4.5.1 Product Notes

Creating Value Through Product Strategy

1. Imagine launching a new smartphone.
2. It’s sleek, packed with features, and hits the market with a splash.
3. But what happens next? How do you ensure it stays relevant and profitable over time?

This is where product strategy comes in.

Product Life Cycle (PLC)

Each stage requires distinct strategies to maximize success.

1. Introduction

1. Characteristics:
   1. Low sales, high costs, and limited competition.
   2. Focus on building awareness and encouraging trial.
2. Marketing Strategies:
   1. Promotion: Heavy advertising to create awareness.
   2. Pricing: Skimming (high prices) for unique products or penetration pricing (low prices) to attract customers.
   3. Distribution: Limited, focusing on early adopters.

2. Growth

1. Characteristics:
   1. Rapid sales increase, growing market acceptance, and emerging competition.
2. Marketing Strategies:
   1. Product: Improve features based on customer feedback.
   2. Promotion: Highlight competitive advantages.
   3. Distribution: Expand to new markets and channels.

3. Maturity

1. Characteristics:
   1. Sales peak, market saturation, and intense competition.
2. Marketing Strategies:
   1. Product: Differentiate with updates or variations.
   2. Pricing: Competitive pricing to maintain market share.
   3. Promotion: Emphasize brand loyalty and customer retention.

4. Decline

1. Characteristics:
   1. Falling sales, reduced demand, and market exit threats.
2. Marketing Strategies:
   1. Product: Focus on best-selling variants.
   2. Pricing: Discount to clear inventory.
   3. Promotion: Minimal, targeting loyal customers.

Product Portfolio

Aligning the Product Portfolio with the Marketing Mix

1. Product: Ensure a diverse range to meet customer needs.
2. Price: Use different pricing strategies for each product.
3. Promotion: Tailor marketing efforts to each product’s stage in the PLC.
4. Place: Optimize distribution channels for each product.

The Boston Consulting Group (BCG) Matrix

1. The BCG Matrix helps businesses categorize products into following groups:
2. Stars:
   1. High growth, high market share.
   2. Invest to maintain leadership.
3. Cash Cows:
   1. Low growth, high market share.
   2. Generate steady profits.
4. Question Marks:
   1. High growth, low market share.
   2. Decide whether to invest or divest.
5. Dogs:
   1. Low growth, low market share.
   2. Consider discontinuation.

Extension Strategies

Extension strategies aim to prolong the maturity stage and delay decline.

Common Extension Strategies

1. Product Updates: Introduce new features or variations.
2. Market Expansion: Enter new geographic or demographic markets.
3. Promotional Offers: Use discounts or loyalty programs to boost sales.
4. Rebranding: Refresh the product’s image to attract new customers.

Relationship Between PLC, Investment, Profit, and Cash Flow

1. The PLC impacts a product’s financial performance at each stage:
   1. Introduction: High investment in development and marketing leads to negative cash flow and losses.
   2. Growth: Rising sales generate positive cash flow and growing profits.
   3. Maturity: Profits peak as sales stabilize and costs decrease.
   4. Decline: Falling sales reduce profits and cash flow.