Product Strategy

1. Product Strategy
Marketing Management [MKTG 315] Lecture 7
WithTexts Based on Kotler & Keller (2012), Ferrell & Hartline (2011)
Lartey Jared Offei
EntrepreneurshipTraining Institute [E.T.I]
Corresponding E-mail: joffei@vvu.edu.gh
Facebook||Twitter: @offeijared
Designed by © 2017 Grey Scholar

2. • Consumer vs. business products
• Challenges of service products
• Unique characteristics of services
• New product development
• Branding Products
• Product lifecycles
- How can we classify products?
- What unique challenges are presented with services?
- How do firms develop new products?
- What advantages are presented by branding products?
- How can we analyze the lifetime of products on markets?
Lecture Outline/Questions

3. • Of all the strategic decisions to be made in the marketing plan,
the design, development, branding and positioning of the product
are perhaps the most important.
• The term product has been used synonymously with services in
marketing literature.
• On that premise, a broad definition for the term product, is
something that buyers can acquire via exchange to satisfy a need
or a want.
• This allows us to classify many things as products:
• For example, information, people, food, entertainment, ideas, etc.
• That being said, an important fact about products is that, they are
not sold as individual elements but rather as an offering.
Overview

4. • Think of products therefore as offering a bundle of consumer
benefits!
• Sometimes, this offering may combine tangible and intangible
elements.
• Depending on the extent or dominance of one of these elements,
we may further classify products as physical goods or services.
• A good product offering focuses on all the elements of a product
than a single element.
• In fact, even manufacturing organizations are having a tough time
distinguishing services from their core physical products.
• This makes developing a product strategy even more challenging
for a firm.
Overview

5. • As we consider product decisions in this lecture, it is important
to remember that product offerings in themselves have little value
to customers.
• Strange? Well… an offering’s real value comes from its ability to
deliver benefits that solve a customer’s problem.
• For example, customers don’t buy pest control, they buy a bug-
free environment.
• They do not buy a degree, they buy knowledge.
• Likewise, Mercedes customers do not buy a car, they buy luxury,
status, comfort, safety and social appeal.
• Companies do not need computers, they need to store, retrieve,
distribute, network and analyze data and information.
Overview

6. • We could further categorize products into two broad portfolios.
• Those purchased for personal use are called consumer products.
• Those purchased for resale, to make other products or for use in
a firms operations are called business products.
• Although the distinction may sound simplistic, it is important in a
strategic sense because the type of product will influence its
pricing, distribution or promotion.
• Most firms sell a variety of products to meet a variety of needs.
• A product line consists of groups of closely related product items.
• A product mix or portfolio is the total group of products offered
by a firm.
The Product Portfolio

7. Consumer products
• Convenience products: Inexpensive, routinely purchased, little
time and effort in acquiring. E.g. soft drinks, candy, petrol.
• Shopping products: Time and effort spent o obtain, consumers
shop different options and compare prices and features. E.g.
clothing, home appliances, furniture.
• Specialty products: Unique, considerable time, effort and
money to acquire. E.g. luxury items, plastic surgery.
• Unsought products: Consumers are unaware of products, do
not consider purchasing until need arises. E.g. repair services,
insurance.
ConsumerVs. Business Products

8. Business products
• Raw materials: Natural materials that become part of finishes
products. E.g. wood, crude oil, agricultural products.
• Component parts: Finished items that become part of a larger
finished product. E.g. computer chips, spark plugs, hard drives.
• Process materials: Finished products that become
unidentifiable upon inclusion into finished good. E.g. food spices,
inactive pharmaceutical ingredients.
• Maintenance, repair and operating products: Used in
business operations but do not become part of the finished
product. E.g. office supplies, building security.
• Business services: Intangible products that support business
operations. E.g. research, legal, accounting and consulting services.
ConsumerVs. Business Products

9. • Products can be intangible services. Service firms include airlines,
hospitals, hair stylists and movie theatres.
• Unlike physical goods, services are produced, consumed and
evaluated simultaneously.
• This presents unique challenges for services. Again these
challenges emanate from the characteristics of services itself.
• Intangibility
• Simultaneous production and consumption
• Perishability
• Heterogeneous
• Client-based relationships
Challenges of Service Products

10. Intangibility
• Services are intangible; they can barely be touched, seen or
physically evaluated before consumption or purchase.
• Firms are forced to sell a promise.
• Customers can not take possession of a service.
Simultaneous consumption and production
• Customers must be present during service production and
delivery.
• Other customers can effect the service quality and satisfaction.
• Service employees play a critical role in the service experience.
The Unique Characteristics of Services

11. Perishability
• Services can not be stored or inventoried for later use.
• Unused service capacity is lost forever.
• Service demand is time and place sensitive.
• Facilities or equipment may sit idle until demand.
Heterogeneity
• Service quality varies across people, time and place.
• Lack of consistency
• Limited standardization opportunities.
• Customizations can dramatically increase the cost of service.
The Unique Characteristics of Services

12. Client-based relationships
• Services are highly dependent on people.
• They live or die by maintaining a satisfied client base.
• Repeat business is crucial for the success of service firms.
The Unique Characteristics of Services

13. • Another major issue in product strategy is the introduction of
new products.
• Developing and commercializing new products is a vital part of
the firm’s effort to sustain growth and profits over time.
• There are six strategic options related to the newness of
products:
New to the world products
New product lines
Product line extensions
Improvement of existing products
Repositioning
Cost reductions
New product Development

14. • The new product development process varies across firms.
However most firms will go through the following stages:
Idea generation
• New product ideas are obtained from a number of sources
including customers, employees, supply chain partners,
competitors, market research. See Google.
Screening and evaluation
• Product ideas are screened for their match with firm capabilities
and customer needs. They are also evaluated with respect to cost,
revenues and potential profit. Prototypes may be developed for
further tests.
New product Development

15. Development
• Product specification and design is finalized. Initial production
begins.
• The full marketing plan is developed in order to acquire the
resources and collaborations needed for a full-scale launch.
Test marketing
• As a final test before launch, the product is test marketed in
either real or simulated situations to determine its performance
relative to customer needs.
Commercialization
• In this final stage, the product is launched with a complete
marketing program designed to simulate customer awareness and
acceptance.
New product Development

16. What comes to mind?
What comes to mind?
What comes to mind?

17. • Product decisions include a strong brand strategy.
• A brands are one of the most valuable intangible assets of an
organization.
• It is a combination of name, symbol, term, design and colours that
identify a specific product to a manufacturer and differentiates it
from competing products.
• Brands essentially have two parts: the brand name and the brand
mark.
• Good brands are those that quickly come to mind when a
customer has a problem or need to be fulfilled.
Branding Products

18. Brands may have different attributes that make up the way
customers perceive them.
• Country of origin
• Branded ingredients
• Channels
• Causes
• People & endorsers
• Company
• Alliances
Potential Brand Attributes

19. Brand loyalty
• It is a positive attitude towards a brand that causes customers to
have a consistent preference for that brand over all other
competing brands.
• There are three degrees of brand loyalty:
• Brand recognition is when customers know about the brand and
are considering it as one of several alternatives in the evoke set.
• Brand preference is a stronger degree for brand loyalty where a
customer prefers on brand to competing brands and would
purchase it if available.
• Brand insistence is the strongest degree of brand loyalty. It occurs
when customers will go out of their way to find the brand and
will not accept substitutes.
BrandTerminologies

20. Brand equity
• The value of a brand is often referred to as brand equity.
• Brand equity usually has tries to brand name, brand loyalty,
awareness and brand quality.
• It represents a key asset of a firm.
• It may also be thought as the marketing and financial value
associated with a brands position in the market place.
BrandTerminologies

21. • Product identification
• Shopping efficiency
• Risk reduction
• Enhanced image
• Built in loyalty
• Total control
• Increased profit
• Product protection
Advantages of Branding

22. Product Life Cycle
Time
Cedis
Growth
Stage
Introduction
Stage
Maturity
Stage
Development
Stage
Decline
Stage
-O+
Industry
Profits
Industry
Sales

23. Development stage
• Due to expenses in product innovation and development, a firm
has no revenues during the development stage.
• A substantial investment of time and financial resources are
necessary.
• The firm assumes a great deal of market and financial risks due to
uncertainties involved in developing new products.
• In the Pharmaceutical industry for instance, there are years of
testing and earning FDA approval before introduction.
• Firms need to understand needs of target, create synergy is sales,
promotional distribution and analyze the feasibility of the product
concept.
Product Life Cycles

24. Introduction stage
• This stage begins when development is complete and end when
sales indicate that targets widely accept the product.
• The marketing strategy devised during development is fully
implemented at this stage and integrated with competitive
advantage.
• There is a need to create awareness, induce customers to try,
educate the target market, expand and strengthen supply chain
relationships.
• Products needs visibility and availability through promotion.
• Markets need to also set pricing objectives that would balance the
firm’s need to recoup investments.
Product Life Cycles

25. Growth Stage
• The firm should be ready for the growth stage as the product’s
upward sales curve may be steep and profits are likely to rapidly
increase and then decline towards the end of the growth stage.
• The length of the growth stage varies by product and competitive
reactions.
• At this stage, the firm must establish a strong and defensible
market position against increasing competitors.
• It must also achieve financial objectives that repay investments.
• Managing demand, positioning and branding becomes very
important.
• The overall strategy shifts from stimulating product trial to
generating repeat purchases and brand loyalty.
Product Life Cycles

26. Maturity Stage
• In a typical product lifecycle, we expect maturity to be the
longest.
• Firms tend to maintain sales volumes to keep the market share
constant.
• Usually, no more firms would enter the market until they have
found some product innovation significant enough to attract large
number of customers.
• Some say the market becomes saturated. However a window of
opportunity remains open for new product features and
variations.
• The firm can develop a new product image, find new users and
uses for the product.
Product Life Cycles

27. Decline Stage
• A products sales plateau would not last forever. Eventually a
persistent decline in revenue begins.
• A firm may attempt to postpone this decline or accept it
inevitable.
• Should a firm attempt to postpone the decline, then demand must
be renewed through a rigorous positioning strategy (See the Ford
Mustang).
• If the firm chooses to accept decline, then it can either harvest
profits while the product declines or divest the product. That is
taking steps to abandon it or sell it to another firm.
• The later approach also requires gradual reduction in marketing
expenditures and using a less resource intensive marketing mix.
Product Life Cycles

28. Marketing Insight
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