Transcript Chapter 7

marketing strategy
O. C. Ferrell
Michael D. Hartline
Product Strategy
C H A P T E R
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
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Types of Products
in Consumer Markets
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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
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Types of Products
in Business Markets
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Raw Materials
Component Parts
Process Materials
MRO Supplies
Accessory Equipment
Installations
Business Services
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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
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Proctor & Gamble’s Portfolio
of House and Home Products
Exhibit 7.2
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Potential Benefits of
Wide Variety & Deep Assortment
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Economies of Scale
Package Uniformity
Standardization
Sales and Distribution Efficiency
Equivalent Quality Beliefs
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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?
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Challenges of Service Products
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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)
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Unique Characteristics of Services
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Intangibility
Simultaneous Production and Consumption
Perishability
Heterogeneity
Client-Based Relationships
From Exhibit 7.3
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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?
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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
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Six Strategic Options
for Newness of Products
1. New-to-the-world products (discontinuous
innovations)
2. New product lines
3. Product line extensions
4. Improvements or revisions of existing products
5. Repositioning
6. Cost reductions
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New Product Development Process
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Idea Generation
Screening and Evaluation
Development
Test Marketing
Commercialization
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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
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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)
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Advantages of Branding
Exhibit 7.4
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The World’s Twenty Five
Most Valuable Brands
Exhibit 7.5
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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?
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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
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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
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A Hypothetical Perceptual Map
of the Automotive Market
Exhibit 7.6
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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
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Positioning Strategies
• Strengthen the Current Position
• Repositioning
• Reposition the Competition
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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
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Managing Products
and Brands Over Time
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Development Stage
Introduction Stage
Growth Stage
Maturity Stage
Decline Stage
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Stages of the Product Life Cycle
Exhibit 7.8
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Strategic Considerations During
the Product Life Cycle
Exhibit 7.9
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Development Stage
• No sales revenue during this stage
• Components of the product concept:
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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
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Introduction Stage
• Begins when development is complete
• Ends when customers widely accept the product
• Marketing strategy goals during this stage:
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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
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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
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Growth Stage (2 of 2)
• Marketing strategy goals in this stage:
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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
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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
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Maturity Stage (2 of 2)
• Four general goals in this stage:
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Generate cash flow
Hold market share
Steal market share
Increase share of customer
• Four options to achieve these goals:
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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
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Decline Stage
• Two options:
– Attempt to postpone the decline
– Accept the inevitability of decline
• Harvesting
• Divesting
• Factors to be considered during this stage:
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Market segment potential
The market position of the product
The firm’s price and cost structure
The rate of market deterioration
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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?
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