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8/8/2019 lecture 9 (strategy)
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Developing Product Strategy
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A Successful Strategy:
Helps achieve coordination among
functional areas of the organization.
Defines how resources are to beallocated.
Leads to a superior market position.
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Elements of a Product Strategy
1. Statement of the objective(s) the productshould attain
2. Selection of strategic alternative(s)
3. Selection of customer targets4. Choice of competitor targets
5. Statement of the core strategy
6. Description of supporting marketing mix.7. Description of supporting functional
programs
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Hierarchy of Objectives
Company Mission/Vision
Corporate objectives
Corporate strategies
Divisional objectives
Divisional strategies
Product/brand objectives
Brand strategies
Program objectives
Tactics
Level I
Level 0
Level III
Level II
Level IV
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Strategic Alternatives
Long-termprofits
Growth in
sales or
market share
New
segments
Market
development
Convert
nonusers
New product
development
Competitors
customers
Efficiency,
short-run
profits
Reduce
costs
Decrease
inputs
Improve
asset
utilization
Increase
price
Increase
outputs
Improve
sales mix
Existing
customers
Market
penetration
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Selling more of an existingproduct to an existing market.This is going deeper into a
market so it is called marketpenetration (More Promotion).
Selling an existing product in anew market, for instance bringingout different bottle sizes to attractdifferent buyers. This is called
market development. Selling a new product to an
existing market. This is calledproduct development as itmeans making changes to a
product, for instance a new
flavour like Coca-Cola Vanilla. Selling a new product to a new
market. This is calleddiversification. Coca-Colaidentified the need for a newsports drink
COCA COLA
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Introductory Stage
Little competition
Sales volume increases slowly
Customers reluctant Distribution is a major issue
Strategy: Skimming and Penetration
Full-Scale Launchof New Products
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Skimming
Product feature based differential advantage
Advantage allows high price
Distribution should be limited
High margins to be further used in R&D
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Penetration
More expensive strategy
Lower margins and high marketing costs
Used for first mover advantage
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Growth Stage
Increasing rate of sales
Entrance of competitors
Customer has options
Puts pressure on price
Strategy: Leader or Follower
Offered in more sizes,flavors, options
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Leader/Follower
Leader can either flee or to fight
Fight: maintain current position or
Keep enhancing the product
Flee: New entrants to strong
Or can re segment and find a niche
Follower can exit or be a strong no.2
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Maturity Stage
Declining sales growth
Saturated markets
Heavy promotions to dealers and consumers
Marginal competitors drop out
Prices and profits fall
Invest just enough money to maintain share
Many consumerproducts are in Maturity
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Decline Stage
Long-run drop in sales
Elimination of all nonessential marketing
expenses
Be the last in the market
Rate of decline depends onchange in tastes or
adoption of substitute products
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Marketing Strategies for PLC
INTRODUCTION GROWTH MATURITY DECLINE
ProductStrategy
DistributionStrategy
Promotion
Strategy
PricingStrategy
Limited models
Frequent
changes
More models
Frequent
changes.
Large number
of models.
Eliminate
unprofitable
models
Limited
Wholesale/
retail distributors
Expanded
dealers. Long-
term relations
Extensive.
Margins drop.
Shelf space
Phase out
unprofitable
outlets
Awareness.
Stimulatedemand.Sampling
Aggressive ads.
Stimulatedemand
Advertise.
Promote heavily
Phase out
promotion
Higher/recoup
development
costs
Fall as result of
competition &
efficient produc-
tion.
Prices fall
(usually).
Prices
stabilize at
low level.