Section Two: Product Strategies

Product Strategy

When developing your product or service strategy, you will need a clear understanding of two things:

  1. Total product concept
  2. Product life cycle

Total Product Concept

A product sells well if it satisfies the needs of consumers. For example, when purchasing a food processor, the consumer is not buying a motor equipped with a variety of bowls, knives and other accessories. The consumer is buying a tool that will help save time in the kitchen.

Product-service relationship is a set of expectations that a company creates to satisfy its customers’ needs and desires.

In the retail environment, total product includes many things, such as:

  • Goods on display
  • Atmosphere
  • Customer service
  • Delivery
  • Price
  • Quality
  • Colour
  • Design
  • Packaging
  • Refunds
  • Guarantees

Product Life Cycle

People’s needs and wants are constantly changing. Products, like people, have a life cycle. For example, computers which were considered state-of-the-art five years ago, may be obsolete today.

Any product or service moves through identifiable and predictable stages from the time it’s first conceived and introduced to the market.

Table 2 outlines the five stages in a product’s life cycle.

Table 2: Five Stages in a Product’s Life Cycle

Stage Description
Introduction
  • Product makes first appearance on the market
  • Sales usually low and rise slowly
  • If product catches on, may enter period of rapid growth lasting several months or even years
  • Very few customers buy the product; those that do, are seen as innovators
  • Profits usually non-existent or very low due to high start up costs and low sales volume that doesn’t cover initial expenses
  • Product generally priced high to minimize losses
  • Advertising and promotion expenses also steep since public must be made aware of product
Growth
  • Price drops
  • Sales rise quickly as product becomes available to larger number o customers
  • Number of competitors may arrive on scene
  • Entry of rival firms, with their promotional efforts, may actually enlarge the market
  • Profits often high, as production costs fall due to an increase in sales volume
  • Brand preference develops
Maturity
  • Level of market acceptance and sales volume reaches a peak
  • Sales revenue may continue to rise but rate of increase falls off, resulting in decline in rate of profit
  • Intense competition
  • Expenses for promotion become heavy
  • Price-cutting may occur
  • Customers pressured to be “brand loyal”
  • Firms that can’t keep pace, drop out of market or are acquired by other companies
  • Large firms begin to dominate industry
  • Have to fight to keep share of market
  • Product loyalty and brand preference becomes noticeable
  • Need to improve product to keep loyalty
Saturation
  • Generally longest stage
  • Product already being bought by customers who can or will use it
  • Marginal firms have left market
  • Promotional strategies concentrate on taking customers away from other firms rather than enlarging market
  • Sales decline steadily
  • Profits drop
  • Number of competitors decrease
  • Tough fight to preserve market share
  • Promotion costs generally decline
  • Must begin to develop new products¬†
Decline
  • Sales drop to lowest level as everyone either already owns product or has replaced it with a better, cheaper or more attractive one

Click on Worksheet 4.2 to develop your product description and strategy.

BizShift Loans

Self Employment Program

Partnerships & Opportunities

Business Planning Workbook