MKM 302: PRODUCT MANAGEMENT

Unit 6: DEVELOPING PRODUCT STRATEGY

OVERVIEW
This chapter addresses the reasons for doing
all the analyses- the selection of product strategy II. SELECTION OF STRATEGIC ALTERNATIVES
(the action plan for the product. This should address - The description of alternatives depends
three related questions: on the objectives being set.
1. Where are we headed?
- The basic objectives 1. Increasing Sales/ Market Share
2. How will we get there?
- The core of marketing/ product strategy a) Market Development Strategies-
or the positioning statement are aimed at non-customers of the
3. What will we do? product (customer acquisition)
- Specific programs employed to  One approach is to pursue non-
implement the strategy (marketing mix) users in segments already
targeted.
BENEFITS OF STRATEGY  Second approach is to enter new
1. It enhances coordination among functional markets, developing new
areas of the organization. segments.
2. It defines how resources will be allocated. b) Market Penetration Strategies
3. It should lead to a superior market position.  One way is to increase the usage
rate of the brand’s existing
ELEMENTS OF A PRODUCT STRATEGY customers (customer expansion).
1. Setting objectives  Second is to attract competitors’
2. Selection of strategic alternative(s) customers.
3. Positioning
 Choice of customer targets 2. Increasing Profitability
 Choice of competitor targets
 Statement of the core strategy a) Decreasing Inputs
4. Description of supporting marketing mix.  Cost Reduction (marketing costs
5. Description of supporting functional and other expenses)
programs.  Improve the utilization of assets
(keeping down accounts
I. SETTING OBJECTIVES receivable)
- Addresses the question “Where do we  Reduce customer turnover
want to go?” (increase customer retention)
 Sales/ Market Share Objective b) Increasing Outputs
 Profit Objective  Improve prices (increasing the
 Noneconomic or non-quantitative list price, reducing discounts)
objectives such as quality, customer  Improve the sales mix (selling
satisfaction, and brand equity. more of the profitable items; if
we apply this in
The tasks of setting objectives: customers---“customer
 Choosing the appropriate objective. deletion”)
 Quantifying the objective.
 Setting a time frame for its III. POSITIONING
achievement. - How the product is to be differentiated
from the competition.
 quality association can be of the
1. Choice of Customer Targets- the general halo type.
choice of which customer group(s) to 4. Brand association- such as quality
target depends on the specification association, geographical
of the strategic alternatives. association, etc.
2. Choice of Competitor Targets- which
competitors are the primary targets
of the strategy.
3. The Core Strategy- the differential
advantage of the product to be
communicated to the target PRODUCT STRATEGY OVER THE LIFE CYCLE
customers.
a) Cost/ Price Strategy- the key differential 1. Introduction Strategy
advantage of the product over the other a) Skimming Strategy- assumes a
is the lower price by lowering cost. product feature-based differential
b) Product/ Feature Strategy or Non-price advantage that allows the product
Strategy manager to enter and stay in the
market with a high price. Target
Five areas: customers are the least price
 Quality- could be improved sensitive.
performance; superior design; b) Penetration Strategy- the product
reliability; and durability. manager uses a low-price core
 Status and Image strategy and attempts to get as
 Branding- brand names and many customers and establish a
brand equity communicated to significant market share position as
customers. quickly as possible.
 Convenience and Service
 Distribution 2. Growth Strategies- the general strategic
options relate to the product’s position in
MANAGING BRAND EQUITY the market.
- A brand name is an asset, and a a) Leader- can choose either to fight,
potentially valuable one. Managing that is, keep the leadership position,
brand equity or brand value is one of the or to flee, which cedes market
most important strategic jobs facing the leadership to another product. The
product manager. leader can fight by simply
- Many brands still remain powerful and maintaining the current position or
profitable even against low-priced by enhancing more the product or
competitors because of brand equity. service.
b) Follower- the follower’s choice
Four Categories of Brand Equity: depends on the strength of the
1. Brand Loyalty- (repeat buying or leader, and its own strength.
word-of-mouth) the strongest  One option is to exit quickly
measure of brand value. and invest in some product
2. Brand Awareness- a familiar brand that has better long-term
gives the customer a feeling of potential.
confidence (risk reduction), and  It can also be content to be a
hence it is more likely to be both strong number two or three
considered and chosen. by fortifying its position.
3. Perceived Quality- a known brand  The riskiest move is to try to
often conveys an aura of quality. A leapfrog the competition.
 3. Maturity Strategies- general strategies are
similar to those in the growth stage, and
depend on the relative market position of
the product.
4. Strategies for Decline Stage- perhaps the
clearest strategy is to be the last in the
market. By being the last, a product gains
monopoly rights to few customers left.

Unit 7: Developing Product Strategy