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Product and Services Strategies

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Product strategy is like a roadmap, and like a roadmap it’s useful only when you know where you are and where you want to go.The Service Strategy provides guidance on how to design, develop, and ...

Product strategy is like a roadmap, and like a roadmap it’s useful only when you know where you are and where you want to go.The Service Strategy provides guidance on how to design, develop, and implement service management not only as an organizational capability but also as a strategic asset.

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Product and Services Strategies Product and Services Strategies Presentation Transcript

  • PRODUCT & SERVICES STRATEGIES
  • ”Product strategy begins with a strategic vision that states where a company wants to go, how it will get there, and why it will be successful.” ”Product strategy is like a roadmap, and like a roadmap it’s useful only when you know where you are and where you want to go.”
  • Product Strategies specify market needs that may be served by different product offerings.  It is a company’s product strategies ,duly related to market strategies ,that eventually come to dominate both overall strategy.  In other words the company’s product strategies dominates the market strategies.  Product strategy deals with the number & diversity of products, product innovations, product scope, and product design.
  • Dimensions of Product Strategies The implementation of Product Strategy involves the cooperation among different groups viz. Finance, research & development, the corporate staff and marketing. This level of integration is not uniform in many organizations and hence the implementation of Product strategy becomes bit difficult. In many companies to achieve proper coordination among the diverse business units ,the decisions regarding Product Strategy is taken by the top management only. In some organization the overall scope of product strategy is laid out at corporate level ,whereas actual design is left to Business Units.
  • Product Classification Schemes Durability Tangibility Use
  •  PRODUCT STRATEGIES: There are about Nine(9) types of Product Strategies as mentioned below: 1. 2. 3. 4. 5. 6. 7. 8. 9. Product-positioning strategy. Product-repositioning strategy. Product-overlap strategy. Product-scope strategy. Product-design strategy. Product-elimination strategy. New –product strategy. Diversification strategy. Value-marketing strategy. Each strategy will be examined from the point of view of SBU.
  •  PRODUCT-POSITIONING STRATEGY The term positioning refers to placing a brand in that part of market where it will receive a favorable reception compared to competing product.  In an heterogeneous market one brand cannot make an impact on the entire market.  Strategically, a product should be matched with that segment of the market in which it is most likely to succeed  In other words the product is to be positioned so that it stands apart from competing brands.
  • PRODUCT-POSITIONING STRATEGY….contd  Positioning tells us what the product stands for, what it is ,and how customer should evaluate it.  Positioning is achieved by using marketing mix ,especially design and communication.  The differentiation in positioning is more visible in consumer goods as compared to the industrial goods.
  • The desired position for a product may determined using the following procedure: Analyze product characteristic that are most important to customers Examine the distribution of these attributes among different market segments Determine the optimal position for the product in regard to each attribute, taking into consideration the position occupied by existing brands Choose an overall position for the product (based on the overall match betn. Product attributes and their distribution in the population& the positions of existing brands) be
  • Approaches to positioning 1.Positining by attribute(associating a product with an attribute, feature or customer benefit). 2.Positioning by price/quantity (i.e.price /quantity attribute is so persistent that is can be considered a separate approach to promotion). 3.Positioning w.r.t. use or application (associating the product with a use or application) 4.Positioning by the product user (assocaiting a product with user or a class of user) 5.Positioning w.r.t. a product class(positioning pears soap as an bath oil soap rather than merely a soap) 6.Positioning w.r.t. a competitor (making a reference to competition)
  • Types of Positioning Strategy POSITIONING STRATEGY SINGLE BRAND STRATEGY MULTIPLE BRAND STRATEGY
  • Single Brand Strategy  A company having one brand that it can be placed in one or more chosen market segments.  To maximize its benefits with a single brand, a company must try to associate itself with a core segment in a market where it can play a dominant role.  In addition to this it may also attract other customers from other segments outside its core. For example: BMW positioning its car mainly in a limited segment to high – income young professionals.  Another example is coca-cola,several years ago this company followed a strategy that proclaimed that Coke quenched the thirst of the total market,but it was short term because now this company has a number of brands to serve different segments: coke, Fenta, Sprite,Diet Coke and even orange juice.
  •  There are 2 fundamentals to manage a single brand successfully: 1. A single brand must be so positioned that it can stand competition from the toughest rival. 2. And its unique position should be maintained by creating an aura of a distinctive product. Generally, Single brand strategy is a choice in short run particularly when the task of managing multiple brands is beyond the managerial & financial capability of a company. Single brand permits better control of operations that do multiple brands
  • Multiple Brands Strategy  Multiple brands are introduced to seek growth by offering varied products in different segments of the market and to avoid competitive threats to a single brand.  Example: General Motors is having cars to sell in all the segments of market, Coca-Cola, IBM/Lenovo sells computers for different computer needs,P&G  To realize desired growth, multiple brands should be carefully positioned in the market so that they do not compete with each other and create cannibalism.  Thus, it is necessary to be careful in segmenting the market and to position the product ,through design and promotion ,as uniquely suited to a particular segment.
  •  Cannibalism is unavoidable, but here the question is how much cannibalism is acceptable when introducing another brand is to be carefully done before introducing a new brand.  Multiple brands can be positioned in the market either by head-on with the leading brand or with an idea.  In head-on positioning the relative strength of new brand compete with the established brand. For example: IBM’s Personal Computer was positioned in head-on competition with Apple’s.  Head-on positioning is highly risky as it is directly having the competition with the established brands.
  •  Positioning with ides ,however can prove better alternative, especially when leading brand is well established.  Positioning with an idea is just like positioning several brands as complements rather than their competitors. Example is Garnier shampoo having its compliment Garnier conditioner  As a strategy positioning of multiple brands ,if properly implemented can lead to increase in growth ,market share and profitability
  • 2.Product-Repositioning Strategy  The product may require repositioning if:     A competitor positioned its brand, creating an adverse effect on the market share of the product. Change in consumer preferences When expectations of consumers is very high as per the present status of product. Mistake is made in the original positioning. For example Coca-Cola’s position has shifted to keep up with the changing mood of the market.
  • Product-Repositioning Strategy  Basically there are three ways to reposition a product: Repositioning among Existing Users Can be accomplished by providing alternative uses for it. For example: Various scheme launched by Mobile service providers for their existing customers. 
  •   Repositioning among New Users Repositioning among new users requires that the product be presented with different twist to the people who have not previously inclined toward it. For example: Introduction of “Diet Coke” by Coca-Cola and “Amul Light” by Amul. Repositioning for New Users. Repositioning for new users requires searching for latent or hidden uses of the product in the users. For Example: Sugar Free
  • 3.Product-Overlap Strategy  When a company decides to compete against its own brand it is called as Product –Overlap Strategy.  It is done in three alternative ways: 1. Competing Brands 2. Private labeling 3. Dealing with OEMs
  • Competing Brands:  In order to gain larger share of the total market, many companies introduce competing products to the market.  A single brand of product may not be able to make an adequate impact and due to this a second brand is introduced into the market.  In other words two competing brands provide more aggressive front against competitors  Examples are: Consumer durables goods from company LG,Samsung etc.
  • Private Labeling  It refers to manufacturing the product under another company's brand name.  Example: Companies like Samsung,LG Etc manufacture mobile phones for TATA & RCOM CDMA phones.  Another view is that a retailer’s interest in selling goods under its own brand name is also motivated by economic considerations. The retailers buy goods with its brand name at low cost ,then offers the goods to customers at a slightly lower price than the price of manufacturer’s brand.  Example: In the MOBILE STORE, Nokia, Samsung and others, supplies their mobiles phones to Mobile Store.
  • Dealing with OEMs  A company may sell to competitors the components used in its own product.  This will enable a competitor to compete with the company in the market.  Example: Carl Zeises make lenses for Sony, Nikon cameras.
  • 4.Product-Scope Strategy  It is basically done in view of the product mix of a company.  It is determined by making reference to the business unit mission. Presumably, the mission defines what sort of business it is going to be, which helps in selecting the products and services that are to become a part of product mix.  Example : Kodak Vs Polaroid-initially Polaroid purchase its negative films from Kodak.
  • 5.Product- Design Strategy  Providing standard or custom-designed product to each individual customer.  Product-design Strategy is of two types: 1. Customized Products 2. Standard products with modifications
  • 6.Product- Elimination Strategy The sick products are eliminated from the market due to low profitability, stagnant or declining sales, poor fit in the business unit.  There are three alternatives in Productelimination Strategy and they are:  1. 2. 3. Harvesting. Line Simplification. Total-line divestment.
  • Harvesting  It refers to getting the most from a product while it last. It is a controlled form of divestment whereby the business unit seeks to get more cash flow from the product.  In harvesting strategy we curtail new investments.
  • Line Simplification  This strategy refers to a situation when a product line is trimmed to a manageable size by reducing the number and variety of products or services offered.  This is a defensive strategy.  This strategy is adopted during the times of rising costs and resource shortages.
  • Total line Divestment  Divestment is a situation of reverse acquisition.  The objective of divestment is to sell or liquidate the business because the resources can be used elsewhere.
  • 7.New-Product Strategy  New product development is an essential activity for companies seeking growth.  By adopting new product strategy companies are better able to sustain competitive pressures on their existing products and make headway.  New Product strategy is of three( types):    Product improvement Modification Product Imitation Product innovation
  • 8.Diversification Strategy  Diversification refers to seeking unfamiliar products or markets or both in pursuit of growth.  This strategy is done on following factors:  Concentric* Diversification: The company seeks new products that have technological/marketing synergies with the existing product lines.  Horizontal Diversification: The company might search for new products that could appeal to its current customers even though the new products are technologically unrelated to its current product line.  Conglomerate Diversification: The company might seek new business that have no relationship to the company current technology, product & market. * Having common centre
  • 9.Value-Marketing Strategy  Today the customers are demanding something different then they did in past. They want the right combination of product quality, good service and timely delivery .  Value marketing strategy stresses real product performance and delivering on promises.
  • Types of Value Marketing Stg  Quality Strategy  Customer Service Strategy  Time based strategy  Example is Dominos Pizza
  • SERVICES STRATEGIES
  • SERVICES DEFINED • “activities, benefits or satisfactions which are offered for sale or provided in connection with the sale of goods”…AMA • “any activity or benefit that one party can offer to another that is successfully intangible and does not result in the ownership of anything, its production may or may not be tied to a physical product.” ….Kotler
  • SERVICES STRATEGY  A strategy is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain competitive advantage(Michael A. Hitt et. al).  The Service Strategy provides guidance on how to design, develop, and implement service management not only as an organizational capability but also as a strategic asset.
  • The Characteristics of a service (1) Lack of ownership (2) Intangibility (3) Inseparability (4) Perishability (5) Heterogeneity
  • Service Marketing Mix / Extended Marketing Mix • The service marketing mix comprises of the 7’p’s. These include: 1.Product 2.Price 3.Place 4.Promotion 5. People 6. Process 7. Physical evidence
  • People • An essential ingredient to any service provision is the use of appropriate staff and people. Recruiting the right staff and training them appropriately in the delivery of their service is essential if the organization wants to obtain a form of competitive advantage. • Consumers make judgments and deliver perceptions of the service based on the employees they interact with. • Staff should have the appropriate interpersonal skills, attitude, and service knowledge to provide the service that consumers are paying for.
  • Process • Refers to the systems used to assist the organization in delivering the service. • Imagine you walk into Domino’s Pizza and you order a Combo Pizza and you get it delivered within 2 minutes. What was the process that allowed you to obtain an efficient service delivery? • Banks that send out Credit Cards automatically when their customers old one has expired again require an efficient process to identify expiry dates and renewal. An efficient service that replaces old credit cards will foster consumer loyalty and confidence in the company.
  • Physical Evidence • Where is the service being delivered? • Physical Evidence is the element of the service mix which allows the consumer again to make judgments on the organization. • If you walk into a restaurant your expectations are of a clean, friendly environment. • On an Airlines if you are travelling in first class you expect enough room to be able to lay down. • Physical evidence is an essential ingredient of the service mix, consumers will make perceptions based on their sight of the service provision which will have an impact on the organizations perceptual plan of the service.
  • The Extended Marketing Mix
  • Service Strategy formulation  In the formulation of strategy ,it is necessary to take considerable and full sets of commitments, decisions and actions required for a firm to achieve strategic competitiveness.  The SWOT analysis provides necessary STRATEGIC INPUTS for effective strategy formulation and implementation.
  • Porter's Competitive strategies for service organizations 1. cost Leadership strategy(Low cost , best value. eg: wall mart, MacD) 2. Differentiation strategy- Eg. Xerox, Citybank, Rolex, Dell 3. Focused (market niche) strategy (Low cost , best value eg. Titan jewelry watches)
  • MARKET ORIENTED SERVICE STRATEGY  A service firm need to differentiate itself from a manufacturing Companies .  The conventional managerial thinking provide three thumb rules for strengthening the competitive edge of a firm.
  • The three rules are: 1. Decrease the cost of production Three thumb rules 2. 3. Enhancement Development of Promotion of new product
  •  The manufacturing firms believes and also achieve positive results by adopting the three distinctive strategies on the marketing front.  However if these three strategies are implemented into services it is more likely the service organization get into further trouble.
  •  This condition is called as “Strategic Management Trap”  Service firms need to watch the conditions that leads to strategic management trap and develop abilities to avoid the use of traditional approach and design service oriented marketing strategy.
  • Deteriorating Corporate Image Financial problems or increasing competition Unsatisfied Customers More Traditional Marketing Efforts (occasionally) Strategic Management Trap Deteriorating service quality Deteriorating Service Quality Deteriorating Internal Atmosphere Decisions concerning internal efficiency (often influencing personnel) Unsatisfied Customers Marginal cost savings
  • Financial problems or increasing competition Increasing sales volume mproving Corporate A Service oriented approach image Improving buyer seller interactions (external efficiency) with cost control Improved service quality Improving Internal Atmosphere More satisfied Customers
  • The Service Triangle (Service Marketing model) COMPANY (TOP MANAGEMENT) INTERNAL MARKETING EXTERNAL MARKETING EMPLOYEES CUSTOMERS INTERACTIVE MARKETING
  •  There are 3 groups that play critical roles in successfully goals.    accomplishing organizational Company (Top management) Employees Customers  According to the Service marketing model there are three marketing plans designed as an integral part of service marketing plan.
  •  Internal Marketing Plan: it is a special marketing plan designed for company and its employees.  External Marketing Plan: marketing plan is in between customers and the company.  Interactive marketing Plan: marketing plan is in between employees and customers. the This the This the