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Developing Product Strategy

McGraw-Hill/Irwin Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
 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. Statement of the objective(s) the product should
attain
2. Selection of strategic alternative(s)
3. Selection of customer targets
4. 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
Level 0
Corporate objectives
Level I
Corporate strategies

Divisional objectives
Level II
Divisional strategies

Product/brand objectives
Level III
Brand strategies

Program objectives
Level IV
Tactics

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 Strategic Alternatives
Long-term
profits

Growth in Efficiency,
sales or short-run
market share profits

Market Market Decrease Increase

development penetration inputs outputs

New Existing Reduce Increase

segments customers costs price

Improve
Convert Competitors Improve
asset
nonusers ’ customers sales mix
utilization

New product
development

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Criteria for Evaluating Strategic
Alternative Options
• Size/growth of the segment
• Opportunities for obtaining
competitive advantage
• Resources available to penetrate the
segment

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Target Segments for Handspring

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 Positioning Decision Steps
1. Identify alternative positioning themes by
consulting the advertising account team, the
product team, and past marketing plans.
2. Screen the alternatives according to whether
each is (a) meaningful to customers, (b) feasible
given the firm and product resources and
customer perceptions, (c) competitively sensible,
or (d) helpful for meeting the product objective
3. Select the position that best satisfies these
criteria and can be sold to the marketing
organization
4. Implement programs (e.g., advertising)
consistent with the product position selected
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 Total Product Concept
Potential Generic
product product

Expected
product

Augmented
product

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Five Areas for Differentiation
1. Quality
2. Status and Image
3. Branding
4. Convenience and Service
5. Distribution

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 Joint Space for Colas
Cola
RC
Segment Cola
3 •
Diet Diet •
Pepsi
Rite • • Pepsi
•

Diet Nondiet
• Segment • •
2 Dr Segment
Tab 1
• Peppe
r •
•
Fresca • Coke
7-Up

Noncola

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 Brand Equity
Reduced marketing
costs
Trade leverage

Brand Attracting new

Brand
loyalty customers
loyalty • Create awareness
• Reassurance Provides value
to customer by
Time to respond to enhancing
competitive threats customer’s:
• Interpretation/
Anchor to which processing of
other associations information
can be attached • Confidence in the
purchase decision
Brand Familiarity-liking
Brand • Use satisfaction
awareness
loyalty Signal of substance/
commitment
Brand to be
considered
Brand
Brand
equity
loyalty

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

Help process/ • Prices/margins

retrieve • Brand extensions
information
• Trade leverage
Brand
Brand Reason-to-buy • Competitive
associations
loyalty advantage
Create positive
attitude/feelings
Extensions

Other
Brand
proprietary Competitive
loyaltyassets
brand advantage

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 Some Brand Attribute
and Image Dimensions
Attributes Image Dimensions
Reliable—unreliable
• Flavor/taste • Color
• Style Old—young
• Caffeine
content • Comfort Technical—nontechnical
• Price • Freshness Sensible—rash
• Packaging • Construction Interesting—boring
• Size material Creative—noncreative
• Calories • Availability Sentimental—nonsentimental
• Brand name • Serviceability Impulsive—deliberate
• Sweetness • Compatibility Trustworthy—untrustworthy
• Weight • Energy efficiency Conforming—rebellious
• Warranty • Instructions Daring—cautious
• Durability • Automation Forceful—submissive
• Convenience • Ease of Use Bold—timid
Sociable-unsociable

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Ten Guidelines for Building Strong Brands
1. Brand Identity
• Each brand should have an identity, a personality. It can be
modified for different segments.
2. Value Proposition
• Each brand should have a unique value proposition.
3. Brand Position
• The brand’s position should provide clear guidance to those
implementing a communications program.
4. Execution
• The communications program needs to implement the identity
and position, and it should be durable as well.
5. Consistency Over Time
• Product managers should have a goal of maintaining a
consistent identity, position, and execution over time. Changes
should be resisted.

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Ten Guidelines for Building Strong Brands (cont.)
6. Brand System
• The brands in the portfolio should be consistent and synergistic.
7. Brand Leverage
• Extend brands and develop co-branding opportunities only if the
brand identity will be both used and reinforced
8. Tracking
• The brand’s equity should be tracked over time, including
awareness, perceived quality, brand loyalty, and brand
associations.
9. Brand Responsibility
• Someone should be in charge of the brand who will create the
identity and positions and coordinate the execution.
10. Invest
• Continue investing in brands even when the financial goals are
not being met.

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 IBM Notebook Computers:
Purchase vs. Positive Opinion

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 Basic Customer Strategies

1. Customer acquisition
2. Customer retention
3. Customer expansion
4. Customer deletion

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Strategy Over the Life Cycle

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Linked Strategy Issues

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Illustration: Odwalla Energy Bar
Objective:
Grow 10 percent faster than the category
Customer Targets:
Existing juice customers
Health conscious and on-the-go
Sports enthusiasts
Health purists
Nutrition-seeking families
Competitive Targets:
Clif Bars and Clif Luna
Kashi Go Lean
Balance (Outdoor, Plus, Oasis)
Core Strategy:
Increase distribution to 80 percent ACV in
mainstream grocery stores
Focus on natural health
Leverage brand name, Minute Maid resources

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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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