25 Product Strategy

P.G. Padma Gowri

What a product is?

Good products are key to market success. A product is any object, which has an identifiable physical existence. Each product has some physical existence. The product represents a bundle of expectations of the consumers. For instance, when one buys toothpaste, he buys in the hope of getting white teeth, prevent the teeth from cavities, avoiding bad odour etc., That is, a consumer buys the promise (Product) of solving problems or avoiding one or enjoying one. For example, one buys a car, expects trouble free journey, quick travel, comfortable seating, can travel along family etc.

According to W.Anderson “A product is a bundle of utilities consists of various product features and accompanying services”

What is a strategy related to marketing,

Philip Kotler defines marketing strategy as “It is a set of objectives, policies, and rules that guide over time firm’s marketing efforts.”

Various product strategies:

The product strategy is often called the roadmap of a product and what the product will become. The company must know where they would like the product to take them in order to identify and plan the necessary activities to reach the destination, and how a company wants to achieve its goals.

The product strategies are

• Product mix strategies
• Product line strategies
• Product positioning strategies
• ategies implemented in product life cycle
• Product related strategies

PRODUCT MIX STRATEGY:

The product mix refers to the collection of products dealt by a business firms. The product mix is one of the elements in the product policy.

Philip Kotler defines “Product mix (also called product assortments) is the set of all product lines and items that a particular seller offers for sale”

William. J. Stanton suggested six different strategies of product mix, which is shown below:

 1.    Expansion of product mix:

A firm may expand its present product mix by increasing the number of product lines or increasing the number of product lines in the same line. New lines may be related or unrelated to the present products. For instance, a provision store may add drugs, cosmetics, baby foods, dry foods etc.

2.    Contraction of product mix:

It means eliminating the whole or one or two product lines or products within a product line. The objective of such contraction is to drop the unprofitable products.

3.    Alteration of existing products:

Instead of developing a completely new product, management may look at the company’s existing products once again. Improving an established product can be more profitable and less risky than developing a completely new one.

4.    Positioning the product:

The product position is the image which that product projects in the minds of the people in relation to its competitive products and also the company’s own related products.

5.    Trading up and trading down:

Trading up means adding higher priced, prestigious product to the line with the hope of increasing the sale of company’s existing low priced product. This strategy will work out only when the marketer has already a reputation for its lower quality and low priced products.

Trading down means adding a low priced product to its line of prestigious product in the hope that people who cannot afford higher priced products. For example: Tata’s low priced Nano car.

6.   Product differentiation and market segmentation:

Product differentiation involves developing and promoting an awareness of differences between one company’s product and those of others. This differentiation is done either in quality, design, brand or packing.

Market segmentation means dividing the whole heterogeneous market into smaller homogeneous market, so that specific needs of the buyers can be identified easily and served.

PRODUCT LINE STRATEGY:

A product line refers to a group of products intended for essentially similar uses and possessing reasonably similar physical characteristics. Product line strategies are of two types such as product modification and product elimination.

Product Modification:

Product modification consists of improvements in the existing quality, size, form or design of the existing products so that it may look almost a new product.

Product modification, according to William J. Stanton, even a slightly changed product either in the colour, design or quality of an existing product is a completely new product.

The purpose of product modification is either to stimulate new sales or attract new users. For a company with an uneven product line, modification can be justified as a viable-alternative to developing new products on two grounds i.e.

1. The product is far less expensive
2. The product often shows a high rate of success.

It often shows a high rate of success. Many companies producing consumer goods have up dated their products in a number of times and maintained their share in the market.

Methods of Modification:

There are countless ways to modify a product. Generally, modifications are grouped into four categories as shown in the figure

1.    Functional Changes:

Changes which make the product work better or satisfy additional needs. The right change can produce a big jump in the product sales.

2.    Quality changes:

Quality of the product can be upgraded or downgraded. Upgrading the quality involves making the product more attractive to its present market or repositioning it in a new and more sophisticated market. Downgrading thequality involves lowering the price of the product to serve lower income group.

3.   Style changes:

Changes in the product style means changes in product appearance. Style play an important role particularly in case of goods, which the consumer thinks as symbols of their prestige.

4.    Environmental- changes:

Environmental- impact changes are generally carried out because of consumer’s pressure or the company’s commitment to social responsibility. These changes may be to improve a product’s safety or its impact on the environment

Modification strategy may involve any of the above changes. Sometimes, sweeping change are also undertaken to reduce risk. The main objective of this strategy is to capture new markets and attract new customers without losing the old customers, who may like the product in its original fashion. For this reason, changes are often introduced gradually in order not to alternate the loyal customers.

Product Elimination:

A company must have a system for terminating products efficiently. Simply dropping a product over night shall cause irreparable loss to the company. Therefore, utmost care is needed while withdrawing a product. The firm should not carry a poor product. It must be dropped if unit does not fit into the organization.

Products are frequently dropped, because they become obsolete. For example. BPL dropped manufacturing of Pager after the arrival of mobile phones.

PRODUT POSITIONING STRATEGY:

Positioning is the act of designing the company’s offering and image to occupy a distinctive place in the target market’s mind. It is creating an image in the minds of the consumer. The various positioning strategies are:

1. Positioning on product attributes:

The marketer can position its product on specific product attributes. Example: Fuel efficiency feature of Hero Honda bikes, Complan is positioned as health builder.

2.  Positioning on benefits:

Products can be positioned on the needs they fill or benefits they offer. Examples: Colgate reduces cavities; Clinic All Clear Shampoo clears dandruff, Close up on fresh breath.

3.  Positioning according to usage occasions:

The product can be positioned for specific usage occasions. For example, wedding saris, reception suits etc.

4.  Positioning the product for certain classes of users:

Positioning the products for certain classes of users. Examples: Book publishers concentrating only on comics, health magazine, sports magazine etc.,

5.  Positioning directly against a competitor:

Positioning by competitors may be used in the case, the competitors enjoy a well established image in the market. The marketer wants the consumers believe that, their brand is superior to the competitors. Example: Horlicks and Complan.

6.Positioning away from competitors:

A product may also be positioned away from the competitors. 7-up became the number three soft drink when it was positioned as the “uncola”, the fresh and thirst quenching alternative to the cola drinks like coke and pepsi.

7. Positioning as to different product class:

Finally the product can be positioned with respect to different product classes. For example, medikar shampoo is positioned with lice clear, rather than with shampoo, camy soap is positioned with bath oils rather than with soap.

PRODUCT LIFE CYCLE STRATEGIES:

Product life cycle is very similar to the human life cycle. Human beings have to pass various stages from his/her birth till death. These stages are together referred to as ‘product life cycle’. The period during which a product lives in the market is termed as ‘product life-cycle’.

STAGES IN THE PRODUCT LIFE CYCLE

• Introduction stage
• Growth stage
• Maturity stage
• Saturation stage
• Decline stage

The following chart depicts the stage of Product Life Cycle clearly

Introduction stage:

In this stage, the product is newly introduced and is in infant stage. Profit may not be there and even negative as there is low sales volume.

The strategies implemented in the introduction stage are:

Rapid Skimming Strategy:

The product is new to the market and launched at a high price. Heavy promotion is needed since the product is new. This strategy will be successful if there are people who are unaware of the product, become aware of it and buy it at a price demanded. There is a risk of competition and so the firm has to build up brand preference.

Slow Skimming Strategy:

The product is priced high. Since the product is known to the market, the money spent on promotion is low. The lower promotional cost keeps the marketing expenses in check. It is perceived that potential competition will not around right now.

Rapid Penetrating Strategy:

The product is offered at the lowest possible price. At the same time, since the product is new to the market, promotion is kept at a high level. The objective is to bring about a very fast market penetration.

Slow Penetration Strategy:

The price and the promotion are kept low at the time of launch. Lower price leads to fast acceptance of the product. The lower promotional costs keep up healthy profits. There is some potential of competition.

Growth stage:

As the name growth indicates, both sales and profit rise up in this stage. The rise is very rapid. The firm gives top priority to sales volume. Effective distribution and advertising are considered as key factors. Word of mouth advertising leads to more new users. Repeat orders are secured.

The following strategies are followed in this stage.

• Product quality is improved.
• New features are incorporated. The style is improves.
• New models are introduced.
• New market segments are tapped.
• Enter into new distribution channels.
• Brand building promotion is resorted to.
• Prices may be lowered to lure the next layer of price-conscious buyers.

Maturity Stage:

This is the longest stage in the life of a product’. Sales continue to increase but at a decreasing rate. Keen competition brings pressure on prices. Increasing marketing expenditure and falling price will reduce profit. Additional expenses are involved in product modification and also improvement in marketing mix, product mix or style changes, to attract the customers and retain the market.

Strategies implemented in maturity stage:

• Improve the quality of the product
• Give proper attention to increase the usage among the current customers.
• Try to convert non-users into users of the product that is creating new users.
• Give more emphasis to advertisement and promotional programmes.
• Try to discover new uses for the product.

The saturation stage occurs in the market when all the potential buyers are using the product and we have only replacement sales. Prices may fall rapidly and profit marginsmay become small unless the firm makes substantial improvements and realizes cost economies. Since the sales cannot be increased, the marketing manager should implement the following strategies:

• Introduce new models
• Pursue new uses for the product
• Introduce new package and repricing.
• To increase middlemen’s margin.
• If the price is high, offer the product on installment basis

Decline Stage:

Once the peak or saturation point is reached, product inevitably enters the decline stage and becomes obsolete. Sales drop severely, competition dwindles, and even the product cannot even stand in the market. A marketer is expected to keep new products ready to fill up the gap created by the demise of existing products.

In this stage, cost control is increasingly important to generate profits by the following measures as suggested by Stanton.

• To improve the product or revitalize it in some way.
• To review the marketing and production programmes to be sure that they are quite efficient.
• To streamline the product assortment by pruning out unprofitable size, styles, colors and models.
• To cut all costs to bare minimum level that will optimize profitability over the limited remaining life of the product.
• Abandon the product.

PRODUCT RELATED STRATEGY:

The various product related strategies are:

• Branding
• Labelling
• Packaging

BRANDING :

Branding is the process by which companies distinguish their product offerings from competition. Marketers develop their products into brands which help to create a unique position in the minds of customers.

In marketing, the brand name is a major selling tool and one of the most important components of the ‘total product personality’. These days no consumer ask for just bath soap. He specifically asks for Lux or Hamam or Medimix or some other brand. Similarly no buyer asks for a toothpaste, he asks his brand.

Definition:

A brand is a “name, term, symbol or design to identify the goods or services and to differentiate them from those of the competitors’.

American Marketing Association defines brand as, “the use of a name, term, symbol or design, or some combination of these, to identify the product of a certain seller from those competitors”.

Types of brands:

1. Individual brand: A firm may decide upon a policy of adopting distinctive brands for each of its products.
2. Family brands: Family name is limited to one line of products. The term family brand refers to one brand name which a firm adopts for a variety of its products. For instance, Johnson and Johnson, Tata, Godrej, Amul (for milk products) etc.,
3. Company name: W may have for all products the name of the company or the producer. When a firm manufactures many products. this type of brand is used, for instance Tata’s textiles, engineering goods, chemicals etc.
4. Combination device: Products have individual names and company brands to indicate the firm producing them. For instance, Tata’s Taj.
5. Private or Middlemen’s brand: Such brands are owned and controlled by middlemen rather than manufactures. Manufacturer introduces his product under a distributor’s brand name.

LABELLING:

“Label is a part of the product, which carries verbal information about the product or the seller. It may be a part of a package, or it may be a tag attached directly to the product”

Label may be a small slip or a printed statement. It may be a part of a package or it may be attached to the product. A complete label gives the following information.

• Brand name
• Address of the producer
• Gross and net quantity of the content.
• Ingredients in the product
• Direction for the use
• Precautionary measures
• Nature of the product
• Date of packing and expiry
• Retail price

PACKAGING:

The packaging of a consumer product is an important part of the marketing plan. Many marketers have called packaging as a fifth P, along with four Ps i.e., product, price, place, promotion. Packaging plays a role of a silent salesman.

Thus packaging is one among is one among the activities of designing and producing the container or wrapper for a product. The wrapper or the container is called package.

Packing means wrapping of goods before they are transported or stored or delivered to a consumer. On the other hand, packaging is the sub-division of the packing function of marketing.

Packaging has been defined as “an activity which is concerned with protection, economy, convenience and promotional considerations”.

Functions of packaging:

1.   Product protection:

Package protects the products. Package prevents breakage, contamination, pilferage, chemical change, insect attack etc.

2.   Product container:

Package means using just the space in which a product will be contained. Ordinary packing is in the form of throw-away containers.

3.    Product attractiveness:

The size and shape of the package, its colour, printed matter on it etc., must make the package attractive to look at. The psychological feeling is that a good package contains good quality in it. Attractiveness is amajor consideration in modern packaging.

Product convenience:

The design and size of the package must be in accordance with the content i.e., product, it must be convenient to the ultimate customers. Package which can be easily handled, opened, moved etc., is appreciated by customers.

Product identification:

Package differentiates similar products and helps the customer to identify their required brand easily.

Effective sales tool:

A good package stimulates sales. A designed and attractive package invites customers. Many people think that a good package, taller in size, not shorter, contains bigger products. Packaging, attractive and innovated, has value, as many people buy the products, for the sake of containers

Reference Books:

1. Marketing Principles and Practice- A.A.Chunnawalla- Himalaya Publishing House
2. Marketing Management- R.S.N.Pillai, Bagavathi- S.Chand & Company Pvt.Ltd.
3. Marketing Management concepts and cases- S.A.Sherlekar, R.Krishnamoorthy- Himalaya Publishing House
4. Principles of Marketing- S.A.Sherlekar, K.Nirmala Prasad, S.J. Salvadore Victor-Himalaya Publishing House
5. Marketing – Dr.L.Natarajan- Margham Publications
6. Marketing Management-Dr.Radha- Prasanna Publishers & Distributors