Transcript 7-2 Product Classification

Ch.7:PRODUCT STRATEGY
Product Classification (1 of 3)
• Consumer Product Classifications
– Convenience Products
– Shopping Products
– Specialty Products
– Unsought Products
• (1) Products of which consumers are unaware
• (2) Products that consumers do not consider
purchasing until a need or emergency
arises
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Product Classification (2 of 3)
• Business Product Classifications
– Raw Materials
– Component Parts
– Process Materials
– MRO Supplies
– Accessory Equipment
– Installations
– Business Services
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Product Classification (3 of 3)
• Product Lines and Mixes
– Product Line
– Product Mix
• Benefits of offering a wide variety and deep
assortment of products:
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Economies of Scale
Package Uniformity
Standardization
Sales and Distribution Efficiency
Equivalent Quality Beliefs
7-3
New Product Development
• Six strategic product development options:
– (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
• Customer perception of differentiation is
critical
7-4
Stages of the Product Life Cycle
Exhibit 7.2
7-5
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
7-6
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
7-7
Growth Stage
• 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:
– (1) Establish a strong, defensible marketing position
– (2) Achieve financial objectives
• 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
7-8
Maturity Stage
• Few, if any, new firms will enter the market
• Still an opportunity for new product features and
variations
• Typically the longest stage in the product life cycle
• Four general goals in this stage:
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(1) Generate Cash Flow
(2) Hold Market Share
(3) Steal Market Share
(4) Increase Share of Customer
• Four options to achieve these goals:
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(1) Develop a new product image
(2) Find and attract new users to the product
(3) Discover new applications for the product
(4) Apply new technology to the product
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Decline Stage
• Two options:
– (1) Attempt to postpone the decline
– (2) Accept its inevitability
• 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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Branding Strategy
• Key Issues In Branding
– Brand Loyalty
– Brand Equity
– Brand Alliances
• Packaging and Labeling
– Packaging
• Protection, storage, convenience, etc.
– Labeling
• The Nutritional Labeling and Education Act of 1990
• Food Choking Prevention Act
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Product Strategy for Services
• Characteristics of Services
• Marketing Strategy for Services
– Product Issues
– Pricing Services
– Promoting Service Benefits
– Distributing Services
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