Class 6 - Product Strategy - Sent

Principles of MARKETING
Lecture 6 Product strategy

12/26/2013 1 nguyenkhanhvan85@gmail.com
Contents
1. Understanding Product
Product definition
Product classification
2. Managing products related decisions
Managing products brand decisions
Managing products package decisions
Managing customer services
Managing product line, and product mix decisions
3. Product life cycles
4. Design and marketing strategy for new product
5. Product matrices

6/13/2013 nguyenkhanhvan85@gmail.com 2
UNDERSTANDING PRODUCT
Product definition
Define the terms product item, product line, and product mix

Understanding product
Product definition
Everything, both favorable
and unfavorable, that a
person receives in an
exchange.

Tangible Good
Service
Idea
Product
Levels of Products and Services
Two major ways to classify products are by type of user and degree of
product tangibility.
Type of User
The first major type of product classification is according to the user.
Consumer goods are products purchased by the ultimate consumer,
whereas business goods (also called industrial goods or organisational
goods) are products that assist directly or indirectly in providing products
for resale.

Product Tangibility
Classification by degree of tangibility divides products into
one of three categories.
1. Non-durable good, an item consumed in one or a few uses,
such as food products and fuel.
2. A durable good is an item that usually lasts over an extended
period of time
3. Services are defined as intangible activities, benefits or
satisfactions offered for sale, such as marketing research,
health care and education.

Unsought
Products
Specialty
Products
Shopping
Products
Convenience
Products
Consumer
Products
Business
Products
Products

There are four types of consumer goods:
1. Convenience (Sn phm d mua)
2. Shopping (Sn phm mua c la chn)
3. Specialty (Sn phm c bit)
4. Unsought (Sn phm mua th ng)
They differ in terms of
1. effort the consumer spends on the decision,
2. attributes used in purchase and
3. frequency of purchase.

Convenience products are consumer products
and services that the customer usually buys
frequently, immediately, and with a minimum
comparison and buying effort
Newspapers
Candy
Fast food
Product Classifications
Shopping products are consumer products and
services that the customer compares carefully on
suitability, quality, price, and style
Furniture
Cars
Appliances

Specialty products are consumer products and
services with unique characteristics or brand
identification for which a significant group of buyers
is willing to make a special purchase effort
Medical services
Designer clothes
High-end electronics

Unsought products are consumer products that the
consumer does not know about or knows about but
does not normally think of buying
Life insurance
Funeral services
Blood donations
MANAGING PRODUCTS
RELATED DECISIONS

Brand
Package
Services
Product category
Managing products related decisions
Brand decisions
A name, term, symbol, design, or
combination that identifies a
sellers products and differentiates
them from competitors products.
Something creates emotion and
belief to customers.
What is a brand?
Benefits of Branding
Consumers
Tell something about
product quality
Increase shoppers
efficiency
Call consumers
attention to new
products
Business
Easier to process
orders and track
down problems
Legal protection for
product features
Can charge higher
price
Pages 245-251
Students are required to read the textbook
Branding decisions

Product attributes are the benefits of the product
or service, making competitive advantages and
differentiation with competitors.
Quality
Features
Style and design
Product and Service Decisions

Product quality includes level and consistency
Quality level is the level of quality that supports the
products positioning
Product features are a competitive tool for
differentiating a product from competitors
products
Product features are assessed based on the value to
the customer versus the cost to the company

Style describes the appearance of the product
Design contributes to a products usefulness as well
as to its looks. Some companies consider design
as core value of their products
Roles of package
Contain and Protect
Promote
Facilitate Storage, Use,
and Convenience
Facilitate Recycling
Universal Product Codes
Universal
Product Codes
(UPCs)
A series of thick and thin
vertical lines (bar codes),
readable by computerized
optical scanners, that
represent numbers used
to track products.
Role of package to product
Dimensions: shape, materials, color, information
design, packaging tests: technical test, form test and
marketing check
What information should be available on package? What factors impact
information on package?
Packaging decisions
One of the competitive tools for companies
What do factors affect service quality level of a company?
(Melinh Plaza IKEA)
Customer services decisions:
What kinds of service customer require and companys ability?
How to charge service charge?
Competitors services influence companys services?
Services delivery: manufacturer (Samsung), seller (Pico, Topcare) or third
party (Selective TGI)

Customer services
Product item, product line, and product mix
Product Item
Product Line
Product Mix
A specific version of a product
that can be designated as a
distinct offering among an organizations
products.
A group of closely-related
product items.
All products that an
organization sells.
Campbells Product Lines and
Mix
Benefits of Product Lines
Equivalent Quality
Efficient Sales and
Distribution
Standardized
Components
Package Uniformity
Advertising Economies
Product Mix Width
The number of product lines an
organization offers.

Diversifies risk
Capitalizes on established
reputations
Product Mix
Width
Product Line Depth
The number of product
Items in a product line.

Attracts buyers with different preferences
Increases sales/profits by further market
segmentation
Capitalizes on economies of scale
Product Line
Depth
Product
Life Cycle
A concept that provides a
way to trace the stages of a
products acceptance, from
its introduction (birth) to its
decline (death).
Product life cycles
Product Life Cycle
Time
D
o
l
l
a
r
s

Profits
Sales
Introductory
Stage
Growth
Stage
Maturity
Stage
Decline
Stage
0
Introduction Stage
The introduction stage of the product life cycle occurs when a product is first
introduced to its intended target market.
During this period, sales grow slowly, and profit is minimal.
The lack of profit is often the result of large investment costs in product
development
The marketing objective for the company at this stage is to create consumer
awareness and stimulate trialthat first purchase of a product by a consumer.
Companies often spend heavily on advertising and other promotion tools to build
awareness among consumers in the introduction stage.
These expenditures are often made to stimulate primary demand, or desire for the
product class rather than for a specific brand since there are few competitors with
the same product.
As more competitors introduce their own products and the product progresses along
its life cycle, company attention is focused on creating selective demand, or demand
for a specific brand.
Introduction Stage
Other marketing mix variables also are important at this stage.
Gaining distribution can be a challenge because channel
members may be hesitant to carry a new product.
Moreover, in this stage a company often restricts the number
of variations of the product to ensure control of product
quality.
During introduction, pricing can be either high or low.
A high initial price may be used as part of a skimming strategy to help the
company recover the costs of development as well as take advantage of the
price insensitivity of early buyers.
High prices tend to attract competitors eager to enter the market because they
see the opportunity for profit.
To discourage competitive entry, a company can price low, referred to as
penetration pricing.
This pricing strategy helps build unit volume, but a company must closely
monitor costs.
Growth Stage
The second stage of the product life cycle, growth, is characterised by
rapid increases in sales.
It is in this stage that competitors appear. The result of more competitors
and more aggressive pricing is that profit usually peaks during the growth
stage.
Product sales in the growth stage grow at an increasing rate because of
new people trying or using the product and a growing proportion of
repeat purchaserspeople who tried the product, were satisfied and
bought again.
Changes start to appear in the product during the growth stage.
To help differentiate a companys brand from its competitors, an improved
version or new features are added to the original design, and product
proliferation occurs.
Distribution is critical at this stage.
Maturity Stage
The third stage, maturity, is characterised by a slowing of total
industry sales for the product class.
Also, weaker competitors begin to leave the market.
Most consumers who would buy the product are either repeat
purchasers of the item or have tried and abandoned it.
Sales increase at a decreasing rate in the maturity stage as
fewer new buyers enter the market.
Profit declines because there is fierce price competition among
many sellers.
Marketing attention in the maturity stage is often directed
towards holding market share through further product
differentiation and finding new buyers.

Decline Stage
The decline stage occurs when sales begin to drop.
Frequently, a product enters this stage not because of any
wrong strategy on the part of the company but because of
environmental changes.
Technological innovation often comes before the decline stage
as newer technologies replace older ones.
A company will follow one of three strategies to handle a
declining product:
deletion
harvesting
or finding a new market.
Decline Stage
Deletion
Product deletion, or dropping the product from the companys product line, is
the most drastic strategy.
Because a residual core of consumers still consume or use a product even in
the decline stage, product elimination decisions are not taken lightly.
Harvesting
A second strategy, harvesting, is when a company keeps the product but
reduces marketing costs.
Finding a new market.
finding a new market, is when a company seeks a market where the product
may not be in the same stage of the life cycle.
Some Dimensions of the Product Life Cycle
Two important aspects of product life cycles are (1) their length and (2)
the shape of their curves.
Length of the Product Life Cycle: There is no exact time that a product
takes to move through its life cycle.
As a rule, consumer products have shorter life cycles than business
products.
Shape of the Product Life Cycle: The product life-cycle curve shown in
Figure 91 is the generalised life cycle, but not all products have the same
shape to their curve.
There are several different life-cycle curves, each type suggesting different
marketing strategies, such as:
High learning product - low learning product
Fashion product - fad product.
The Life Cycle and Consumers
The life cycle of a product depends on sales to consumers.
Not all consumers rush to buy a product in the introductory stage, and the
shapes of the life-cycle curves indicate that most sales occur after the
product has been on the market for some time.
In essence, a product diffuses, or spreads, through the population, a
concept called the diffusion of innovation.
Several factors affect whether a consumer will adopt a new product or
not.
Common reasons for resisting a product in the introduction stage are
usage barriers (the product is not compatible with existing habits),
barriers (the product provides no incentive to change), risk barriers
(physical, economic or social) and psychological barriers (cultural
differences or image)
Five categories and profiles of product adopters
Introduction to Product Matrices
The Boston Consulting Groups Growth-Share
Matrix
20%-
18%-
16%-
14%-
12%-
10%-
8%-
6%-
4%-
2%-
0
M
a
r
k
e
t

G
r
o
w
t
h

R
a
t
e

3
?
Question marks
?
2
1
Cash cow
6
Dogs
8
7
10x 4x 2x 1.5x 1x
Relative Market Share
.5x .4x .3x .2x .1x
Stars
5
4
Boston Classification
Stars high share of a high growth market. In
short term, requires capital expenditure in
excess of the cash they generate, in order to
maintain their market position, but promise
high returns in the future
Cash Cows Stars will become cash cow, with
high share of a low growth market. Cash cows
need very low capital expenditure and generate
high levels of cash income, which can be used to
finance the stars
Question Marks high growth market, but
where they have low market share. Because
considerable expenditure would be needed to
turn a question mark into a star by building up
market share, question marks will usually be
poor cash generators and show a negative cash
flow
Dogs low share of a low growth market.
Although they will show only a modest net cash
outflow, or even a modest net cash inflow, they
are cash traps which tie up funds and provide a
poor return on investment (R.O.I), and not
enough to achieve the organizations target rate
of return
ANSOFFS Product-market
Growth Matrix
New Products Existing Products
Existing
markets
New
markets
Market Penetration Strategy
1. More purchasing and usage from
existing customers
2. Gain customers from competitors
3. Convert non-users into users
(where both are in same market
segment)
Product Development Strategy
1. Product modification via
new features
2. Different quality levels
3. New product
Market Development Strategy
1. New market segments
2. New distribution channels
3. New geographic areas e.g. exports
Diversification Strategy
1. Organic growth
2. Joint ventures
3. Mergers
4. Acquisition/take over
Questions
If you are a marketing manager at Heineken,
what should you do to increase your sales?
6/25/2014 47

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