Product strategy: types, formation, development and management

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

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 likely development opportunities, product development ambitions, goals, and overall vision for future change.

Concept

Product strategy is a set of actions that are based on the adaptation of the product to the requirements of customers, their current and future needs. Such activities are already carried out at the beginning of product concept development and continue at the ongoing stage, i.e. market entry and sale. The activity ends in parallel with the recall of the product from the market. Product strategy acts as the basis for business management. It is one of the most important management tools in the second half of the 20th century.

Basic elements

To be effective, product strategy must be coordinated with other marketing efforts. It's the price, distributionand promotion. Strategy includes:

1. Formation of the function of the product, which is to determine the characteristics of its future image: physical characteristics, quality.
2. Packaging and scope of warranty and after-sales services. These features affect the customer's perception of its usefulness, so they have a significant impact on purchasing decisions.
3. Formation of the assortment structure, that is, the width and depth of the assortment (types and varieties) of the products offered.
4. Planning the life cycle of a product, that is, activities related to the release to the market, monitoring the subsequent stages of the life cycle, improvement, exit from the market.
5. Creating new needs and products that can meet them as a result of technological progress and lifestyle changes.

Basic types

The strategy to keep the offer competitive is to create products that are as good as the competition, even better. It requires a continuous focus on all characteristics of the product, mainly on quality. The relative improvement in quality has a decisive influence on a company's market share. Two equally important factors affecting a company's market share are the expansion of new product activities, as well as an increase in advertising and promotion spending.

There are six main types of trading strategies:

• Full range offersconsumers a complete set of products with complete equipment.
• Limited Range offers customers a range designed specifically for a specific market segment or distribution channel.
• Line extensions (offers). This applies to businesses with a limited product line that can expand their offering to be complete. However, before the company's offer is expanded, a detailed analysis of the situation and various options for financial analysis should be carried out.
• Replenishment of the product line (offers). It is to fill in the gaps, that is, the lack of certain units in the company's offer.
• Cleaning the product line (offer) is aimed at excluding from the company's offer products that no longer meet the expectations of buyers, and therefore do not bring profit and even cause losses.

To ensure maximum benefits, many companies use effective strategies and tactics in managing product and service innovation. They provide not only maximum benefits, but also minimize costs and risks. The product strategy allows you to determine in which markets, technologies and areas to invest. Based on these decisions, understand what actions are best to apply in the market.

The product strategy aims to set the direction for decision-making for management regarding the effective allocation of resources necessary for the development of markets that will provide the enterprise with the desiredcompetitive position, survival and development in a changing environment.

Development basics

The correct development of a product strategy and its subsequent implementation effectively build an action plan at a time of growth and crisis. The strategy development process should consist of the following steps:

• product function formation;
• selection of basic functions;
• launching a new product on the market;
• deciding on changes;
• formation of the correct assortment structure;
• gathering the necessary information before withdrawing the goods from the market.

In the process described above, it is very important to analyze the situation of a certain 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. Items that generate losses should be excluded from the offer.

Shaping 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 consumer needs and preferences. The phenomenon of gradual acquisition and loss of the ability of a product to satisfy the needs of the consumer is associated with its life cycle.

Besides determining factors such as product type, technical and technologicalprogress in the field of production or the exposure of a product to trends, its life cycle is reduced as socio-economic development, an increase in social welfare and an intensification of innovation processes. Regardless of the duration of this cycle, four phases can be distinguished in it: introduction, growth, repayment and decline (or decline), which differ both in the category of buyers, the achievable 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 product strategy of the company 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 acquainted with it or are not even aware of its existence. However, it focuses the attention of recipients who are innovative and who enjoy taking risks. Therefore, advertising is necessary to provide consumers with information about the product and its intended use, the benefits of having it available, and where it can be purchased.

Stage 2 is growth. The product development strategy in the growth stage is the stage in which there is an intensive increase in sales through 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 withsimilar species affecting its life expectancy. Manufacturers are focusing on product diversification, modernization, technology development and distribution expansion.

Stage 3 is maturity. The maturity covers the period during which product sales peak 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 done through actions aimed at expanding the market, that is, stimulating sales growth both in the global market and in new segments (acquiring new customers, finding additional use of the product, increasing the frequency of purchase) or expanding the product (improving packaging, quality and service, differentiation of the offer, for example, other types, sizes, addition of other units under the same brand).

Stage 4 - Decline. The decline is characterized by a decrease in sales due to the emergence of new, more efficient technologies and trends that consumer preferences have turned to. At this stage, organizations seek to reduce costs and leverage their market position by applying one of three enterprise product strategy options:

• trying to keep the lead, 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 goods, consisting instopping its production and selling or reselling a license to another company.

When developing a product strategy, you must always understand what stage of the product cycle it is in, because it determines the acceptable course of action. While at an early stage a company may decide to reach out to a group of innovators in society and offer them a high price, it is difficult to expect such a strategy to be right at the stage of maturity, when the market is fiercely competitive and the client can choose from many similar offers..

Basics of Management

Enterprise experience shows that product strategy management must be handled with care. Especially if you plan to achieve the planned profit.

Product management is of particular importance in many aspects. The choice of a 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 a detailed analysis.

Example

Take a grocery store strategy as an example. The first step towards 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 to stimulate customers, attracting a huge number of customers.

It is important to deepen the range of products, make it wider, morepopular with buyers. This will allow you to designate a store or outlet unique in the market.

Conclusion

Product strategy is the direction of optimizing the company's product range, which is most preferable to achieve its maximum effect. These are options for long-term strategies. They relate to the assortment, its rationality and the profitability of individual products in the line. Product strategy can determine the direction of the company's development in relation to the choice of offering its products on the market, taking into account the opinions of customers.