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Product strategyProduct strategy


A product is...


A bundle of customer benefits that are:

1. Tangible  and intangible 

  • tangible - quality, looks, design, packaging, ease of use and reliability.
  • intangible - style, service, brand reputation and image.


2. Actual and perceived 

(what people think about the product as well as actually see).


Product strategy

3. Linked to the product producer’s business definition 

For example, Disney is in the entertainment business, so its products must entertain customers.

A product may also be called a brand that is closely associated with certain “brand values” e.g. Disney means family entertainment.

A company’s product mix (or product portfolio) is the different products it sells to its customers.


The world’s top 10 brands in 2013 were...

1. Apple

2. Google

3. Coca-Cola

4. IBMProduct strategy

5. Microsoft

6. GE (General Electric)

7. McDonald's (pictured right)

8. Samsung

9. Intel

10. Toyota

(Source: Interbrand, the brand management firm)


How to have the best products


Product strategy

1. Think customer

A product must provide better customer benefits than competitors (called product differentiation).

Think about Theodore Levitt’s total product concept that splits a product into four parts:

Product strategy


a) generic product – the basic product (e.g. the water, sugar and distinctive flavouring of Coca-Cola).


b) expected product – the least a customer expects from the product (e.g. flavour, fizz and thirst quenching).


c) augmented product – gives customers what they think they need and the extras they expect (e.g. cool image and sex appeal).


d) potential product – anything that might possibly give a product customer appeal.

A company must also consider how new and existing products can be sold to different customers (or markets), as shown by Ansoff’s matrix (see also corporate strategy).

Product strategy

This matrix shows four possibilities:

  • Market penetration – existing products, existing markets.
  • Market development – existing products, new markets.
  • Product development – new products, existing markets.
  • Diversification – new products, new markets.



2. Think about the product life cycle (PLC)

This shows a product’s sales revenue (and profits) at four different stages of its lifetime:

 Product strategy


a) introduction 

  • costs high (because of research and development and marketing of product launch) and
  • sales/profits low.


b) growth 

Highest sales growth but marketing costs still high.


c) maturity 

Profits are usually highest because the product is established with high sales and lower marketing costs.


d) decline 

Sales/profits fall.


A business should keep products in growth and maturity and axe/sell the ones in decline.



3. Use the BCG matrix (also called the Boston box)

Named after its creator, the American management consultants, the Boston Consulting Group, it evaluates products in terms of market growth and market share.

Product strategy

It says that companies should have a balance between cash cows and stars.

This will become clear when we look at each product category:


a) cash cows (high market share, low growth)

  • in the maturity stage of the product life cycle (PLC) with high sales and low costs.
  • earn a great deal of money which should be used to invest in stars

Stars are vital because they are tomorrow's cash cows -see below.


b) stars (high market share, high growth)

  • in the growth stage of the PLC
  • become cash cows, as they move into the maturity stage and sales growth falls.


c) question marks, or problem childs (low market share, high growth)

 These should be either

  • sold, or
  • turned into stars by increasing their market share.


d) dogs (low market share, low growth)




4. Use the General Electric (or McKinsey) matrix

This examines products in terms of industry attractiveness and business strengths:

 Product strategy

The best products (in top left quadrant) are where the product seller or maker:



5. Use your brand effectively

Like a product, a brand is a bundle of actual and perceived customer benefits that are tangible  (e.g. quality) or intangible (e.g. image).Product strategy

The aim is to create brand loyalty i.e. people keep on buying because of its great benefits (and so reputation).

A product’s packaging can help to promote the brand with the packaging design, brand name and logo.

Brand extension is selling a new product under the same brand name (e.g. Apple).




Key quotes explained


Product strategy

“You can have any product so long as it’s black”

- Henry Ford (talking about his Model T car, pictured right)

This is called product orientation i.e. selling what you can make.

Henry Ford could do this, because his prices and costs were much lower than competitors (due to his revolutionary mass production factory).

But in today’s highly competitive world organizations must always make products that customers want (customer orientation)

In the 1920's General Motors became more customer oriented and took over from Henry Ford as number one.



Product strategy

We’re not in the coffee business serving people, we’re in the people business serving coffee”

- Howard Schultz (founder and boss of Starbucks, pictured right)

You have to be creative and imaginative with products.

For example, Starbucks doesn’t just sell coffee, it sells an experience for people to enjoy.

So a product should be thought of as a bundle of customer benefits and solutions.

“People don’t buy things they buy solutions to problems”, the American marketing professor, Theodore Levitt, said.



Product strategy

“The product is the most important thing”

- James Dyson (English inventor of the bagless vacuum cleaner, pictured right)

The best advertisement for a company is its product.

“Our belief was that, if we kept putting great products in front of customers, they would continue to open their wallets”, said Apple’s co-founder, Steve Jobs.



Best books


Product strategy

Theodore Levitt (pictured right), The Marketing Imagination (1983)

Business success depends upon the “marketing imagination” – finding creative and imaginative solutions to customers’ problems.

So vital considerations are:

  • the “total product concept” (see above)
  • product differentiation (making a product unique e.g. by innovation and product image).

(For more detail see The Marketing Imagination in the Business Books section)



Product strategy

Alvin Toffler (pictured right) , Future Shock (1970)

People want quality, style and brand image.

So organizations must become “experience makers” and sell an experience to enjoy (e.g. shops should be fun).

 (For more detail see Future Shock in the Business Books section)

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