lecture 9 (strategy)

8/8/2019 lecture 9 (strategy)

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Developing Product Strategy


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A Successful Strategy:

Helps achieve coordination among

functional areas of the organization.

Defines how resources are to beallocated.

Leads to a superior market position.


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Elements of a Product Strategy

1. Statement of the objective(s) the productshould attain

2. Selection of strategic alternative(s)

3. Selection of customer targets4. Choice of competitor targets

5. Statement of the core strategy

6. Description of supporting marketing mix.7. Description of supporting functional

programs


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Hierarchy of Objectives

Company Mission/Vision

Corporate objectives

Corporate strategies

Divisional objectives

Divisional strategies

Product/brand objectives

Brand strategies

Program objectives

Tactics

Level I

Level 0

Level III

Level II

Level IV


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Strategic Alternatives

Long-termprofits

Growth in

sales or

market share

New

segments

Market

development

Convert

nonusers

New product

development

Competitors

customers

Efficiency,

short-run

profits

Reduce

costs

Decrease

inputs

Improve

asset

utilization

Increase

price

Increase

outputs

Improve

sales mix

Existing

customers

Market

penetration


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Selling more of an existingproduct to an existing market.This is going deeper into a

market so it is called marketpenetration (More Promotion).

Selling an existing product in anew market, for instance bringingout different bottle sizes to attractdifferent buyers. This is called

market development. Selling a new product to an

existing market. This is calledproduct development as itmeans making changes to a

product, for instance a new

flavour like Coca-Cola Vanilla. Selling a new product to a new

market. This is calleddiversification. Coca-Colaidentified the need for a newsports drink

COCA COLA


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Introductory Stage

Little competition

Sales volume increases slowly

Customers reluctant Distribution is a major issue

Strategy: Skimming and Penetration

Full-Scale Launchof New Products


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Skimming

Product feature based differential advantage

Advantage allows high price

Distribution should be limited

High margins to be further used in R&D


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Penetration

More expensive strategy

Lower margins and high marketing costs

Used for first mover advantage


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Growth Stage

Increasing rate of sales

Entrance of competitors

Customer has options

Puts pressure on price

Strategy: Leader or Follower

Offered in more sizes,flavors, options


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Leader/Follower

Leader can either flee or to fight

Fight: maintain current position or

Keep enhancing the product

Flee: New entrants to strong

Or can re segment and find a niche

Follower can exit or be a strong no.2


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Maturity Stage

Declining sales growth

Saturated markets

Heavy promotions to dealers and consumers

Marginal competitors drop out

Prices and profits fall

Invest just enough money to maintain share

Many consumerproducts are in Maturity


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Decline Stage

Long-run drop in sales

Elimination of all nonessential marketing

expenses

Be the last in the market

Rate of decline depends onchange in tastes or

adoption of substitute products


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Marketing Strategies for PLC

INTRODUCTION GROWTH MATURITY DECLINE

ProductStrategy

DistributionStrategy

Promotion

Strategy

PricingStrategy

Limited models

Frequent

changes

More models

Frequent

changes.

Large number

of models.

Eliminate

unprofitable

models

Limited

Wholesale/

retail distributors

Expanded

dealers. Long-

term relations

Extensive.

Margins drop.

Shelf space

Phase out

unprofitable

outlets

Awareness.

Stimulatedemand.Sampling

Aggressive ads.

Stimulatedemand

Advertise.

Promote heavily

Phase out

promotion

Higher/recoup

development

costs

Fall as result of

competition &

efficient produc-

tion.

Prices fall

(usually).

Prices

stabilize at

low level.

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lecture 9 (strategy)