product and brand strategies(4210)

MARK4210, 2014 Spring, L1/L2
MARK4210: Strategic Marketing
2014 Spring, Section L1/L2
[Class #9]
Product Strategies

2
Refresher: Product Life Cycle
Promote
demand
for new
offering
(market
education)
Initial
structural
invest-
ments
More new
customers
join early
users & re-
purchasers
Company
begins to earn
profits on the
new product
More competition
Industry eventually reaches
saturation level -- difficult to
expand further
More intense
competition
(possibly
‘price wars’)
Market may
perceive
product
category as
“old”
Sales fall and
profits decline

3
Product Strategies
 Specifies market needs that may be served by
different product offerings
 Directly linked to market strategy
 Deals with number and diversity of products, product
innovations, design, etc.
Source: Strategic Marketing Asia Edition, Jain & Haley, Cengage Learning, 2009

4
Product Strategies
 BCG Matrix – Product Resource Allocation Strategy
 Product Re-positioning Strategy
 Product Overlap Strategies
 Product Design Strategies
 New Product Strategies

5
BCG Matrix: Product Resource
Allocation Strategy Recommendations
High Low
High
Low
ProductSalesGrowthRate
Relative Market Share
• Investment strategy: Grow further;
maintain market position
• Cash flow: Self-fund own growth;
funding from ‘Cash Cows’
• Assure company’s future
• Grow into ‘Cash Cows’
• Investment strategy: Increase
market share; selectively develop
into ‘Stars’
• Cash Flow: Funding from ‘Cash
Cows’
• Unrealized future opportunities
• Investment strategy: Maintain
market share; maintain capacity
• Cash flow: Positive cash flow;
support ‘Stars’ & “?’s”
• No potential for profit growth
• Investment strategy: Divestiture;
reduce capacity, free-up resources
• Cash Flow: Achieve positive cash
flow; divest if negative cash flow
• No real growth opportunities

6
BCG Matrix: Pros/Cons
PROS
 Relatively quick & simple
 Good measurability of
market share and growth
 Strong basis for decision-
making
 Provides guidance on
efficiently allocating
resources within the
organization
 Generates strategic
options
CONS
 Oversimplifies complex
decisions
 Only 2 factors considered --
creates risk
 Uncertainty in market and
SBU definition
 Only considers current
businesses – not dynamic
 Does not recognize
synergies between SBUs
 Susceptible to “GI-GO”

7
Product Re-positioning Strategy
 Product may need repositioning if:
• Competitive entry has been positioned next to the brand
• Consumer preferences have changed
• New customer-preference clusters have been discovered
with promising opportunities
• Mistake has been made in the original positioning

8
Product Re-positioning: Ways to
Reposition a Product
Repositioning Description
Among existing
customers
• Involves promoting new & alternative
product uses
• Revitalizes product by building a new
character
• In some instances, leads to a new sub-
category
To new
consumers
• Presenting product with a different twist to
entice new consumers, and minimize
alienating current users
• In some instances, leads to a new category

9

10
Product Overlap Strategy
 Company decides to compete with its own brand
 Common strategies:
• Promote competing lines
• Provide private labeling
• Original equipment manufacturers (OEM)

11
Product Overlap: Promote Competing
Lines – Risks & Opportunities
 While cannibalism occurs, overall sales usually
increase substantially
 Two competing brands from same company
provides more aggressive front against other
competitors
 Often used to transition new products into the
market – existing product maintained until new
product establishes market, thus minimize
competitive switches

12

13
Product Overlap: Provide Private
Labeling
 Manufacture product for another company
Pros Cons
• Represents large (usually
growing) market segment
• Economies of scale (e.g.,
manufacturing, distribution, etc.)
• Improves trade relationships
• Control over technology and raw
materials reduces overall risks
• Clear consumer segmentation
between branded and unbranded
• Helps eliminate small, local
competitors
• Compete on price vs. competitors
• Increases shelf space
• Market share growth at expense
of profitability (more price
sensitive, lower margins)
• Discloses cost information to
traders
• To displace existing private label
suppliers, risk of starting price war
• Affects consumer perception of
branded business

14

15
Product Overlap: Deal with OEM
 Sell to competitors the components used in its own
products, leading to direct competition
 Motivation for Seller:
• Maximize manufacturing capacity levels (economies-of-
scale)
• Share burden of driving primary demand
• Seller can always limit/restrict sales to problematic
competitors
 In some cases, forced by governments to promote
industry competition

16

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Product Design Strategy
 A business may offer a standardized or a custom-
designed product; decision based on factors such
as:
• Capabilities
• Business vision
 Strategic alternatives:
• Standard products
• Customized products
• Modifying standard products

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Product Design: Standard Products
 Standard products are more familiar, lessen
company’s “experience curve effect” and yield lower
costs
 Can be efficiently marketed more broadly
 Generally offered in limited grades and styles with
varying prices
 Generally more suited for large companies

19

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Product Design: Customized Products
 Based on the extent that the product meets customer
specifications – usually by working closely with
customers from development to completion
 Price is less of a factor versus standard products
 Depending on nature/complexity of the product, generally
more suitable for smaller, flexible, specialized companies
 Recent rise of “mass customization” – “build-to-order”

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 MAYBACH: Most customizable production car: ~2 million
equipment option possibilities
 “Personal Relationship Manager” to help customize 'ships'

23
Product Design: Modifying Standard
Products
 Customers can specify a limited number of desired
modifications to a standard product
 Manufacturing base product provides economies-of-
scale, while modifications allow product certain level
of individualization based on customer requirements

24

25
New Product Strategy
 New-product development is essential for
companies seeking growth
 Facilitated by technological innovations and
customer willingness to accept new things
 Strategic alternatives:
• Product innovation
• Product imitation
• Product improvement/modification

26
New Product: Product Innovation
 Introduce offering with a completely new approach in
fulfilling customer desires, or replace existing ways to
satisfying customer desires
 Involves major financial commitment, heavy
management effort, and often risky
 Ways to encourage innovation:
• Smaller divisions (better interaction amongst team)
• Willingness to tolerate failure (experimentation, risk taking)
• Champions are motivated (encouragements, incentives)
• Close liaison with customer
• Technology is widely shared
• Projects are sustained despite initial discouragements

27
 RIM Blackberry: First
“integrated” phone
 Series 6000 launched in
2003
 Model 6210 listed in
influential “Time All Time
100 Gadgets” list

28
New Product: Product Imitation
 Introducing product with existing characteristics in
the market, but new to the company
 “Follower” strategy by letting other companies take
the riskier first move, and learning the lessons
 Saves investment in R&D or costly acquisitions,
especially for companies with limited resources
 Also used by companies to leverage unique
capability or competency from one product category
to another (e.g., distribution)
 Caution on patents and trademarks

29
??
?

30
New Product: Product Improvement/
Modification
 Introducing new or improved version of existing
product, usually by:
• adding new features/styles
• changing processing requirements
• altering ingredients
 Usually when existing products become mature, and
ceased to provide adequate return, and/or
competitive pressure has reduced existing product
to “me-too”

31

32
Guide Questions: The Birth of
Swatch
1. Prior to Swatch, what was the watch industry like in various
historical stages (prior to 1950s, between 1950s-1970s,
1970s-1980s)? Consider various aspects of the category
(e.g., the positioning of the category, marketing mix, and
consumer behavior).
2. Why did Swatch became a success, what are the key
elements of their marketing plan (positioning, marketing
mix) that contributed to their success?
3. How has Swatch influenced/impacted the watch industry in
terms of how people view the category and consumer
behavior

33
Reminder: Mid-term Exam
 When: March 19 (Wednesday) 7:00-8:20pm
• No lecture during the day
• Pls try to arrive at 650pm to find your assigned seat
 Where: LSK1001, LSK1003, LSK1005
• Assigned seating plan will be posted outside rooms by
650pm
 What: Classes up to STP (including STP & JBC)
• Open-notes
• Bring your own calculator (NO borrowing allowed)
• Short scenarios questions based on discussed concepts
& methodologies

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OPTIONAL Tutorial for Mid-term
Exam
 Entirely OPTIONAL, NO attendance check, NO
participation points
 NO new slides/concepts NOR preset discussion
plan, will be based review of past classes and slides
depending on student questions
 March 12, Wednesday, 6-8pm
• Please arrive on time
• BUT, you can leave early if your concerns are addressed
 If interested to attend, please register by 7pm of
March 11 with your question/topic request (see
course announcement for details)

End
Next Class: March 7, Friday
Pre-reading/Case Analysis:
“The Birth of Swatch” Case

product and brand strategies(4210)

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