product and brand strategies(4210)
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TRANSCRIPT
MARK4210, 2014 Spring, L1/L2
MARK4210: Strategic Marketing
2014 Spring, Section L1/L2
[Class #9]
Product Strategies
2 MARK4210, 2014 Spring, L1/L2
Refresher: Product Life Cycle
Promote
demand
for new
offering
(market
education)
Initial
structural
invest-
ments
More new
customers
join early
users & re-
purchasers
Company
begins to earn
profits on the
new product
More competition
Industry eventually reaches
saturation level -- difficult to
expand further
More intense
competition
(possibly
‘price wars’)
Market may
perceive
product
category as
“old”
Sales fall and
profits decline
3 MARK4210, 2014 Spring, L1/L2
Product Strategies
Specifies market needs that may be served by
different product offerings
Directly linked to market strategy
Deals with number and diversity of products, product
innovations, design, etc.
Source: Strategic Marketing Asia Edition, Jain & Haley, Cengage Learning, 2009
4 MARK4210, 2014 Spring, L1/L2
Product Strategies
BCG Matrix – Product Resource Allocation Strategy
Product Re-positioning Strategy
Product Overlap Strategies
Product Design Strategies
New Product Strategies
Source: Strategic Marketing Asia Edition, Jain & Haley, Cengage Learning, 2009
5 MARK4210, 2014 Spring, L1/L2
BCG Matrix: Product Resource
Allocation Strategy Recommendations
High Low
High
Low
Pro
du
ct
Sale
s G
row
th R
ate
Relative Market Share
• Investment strategy: Grow further;
maintain market position
• Cash flow: Self-fund own growth;
funding from ‘Cash Cows’
• Assure company’s future
• Grow into ‘Cash Cows’
• Investment strategy: Increase
market share; selectively develop
into ‘Stars’
• Cash Flow: Funding from ‘Cash
Cows’
• Unrealized future opportunities
• Investment strategy: Maintain
market share; maintain capacity
• Cash flow: Positive cash flow;
support ‘Stars’ & “?’s”
• No potential for profit growth
• Investment strategy: Divestiture;
reduce capacity, free-up resources
• Cash Flow: Achieve positive cash
flow; divest if negative cash flow
• No real growth opportunities
6 MARK4210, 2014 Spring, L1/L2
BCG Matrix: Pros/Cons
PROS
Relatively quick & simple
Good measurability of
market share and growth
Strong basis for decision-
making
Provides guidance on
efficiently allocating
resources within the
organization
Generates strategic
options
CONS
Oversimplifies complex
decisions
Only 2 factors considered --
creates risk
Uncertainty in market and
SBU definition
Only considers current
businesses – not dynamic
Does not recognize
synergies between SBUs
Susceptible to “GI-GO”
7 MARK4210, 2014 Spring, L1/L2
Product Re-positioning Strategy
Product may need repositioning if:
• Competitive entry has been positioned next to the brand
• Consumer preferences have changed
• New customer-preference clusters have been discovered
with promising opportunities
• Mistake has been made in the original positioning
Source: Strategic Marketing Asia Edition, Jain & Haley, Cengage Learning, 2009
8 MARK4210, 2014 Spring, L1/L2
Product Re-positioning: Ways to
Reposition a Product
Repositioning Description
Among existing
customers
• Involves promoting new & alternative
product uses
• Revitalizes product by building a new
character
• In some instances, leads to a new sub-
category
To new
consumers
• Presenting product with a different twist to
entice new consumers, and minimize
alienating current users
• In some instances, leads to a new category
Source: Strategic Marketing Asia Edition, Jain & Haley, Cengage Learning, 2009
9 MARK4210, 2014 Spring, L1/L2
10 MARK4210, 2014 Spring, L1/L2
Product Overlap Strategy
Company decides to compete with its own brand
Common strategies:
• Promote competing lines
• Provide private labeling
• Original equipment manufacturers (OEM)
Source: Strategic Marketing Asia Edition, Jain & Haley, Cengage Learning, 2009
11 MARK4210, 2014 Spring, L1/L2
Product Overlap: Promote Competing
Lines – Risks & Opportunities
While cannibalism occurs, overall sales usually
increase substantially
Two competing brands from same company
provides more aggressive front against other
competitors
Often used to transition new products into the
market – existing product maintained until new
product establishes market, thus minimize
competitive switches
Source: Strategic Marketing Asia Edition, Jain & Haley, Cengage Learning, 2009
12 MARK4210, 2014 Spring, L1/L2
13 MARK4210, 2014 Spring, L1/L2
Product Overlap: Provide Private
Labeling
Manufacture product for another company Pros Cons
• Represents large (usually
growing) market segment
• Economies of scale (e.g.,
manufacturing, distribution, etc.)
• Improves trade relationships
• Control over technology and raw
materials reduces overall risks
• Clear consumer segmentation
between branded and unbranded
• Helps eliminate small, local
competitors
• Compete on price vs. competitors
• Increases shelf space
• Market share growth at expense
of profitability (more price
sensitive, lower margins)
• Discloses cost information to
traders
• To displace existing private label
suppliers, risk of starting price war
• Affects consumer perception of
branded business
Source: Strategic Marketing Asia Edition, Jain & Haley, Cengage Learning, 2009
14 MARK4210, 2014 Spring, L1/L2
15 MARK4210, 2014 Spring, L1/L2
Product Overlap: Deal with OEM
Sell to competitors the components used in its own products, leading to direct competition
Motivation for Seller:
• Maximize manufacturing capacity levels (economies-of-scale)
• Share burden of driving primary demand
• Seller can always limit/restrict sales to problematic competitors
In some cases, forced by governments to promote industry competition
Source: Strategic Marketing Asia Edition, Jain & Haley, Cengage Learning, 2009
16 MARK4210, 2014 Spring, L1/L2
17 MARK4210, 2014 Spring, L1/L2
Product Design Strategy
A business may offer a standardized or a custom-
designed product; decision based on factors such
as:
• Capabilities
• Business vision
Strategic alternatives:
• Standard products
• Customized products
• Modifying standard products
Source: Strategic Marketing Asia Edition, Jain & Haley, Cengage Learning, 2009
18 MARK4210, 2014 Spring, L1/L2
Product Design: Standard Products
Standard products are more familiar, lessen
company’s “experience curve effect” and yield lower
costs
Can be efficiently marketed more broadly
Generally offered in limited grades and styles with
varying prices
Generally more suited for large companies
Source: Strategic Marketing Asia Edition, Jain & Haley, Cengage Learning, 2009
19 MARK4210, 2014 Spring, L1/L2
20 MARK4210, 2014 Spring, L1/L2
Product Design: Customized Products
Based on the extent that the product meets customer
specifications – usually by working closely with
customers from development to completion
Price is less of a factor versus standard products
Depending on nature/complexity of the product, generally
more suitable for smaller, flexible, specialized companies
Recent rise of “mass customization” – “build-to-order”
Source: Strategic Marketing Asia Edition, Jain & Haley, Cengage Learning, 2009
22 MARK4210, 2014 Spring, L1/L2
MAYBACH: Most customizable production car: ~2 million
equipment option possibilities
“Personal Relationship Manager” to help customize 'ships'
23 MARK4210, 2014 Spring, L1/L2
Product Design: Modifying Standard
Products
Customers can specify a limited number of desired
modifications to a standard product
Manufacturing base product provides economies-of-
scale, while modifications allow product certain level
of individualization based on customer requirements
Source: Strategic Marketing Asia Edition, Jain & Haley, Cengage Learning, 2009
24 MARK4210, 2014 Spring, L1/L2
25 MARK4210, 2014 Spring, L1/L2
New Product Strategy
New-product development is essential for
companies seeking growth
Facilitated by technological innovations and
customer willingness to accept new things
Strategic alternatives:
• Product innovation
• Product imitation
• Product improvement/modification
Source: Strategic Marketing Asia Edition, Jain & Haley, Cengage Learning, 2009
26 MARK4210, 2014 Spring, L1/L2
New Product: Product Innovation
Introduce offering with a completely new approach in fulfilling customer desires, or replace existing ways to satisfying customer desires
Involves major financial commitment, heavy management effort, and often risky
Ways to encourage innovation:
• Smaller divisions (better interaction amongst team)
• Willingness to tolerate failure (experimentation, risk taking)
• Champions are motivated (encouragements, incentives)
• Close liaison with customer
• Technology is widely shared
• Projects are sustained despite initial discouragements
Source: Strategic Marketing Asia Edition, Jain & Haley, Cengage Learning, 2009
27 MARK4210, 2014 Spring, L1/L2
RIM Blackberry: First
“integrated” phone
Series 6000 launched in
2003
Model 6210 listed in
influential “Time All Time
100 Gadgets” list
28 MARK4210, 2014 Spring, L1/L2
New Product: Product Imitation
Introducing product with existing characteristics in
the market, but new to the company
“Follower” strategy by letting other companies take
the riskier first move, and learning the lessons
Saves investment in R&D or costly acquisitions,
especially for companies with limited resources
Also used by companies to leverage unique
capability or competency from one product category
to another (e.g., distribution)
Caution on patents and trademarks
Source: Strategic Marketing Asia Edition, Jain & Haley, Cengage Learning, 2009
30 MARK4210, 2014 Spring, L1/L2
New Product: Product Improvement/
Modification
Introducing new or improved version of existing
product, usually by:
• adding new features/styles
• changing processing requirements
• altering ingredients
Usually when existing products become mature, and
ceased to provide adequate return, and/or
competitive pressure has reduced existing product
to “me-too”
Source: Strategic Marketing Asia Edition, Jain & Haley, Cengage Learning, 2009
31 MARK4210, 2014 Spring, L1/L2
32 MARK4210, 2014 Spring, L1/L2
Guide Questions: The Birth of
Swatch
1. Prior to Swatch, what was the watch industry like in various
historical stages (prior to 1950s, between 1950s-1970s,
1970s-1980s)? Consider various aspects of the category
(e.g., the positioning of the category, marketing mix, and
consumer behavior).
2. Why did Swatch became a success, what are the key
elements of their marketing plan (positioning, marketing
mix) that contributed to their success?
3. How has Swatch influenced/impacted the watch industry in
terms of how people view the category and consumer
behavior
33 MARK4210, 2014 Spring, L1/L2
Reminder: Mid-term Exam
When: March 19 (Wednesday) 7:00-8:20pm
• No lecture during the day
• Pls try to arrive at 650pm to find your assigned seat
Where: LSK1001, LSK1003, LSK1005
• Assigned seating plan will be posted outside rooms by
650pm
What: Classes up to STP (including STP & JBC)
• Open-notes
• Bring your own calculator (NO borrowing allowed)
• Short scenarios questions based on discussed concepts
& methodologies
34 MARK4210, 2014 Spring, L1/L2
OPTIONAL Tutorial for Mid-term
Exam
Entirely OPTIONAL, NO attendance check, NO
participation points
NO new slides/concepts NOR preset discussion
plan, will be based review of past classes and slides
depending on student questions
March 12, Wednesday, 6-8pm
• Please arrive on time
• BUT, you can leave early if your concerns are addressed
If interested to attend, please register by 7pm of
March 11 with your question/topic request (see
course announcement for details)
MARK4210, 2014 Spring, L1/L2
End
Next Class: March 7, Friday
Pre-reading/Case Analysis:
“The Birth of Swatch” Case