Product Strategies
What is a Product?
The product is a bundle of
satisfaction that a customer buys
So.. the Product strategy begins with a strategic vision that states where a company wants to go, how it will get there, and why it will be successful. Product strategy is like a road-map, and like a road-map it’s useful only when you know where you are and where you want to go.”
PRODUCT- KEY CONCEPTS
The
product is a bundle of satisfaction that a customer buys. It represents a
solution to a customer’s problems. It is in this context that the marketing definition
of a product is more than just what the manufacturer understands it to be. As Peter
Drucker puts it, So long as a product is not bought and consumed. It remains a
raw material or at best an intermediate the product is almost always a
combination of tangible and intangible Benefits. For example a refrigerator is
not just merely steel, plastic, Freon gas, brand name, number of doors, and so
on, but also involves factors like after sales service, delivery and installation
assistance in purchase of the product, dealer network, and service. It also
connotes status in developing countries. It is the same with products like TV,
music systems, automobiles, personal products, and services like banks,
airlines, telephone, courier, and so forth.
What
Constitutes a Product?
To
understand and appreciate it, we need to perceive it as a four layer item. At
the heart of it is the “core” or “generic” part. As Levitt Puts it, this is the
table stakes of business, or what is needed to play the game of market
participation. For a refrigerator manufacturer is the compressor, steel, Freon
gas, condenser, and various other electrical or electronic components that need
to be assembled. To a five star hotel management it is the number of rooms,
restaurants and swimming pools. To an airline operator, it is the aircraft. But
in today’s competitive world, there is hardly any
difference between firms on the generic component of the product. Also, because
of the standardization of technology, customers are never able to perceive any
significant difference among “core” or “generic” products of competing firms in
the industry.
Formal product and Augmented
Product
To
differentiate its product from all others, the Firms names it (branding), packs it , puts
additional features—like laminated top, a stand, or a water tap on the door of the door of the
refrigerator—uses colors and aesthetics to give a distinctive appeal. This makes a “core”
product a “formal product” or the expectant Product. But as inter-firm rivalry
intensifies, differentiation on the basis of the formal product ceases to
exist. Consider the example of ceiling fans. Today, there is no difference in the
fans marketed by Crompton and others. All look like in terms of attributes,
style and color. Besides, all have identical warranties making the task of fan
marketer difficult. It is here that the marketer searches for possible
differentiation. When technology ceases to give one and it becomes a price and
promotions wars, the marketer looks for the intangibles. Intangibles are
services like after sales service, delivery and installation schedules, and
helping buyers purchase the product through low cost financing options.
There
is no fixed range of services that a marketer may offer. It is based on
customer needs and the marketer’s creative strategy to serve it. This
intangible component of the product along with formal and core components is
called “augmented product”. Levitt believes that further competition will be in
the augmented product. The marketer keeps expanding the service component, thus
enhancing the product value. Not all customers for all products and under all
circumstances can be attracted by this ongoing process of value enhancement.
They may prefer a low priced product to an augmented product. Some customers
may not be able to use the extra services offered by the marketer. Nonetheless,
it is an irony in marketing that as customers get more enlightened about the
product (through marketer’s communication about the use of the product), the
more vulnerable the marketer becomes to losing them. And this is precisely when
the customers shops for a price. “At this point, it makes sense to embark on
systematic programmed of customer benefiting and therefore customer keeping,
product augmentation.”
The
firm should also undertake cost reduction programmers so that it can compete on
the price front too. According to Levitt the augmented product is a condition
of market maturity or of relatively experienced or sophisticated customers. The
potential product consists of everything that might be done to attract and hood
customers. These offerings differ from one market to another because of varying
economic and competitive conditions. The driving force in developing these
offerings is the prime goal of any firm—retains competitive advantage Figure explains these product concepts. Thus, the product is the total concept
that a customer buys. As competition intensifies, markets open up,
telecommunication and information networks improve, and exposures of Indian
families improve, firms will have to re-examine their product concepts. For an
important fact to be kept in mind is that these concepts keep changing as
customers become more aware and sophisticated.
One
of the realities of business is that most firms deal with multiple products.
This helps a firm diffuse its risks across different product groups. Also, it
enables the firm to appeal to a much larger group of customers or to different
needs of the same customer group. So when a company like Samsung entered India
with a diversified product portfolio consisting of television, music systems,
washing machines, refrigerators, microwave ovens and call phones, it sought to
satisfy the aspirations of the middle and upper middle income group of
consumers. Likewise, Bajaj Electricals a household name in India has almost
ninety products in its portfolio ranging from low value items like bulbs to
high priced consumer durables like mixers luminaries and lighting projects. The
number of products carried by a firm at a given point of time is called its
product mix. This product mix contains product lines and product items. In
other words it’s a composite of products offered for sale by a firm.
Product Line
The
consists of different products that are closely related to each other by virtue
of satisfying a particular class of needs, being used together, being
distributed through the same channels, or possessing common physical of
technical characteristics. In other words, a product line refers to a group of
products clubbed together because they have one of the above described
characteristics in common. The number of product lines carried by a firm at a
given point of time is a function of its resources and competitive position.
PRODUCT
STRATEGIES
Product
strategies specify market needs that may be served by different product
offerings. It is a company’s product strategies, duty related to market
strategies that eventually come to dominate both overall strategy and the
spirit of the company. Product strategies deal with such matters as number and
diversity of products, product innovations, product scope, and product design.
In this chapter, different dimensions of product strategies are examined for
their essence, their significance, there limitations, if any, their
contributions to objectives and goals. Each strategy will be exemplified with illustrations
from marketing literature.
The
implementation of product strategies requires cooperation among different
groups: finance, research and development, the corporate staff, and marketing.
This level of integration makes product strategies difficult to develop and
implement. In many companies, to achieve proper coordination among diverse
business units, product strategy decisions are made by top management. At
Gould, for example, the top management decides what kind if business Gould is
and what type it wants to be. The company pursues products in the areas of
electro-mechanics, electro-chemistry, metallurgy, and electronics. The company
works to discoed of products that do not fall strictly into of interest.
In
some companies, the overall scope of product strategy is laid out at the
corporate level, whereas actual design is left to business units. These
companies contend that this alternative is more desirable than other
arrangements because it is difficult for top management to deal with the details
of product strategy in a diverse company. In this chapter, the following
product strategies are recognized:
(a)
Product-positioning strategy
(b)
Product-re-positioning strategy
(c)
Product-overlap strategy
(d)
Product-scope strategy
(e)
Product-design strategy
(f)
Product-elimination strategy
(g)
New-Product strategy
(h)
Diversification strategy
(i)
Value-marketing strategy
Each strategy is
examined from the point of view of an SBU.
PRODUCT POSITIONING STRATEGY
The term positioning
refers to placing a brand in that part of market where it will receive a
favorable reception compared to competing product.
·
In
an heterogeneous market one brand cannot make an impact on the entire market.
· Strategically,
a product should be matched with that segment of the market in which it is most
likely to succeed
·
In
other words the product is to be positioned so that it stands apart from
competing brands.
·
Positioning
tells us what the product stands for, what it is ,and how customer should
evaluate it.
·
Positioning
is achieved by using marketing mix ,especially design and communication.
· The
differentiation in positioning is more visible in consumer goods as compared to
the industrial goods.
The Desired position for a product may be determined using the following procedure:
Approaches towards Positioning
1. Positioning by attribute(associating
a product with an attribute, feature or customer benefit).
2.Positioning by price/quantity
(i.e.price /quantity attribute is so persistent that is can be considered a
separate approach to promotion).
3.Positioning w.r.t. use or application
(associating the product with a use or application)
4.Positioning by the product user
(assocaiting a product with user or a class of user)
5.Positioning w.r.t. a product class(positioning
pears soap as an bath oil soap rather than merely a soap)
6.Positioning w.r.t. a competitor
(making a reference to competition)
Single
Brand Strategy
A company having one brand that it can be placed in one
or more chosen market segments.
To maximize
its benefits with a single brand, a company must try to associate itself with a
core segment in a market where it can play a dominant role.
In addition
to this it may also attract other customers from other segments outside its
core. For example: BMW positioning its car mainly in a limited segment to high
–income young professionals.
Another
example is coca-cola,several years ago this company followed a strategy that
proclaimed that Coke quenched the thirst of the total market,but it was short
term because now this company has a number of brands to serve different
segments: coke, Fenta, Sprite,Diet Coke and even orange juice.
There are 2
fundamentals to manage a single brand successfully:
- A single brand must be so
positioned that it can stand competition from the toughest rival.
- And its unique position should
be maintained by creating an aura of a distinctive product.
Generally, Single
brand strategy is a choice in short run particularly when the task
of managing multiple brands is beyond the managerial & financial capability
of a company. Single brand permits better control of operations that do multiple
brands
Multiple
Brand Strategy
Multiple
brands are introduced to seek growth by offering varied products in
different segments of the market and to avoid competitive threats to a single
brand.
Example:
General Motors is having cars to sell in all the segments of market, Coca-Cola,
IBM/Lenovo sells computers for different computer needs, P&G
To realize
desired growth, multiple brands should be carefully positioned in the market so
that they do not compete with each other and create cannibalism.
Thus, it is
necessary to be careful in segmenting the market and to position the product
,through design and promotion ,as uniquely suited to a particular segment.
PRODUCT-REPOSITIONING STRATEGY
Often,
a product may require repositioning. This can happen if (a) a competitive entry
is positioned next to the brand, creating an adverse effect on its share of the
market; (b) consumer preferences change; (c ) new customer preference clusters
with promoting opportunities are
discovered; or (d) a mistake is made in the original positioning.
Citations
from the marketing literature serve to illustrate how repositioning becomes
desirable under different circumstances. When A & W went national in 1989
showed that consumers perceived cream soda as an extension of the root beer
family. To correct this, the company repositioned the brand as a separate soda
category by emphasizing the vanilla through advertising and packaging.
Following the repositioning, cream soda’s sales increased rapidly. Over the
years, Coca-Cola’s position has shifted to keep up with the changing mood of
the market. In recent years, the theme of Coca-Cola’s advertising has evolved
from “Things go better with Coke” to “It’s the real thing” to “Coke is it to
“Can’t beat the feeling” to “Catch the Wave” to “Always new, always real always
you, always Coke”. The current perspective of Coca-Cola’s positioning is to
reach a generation of young people and those young a heart.
The
risks involved in positioning or repositioning a product or service are high.
The technique of perceptual may be used gainfully to substantially reduce those
risks. Perceptual mapping helps in examining the position of a product relative
to competing products. It helps marketing strategists
·
Understand how competing products or
services are perceived by various consumer groups in terms of strengths and
weakness.
·
Understand the similarities and
dissimilarities between competing products and services.
·
Understand how to reposition a current
product in the perceptual space of consumer segments.
·
Position a new product or service in an
established marketplace.
·
Track the progress of a promotional or
marketing campaign on the perceptions of targeted consumer segments.
PRODUCT-OVERLAP
STRATEGY
The
product-overlap strategy refers to a situation where a company decides to
compete against its own brand. May factors lead companies to adopt such a
strategic posture? For example, A&P stores alone cannot keep the company’s
42 manufacturing operations working at full capacity. Therefore, A&P
decided to distribute May of its products through independent food retailers.
A&P’s Eight O’ Clock coffee, for example, is sold through 7-Eleven stores.
Procter & Gamble has different brands of detergents virtually competing in
the same market. Each brand has its own organization for marketing research,
product development, merchandising, and promotion. Although sharing the same
sales force, each brand behaves aggressively to outdo others in the
marketplace. Sears’ large appliance brands are actually manufactured by the
Whirlpool Corporation. Thus, Whirlpool’s branded appliance competes against
those that it sells to Sears
There
are alternative ways in which the product-overlap strategy may be operational
zed. Principal among them are having competing lines, doing private labeling,
and dealing with original-equipment manufacturers.
Competing Brands
In
order to a gain a larger share of the total market, many companies introduce
competing products to the market. When a market is not neatly delineated, a
single brand of a product may not be able to make an adequate impact. If a
second brand is placed to compete with the first one, overall sales of the two
brands should increase substantially, although there will be some cannibalism.
In other words, two competing brands provide a more aggressive front against
competitors.
Private Labeling
It refers to manufacturing the product under
another company's brand name. Example: Companies like Samsung, LG Etc manufacture
mobile phones for TATA & RCOM CDMA phones. Another view is that a retailer’s
interest in selling goods under its own brand name is also motivated by
economic considerations. The retailers buy goods with its brand name at low
cost , then offers the goods to customers at a slightly lower price than the
price of manufacturer’s brand.
Dealing with Original-Equipment Manufacturers
(OEMs)
Following the
strategy of dealing with an OEM, a company may sell to competitors the
components used in its own product. This enables competitors to compete with
the company in the market. For example, in the initial stages of color television, RCA was the only company that
manufactured picture tubes. It sold these picture tubes to GE and to other
competitors, enabling them to compete with RCA color television sets in the
market.
PRODUCT-SCOPE STRATEGY
The
product-scope strategy deals with the perspective of the product mix of a
company (i.e., the number of product lines and items in each line that the
company may offer). The product-scope strategy is determined by making
reference to the business unit mission. Presumably, the mission defines what
sort of business it is going to be, which helps in selecting the products and
services that are to become a part of the product mix.
PRODUCT-DESIGN STRATEGY
A Business unit may otter a standard or a custom-designed product to each
individual customer. The decision about whether to offer a standard or a
customized product can be simplified by asking questions, among others: what
are our capabilities? What business are we in? With respect to the first
question, there a danger of over identification of capabilities for a specific
product. If capabilities are over identified, the business unit may be in
trouble. When the need for the product declines, the business unit will have
difficulty in relating its product’s capabilities to other products.
Product-design Strategy is of
three types:
Standard Products
Customized Products
Standard products with
modifications
PRODUCT-ELIMINATION STRATEGY
When
a product reaches the stage where continued support is no longer justified
because performance is falling short of expectations, it is desirable to pull
the product out of the marketplace. Poor performance is easy to spot. It may be
characterized by any of the following:
I.
Low profitability.
II.
Stagnant or declining sales volume or
market share that is too costly to rebuild.
III.
Risk of technological obsolescence.
IV.
Entry into a mature or declining phase
of the product life cycle.
V.
Poor fit with the business unit’s
strengths or declared mission.
There are three alternatives
in Product-elimination Strategy and they are:
Harvesting(getting
more from a product while it last)
Line Simplification: product line is trimmed to a manageable size by
pruning the number and variety of products or service
Total-line divestment:The process of selling an
asset known as divestment, it is made for either financial or
social goals. Divestment is the opposite of investment
NEW-PRODUCT STRATEGY
New-product
development is an essential activity for companies seeking growth. By adopting the new-product strategy as their
posture, companies are better able to sustain competitive pressures on their
existing products and make headway .The implementation of his strategy has
become easier because of technological innovations and the willingness of
customers to accept new ways of doing things.
New
Product strategy is of three( types):
n Product improvement Modification
n Product imitation
n Product innovation
DIVERSIFICATION
STRATEGY
Diversification
refers to seeking unfamiliar products or markets or both in the pursuit of
growth. Every
company is best at certain products; diversification requires
substantially different knowledge, thinking, skills,
and processes. Thus,
diversification is at best a risky strategy, and a company should choose this
path only
when current product/market orientation does not seem to provide
further opportunities for growth.
This
strategy is done on following factors:
Concentric Diversification: The
company seeks new products that have technological/marketing synergies
with the existing product lines.
with the existing product lines.
Horizontal Diversification: The
company might search for new
products
that could appeal to its current
customers even though the new products are technologically unrelated to its current product line
customers even though the new products are technologically unrelated to its current product line
Conglomerate Diversification: The
company might seek new business that have no relationship to the
company current technology, product & market.
company current technology, product & market.
VALUE-MARKETING
STRATEGY
In
the 1990s, value has become the marketer’s watchword. Today, customers are
demanding something
different than they did in the past. They want the right
combination of product quality, good service, and
timely delivery. These are
the keys to performing well in the next century. It is for this reason that we
examine
this new strategic focus.
Value
marketing strategy stresses real product performance and delivering on
promises. Value marketing
doesn’t mean high quality if it is only available at
ever-higher prices. It doesn’t necessarily mean cheap, if
cheap means bare
bones or low grade. It doesn’t mean high prestige, if the prestige is viewed as
snobbish or
self-indulgent. At the same time, value is not about positioning
and image mongering. It simply means
providing a product that works as claimed,
is accompanied by decent service, and is delivered on time.
Types of Value marketing strategies
1.
Quality
Strategy
2.
Customer
Service Strategy
3.
Time
based strategy
Example is Dominos Pizza
SERVICES STRATEGIES
Services Defined
“activities,
benefits or satisfactions which are offered for sale or provided in connection
with the sale of
goods”…AMA
“any activity
or benefit that one party can offer to another that is successfully
intangible and does
not result in the ownership of anything, its production
may or may not be tied to a physical product.”
….Kotler
Robert Judd (1964) According to
Robert Judd, service is “a market transaction by an enterprise or entrepreneur
where the object of the market transaction is other than the transfer of
ownership of a tangible commodity”. In this definition three broad areas of
service are recognized. They are:
1.
Right to posses and use a product
(rented goods business).
2.
The custom creation, repair or
improvement of a product (owned product services).
3.
No product element, but an experience
(non-goods services)
An attempt was made through this
definition to give an independent status to more and more services and to focus
the attention of the researchers for further development.
William J. Stanton (1974) A comprehensive
view of services was provided by Stanton. According to him services are
“separately identifiable, activities which provide want satisfaction when
marketed to consumers and/or industrial users and which are not necessarily
tied to the sale of a product or another service.” This definition focuses upon
several issues for recognition. They are:
1.
Services are those activities that are
identifiable separately.
2.
Services are intangibles that provide
want satisfaction to consumers.
3.
Services are marketed directly to
consumers and also to the industrial users.
4.
Services may or may not be tied with the
sale of goods.
5.
A service may be or may not be tied with
the sale of another service.
SERVICES STRATEGY
Strategic
planning entered business in the 1970s when the industry faced several shock
waves in
succession due to several crises such a energy crisis inflation,
severe competition and changing
government policy. A strategy is an integrated
and coordinated set of commitments and actions designed
to exploit core
competencies and gain competitive advantage (Michael A. Hitt et. al). A strategy
consists of a combination of
competitive moves and business approaches that managers employ to
please
customers compare successfully and achieve organizational objectives (Thompson,
Strickland).
According to Philip Kotler, market-oriented strategic planning is
a managerial process of developing and
maintaining a viable fit between
organizational objectives, skills and resources and its changing market
opportunities. The aim of strategic planning is to shape the company’s business
and products in such a
way that they yield target profit and growth. Thus,
strategic planning is oriented to achieve two distinctive
and most important
objectives of an organization. They are growth in profits and growth in
business.
The
success or failure of a business mostly depends not only upon the management
team’s ability in
setting a company’s long term direction and developing
competitively effective strategic moves and
approaches, but also on effective
execution of strategy. Excellent execution of excellent strategy is the
best
test of managerial excellence and the most reliable recipe for organizational
success (Thompson,
Strickland).
Components of the Services Marketing Mix
Product
Service
is an intangible product. It consists of a bundle of features and benefits that
have relevance to a specific target market. As such, there is a high level of
flexibility and opportunity to be innovative in designing a product offer.
Physical evidence
Most
services cannot be offered without the support of tangibles. Though customers
cannot see the
service, they can definitely see the tangibles associated,
examine them and try to form an opinion on the
service provider. Thus, a
passenger transport organization’s promise of a safe, comfortable and timely
journey from one place to another will be examined by the transport vehicle’s
condition, seating facilities
and other physical facilities, the personality of
the driver and other personnel, the office furniture and
equipment being used
and also the way in which the employees are responding to customers. All these
physical objects are used as evidence by the customer to assess and expert
performance from the
service provider. Hence, physical evidence plays a
critical role in shaping consumer perceptions and also
expectations.
Price
The
pricing decision is a critical one in service too, as this firm consumer
sensitivity to price would be
higher in services than in goods. Though the
basic methods of pricing are the same as in goods, the
pricing strategies for
services basically depends upon value perceptions of various groups of people
that
are targeted by the organization.
Place (distribution)
Services
are intangible as well as inseparable. These two characteristics do not allow a
service firm to
follow the same channel options available for goods marketing.
Due to the intangible character of service,
traditional wholesalers and
retailers cannot be used. As service cannot be stored and cannot be
separated
from producers, retailing cannot be an independent activity in services
marketing. Production,
distribution, and consumption are simultaneous
activities in services. However, services have an
advantage of using a direct
selling approach, through which services can be offered to the customer at a
lower cost. This does not mean direct selling is the only way of selling the services.
There are certainly
other channels of distribution such as agents and brokers,
franchisers and electronic channels that are
used for distribution of services.
People
Service
organizations are people-oriented and people-based organizations. Employees of
a service firm
constitute the major competency in undertaking business
operations. Every employee of the service
organization is a marketing person,
who undertakes either fulltime or part-time marketing activity.
Whether an
employee is involved in direct contact with the customer or not, if he was
placed on the line
of visibility, his behavior, activities and performance will
have a direct influence on consumers. Service
employees are to be trained and
motivated for better performance in marketing activities.
Promotion
Consumers
are co-producers in the services business, the quality of services will not
only depend upon
the performance of the service provider but also on the
performance of the service consumer. Very few
service organization or service
concepts can have readily available mature performers as consumers. It is
the
responsibility of service organizations to educate and, if necessary, train
customers so as to make
them prepared to use the services efficiently. A well
designed promotional programme is of immense help
to organization to inform,
persuade and train customers to better their experiences.
Process
Process
is a functional activity that assures service availability and quality. The way
the physical setting is
designed technically and how the functions are
scheduled and routed to provide promised services to the
customers speaks of
the efficiency of the process. In simple terms the management of process is to
manage service encounters (the interaction between service employees and
customers and service
environment, systems and other facilities) effectively.
Gronroos has described process as interactive
marketing wherein moments of
truth occur. The challenge of process management is to improve the
moment of
truth.
The
seven P’s of services marketing become the marketing offer of the organization
to the target market.
The marketing mix aims to achieve seven distinctive
goals. They are matching the offer to the consumer
needs and wants, consumer
quality expectations, consumer perceptions, consumer satisfaction,consumer
relationships, customer welfare and protection and societal well-being. The
dynamic nature of the target
market in all the seven distinctive areas offers
to marketing organizations. Service firms can be successful
only when they make
all the marketing mix elements dynamic and adaptable to the changes in the
market
environment.
STRATEGY IMPLEMENTATION
The
development of a good marketing of a good marketing strategy alone does not
yield results.
Implementation of the strategy is equally important. Strategies
like a blue print indicate various courses of
action to achieve desired
objectives. Fred R. David rightly pointed out that strategy formulation is
operational in character. Strategy formulation requires good conceptual,
integrative and analytical skills
but strategy implementation requires special
skills in motivating and managing others. Strategy formulation
occurs primarily
at the corporate level of an organization, while strategy implementation
permeates all
hierarchical levels. Strategy formulation requires coordination
among few individuals but strategy
implementation requires coordination among
many. Operational sing the strategy requires transcending
various components of
the strategy to different levels; mobilization and allocation of resources;
structuring
authority, responsibility, tasks and information flows;
establishing policies; and evaluation and control
(Francis Chernilam).
Effective
implementation of strategies requires resource strengths and organizational
capabilities. Service
firms need to link the budget to the strategy and develop
strategy and develop strategy support to
policies and procedures. The best
practices in internal management need to be initiated and a
commitment among
all the people for continuous improvements has to be promoted. For the purpose,
whatever support systems are required have to be arranged to improve the
performance of the people
and reward system should be directed for the support
of strategy implementation. Above all a right kind
of corporate culture and
strategic leadership need to be nurtured and develop for achieving the desired
results.
MARKET
ORIENTED SERVICE STRATEGY
·
A
service firm need to differentiate itself from a manufacturing Companies
.
· The
conventional managerial thinking provide three thumb rules for
strengthening the
competitive edge of a firm.
The three
rules are:
The manufacturing firms believes and
also achieve positive results by
adopting
the three distinctive strategies on the
marketing front. However if
these
three strategies are implemented into
services it is more likely the
service organization get into further
trouble.
This
condition is called as “Strategic
Management Trap” Service firms need to watch the
conditions that leads to strategic
management trap and develop abilities to
avoid the use of traditional approach and design service oriented marketing
strategy.
No comments:
Post a Comment