Chapter 6 Product Strategy

COPYRIGHT © 2002 by Thomson Learning, Inc. All Rights Reserved Approaches to Developing New Products... Innovation New product lines Product line extensions Repositioning Cost reductions Improvements or changes in existing products

COPYRIGHT © 2002 by Thomson Learning, Inc. All Rights Reserved Elements to Consider in Developing Marketing Strategies Must consider mission, goals, & objectives in light of the firm’s strengths, weaknesses, opportunities & threats The best marketing strategy should be: differentially advantageous, sustainable (not easily copied), timely (strategic window), feasible (skills, experience & resources) & affordable –one of the primary reasons marketing plans fail…not enough financial resources devoted in implementation

COPYRIGHT © 2002 by Thomson Learning, Inc. All Rights Reserved Life Cycle Considerations… Development Stage: –usually begins with a product concept –no sales revenue during product development –innovations require financial resources & time as well as the assumption of risk –there is no guarantee of success & many new products fail

COPYRIGHT © 2002 by Thomson Learning, Inc. All Rights Reserved Product Concept Stage… Requires an understanding of target market needs & benefits sought Involves consideration of product line extensions to provide synergies in sales & income Produces feasibility studies including anticipated sales, return on investment, time of introduction, length of time to repay investment

COPYRIGHT © 2002 by Thomson Learning, Inc. All Rights Reserved Introduction Stage… Marketing strategy should be fully implemented Attract customers through advertising, public relations, & publicity promoting features & benefits –where to find the product & its uses Encourage trial and repurchase Induce trial through price concessions & sales tools Strengthen channel relationships

COPYRIGHT © 2002 by Thomson Learning, Inc. All Rights Reserved Growth Stage… Must establish a strong market position & defend it from competitors Must achieve financial objectives & repay investment –make a long term product commitment

COPYRIGHT © 2002 by Thomson Learning, Inc. All Rights Reserved Marketing Strategy Considerations in the Growth Stage Use perceived differential advantage (price, quality, value) to secure market position Clarify product/brand identity through image-oriented advertising & personal selling Maximize availability through trade promotions Find the ideal balance between price & demand Maintain control over product quality

COPYRIGHT © 2002 by Thomson Learning, Inc. All Rights Reserved Other Growth Stage Considerations… Generate repeat purchases & build brand loyalty Keep in mind, the growth stage is the most expensive (marketing expenditures) Increased competition is to be expected in this stage as your success invites competitor’s product entries

COPYRIGHT © 2002 by Thomson Learning, Inc. All Rights Reserved Maturity Stage… Longest stage in the typical product life cycle Few new competitors are entering the market Best way to gain market share: ‘steal it from the competition’ Key goals: generate cash flow & hold market share –develop a new product image –find & attract new users to the product –discover new product uses –apply new technology

COPYRIGHT © 2002 by Thomson Learning, Inc. All Rights Reserved Other Maturity Stage Considerations… Requires heavy spending on advertising & promotion

COPYRIGHT © 2002 by Thomson Learning, Inc. All Rights Reserved Decline Stage… Popular brands can delay this stage longer than weak brands Ends with product termination Two key options: –harvesting-gradual reduction in marketing expenditures –divesting-total withdrawl of marketing support

COPYRIGHT © 2002 by Thomson Learning, Inc. All Rights Reserved Marketing Strategies for Services... Must consider the unique aspects of services –intangibility –inseparability of production & consumption –customer contact –perishability –heterogeneity –client-based relationships

COPYRIGHT © 2002 by Thomson Learning, Inc. All Rights Reserved Product Considerations for Services... Provide satisfaction guarantees to customers Standardization & service quality are difficult to control Services can be customized to meet consumers specific needs Customized services tend to be very expensive

COPYRIGHT © 2002 by Thomson Learning, Inc. All Rights Reserved Pricing Considerations for Services... Pricing conveys quality to many consumers Determining the cost of productivity & delivering a service is difficult Pricing tactics can help a firm balance peak & off peak demand

COPYRIGHT © 2002 by Thomson Learning, Inc. All Rights Reserved Promotion Considerations for Services... Services are difficult to explain to customers Service advertising typically focuses on tangible cues that symbolize the service Endorsements from satisfied customers are often used

COPYRIGHT © 2002 by Thomson Learning, Inc. All Rights Reserved Distribution Considerations for Services... Consumers cannot take physical possession of services Services must be provided in a convenient manner –often requires multiple outlets to increase convenience Production & consumption may need to be separated by creating a tangible representation of the service –i.e.-a credit card represents a line of credit offered by a bank

COPYRIGHT © 2002 by Thomson Learning, Inc. All Rights Reserved Branding Strategy... Branding is the identification a product maintains through name, symbol or design –differentiates one manufacturer’s products from another Brand name is the spoken part of the brand Brand mark is the symbol or design Trade mark is the legal description indicating that owner has exclusive use of the brand or part of the brand & that others are prohibited from using it Trade name is the full & legal name of the organization

COPYRIGHT © 2002 by Thomson Learning, Inc. All Rights Reserved Other Elements of Brands... Brand loyalty Brand recognition Brand preference Brand insistence Brand equity Co-branding Brand licensing

COPYRIGHT © 2002 by Thomson Learning, Inc. All Rights Reserved Advantages of Branding... Helps buyers identify the brands they support Speeds up the buying process Provides status & psycho social identification Assists in evaluating product quality & price Reduces the risk in purchasing Makes repeat purchases easier Allows for greater acceptance of new products under that brand name Generates consumer loyalty

COPYRIGHT © 2002 by Thomson Learning, Inc. All Rights Reserved The World’s Most Valuable Brands... Coca-Cola Microsoft Windows IBM Intel Nokia General Electric Ford Disney McDonald’s AT&T