CHAPTER 9CHAPTER 9PRODUCT STRATEGYPRODUCT STRATEGY

PRODUCT STRATEGY

• Developing New Products

• Product Life Cycle

• Branding Strategy

DEVELOPING NEW PRODUCTS

• New Product Process

• New Product Failures

NEW PRODUCT PROCESS

Creative Ideas

Time

Creative Business Ideas

Development and Testing

Introduce New Product

SEARCH FOR CREATIVE IDEAS

• Create cross-functional committees

• Collect stakeholder ideas

• Listen to customers

TYPES OF CREATIVE IDEAS

• Never been done before

• Improved product technology

• Creative twist of an existing idea

CREATIVE IDEAS EXAMPLES

• Charles Schwab

• Ralph Lauren Polo Shirts

• Houston National Bank

• Blue Chip Forecast

Ralph Lauren Polo Shirt for Dogs

CREATIVE BUSINESS IDEAS

• Company Fit

• Financial Analysis - Feasibility study - Business Plan

COMPANY FIT

• Existing Production Fit

• Existing Distribution Fit

• Product Strategy Fit

FEASIBILITY STUDIES

Studies of potential new products, with evaluations of resources and time in screening creative ideas

FEASIBILITY STUDY PROCESS

Potential New Products

Financial Viability

Time and Resources

Proceed or Drop Creative Idea

PRODUCT DEVELOPMENT AND TESTING

• Product development - Types of new products - Product design

• Testing - Beta testing - Store audits

COMMERCIALIZATION

• Launch new product

• Design and place promotions

• Fill distribution pipeline

NEW PRODUCT FAILURES

• Failure to define target market

• Lack of customer knowledge

• Poor product performance

NEW PRODUCT FAILURE EXAMPLES

• Betamax

• Harley Davidson Perfume

• Susan B Anthony Dollar

PRODUCT LIFE CYCLE

Sales

Introduction Growth Maturity Decline

Time

STAGES OF PRODUCT LIFE CYCLE

Stage Sales ProfitsIntroduction Low NegativeGrowth Climbing RisingMaturity Stable PeakingDecline Dropping Declining

CHARACTERISTICS OF THE INTRODUCTION STAGE

• Negative Profits

• Heavy Promotion Cost

• Heavy Distribution Cost

INTRODUCTION STAGE EXAMPLES

•Electric vehicles

•Life Straw

•Astrata

ASTRATA THEFT BOX

• Stops motor on stolen trucks

• Locks doors remotely, trapping thieves

• Programmed to notify police

CHARACTERISTICS OF THE GROWTH STAGE

• Increasing Revenue

• Experience Curve

• Increasing Profits

GROWTH STAGE EXAMPLES

• Kindle

• Greek Yogurt

• Smart Phones

• Zip Lines

• Audio Books

SALES OF KINDLES

2009 2 million

2011 12 million

AUDIO BOOK SALES

1997 $480 Million

2013 $1,200 Million

CHARACTERISTICS OF THE MATURITY STAGE

• Intense Competition

• Maintain Promotion

• Layering Strategy

MATURE STAGE EXAMPLES

• Crayola

• Baby carrots

• Campbell soup

CONCEPT OF LAYERINGSales

Time

LAYERING EXAMPLES

• Chicken Soup for the Soul

• Movies

• Dental Services

MOVIE EXAMPLES OF LAYERING

• Shrek

• Star Trek

• Halloween

LAYERING OF DENTAL SERVICES

• Cosmetic

• Straighten Teeth

• Bonding Teeth

• Whiten Teeth

DECLINE STAGE STRATEGIES

• Simplify Product Line

• Minimize Promotional Cost

• Discontinue Product Line

• Sell Product Line

DECLINE STAGE EXAMPLES

• Hostess Brands

• Kodak

• Yellow Pages

• PC Decline

YELLOW PAGES REVENUE

2005 14 Billion

2011 9 Billion

BRANDING STRATEGY

• Product Names

• Major Types of Branding

• Multiple Branding Strategy

• Brand Extension

PRODUCT NAMES

Commodity Any company can use

Grade Defined by government

Brand Owned by a company

COMMODITY EXAMPLES

• Aspirin

• Gasoline

• Nylon

GRADING EXAMPLES

• Grade AA eggs

• Choice beef

• Organic foods

MAJOR TYPES OF BRANDING

• National Brands by Manufacturers

• Store Brands by Retailers

MANUFACTURING BRANDS ARE LOSING TO STORE BRANDS

• Mass media universe has shattered

• Mass channel universe has consolidated

• High gross margins for store brands

MULTIPLE BRANDING STRATEGY

• BLANKET BRANDS - Same brand name

• INDIVIDUAL BRANDS - Different brand names

EXAMPLES OF BLANKET BRANDS

• IBM

• Whole Foods (365)

• Costco (Kirkland)

EXAMPLES OF INDIVIDUAL BRANDS

• Yum Brands

• Sears

YUM BRANDS

• Pizza Hut

• Taco Bell

• Kentucky Fried Chicken

SEARS RETAIL BRANDS

• Kenmore

• Craftman

• Diehard

BRAND EXTENSION

A company with a well-known brand uses that brand to market to a different product category.

BRAND EXTENSION SUCCESSES

• Visio

• JELL-O pudding

• IAMS pet insurance

BRAND EXTENSION FAILURES

• New Coke

• BIC pantyhose

• Hooter’s airline

MOST POWERFUL BRANDS IN 2013

#1) Apple

#2) Microsoft

#3) Coca Cola

#4) IBM

#5) Google