Product Strategies

Xitij Nanavaty
What is a Product?
 Something tangible that can be
described in terms of physical
attributes, such as shape, dimension,
components, form, color, & so on.

 This definition of product is

misleading since many products are
intangible ( e.g. services).
 In many situations, both tangible and
intangible products must be combined
to create a single, total product.

 The best way to define a product is to

describe it as a bundle of utilities or
satisfaction.
New Product Development
 Six steps….
 Generation of new product ideas
 Screening of Ideas
 Business Analysis
 Product Development
 Test Marketing
 Full scale Commercialization
 It should be pointed out that not all
these six steps in NPD will be
applicable to all products and
countries.

 For example, test marketing may be

irrelevant in countries where most
major medias are more national than
local.
Market Segmentation
 Purpose of Segmentation is to satisfy
consumer needs more precisely – not
to segment the market just for the
sake for segmentation.

 The most important reason behind the

utilization of market segmentation is
Market Homogeneity/heterogeneity.
Product Positioning
 A marketing strategy that attempts to
occupy an appealing space in
consumer’s mind in relation to the
space occupied by other competitive
products.

 A marketer determines the perceived

position of a product as well as the
ideal position in a number of ways.
 A product must be positioned carefully.

 A company may even use dual as well as

triple positioning.
 When a product has been incorrectly
positioned or the original position loses its
appeal, a firm should reposition its product.
 In the final analysis, consumer needs must
determine how product is to be positioned.
Product Adoption
 In breaking into foreign market,
marketer should consider factors that
influence product adoption.
 Relative Advantage :
Wool coats are
not needed in hot countries.
Dishwashing machines do not market
well in countries where manual labor
is readily available and expensive.
 A product must also be Compatible
with local customs and habits.
 A new product has an advantage if it
is capable of being divided and
tested in small trial quantities to
determine its suitability and benefits.
This is a product’s
trialability/divisibility factor.
 Observation of a product in public
tends to encourage social acceptance
and reinforcement, resulting in the
product’s being adopted more rapidly
and with less resistance.
 Complexity of a product or difficulty
in understanding a product’s qualities
tends to slow its market acceptance.
 Like complexity, Price is negatively
related to product adoption.
 For example, In 1982 canon
introduced personal copiers that
customers could change. Its low price
(less than 1000$) was so attractive to
consumers that canon easily
dominated the market.
International Product Life Cycle
 This theory was developed and verified
by economists to explain trade in a
context of comparative advantage .
 It describes the diffusion process of
innovation across national borders.
 IPLC theory has the potential to be a
valuable framework for marketing
planning.
IPLC
Stages & Characteristics
 Stage 0: Local Innovation
 Stage 1: Overseas Innovation
 Stage 2: Maturity
 Stage 3: Worldwide Imitation
 Stage 4: Reversal
Marketing Strategies
 Product Policy
 Pricing Policy
 Promotion Policy
 Place (Distribution) Policy
Product Policy
 The IPLC emphasizes the importance of
cost advantage. One way is to cut
labor costs through automation and
robotics.
 Another way to reduce production
costs is to eliminate unnecessary
options, since such options increase
inefficiency and complexity.
 Outsourcing
 A modification of outsourcing involves
producing various components or having
them produced under contract in different
countries.

 Once in the maturity stage, the innovator’s

comparative advantage is gone, and the
firm should switch from producing simple
versions to producing sophisticated models
in order to remove cut-throat competition.
Pricing Policy
 Initially, an innovating firm can afford
to behave as a monopolist.

 But, this price must be adjusted

downwards in the second and third
stages of IPLC to discourage potential
newcomers and to maintain market
share.
Promotion Policy
 Promotion and pricing are highly related.

 A new product should be promoted as a

premium product with a high quality
image.

 To maintain the price, Uniqueness should

be retained in the form of superior
quality, style or services.
Place (Distribution) Policy
 Strong distribution network in the
beginning stage, as the firm is in the
near monopoly situation and in a
good position to select the most
qualified agents/distributors.
 Manufacturers as well as agents/
distributors can survive by becoming
agents of their former competitors.
 Once a product is in a final stage, the
innovating firm should either add
product features or offer more
services.
Product Standardization
 Product Standardization means that a
product originally designed for a local
market is exported to other countries with
virtually no change, except perhaps for the
translation of words and other cosmetic
changes.
 For example, Revlon used to ship
successful products without changes in
product formulation, packaging and
advertising.
Advantages of Standardization
 It is an easy process for executives to
understand and is also cost effective.

 When a consistent company or

product image is needed, product
uniformity is required. For example,
McDonald’s worldwide success is
based on consistent product quality
and services.
Adaptation
 Big car syndrome
 Left hand drive syndrome
 American exporters have failed to
realize that when in Rome one should
do as the Romans do.
 Those American firms that have
understood the need of product
modification have done well in Japan.
Mandatory Product Modification
 Government’s Mandatory Standards.
 Electrical Current Standards.
 Measurement Standards.
 Product Standards and Systems.
Optional Product Modification
 Physical Distribution
 Local use Conditions including
Climatic Conditions.
 Space Constraint
 Consumer Demographics as related
to Physical appearance.
 User’s Habits.
 Environmental Characteristics.
 Price
 Limiting Product movement across
national borders.
 Local Customs or culture.
World Product
 A world product is a product designed
for the International market.
 A standardized product is a product
developed for one national market
and then exported with no change to
International market.
Marketing Of Services
 Internationally, the “Invisible” trade
is responsible for one-fifth of the
value of world exports.
 United states is the most service
oriented society on earth.
Category of Services
 There are two major categories of
services: Consumer and Business
services.
 Business services that are exported
consist of numerous and varied types,
including advertising, construction
and engineering, insurance, legal
services, data processing and
banking.
 Technology has also greatly benefited
information intensive services (e.g.
research and development) as well as
knowledge-based services( e.g.
banking and insurance, education)
Economic and Legal Environment
 Like merchandise trade, exports of services
are influenced by changes in relative
economic conditions and exchange rates.
 Countries such as India view service as an
infant industry that must be nurtured and
protected. International marketers may
also face outright bans on investing in
certain business altogether. For e.g. foreign
life insurers are not allowed to set up shops
in South Korea
 One good sign is that services are
being Liberalized.
 One successful aspect of the Uruguay
round is the adoption of GATS.
 This agreement has extended
multilateral rules e.g. MFN.
Market Entry Strategies
 Regarding market entry strategies, a
service firm’s unique characteristics
may have some impact on entry-
mode choice.
 In practice, service firms can use
virtually all market entry strategies
when they are appropriate.
Factors affecting Market entry
 Capital Intensity
 Inseparability
 Cultural Distance
 Firm Size
 Country Risk