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. 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

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

5. 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

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

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

8. 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?

9. 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)

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

11. 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?

12. 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

13. 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

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

15. 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

16. 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)

17. Advantages of Branding
Exhibit 7.4

18. The World’s Twenty Five Most Valuable Brands
Exhibit 7.5

19. 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?

20. 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

21. 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

22. A Hypothetical Perceptual Map of the Automotive Market
Exhibit 7.6

23. 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

24. Positioning Strategies
Strengthen the Current Position
Repositioning
Reposition the Competition

25. 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

26. Managing Products and Brands Over Time
Development Stage
Introduction Stage
Growth Stage
Maturity Stage
Decline Stage

27. Stages of the Product Life Cycle
Exhibit 7.8

28. Strategic Considerations During the Product Life Cycle
Exhibit 7.9

29. 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

30. 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

31. 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

32. 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

33. 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

34. 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

35. Decline Stage Two options: Factors to be considered during this stage:
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

36. 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?