Product Strategy PDF

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Complete Summary and Notes on the topic of Product Strategy...

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Week 9 - Product Selling and Strategy Positioning and Differentiation Positioning involves decisions and activities intended to create and maintain a certain concept of the firm’s product in the customer’s mind -

It requires developing a marketing strategy that influences how a particular market segment perceives a product in comparison to the competition

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Good positioning means that the product’s name, reputation, and niche are well recognized o Customers’ wants and needs change, so the positioning process must be continually modified o

Most companies combine marketing and sales strategies to give their products a unique position in the marketplace

Differentiation refers to the ability to separate yourself and your product from your competitors and their products -

Key to building and maintaining a competitive advantage o Competitors in virtually all industries are differentiating themselves on the basis of quality, price, convenience, economy, or some other factor o Differentiating your product helps you stand out from the crowd and creates barriers that make it difficult for the buyer to choose a competing product simply based on price

Creating a Value Proposition -

Value proposition is the set of benefits and values the company promises to deliver to customers to satisfy their needs

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A well-informed customer will usually choose the product that offers the most value o Salespeople need to position their product with a value proposition o In many situations, salespeople must quantify the value proposition, which is especially true when the customer is a business buyer o The value quantification process heightens customers’ understanding of the merits of buying your product or service

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Products are problem-solving tools and people buy products if the products fulfill a problem-solving need o Today’s better-educated and more demanding customers seek a cluster of satisfactions o Satisfactions arise from the product itself, from the company that makes or distributes the product, and from the salesperson who sells and services the product

Product-Selling Model

Salespeople who are knowledgeable in all areas of the Product-Selling Model are better able to position a product -

Knowledge helps you achieve product differentiation, understand the competition, and prepare an effective value proposition

Product Positioning Options Product positioning is a concept that applies to both new and existing products -

Given the dynamics of most markets, it may be necessary to reposition products several times in their lifespan, because even solid, popular products can lose market position quickly

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Salespeople assume an important and expanding role in differentiating products

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To succeed in our society, which is overloaded with communications and information, marketers must use a direct and personalized form of contact with customers

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Advertising directed toward a mass market often fails to position a complex product

Product Positioning Options 1. Position new versus established products o If the product is new, position it against the more established or mature product 2. Position with price strategies o Use a price strategy, such as being less expensive than the competitor’s product, to position the product 3. Position with value added features o Position the product by using value-added features and benefits

Competitive Analysis -

Value-added product selling strategy is enhanced when based on a comprehensive analysis of the competitive situation, analysing the attributes of the competition’s product, company, and salesperson in relation to the benefits they offer o The product o Its attributes o The benefits it offers

Competitive Analysis Worksheet This table is a good example of the kinds of information that marketers and salespeople need to discover about their competitors and to assess in terms of their own company, products, and services

Selling Emerging versus Mature Products The strategies used to sell a product or service depend on its stage in the product life cycle -

As the product moves through this cycle, the strategies relating to competition, promotion, pricing, and other factors must be evaluated and possibly changed

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The nature and extent of each stage in the product life cycle are determined by several factors, including: 1. The product’s perceived advantage over available substitutes 2. The product’s benefits and the importance of the needs it fulfills 3. Competitive activity, including pricing, substitute product development and improvement, and effectiveness of competing advertising and promotion, and 4. Changes in technology, fashion, or demographics

Selling Emerging versus Mature Products

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The sales strategy used to sell a new and emerging product is much different from the strategy used to sell a mature, well-established product

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Emerging Products o Develop new levels of expectation o Change Habits o Establish new standards o Build Desire for the product o Focus on creating new markets

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Mature/Established Products o Emphasize Brand Superiority o Emphasize Company Superiority o Point out Unique Features o Provide outstanding customer service o Focus on sustaining market share

Selling Products with a Price Strategy -

Pricing decisions must be made at each stage of the product life cycle

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The first step in establishing price is to determine the firm’s pricing objectives o Some firms set their prices to maximize their profits by aiming for a price as high as possible without causing a reduction in unit sales o Other firms set a market share objective

o Management may decide that the strategic advantage of an increased market share outweighs a temporary reduction in profits Transactional Selling Tactics that Emphasize Low Price -

Quantity discounts, which allow the buyer a lower price for purchasing in multiple units or above a specified dollar amount

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With seasonal discounts, the salesperson adjusts the price up or down to spur or acknowledge changes in demand. Common seasonal discounts include travel and lodging prices in the off season

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A promotional allowance is a price reduction given to a customer who participates in an advertising or a sales support program. Many salespeople give supermarkets promotional allowances for displaying a product

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Trade or functional discounts cover the cost of channel intermediaries, such as wholesalers, that often perform storage, or transportation services

Consequences of Low Price Tactics Pricing is a critical factor in the sale of many products and services -

In markets where competition is extremely strong, setting a product’s price may be a firm’s most complicated and important decision 1. Are you selling to high-involvement or low-involvement buyers? •

High-involvement buyers emotionally identify with buying the product they consider the best, such as BMW, Sony, and Mac computers

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In contrast, low-involvement buyers care mostly about price

2. How important is quality in the minds of buyers? If buyers do not fully understand the price–quality relationship, they may judge the product solely by price. For a growing number of customers, long-term value is more important than the short-term savings received from low prices

3. How important is service? For many buyers, service is a critical factor. o Even online customers, who are thought to be focused on price, rate quality of service very highly, especially in business-to-business sales o A survey conducted by Accenture reports that 80 percent of nearly 1,000 corporate buyers rate a strong brand and reliable customer service ahead of low prices when deciding which companies to do business with online

Value-Added Selling Many progressive marketers have adopted a market plan that emphasizes valueadded strategies -

Companies can add value to their product with one or more intangibles: o Better-trained salespeople o Increased levels of courtesy o More dependable product deliveries o Better service after the sale o Innovations that truly improve the product’s value in the eyes of the customer

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In today’s highly competitive marketplace, these value-added benefits give the company a unique niche and competitive edge

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Companies that don’t make selling and delivering high-value solutions a high priority will consistently lose sales to competitors

The Total Product Concept

To fully understand the importance of the value-added concept in selling—and how to apply it in a variety of selling situations—it helps to visualize every product as having four dimensions -

The total product is made up of four “possible” products: 1. The generic product 2. The expected product 3. The value-added product, and 4. The potential product

1- Generic Product -

Generic product = Basic product you are selling; describes product category (such as hotels, or insurance) o Example: Every Ritz-Carlton hotel offers guest rooms, meeting rooms, and other basic hotel services

2- Expected Product -

Expected product = Everything that meets the customer’s minimal expectations beyond generic product

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Because the minimal purchase conditions vary among customers, the salesperson must discover the specific attributes the customer envisions the expected product to have o When the customer expects more than the generic product, he will only buy the product if those expectations are met

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Example: Every Ritz-Carlton offers not only guest rooms, but the rooms are upscale and luxurious

3- Value-Added Product -

Value-added product = Salesperson offers customers more than they expect

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One way a salesperson adds value is by coupling CRM with a differentiation strategy o For example, the Ritz-Carton hotel uses modern technology to delight its guests. When you make a reservation and request a special amenity, such as a tennis lesson, this request is recorded in the computer system

o Then, the next time you make a reservation at a Ritz-Carlton, the agent informs you of the availability of a tennis court 4- Potential Product -

Potential product = What remains to be done, what is possible, anticipating customers’ future needs o Salespeople must anticipate customer’s future needs and explore new possibilities

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Example: Every Ritz-Carlton plans to offer complete services for business meetings

Marketing Malpractice: The Cause and the Cure – Christensen – HBR To build brands that mean something to customers, you need to attach them to products that mean something to customers. And to do that, you need to segment markets in ways that reflect how customers actually live their lives Reconfiguring the principles of Market Segmentation -

“People don’t want to buy a quarter-inch drill. They want a quarter-inch hole!” o Yet these same people segment their markets by type of drill and by price point

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Segmenting markets by type of customer is no better o Having shoehorned consumers into age, gender, or lifestyle brackets o The problem is that customers don’t conform their desires to match those of the average consumer in their demographic segment

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There is a better way to think about market segmentation and new product innovation. The structure of a market, seen from the customers’ point of view, is very simple: They just need to get things done o The marketer’s task is therefore to understand what jobs periodically arise in customers’ lives for which they might hire products the company could make

o If a marketer can understand the job, design a product and associated experiences in purchase and use to do that job, and deliver it in a way that reinforces its intended use, then when customers find themselves needing to get that job done, they will hire that product

Designing Products That Do the Job -

With few exceptions, every job people need or want to do has a social, a functional, and an emotional dimension. If marketers understand each of these dimensions, then they can design a product that’s precisely targeted to the job o McDonalds Milkshake example 

Job to be done for commuters: make them thicker, add fruit chunks (exciting), and faster to buy

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Job to be done for kids (parents of kids): Bigger straws, smaller sizes

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Focus on the Job not the Consumer

How a Job Focus Can Grow Product Categories -

When companies segment by job instead of category, their market is much larger than they had thought

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Arm & Hammer baking soda o The single product of boxed baking soda just wasn’t giving customers the guidance they needed, given the many jobs it could be hired to do o Today, a family of job-focused Arm & Hammer products has greatly grown the baking soda product category (variety of household functions) 

Toothpaste

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Cleaning

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Laundry

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Deodorant

Building Brands That Customers Will Hire -

If consumers are lucky, when they discover the job they need to do, a branded product will exist that is perfectly and unambiguously suited to do it o We call the brand of a product that is tightly associated with the job for which it is meant to be hired a purpose brand

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Fed-Ex o I-need-to-send-this-from-here-to-there-with-perfect-certainty-as-fast-aspossible job

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Most of today’s great brands—Crest, Starbucks, Kleenex, eBay, and Kodak, to name a few—started out as just this kind of purpose brand. The product did the job, and customers talked about it o This is how brand equity is built o Brand equity can be destroyed when marketers don’t tie the brand to a purpose. When they seek to build a general brand that does not signal to customers when they should and should not buy the product

The Role of Advertising -

Much advertising is wasted in the mistaken belief that it alone can build brands. Advertising cannot build brands, but it can tell people about an existing branded product’s ability to do a job well

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Unilever’s Microwave 4:00pm Soup – lets workers know this will perk you up when you’re tired at 4:00pm

Extending—Or Destroying—Brand Equity -

Once a strong purpose brand has been created, people within the company inevitably want to leverage it by applying it to other products. Executives should consider these proposals carefully o There are rules about the types of extensions that will reinforce the brand—and the types that will erode it

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If a company chooses to extend a brand onto other products that can be hired to do the same job, it can do so without concern that the extension will compromise what the brand does o For example, Sony’s portable CD player, although a different product than its original Walkman, was positioned on the same job (the help-meescape-the-chaos-in-my-world job). So the new product caused the Walkman brand to pop even more instinctively into customers’ minds when they needed to get that job done

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The fact that purpose brands are job specific means that when a purpose brand is extended onto products that target different jobs, it will lose its clear meaning as a purpose brand and develop a different character instead—an endorser brand o An endorser brand can impart a general sense of quality, and it thereby creates some value in a marketing equation. But general endorser brands lose their ability to guide people who have a particular job to do to products that were designed to do it 

Without appropriate guidance, customers will begin using endorser-branded products to do jobs they weren’t designed to do

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The resulting bad experience will cause customers to distrust the brand

o P&G’s Crest brand is a story of products that ace the customer job, lose their focus, and then bounce back. Its revolutionary toothpaste made cavity-preventing fluoride treatments cheap and easy to apply at home, replacing an expensive and inconvenient trip to the dentist 

Crest lost share as competitors innovated in other areas, including flavour, mouthfeel, and common sense ingredients like baking soda. P&G began copying and advertising these attributes. But unlike Marriott, P&G did not append purpose brands to the general endorsement of Crest, and the brand began losing its distinctiveness.

Why Strong Purpose Brands Are So Rare -

There are a significant number of different jobs that people who purchase cars need to get done, but only a few companies have staked out any of these job markets with purpose brands. Volvo is positioned on the safety job. Toyota has earned the connotation of reliability. But for so much of the rest? It’s hard to know what they mean o Focusing a product and its brand on a job creates differentiation. However when a company communicates the job a branded product was designed to do perfectly, it is also communicating what jobs the product should not be hired to do. Focus is scary—at least the carmakers seem to think so. They deliberately create words as brands that have no meaning in any language, with no tie to any job, in the myopic hope that each individual model will be hired by every customer for every job...