CHAPTER

Developing A Product Strategy: - Setting Objectives - Choosing a Marketing Strategy

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Quick Review
Ch.2: Boundary of your business domain Chs. 3-5: Analysis of Major Stakeholders Ch. 6: Your prediction about future Potential and Forecasting Ch. 7: Strategy (to achieve your objectives) Target (Competitive & Customer) Positioning (Value Proposition)
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Action Plan
Where are we headed? How will we get there? What will we do?

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A Successful Strategy:
Helps achieve coordination among functional areas of the organization. Defines how resources are to be allocated. Leads to a superior market position.

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Elements of a Product Strategy

1. 2. 3. 4. 5. 6. 7. Statement of the objective(s) the product should attain* Selection [Consideration] of strategic alternative(s) Selection of customer targets Choice of competitor targets Statement of the core strategy Description of supporting marketing mix. Description of supporting functional programs

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Hierarchy of Objectives
Company mission/vision

Level 0
Corporate objectives

Level I
Corporate strategies

Divisional objectives

Level II
Divisional strategies Product/brand objectives Brand strategies

Level III

Program objectives

Level IV
Tactics
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1. Setting Objectives
1. Characteristics of Good Objectives
1. Quantified standards 2. Challenging 3. Milestone

2. Two Major Decisions

1. Which Objective to Pursue? 2. How High it should be?
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2. Consideration of Strategic Alternatives

1. Corporate Objectives 2. Two Major Paths
1. Increasing Sales/Market Share
1. Market Development Strategy 2. Market Penetration Strategy

2. Increasing Profitability
1. Decreasing Inputs 2. Increasing Outputs
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Strategic Alternatives
Long-term profits

Growth in sales or market share

Efficiency, short-run profits

Market development

Market penetration

Decrease inputs

Increase outputs

New segments

Existing customers

Reduce costs

Increase price

Convert nonusers

Competitors customers

Improve asset utilization

Improve sales mix

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Criteria for Evaluating Strategic Alternatives

Size/growth of the segment

Opportunities for obtaining competitive advantage Know Yourself Resources available to penetrate the segment

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3. Targeting and Positioning

Choice of Customer Targets of Competitor Targets of the Core Strategy =Value Proposition

Choice

Statement

Economic

(cost/price) Advantage Functional Advantage Psychological Advantage

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Target Segments for Handspring

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3. Targeting and Positioning (contd)

Five Areas of Differentiation Quality Convenience and Service Status and Image Branding Distribution Channels

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Joint Space for Colas

Cola Segment 3 Diet Pepsi RC Cola Pepsi

Diet Rite Diet

Tab

Fresca

Segment 2

Segment Dr 1 Peppe r Coke 7-Up Noncola

Nondiet

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Total Product Concept

Potential product Generic product

Expected product Augmented product

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Managing Brand Equity

Reduced marketing costs Trade leverage 4. Brand Brand loyalty loyalty Attracting new customers
Create awareness Reassurance

Time to respond to competitive threats Anchor to which other associations can be attached 1. Brand Brand loyalty awareness Familiarity-liking Signal of substance/ commitment Brand to be considered Brand equity Brand loyalty
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Provides value to customer by enhancing customers:

Interpretation/ processing of information

Confidence in the purchase decision

Use satisfaction

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Brand Equity (contd).

Brand equity Brand loyalty 3. Perceived Brand quality loyalty Reason-to-buy Differentiate/position Price Channel member interest Extensions Provides value to firm by enhancing:
Efficiency and effectiveness of marketing programs Brand loyalty Prices/margins

Help process/ retrieve information 2. Brand Brand loyalty associations Reason-to-buy Create positive attitude/feelings Extensions Other proprietary Brand loyalty brand assets
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Brand extensions Trade leverage Competitive advantage

Competitive advantage
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3. Targeting and Positioning (contd)

Values

Being Sought by Customers (Rackham)

Transactional

Sales: Intrinsic Value Consultative Sales: Extrinsic Value Enterprise Sales: Strategic Value
Relationship
Customer

Life Cycle and Strategy

Acquisition Customer Retention Customer Expansion Customer Deletion*

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Making Sense of A Strategy Jungle

Strategy at different levels

Corporate

or Business Level: Porters Generic Strategy Functional Level Strategies:

Cost

Leadership: Fixed Cost and Variable Cost Differentiation: Supply side and Demand side Focus: Segmentation
Relationship

Life Cycle-based Strategy Product Life Cycle-based Strategy:

First

mover advantage
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Strategy Over the Life Cycle

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4. Supporting Marketing Mix & Programs

Product Pricing Marketing

and Brand

Channels Communication: ex) Advertising and Sales Promotion

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Illustration: Handspring
Objective: To capture 15 percent of the PDA market by the end of year 2 Customer Targets: Price-conscious professionals Nonbusiness professionals Nonprofessionals Competitive Targets: Palm Sharp Core Strategy: Simplicity/convenience Low price Expandability (via expansion slot)

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