In a constantly changing world, a product cannot be successful without a developed strategy for its implementation, even if at the present stage of existence it is profitable and meets the requirements of customers. The strategy outlines the likely development opportunities, product development ambitions, goals, and general ideological vectors for future changes.
Concept
A product strategy is a set of actions that are based on adapting a product to the requirements of customers, their current and future needs. Such actions are already carried out at the beginning of the development of the product concept and continue at a constant stage, that is, entering the market and selling. The activity ends in parallel with the recall of goods from the market. Product strategy acts as the basis of business management. It is one of the most important management tools in the second half of the 20th century.
Essential elements
To be effective, the product strategy must be coordinated with other marketing areas. This is the price, distribution and promotion. The strategy includes:
- The formation of the product function, which consists in determining the characteristics of its future image: physical characteristics, quality.
- Packaging and scope of warranty and after-sales services. These features influence the customer’s perception of its usefulness, so they have a significant impact on purchasing decisions.
- The formation of the structure of the assortment, that is, the width and depth of the assortment (types and varieties) of the products offered.
- Planning the product’s life cycle, that is, actions related to the launch of the market, monitoring of the subsequent stages of the life cycle, improvement, exit from the market.
- Creation of new needs and products that can satisfy them, which is the result of technological progress and changes in lifestyle.
Main types
The strategy of maintaining competitiveness of the proposal is aimed at creating products that would be as good as those of competitors, even better. It requires continuous concentration on all characteristics of the product, mainly on quality. Relative quality improvement has a decisive influence on the company's market share. Another two equally important factors affecting the company's market share are the expansion of activities associated with a new product, as well as an increase in the cost of advertising and promotion.
There are six main types of trading strategies:
- The full range offers consumers a complete range of products with full equipment.
- A limited assortment offers customers an assortment designed specifically for a specific market segment or corresponding distribution channel.
- Line extensions (sentences). This applies to companies with a limited product line that can expand their offer to make it complete. However, before the company’s offer is expanded, it is necessary to conduct a detailed analysis of the situation and analyze various options for financial analysis.
- Replenishment of the product line (offers). It consists in filling in the gaps, that is, the lack of certain units in the company's offer.
- The cleaning of the product line (offer) is aimed at eliminating from the company's offer products that no longer meet the expectations of customers, and therefore do not bring profit and even cause losses.
To maximize benefits, many companies use effective strategies and tactics in managing product and service innovations. They provide not only maximum benefits, but also minimize costs and risks. The product strategy allows you to determine which markets, technologies and directions to invest in. Based on these decisions, understand what actions are best applied in the market.
The product strategy is aimed at establishing the direction for decision-making regarding the efficient allocation of resources necessary for market development, which will provide the enterprise with the desired competitive position, survival and development in a changing external environment.
Development basics
Proper development of a product strategy and its subsequent implementation effectively build an action plan at the time of growth and crisis. The strategy development process should consist of the following stages:
- the formation of the function of the goods;
- selection of basic functions;
- launch of a new product on the market;
- decision making on changes;
- the formation of the correct assortment structure;
- collection of necessary information before the withdrawal of goods from the market.
In the process described above, it is very important to analyze the situation with a particular product. The formulation and implementation of the strategy must be carried out carefully so that potential goals can be achieved. The attractiveness of profitable products should be maintained. Products that incur losses should be excluded from the offer.
Formation Basics
When forming a product strategy, not only the properties of the product are important, but, above all, the relationship between it and the needs of the client. These relationships may change due to the dynamics of the product itself, as well as changes in the needs and preferences of consumers. The phenomenon of the gradual acquisition and loss of the ability of the product to satisfy the needs of the consumer is associated with its life cycle.
In addition to such determining factors as the type of product, technical and technological progress in the production sphere, or the susceptibility of the product to trends, its life cycle decreases as socio-economic development, public welfare and the intensification of innovative processes increase. Regardless of the duration of this cycle, four phases can be distinguished in it: implementation, growth, repayment and recession (or decrease), which differ both in the category of customers, the attainable level of sales and profits, and in the specifics of operations within individual marketing tools.
Formation of a strategy depending on the stages of the life cycle
Stage 1 - Introduction. It follows the introduction and technical development of the product. The company's product strategy at this stage is that the product is placed on the market and offered for sale. Sales are growing slowly, because the product has just appeared on the market and buyers are beginning to get to know it or do not even know about its existence. However, it focuses on recipients who are innovative and who like risk. Therefore, advertising is necessary to provide customers with information about the product and its intended use, about the benefits of its availability and where it can be purchased.
Stage 2 is growth. The strategy of product development at the growth stage is a stage at which an intensive increase in sales occurs due to entry and distribution in the target market. The level of market acceptance of a new product depends on the reaction of competitors who are trying to enter the market with similar types that affect its expected life. Manufacturers focus on product diversification, modernization, technology development and expansion of distribution.
Stage 3 is maturity. The maturity period covers the period during which product sales reach their highest levels and begin to decline slowly. The level of sales depends on the scale of demand, repeated purchases of this product by the same buyer. For the company, this is the most profitable phase of the entire cycle, so they often try to extend it.
This is carried out through actions aimed at expanding the market, that is, stimulating sales growth both in the world market and in new segments (acquiring new customers, searching for additional product use, increasing the frequency of purchases) or expanding the product (improving packaging, quality and service, differentiation of the proposal, for example, other types, sizes, adding other units under the same brand).
Stage 4 - Recession. The decline is characterized by a decrease in sales due to the emergence of new, more efficient technologies and trends addressed by consumer preferences. At this stage, organizations seek to reduce costs and use their market positions by applying one of three options for the enterprise’s product strategy:
- Striving to maintain leadership, hoping that competitors will leave the industry earlier;
- operation, maintaining the current level of sales and at the same time reducing costs associated mainly with promotion and sale;
- recall of the goods, consisting in the termination of its production and sale or resale of the license of another company.
When developing a product strategy, you must always understand what stage of the cycle it is at, because an acceptable course of action depends on it. While at the initial stage the company may decide to reach a group of innovators in society and offer them a high price, it is difficult to expect that such a strategy will be right at the maturity stage, when there is fierce competition in the market, and the client can choose from a variety of similar offers .
Management basics
The experience of enterprises shows that product strategy management must be careful. Especially if it is planned to achieve the planned profit.
Product management in many aspects is of particular importance. The choice of product strategy, as well as its further development should be preceded by an analysis of the situation, the purpose of which is to collect the necessary information and subject it to detailed analysis.
Example
An example is a grocery store strategy. The first step to its development is the selection of a more optimal product range. Often this becomes one of the main competitive advantages of the outlet. It is necessary to introduce various innovations, invent new methods of stimulating customers, attracting a huge number of customers.
It is important to deepen the range of products, to make it wider, more popular among customers. This will mark the store or outlet unique to the market.
Conclusion
A product strategy is a direction for optimizing the assortment range of company products, which is most preferable for achieving its maximum effect. These are options for long-term strategies. They relate to the assortment, its rationality and profitability of individual products in the lineup. A product strategy can determine the vector of a firm’s development in relation to the choice of its product offer on the market, taking into account the opinions of customers.