Speech delivered by

Product Strategy

Dr. Hossain Shahid Shohrowardhy

Professor of Marketing
Department of Marketing
University of Chittagong
Mobile: 01822-907614
Mail address: [email protected]
Business of this Chapter
• Product Life Cycle
• New product development process
• Consumer Adaptation process (AIDA)
• Diffusion of innovation adaptation
• Level of product
• Product hierarchy
• Product mix strategy
• Product line strategies
Product?
A product is anything that can be offered to a
market to satisfy a want or need, including
physical goods, services, experiences, events,
persons, places, properties, organizations,
information, and ideas.
Components of the Market Offering

Value-based prices

Attractiveness
of the market
offering

Product features and quality Services mix and quality

Five Product Levels
Product Classification Schemes

Durability

Tangibility

Use
Durability and Tangibility

Nondurable
goods

Durable
Services
goods
Consumer Goods Classification

Convenience Shopping

Specialty Unsought
Industrial Goods Classification

Materials and parts

Supplies/
Capital items
business services
Product Differentiation

• Product form
• Features
• Customization
• Performance
• Conformance
• Durability
• Reliability
• Repairability
• Style
Service Differentiation

• Ordering ease
• Delivery
• Installation
• Customer training
• Customer consulting
• Maintenance and
repair
• Returns
The Product Hierarchy

Item

Product type

Product line
Product class
Product family
Need family
• Product system

Product Systems and Mixes

• Product mix
• Product assortment
• Depth
• Length
• Width
• Consistency
Product Line Analysis

Core product Staples

Convenience
Specialties
items
Product-Mix Pricing

• Product-line pricing
• Optional-feature pricing
• Captive-product pricing
• Two-part pricing
• By-product pricing
• Product-bundling pricing
What is the Fifth P?

Packaging, sometimes called the fifth

P, is all the activities of designing and
producing the container for a product.
New-Product Development
&
Product Life-Cycle Strategies
Categories of New Products

New-to-the-world

New product lines

Additions

Improvements

Repositionings

Cost reductions
New-Product Development Strategy
• A firm can obtain new products in two ways.
• One is through acquisition ─ by buying a whole
company, a patent, or a license to produce
someone else’s product.

• The other is through the firm’s own new-

product development which is the development
of original products, product improvements,
product modifications, and new brands through
the firm’s own product development efforts.
The New-Product Development
Process
Idea Generation: Creativity Techniques

• Attribute listing
• Forced relationships
• Morphological
analysis
• Reverse assumption
analysis
• New contexts
• Mind mapping
Variations on Failure

• Absolute product failure

• Partial product failure
• Relative product failure
Concepts in Concept Development

• Product idea
• Product concept
• Category concept
• Brand concept
• Concept testing
Concept Testing

• Communicability and believability

• Need level
• Gap level
• Perceived value
• Purchase intention
• User targets, purchase occasions,
purchasing frequency
Marketing Strategy

• Target market’s size, structure, and

behavior
• Planned price, distribution, and promotion
for year one
• Long-run sales and profit goals and
marketing-mix strategy over time
Prototype Testing

• Alpha testing
• Beta testing
• Rank-order method
• Paired-comparison method
• Monadic-rating method
• Market testing
Consumer Goods Market Testing

• Sales-Wave Research
• Simulated Test Marketing
• Controlled Test Marketing
• Test Markets
Timing of Market Entry
• First entry
• Parallel entry
• Late entry
Criteria for
Choosing Rollout Markets
• Market potential
• Company’s local reputation
• Cost of filling pipeline
• Cost of communication media
What is Adoption?

• Adoption is an individual’s decision to become a

regular user of a product.
Stages in the Adoption Process

Awareness

Interest

Evaluation

Trial

Adoption
Adopter Categorization
Characteristics of an Innovation

• Relative advantage
• Compatibility
• Complexity
• Divisibility
• Communicability
Product Life-Cycle Strategies
Product Life-Cycle Strategies
• It is a basic and distinctive mode of
• The PLC concept
Style
expression can describe a product
class (gasoline-powered automobiles), a
product form (SUVs), or a brand (the Ford
Escape).• It is a currently accepted or popular style
in a given field.
• Fashion
The PLC concept also can be applied to
what are known as styles, fashions, and
fads. • It is a temporary period of unusually high
sales driven by consumer enthusiasm and
Fad immediate product or brand popularity.
Introduction Stage

• The introduction stage starts when a new product is first

launched.
• In this stage, as compared to other stages, profits are
negative or low because of the low sales and high
distribution and promotion expenses.
• A company, especially the market pioneer, must choose a
launch strategy that is consistent with the intended product
positioning.
Growth Stage
• If the new product satisfies the market, it will enter a growth stage, in
which sales will start climbing quickly.

• Attracted by the opportunities for profit, new competitors will enter

the market.
• They will introduce new-product features, and the market will
expand.
• The increase in competitors leads to an increase in the number of
distribution outlets, and sales jump just to build reseller inventories.

• Profits increase during the growth stage as promotion costs are

spread over a large volume and as unit manufacturing costs decrease.
• The firm uses several strategies to sustain rapid market growth as
long as possible.
• It improves product quality and adds new product features and
models.
Maturity Stage
At some point, a product’s sales Competitors begin marking down
growth will slow down, and it will prices, increasing their advertising
enter the maturity stage. and sales promotions, and upping
their product development budgets
to find better versions of the product .
The slowdown in sales growth
results in many producers with many
products to sell.
This step lead to a drop in Profit.

In turn, this overcapacity leads to

greater competition.
The company might also try
modifying the product ─ changing
characteristics such as quality,
features, style, packaging, or
technology platforms to retain
current users or attract new ones.
• Sales may plunge to zero, or they may drop to a low level
where they continue for many years. This is the decline
stage.
• Sales decline for many reasons, including technological
Decline Stage

advances, shifts in consumer tastes, and increased

competition.
• A product’s failing reputation can cause customer
concerns about the company and its other products.
Idea Generation

• New-product development starts with idea

generation ─ the systematic search for
new-product ideas.
• Major sources of new-product ideas include
internal sources and external sources such
as customers, competitors, distributors and
suppliers, and others.
Idea Screening

• The first idea-reducing stage is idea screening, which

helps spot good ideas and drop poor ones as soon as
possible.
• Product development costs rise greatly in later stages, so
the company wants to go ahead only with those product
ideas that will turn into profitable products.
• Many companies require their executives to write up new-
product ideas in a standard format that can be reviewed by
a new-product committee.
Concept Development and
Testing
• A product concept is a detailed version of the new-
product idea stated in meaningful consumer terms.
• A product idea is an idea for a possible product that the
company can see itself offering to the market.
• A product concept is a detailed version of the idea stated
in meaningful consumer terms.
• A product image is the way consumers perceive an actual
or potential product.
Marketing Strategy Development
Step 1
• The marketing strategy development
Describes the target market; the planned value
designs an initial marketing strategy for
proposition; and the sales, market share, and profit
a
new
goalsproduct
for the firstbased on the product concept.
few years.

• The marketing strategy statement consists

Step 2
of three parts.
Outlines the product’s planned price, distribution, and
marketing budget for the first year.

Step 3
Describes the planned long-run sales, profit goals,
and marketing mix strategy.
Business Analysis

• Business analysis involves a review of the

sales, costs, and profit projections for a new
product to find out whether they satisfy the
company’s objectives.
Product Development

• Product development develops the product concept into

a physical product to ensure that the product idea can be
turned into a workable market offering.
• R&D hopes to design a prototype that will satisfy and
excite consumers and that can be produced quickly and at
budgeted costs.
• Often, products undergo rigorous tests to make sure that
they perform safely and effectively, or that consumers will
find value in them.
Test Marketing
• Test marketing gives the marketer
Controlled Test Markets
• If the product passes both the
experience with marketing a Both
concept test and the productproduct
test, thebefore going to the great
controlled
New products and tactics are tested
next step is test marketing,expense
the of full introduction. test markets
among controlled panels of shoppers
• Itand
stage at which the product letsitsthe company test the and
and stores.
proposed marketing program are and its entire marketing
product simulated
program ─ targeting and
introduced into realistic market test markets
Simulated
settings. Test Markets positioning strategy, advertising, reduce the
distribution, pricing, brandingcostsand of test
Researchers measure consumerpackaging, and budget levels. marketing
responses to new products and and speed
marketing tactics in laboratory stores up the
or simulated online shopping process.
environments.
Commercialization

• If the company goes ahead with commercialization ─

introducing the new product into the market ─ it will face
high costs.
• A company launching a new product must first decide on
introduction timing.
• Next, the company must decide where to launch the new
product ─ in a single location, a region, the national
market, or the international market.
Managing New-Product Development

• New-product development involves more than just going

through a set of steps.
• Companies must take a holistic approach to managing this
process.

Customer-Centered New-Product Development

Team-Based New-Product Development

Systematic New-Product Development

Customer-Centered New-Product
Development
• Customer-centered new-product development focuses
on finding new ways to solve customer problems and
create more customer-satisfying experiences.
• The most successful new products are ones that are
differentiated, solve major customer problems, and offer a
compelling customer value proposition.
Team-Based New-Product
Development
• Team-based new-product development is the various
company departments work closely together, overlapping
the steps in the product development process to save time
and increase effectiveness.
• This approach does have some limitations. For example, it
sometimes creates more organizational tension and
confusion than the more orderly sequential approach.