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McGraw-Hill/Irwin Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.

8

Developing Product Strategy

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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 Strategy1. 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 ObjectivesCompany 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 AlternativesLong-term

profits

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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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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Five Areas for Differentiation

1. Quality

2. Status and Image

3. Branding

4. Convenience and Service

5. Distribution

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Brand EquityReduced marketing costs

Attracting new customers• Create awareness• Reassurance

Time to respond to competitive threats

associations can be attached

Familiarity-liking

commitment

Brand to be considered

Provides value to customer by enhancing customer’s:• Interpretation/

processing of information

• Confidence in the purchase decision

• Use satisfaction

Brand loyalty

Brand loyalty

Brand loyalty

Brand awareness

Brand loyalty

Brand equity

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Brand Equity cont.

Reason-to-buy

Differentiate/position

Price

Channel member interest

Extensions

Help process/ retrieve information

Reason-to-buy

Create positive attitude/feelings

Extensions

Provides value to firm by enhancing:• Efficiency and

effectiveness of marketing programs

• Brand loyalty

• Prices/margins

• Brand extensions

• Trade leverage

• Competitive advantage

Brand loyalty

Perceived quality

Brand loyalty

Brand associations

Brand loyalty

Brand equity

Competitive advantage

Brand loyalty

Other

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Some Brand Attribute and Image Dimensions

Attributes•Flavor/taste•Price•Packaging•Size•Calories•Brand name•Warranty•Durability•Convenience•Color•Style•Comfort•Freshness•Availability

Image Dimensions

Reliable—unreliableOld—youngTechnical—nontechnicalSensible—rashInteresting—boringCreative—noncreativeSentimental—nonsentimental

Trust—untrustDaring—cautiousSociable-unsociable

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Ten Guidelines for Building Strong Brands1. 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.

5. Consistency over Time• Product managers should have a goal of maintaining 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 should be consistent & synergistic.

7. Brand Leverage• Extend brands and develop co-branding opportunities only if

the brand identity will be both used and new8. 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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Basic Customer Strategies

1. Customer acquisition

2. Customer retention

3. Customer expansion

4. Customer deletion

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Strategy Over the Life Cycle