class 6 - product strategy_sent

8/12/2019 Class 6 - Product Strategy_sent

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Contents

1. Understanding Product Product definition

Product classification

2. Managing products related decisions Managing products brand decisions

Managing products package decisions Managing customer services

Managing product line, and product mix decisions

3. Product life cycles

4. Design and marketing strategy for new product

5. Product matrices

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UNDERSTANDING PRODUCT

Product definition


Define the terms product item, product line, and product mix



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Understanding productProduct definition

Everything, both favorable

and unfavorable, that a

person receives in an

exchange.

Tangible Good

Service

Idea

Product


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Levels of Products and Services


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Understanding product

Two major ways to classify products are by type of user and degree of

product tangibility.

Type of User

The first major type of product classification is according to the user.

Consumer goodsare products purchased by the ultimate consumer,

whereas business goods (also called industrial goods or organisationalgoods) are products that assist directly or indirectly in providing productsfor resale.


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Product Tangibility

Classification by degree of tangibility divides products intoone of three categories.

1. Non-durable good, an item consumed in one or a few uses,such as food products and fuel.

2. A durable good is an item that usually lasts over an extendedperiod of time

3. Services are defined as intangible activities, benefits or

satisfactions offered for sale, such as marketing research,health care and education.



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UnsoughtProducts

SpecialtyProducts

ShoppingProducts

ConvenienceProducts

ConsumerProducts BusinessProducts

Products


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There are four types of consumer goods:

1. Convenience (Snphmdmua)

2. Shopping (Snphmmua c lachn)

3. Specialty (Snphmcbit)

4. Unsought (Snphmmua thng)

They differ in terms of

1. effort the consumer spends on the decision,

2. attributes used in purchase and

3. frequency of purchase.




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Convenience products are consumer products

and services that the customer usually buysfrequently, immediately, and with a minimum

comparison and buying effort

Newspapers

Candy

Fast food

Product Classifications


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Shopping products are consumer products and

services that the customer compares carefully on

suitability, quality, price, and style Furniture

Cars

Appliances



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Specialty products are consumer products and

services with unique characteristics or brand

identification for which a significant group of buyersis willing to make a special purchase effort

Medical services

Designer clothes High-end electronics



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Unsought products are consumer products that the

consumer does not know about or knows about but

does not normally think of buying Life insurance

Funeral services

Blood donations



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MANAGING PRODUCTSRELATED DECISIONS

Brand

Package

Services

Product category



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Managing products related decisions

Brand decisions

A name, term, symbol, design, or

combination that identifies a

sellers products and differentiates

them from competitors products.

Something creates emotion and

belief to customers.

What is a brand?


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Benefits of Branding

Consumers

Tell something aboutproduct quality

Increase shoppers

efficiency

Call consumersattention to newproducts

Business

Easier to processorders and trackdown problems

Legal protection forproduct features

Can charge higherprice


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Pages 245-251

Students are required to read the textbook

Branding decisions


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Product attributesare the benefits of the product

or service, making competitive advantages and

differentiation with competitors.

Quality

Features

Style and design

Product and Service Decisions


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Product quality includes level and consistency

Quality levelis the level of quality that supports the

products positioning

Product featuresare a competitive tool for

differentiating a product from competitors

productsProduct features are assessed based on the value tothe customer versus the cost to the company



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Styledescribes the appearance of the product

Designcontributes to a products usefulness as well

as to its looks. Some companies consider designas core value of their products



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Roles of package

Contain and Protect

Promote

Facilitate Storage, Use,

and Convenience

Facilitate Recycling


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Universal Product Codes

Universal

Product Codes

(UPCs)

A series of thick and thin

vertical lines (bar codes),readable by computerized

optical scanners, that

represent numbers used

to track products.


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Role of package to product

Dimensions: shape, materials, color, information

design, packaging tests: technical test, form test andmarketing check

What information should be available on package?What factors impact

information on package?

Packaging decisions



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One of the competitive tools for companies

What do factors affect service quality level of a company?

(Melinh PlazaIKEA)

Customer services decisions: What kinds of service customer require and companys ability?

How to charge service charge?

Competitors services influence companys services?

Services delivery: manufacturer (Samsung), seller (Pico, Topcare) or third

party (SelectiveTGI)

Customer services



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Product item, product line, and product mix

Product Item

Product Line

Product Mix

A specific version of a productthat can be designated as a

distinct offering among an organizationsproducts.

A group of closely-relatedproduct items.

All products that anorganization sells.


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ampbells Product Lines andix


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Benefits of Product Lines

Equivalent Quality

Efficient Sales andDistribution

StandardizedComponents

Package Uniformity

Advertising Economies


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Product Mix Width

The number of product lines anorganization offers.

Diversifies risk

Capitalizes on established

reputations

Product Mix

Width


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Product Line Depth

The number of productItems in a product line.

Attracts buyers with different preferences Increases sales/profits by further market

segmentation Capitalizes on economies of scale

Product Line

Depth


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Product

Life Cycle

A concept that provides a

way to trace the stages of a

products acceptance, from

its introduction (birth) to its

decline (death).

Product life cycles


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Product Life Cycle

Time

Dollars

Prof i ts

Sales

IntroductoryStage

GrowthStage

MaturityStage

DeclineStage

0


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Introduction Stage

The introduction stageof the product life cycle occurs when a product is firstintroduced to its intended target market.

During this period, sales grow slowly, and profit is minimal.

The lack of profit is often the result of large investment costs in productdevelopment

The marketing objective for the company at this stage is to create consumerawareness and stimulate trialthat first purchase of a product by a consumer. Companies often spend heavily on advertising and other promotion tools to build

awareness among consumers in the introduction stage.

These expenditures are often made to stimulateprimary demand, or desire for theproduct class rather than for a specific brand since there are few competitors with

the same product. As more competitors introduce their own products and the product progresses along

its life cycle, company attention is focused on creatingselective demand, or demandfor a specific brand.


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Introduction Stage

Other marketing mix variables also are important at this stage. Gaining distribution can be a challenge because channel

members may be hesitant to carry a new product.

Moreover, in this stage a company often restricts the numberof variations of the product to ensure control of product

quality.

During introduction, pricing can be either high or low. A high initial price may be used as part of askimming strategy to help the

company recover the costs of development as well as take advantage of theprice insensitivity of early buyers.

High prices tend to attract competitors eager to enter the market because theysee the opportunity for profit.

To discourage competitive entry, a company can price low, referred to aspenetration pricing.

This pricing strategy helps build unit volume, but a company must closelymonitor costs.


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Growth Stage

The second stage of the product life cycle, growth, is characterised by

rapid increases in sales.

It is in this stage that competitors appear. The result of more competitors

and more aggressive pricing is that profit usually peaks during the growth

stage.

Product sales in the growth stage grow at an increasing rate because of

new people trying or using the product and a growing proportion of

repeat purchaserspeople who tried the product, were satisfied and

bought again.

Changes start to appear in the product during the growth stage.

To help differentiate a companys brand from its competitors, an improved

version or new features are added to the original design, and product

proliferation occurs.

Distribution is critical at this stage.


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Maturity Stage

The third stage, maturity, is characterised by a slowing of totalindustry sales for the product class.

Also, weaker competitors begin to leave the market.

Most consumers who would buy the product are either repeat

purchasers of the item or have tried and abandoned it. Sales increase at a decreasing rate in the maturity stage as

fewer new buyers enter the market.

Profit declines because there is fierce price competition among

many sellers. Marketing attention in the maturity stage is often directed

towards holding market share through further productdifferentiation and finding new buyers.


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Decline Stage

The decline stage occurs when sales begin to drop.

Frequently, a product enters this stage not because of anywrong strategy on the part of the company but because ofenvironmental changes.

Technological innovation often comes before the decline stageas newer technologies replace older ones.

A company will follow one of three strategies to handle adeclining product:

deletion

harvesting

or finding a new market.


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Decline Stage

Deletion

Product deletion, or dropping the product from the companys product line, is

the most drastic strategy.

Because a residual core of consumers still consume or use a product even in

the decline stage, product elimination decisions are not taken lightly.

Harvesting

A second strategy, harvesting, is when a company keeps the product but

reduces marketing costs.

Finding a new market.

finding a new market, is when a company seeks a market where the product

may not be in the same stage of the life cycle.


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Some Dimensions of the Product Life Cycle

Two important aspects of product life cycles are (1) their length and (2)

the shape of their curves.

Length of the Product Life Cycle: There is no exact time that a product

takes to move through its life cycle.

As a rule, consumer products have shorter life cycles than business

products.

Shape of the Product Life Cycle: The product life-cycle curve shown in

Figure 91 is the generalised life cycle, but not all products have the same

shape to their curve.

There are several different life-cycle curves, each type suggesting differentmarketing strategies, such as:

High learning product - low learning product

Fashion product - fad product.


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The Life Cycle and Consumers

The life cycle of a product depends on sales to consumers.

Not all consumers rush to buy a product in the introductory stage, and the

shapes of the life-cycle curves indicate that most sales occur after the

product has been on the market for some time.

In essence, a product diffuses, or spreads, through the population, a

concept called the diffusion of innovation.

Several factors affect whether a consumer will adopt a new product or

not.

Common reasons for resisting a product in the introduction stage are

usage barriers (the product is not compatible with existing habits),barriers (the product provides no incentive to change), risk barriers

(physical, economic or social) and psychological barriers (cultural

differences or image)


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Five categories and profiles of product adopters


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Introduction to Product Matrices


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The Boston Consulting Groups Growth-Share

Matrix

20%-

18%-

16%-14%-

12%-

10%-

8%-

6%-

4%-2%-

0MarketGrowth

Rate

3

?

Question marks

?2

1

Cash cow

6

Dogs

8

710x 4x 2x 1.5x 1x

Relative Market Share

.5x .4x .3x .2x .1x

Stars

5

4


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Boston Classification

Starshigh share of a high growth market. Inshort term, requires capital expenditure inexcess of the cash they generate, in order tomaintain their market position, but promisehigh returns in the future

Cash CowsStars will become cash cow, withhigh share of a low growth market. Cash cows

need very low capital expenditure and generatehigh levels of cash income, which can be used tofinance the stars


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Question Markshigh growth market, butwhere they have low market share. Because

considerable expenditure would be needed toturn a question mark into a star by building upmarket share, question marks will usually bepoor cash generators and show a negative cash

flow Dogslow share of a low growth market.

Although they will show only a modest net cashoutflow, or even a modest net cash inflow, theyare cash traps which tie up funds and provide apoor return on investment (R.O.I), and notenough to achieve the organizations target rateof return


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ANSOFFS Product-market

Growth Matrix

New ProductsExisting Products

Existing

markets

New

markets

Market Penetration Strategy1. More purchasing and usage from

existing customers2. Gain customers from competitors

3. Convert non-users into users

(where both are in same market

segment)

Product Development Strategy1. Product modification via

new features2. Different quality levels

3. New product

Market Development Strategy1. New market segments

2. New distribution channels

3. New geographic areas e.g. exports

Diversification Strategy1. Organic growth

2. Joint ventures

3. Mergers

4. Acquisition/take over


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Questions

If you are a marketing manager at Heineken,

what should you do to increase your sales?

class 6 - product strategy_sent

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