8-1 © 2006 by nelson, a division of thomson canada limited 9/17/2015 slides developed by: peter...

© 2006 by Nelson, a division of Thomson Canada Limited8-104/21/23

Slides developed by:Slides developed by:

Peter YannopoulosPeter Yannopoulos

Chapter 8Chapter 8

Product Strategy

© 2006 by Nelson, a division of Thomson Canada Limited8-2

Product

A product is a bundle of benefitsthat provide customer satisfaction


New Product Development Approaches

Market pull

New Product New Product DevelopmentDevelopmentApproachesApproaches

Technology push


Classification of New Products

New product lines

Classification of Classification of New Products New Products

New-to-the-world

products

Additions to existing product

lines

Improvements to existingproducts

Repositioning

Cost reductions


Marketing managersmust be aware that:

New products must fit the vision, goals, distinctive competencies, and value proposition of the organization

New products must fit the vision, goals, distinctive competencies, and value proposition of the organization


In managing new products it is important that:

Management must decide its innovation strategy and what the role of new products in that strategy willbe

Management must decide its innovation strategy and what the role of new products in that strategy willbe


Importance of New Products

There is evidence that new products help firms increase their market share and profitability

There is evidence that new products help firms increase their market share and profitability

A lack of successful new products may threaten highly successful companies Examples: Wang Laboratories and Polaroid

A lack of successful new products may threaten highly successful companies Examples: Wang Laboratories and Polaroid


New Product Strategy

The new product strategy reflects the value proposition, positioning, and distinctive competencies of the organization

The new product strategy reflects the value proposition, positioning, and distinctive competencies of the organization


Major Objective of the New Product Strategy

To help manage the new product development process

To help manage the new product development process


Elements of a New Product Strategy

New product objectivesNew product objectives

Area of search for new productsArea of search for new products

Behaviour of team members Behaviour of team members

Speed of new product introduction Speed of new product introduction

Timing of entry into market Timing of entry into market


The Stage-Gate New Product Development System

Preliminary Gate Assessment Gate Product Gate Validation Gate Commercial Gate Assessment 1 2 Development 3 4 Launch 5


Timing of Market Entry Strategies

First moverFirst mover

Late moverLate moverTiming of

Market Entry Strategies

Timing of Market Entry

Strategies


First Mover Advantages

Barriers to entrySwitching costsConsumer search costsBuyer uncertainty Image and reputationFirst choice of market segments and

positionPreempt scarce resources


Late Mover Advantages

Let the first mover enter first and test the waters

Let first movers face the uncertaintyAvoid being locked into an obsolete

product design


The introduction stage is characterized by high:

Competitive uncertainty

IntroductionIntroductionStageStage

Marketuncertainty

Technologicaluncertainty


Tasks to be accomplished during the introduction stage include:Tasks to be accomplished during the introduction stage include:

Decide on an entry strategyDecide on an entry strategy

Choose a pricing strategy Choose a pricing strategy

Establish distributionEstablish distribution

Design a promotional strategy Design a promotional strategy


The growth stage is characterized by a reduction in:

Market uncertaintiesTechnological uncertaintiesCompetitive uncertainties

Market uncertaintiesTechnological uncertaintiesCompetitive uncertainties


Determine value proposition Raise barriers to entry Create brand loyalty and favourable

attitudes Do not lose customer focus Improve product and operations Fine-tune prices and expand distribution

Determine value proposition Raise barriers to entry Create brand loyalty and favourable

attitudes Do not lose customer focus Improve product and operations Fine-tune prices and expand distribution

Tasks to be accomplished during the growth stage include:Tasks to be accomplished during the growth stage include:


Additional tasks to be accomplishedduring the growth stage include:

Avoid complacency Improve the product or service Fine-tune operationsBuild loyalty and customer relationships

Avoid complacency Improve the product or service Fine-tune operationsBuild loyalty and customer relationships


A common problem during the growth stage is:

The loss of customer focus due to more pressing internal concerns, such as building volume, reducing costs and meeting production schedules

The loss of customer focus due to more pressing internal concerns, such as building volume, reducing costs and meeting production schedules


The basic marketing tasks during the shakeout stage are:

Rationalize product linesRationalize

product lines

Lower pricesLower prices

Marketing tasks in

shakeout stage

Marketing tasks in

shakeout stage


The maturity stage is characterized by:

Stability in buying patternsHigh degree of market, competition,

and technical stabilityPrice competitionProduct commoditization


Tasks to be accomplished during the maturity stage include:

Appeal to selected segments Appeal to selected segments

Differentiate product and reduce costsDifferentiate product and reduce costs

Find new ways of increasing sales Find new ways of increasing sales


Ways of Increasing Sales in Mature Markets

Promote new uses to existing product usersEncourage customers to increase their usage of

the productPromote more frequent use of the productPromote the product for use in different

occasionsReach market segments whose needs are

ignored or underserved


Ways of Increasing Sales in Mature Markets (continued)

Broaden the customer base by converting non-users

Attract users of competitors’ brandsExpand product line by adding new items,

sizes, or flavoursEnhance product appeal by improving quality

and service or adding new featuresReplace product with superior new products


The decline stage is caused by:

Changes in tastes and preferences Changes in tastes and preferences

Product substitutionProduct substitution

Demographic changes Demographic changes


Product Line Strategies

Trade-downstrategy

Product Product Line StrategiesLine Strategies

Trade-up strategy

Product-line extensionstrategy


Reasons Companies Pursue Trade up Strategies

Lack of growth opportunities in

low endAdd prestige to product lineTo become a full line competitor


Risks of Trade up Strategies

High competitive intensity in high endHigh-end competitors may counteractLack of credibility in high endLack of resources for supporting the

moveAlienation of existing customers


Reasons Companies Pursue Trade Down Strategies

Limited growth opportunitiesTo become full line competitorBlocking or fighting brandAdvertise as starting at a low

priceAttract first-time buyers


Risks of Trade Down Strategies

Tarnish imageCannibalization of sales of

high-end productInconsistency in quality


Reasons Companies Pursue Product Line Extension Strategies

Strengthen product lineLower costsEnhance perceived valueFill market gaps or pre-empt shelf

space


Risks of Product Line Extension Strategies

OverextensionCannibalization


Service Characteristics and Marketing Challenges

Service characteristic Marketing Problem Intangibility No storage

No patentsDifficult to communicateDifficult to priceCustomers can’t take

possession

Service heterogeneity Difficult to standardizeQuality control is difficult


Service Characteristics and Marketing Challenges (concluded)

Simultaneous production Lack of mass productionand consumption Consumer presence

Other customers affect outcomeDifficult to distributeFront line employees important

for service delivery

Perishability Services cannot be inventoriedDifficult to match demand

and supply


Marketing Mix Strategies for Services

Pricingof services

Marketing Mix Marketing Mix Strategies for Strategies for

ServicesServices

Productstrategies

Distributionof servicesPromotion

of services

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