Product Strategy

What is a Product? (Company)

— Physical Product e.g. Elevator
— Service e.g. Consultancy
— Idea e.g. No-smoking, Health awareness
 What is a Product? (Customers)

Core
Benefits
Add-on

Customer Value
Price

Sacrifices Acquisition
costs

Operations
costs

Source: Adapted from Ajay Menon, Christian Homburg, and Nikolas Beutin, “Understanding Customer Value,”
Journal of Business-to-Business Marketing, 12, no. 2 (2005), pp. 4–7.
Benefits & Sacrifices
— Benefits:
1. Core – requirements a product must possess for a
relationship to exist.
2. Common across all suppliers e.g. Transportation
3. Add-ons – attributes that create differentiation & provides
more value than competition. e.g. AMC, buyback
guarantee, new product development assistance.

— Sacrifices:
1. Price
2. Acquisition costs (e.g., ordering & delivery costs)
3. Operations costs (Can defect free parts really lower
operation costs?) e.g. inspection costs, installation and
training costs.
What matters most?
Add-ons: All qualified vendors provide equal
core, so add-ons are the differentiators,
which include:
a. Differing attributes
b. Relationships
c. Advice
d. Product support Services – Pre & Post sale
 Catalog Products
— Offered in limited configurations. e.g. standard product
— Produced in advanced in anticipation of orders. E.g.
make to stock
— Product line decision: adding, deleting or repositioning
product.
— E.g. Fastener, Gasket, rivet, electric motor, water pump.
 Custom build products
— Offered as a set of basic product with numerous
options and accessories.
— Product line decision: offering the proper mix of
options.
— E.g. dell laptops, CRM and ERP software, Forklift truck
 Custom designed products
— Products are created to meet the need of a customer
or small set of customers.
— Product line decision: developing marketing capability
to produce customized product.
— E.g. power plant, pressure vessel, building etc.
 Industrial Services
— Buyers purchase company’s capability to solve their
problems.
— Product line decision: developing service capability
— E.g. maintenance & repair, consultancy, technical service
etc.
High-tech Product
— Technology based products influence
customers to change their behavior with
the promise of gaining dramatic new
benefits.
— Examples:
o Cars replaced horse-drawn carriages
o Computers opened the doors to
revolutionary new products
o Internet changed the way we do
business
High tech products and manufacturing
Technology adoption: Classes of Customers
— Technology enthusiasts
— Visionaries
— Pragmatists
— Conservatives
— Laggards
Innovation: Classes of Customers
— Technology enthusiasts (innovators) -
explore new products, influence buyers, and lack
of resources.

— Visionaries (early adopters) – exploit

innovation for CA, have access to resources,
demand modification that difficult to provide.

— Pragmatists (early majority) – bulk of

technology purchase, believe in evolution, and
buy from proven vendors.
Innovation: Classes of Customers

— Conservatives (late majority) –

pessimistic about value of technology, price
sensitive and reluctantly purchase high tech
products.

— Skeptics (laggards) – critics of the high

tech products.
 Strategy for High Tech Adoption
1. Put innovative products in the hands of
technology enthusiasts.

2. After a while visionaries will see the value of the

new technology and will begin to view it in
business terms.

3. New technologies usually enjoy a honeymoon

reception from enthusiasts and visionaries,
however sales begin to falter… a chasm forms…
Chasm
— A Chasm is a period of time where sales falter due
to differences between Visionaries and
Pragmatists.

— Visionaries want change (revolution) whereas

Pragmatists want change (evolution). But
Pragmatists make most buying decisions in
organizations.

— Pragmatists are the gateway to the mainstream

market. If that chasm gap can’t be bridged, often
products become part of ancient history.
Strategies to Cross the Chasm
— One strategy to cross the chasm is for the
marketer to provide pragmatists with 100%
solutions to their problems using the new
technology.
— Goal: Win a niche foothold with a small
group of pragmatists as quickly as possible
… that is what crossing the Chasm means.

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 Bowling Alley Strategy
— Each market is like a bowling
pin.The momentum of moving
one pin (with good technology
products) successfully carries
over into surrounding
segments.

— The bowling alley is where

mainstream market segments
begins to accept the new
product, but it still has a way to
go.

— Strategy: Win one niche, then

work on another.
 Tornado Strategy
— This strategy assumes a product has very
wide appeal. The seller’s strategy is to:
1. Move as quickly as possible in getting the
product out to the market.
2. Build distribution ASAP.
3. Drive price down to next lower price break
ASAP.
— This strategy demands product leadership,
operational excellence in manufacturing
and distribution.
Main Street
Once the mainstream has adopted the
product, the aftermarket phenomenon
occurs:
a. Mass marketers of the products begins to
subside.
b. Competitors force supply to exceed demand.
c. Prices fall.
d. High tech product becomes a commodity.
e. Profit growth can no longer come from selling
the commodity.
f. Profit can only come from extending the
platform of the product to other niche-specific
needs.
Thank You

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