Developing Product Strategy

A Successful Strategy:
• Helps achieve coordination among
functional areas of the organization.
• Defines how resources are to be
allocated.
• Leads to a superior market position.

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Elements of a Product Strategy
1. Statement of the objective(s) the product should
attain
2. Selection of strategic alternative(s)
3. Selection of customer targets
4. Choice of competitor targets
5. Statement of the core strategy
6. Description of supporting marketing mix.
7. Description of supporting functional programs

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 Hierarchy of Objectives
Company Mission/Vision
Level 0
Corporate objectives
Level I
Corporate strategies

Divisional objectives
Level II
Divisional strategies

Product/brand objectives
Level III
Brand strategies

Program objectives
Level IV
Tactics

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 Strategic Alternatives
Long-term
profits

Efficiency,
Growth in sales
short-run
or market share
profits

Market Market Decrease Increase

development penetration inputs outputs

Existing Increase
New segments Reduce costs
customers price

Improve
Convert Competitors’ Improve
asset
nonusers customers sales mix
utilization

New product
development

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8-6
• Selling more of an existing
product to an existing market.
This is going deeper into a market
so it is called market penetration
(More Promotion).
• Selling an existing product in a COCA COLA
new market, for instance bringing
out different bottle sizes to attract
different buyers. This is called
market development.
• Selling a new product to an
existing market. This is called
product development as it means
making changes to a product, for
instance a new flavour like Coca-
Cola Vanilla.
• Selling a new product to a new
market. This is called
diversification. Coca-Cola
identified the need for a new
sports drink

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 Introductory Stage
Full-Scale
Full-Scale Launch
Launch
• Little competition of
of New
New Products
Products
• Sales volume increases slowly
• Customers reluctant
• Distribution is a major issue
• Strategy: Skimming and Penetration

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 Skimming
• Product feature based differential advantage
• Advantage allows high price
• Distribution should be limited
• High margins to be further used in R&D

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 Penetration
• More expensive strategy
• Lower margins and high marketing costs
• Used for first mover advantage

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 Growth Stage
• Increasing rate of sales Offered
Offered in
in more
more sizes,
sizes,
• flavors,
flavors, options
options
Entrance of competitors
• Customer has options
• Puts pressure on price
• Strategy: Leader or Follower

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 Leader/Follower
• Leader can either flee or to fight
• Fight: maintain current position or
• Keep enhancing the product
• Flee: New entrants to strong
• Or can re segment and find a niche
• Follower can exit or be a strong no.2

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 Maturity Stage
• Declining sales growth
Many
Many consumer
consumer
• Saturated markets products
products are
are in
in Maturity
Maturity
• Heavy promotions to dealers and consumers
• Marginal competitors drop out
• Prices and profits fall
• Invest just enough money to maintain share

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 Decline Stage

Rate
Rate of
of decline
decline depends
depends on
on
change
change inin tastes
tastes or
or
adoption
adoption of
of substitute
substitute products
products
• Long-run drop in sales
• Elimination of all nonessential marketing
expenses
• Be the last in the market

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 Marketing Strategies for PLC
INTRODUCTION GROWTH MATURITY DECLINE

Product Limited models More models Large number Eliminate

Strategy Frequent Frequent of models. unprofitable
changes changes. models

Distribution Limited Expanded Extensive. Phase out

Strategy Wholesale/ dealers. Long- Margins drop. unprofitable
retail distributors term relations Shelf space outlets

Awareness. Aggressive ads. Advertise. Phase out

Promotion Stimulate Stimulate Promote heavily promotion
Strategy demand.Sampling demand
Higher/recoup Fall as result of Prices fall Prices
Pricing development competition & (usually). stabilize at
Strategy costs efficient produc- low level.
tion.

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