition the Competition

27. 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

28. Development Stage Introduction Stage Growth Stage Maturity Stage Decline Stage Managing Productsand Brands Over Time

29. Stages of the Product Life Cycle Exhibit 7.8

30. Strategic Considerations Duringthe Product Life Cycle Exhibit 7.9

31. 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

32. 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

33. 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

34. 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

35. 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

36. 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

37. 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

38. 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?