Transcript AMP Chapter 7.ppt

CHAPTER
Developing A Product Strategy:
- Setting Objectives
- Choosing a Marketing Strategy
McGraw-Hill/Irwin
7
© 2002 The McGraw-Hill Companies, Inc., All Rights Reserved.
Quick Review
•
Ch.2: Boundary of your business domain
•
Chs. 3-5: Analysis of Major Stakeholders
•
•
•
•
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Ch. 6: Your prediction about future
 Potential and Forecasting
Ch. 7: Strategy (to achieve your objectives)
 Target (Competitive & Customer)
 Positioning (Value Proposition)
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Action Plan
•
Where are we headed? 
•
How will we get there? 
•
What will we do? 
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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 Strategy
1.
2.
3.
4.
5.
6.
7.
Statement of the objective(s) the product should attain*
Selection [Consideration] of strategic alternative(s)
Selection of customer targets
Choice of competitor targets
Statement of the core strategy
Description of supporting marketing mix.
Description of supporting functional programs
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Hierarchy of Objectives
Company mission/vision
Level 0
Corporate objectives
Level I
Corporate strategies
Divisional objectives
Level II
Divisional strategies
Level III
Product/brand
objectives
Brand strategies
Program objectives
Level IV
Tactics
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1. Setting Objectives
1. Characteristics of Good Objectives
1. Quantified standards
2. Challenging
3. Milestone
2. Two Major Decisions
1. Which Objective to Pursue?
2. How High it should be?
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2. Consideration of Strategic Alternatives
1. Corporate Objectives
2. Two Major Paths
1. Increasing Sales/Market Share
1. Market Development Strategy
2. Market Penetration Strategy
2. Increasing Profitability
1. Decreasing Inputs
2. Increasing Outputs
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Strategic Alternatives
Long-term
profits
Efficiency,
short-run
profits
Growth in
sales or
market share
Market
development
Market
penetration
Decrease
inputs
Increase
outputs
New segments
Existing
customers
Reduce
costs
Increase
price
Convert
nonusers
Competitors’
customers
Improve
asset
utilization
Improve
sales mix
New product
development
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Criteria for Evaluating Strategic Alternatives



Size/growth of the segment
Opportunities for obtaining competitive
advantage  Know Yourself
Resources available to penetrate the segment
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3. Targeting and Positioning

Choice of Customer Targets
 Choice
of Competitor Targets
 Statement
of the Core Strategy =Value Proposition
 Economic
(cost/price) Advantage
 Functional Advantage
 Psychological Advantage
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Target Segments for Handspring
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3. Targeting and Positioning (cont’d)

Five Areas of Differentiation
 Quality
 Convenience and Service
 Status and Image
 Branding
 Distribution Channels
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Joint Space for Colas
Cola
Segment
3
Diet •
Pepsi
•
Diet
Rite •
Diet
•
Tab
•
RC
Cola
•
Pepsi
•
•
Segment
2
•
•
Nondiet
Segment
Dr
1
Peppe
r
•
Coke
•
7-Up
Fresca
Noncola
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Total Product Concept
Potential
product
Generic
product
Expected
product
Augmented
product
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Managing Brand Equity
Reduced marketing
costs
Trade leverage
4. Brand
Brand loyalty
loyalty
Attracting new
customers
• Create awareness
• Reassurance
Time to respond to
competitive threats
Anchor to which
other associations
can be attached
1. Brand
Brand loyalty
awareness
Familiarity-liking
Provides value to
customer by
enhancing
customer’s:
• Interpretation/
processing of
information
• Confidence in the
purchase decision
• Use satisfaction
Signal of substance/
commitment
Brand to be
considered
Brand
Brandequity
loyalty
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Brand Equity (cont’d).
Reason-to-buy
Brand
Brandequity
loyalty
Differentiate/position
3. Perceived
Brand loyalty
quality
Price
Channel member
interest
Extensions
Provides value to
firm by
enhancing:
• Efficiency and
effectiveness of
marketing programs
• Brand loyalty
• Prices/margins
Help process/
retrieve information
2. Brand
Brand loyalty
associations
Reason-to-buy
Create positive
attitude/feelings
• Brand extensions
• Trade leverage
• Competitive
advantage
Extensions
Other
proprietary
Brand loyalty
brand assets
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Competitive
advantage
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3. Targeting and Positioning (cont’d)
 Values
Being Sought by Customers (Rackham)
 Transactional
Sales: Intrinsic Value
 Consultative Sales: Extrinsic Value
 Enterprise Sales: Strategic Value
 Relationship
Life Cycle and Strategy
 Customer
Acquisition
 Customer Retention
 Customer Expansion
 Customer Deletion*
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Making Sense of A Strategy Jungle

Strategy at different levels
 Corporate
or Business Level: Porter’s Generic Strategy
 Functional Level Strategies:
 Cost
Leadership: Fixed Cost and Variable Cost
 Differentiation: Supply side and Demand side
 Focus: Segmentation
 Relationship
Life Cycle-based Strategy
 Product Life Cycle-based Strategy:
 First
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mover advantage
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Strategy Over the Life Cycle
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4. Supporting Marketing Mix & Programs
 Product
and Brand
 Pricing
 Marketing
Channels
 Communication: ex) Advertising and Sales
Promotion
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Illustration: Handspring
Objective:
To capture 15 percent of the PDA market by the end of year 2
Customer Targets:
Price-conscious professionals
Nonbusiness professionals
Nonprofessionals
Competitive Targets:
Palm
Sharp
Core Strategy:
Simplicity/convenience
Low price
Expandability (via expansion slot)
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