My earlier article was about product strategies for brands which look to enter new markets. This article will deep-dive into product decisions which are required basis the lifecycle of a product – introduction, growth, maturity and finally decline. Such strategies increase the life span of each phase and maintain consistent excitement around the product. Product strategy can be divided into 3 components: Product-line analysis, Product-line length, and Line featuring & pruning.I. Product-line analysis
To support decisions about which items to build, maintain, harvest, or divest, product-line managers need to analyze the market profile as well as topline & bottomline:
- Market profile: The manager must review how the line is positioned against competitors’ lines. A useful tool here is a product map showing which competitive products compete against the company’s products on specific features or benefits. A consumer research can precede to identify how consumers position different brands basis their benefits & features. This helps management identify different market segments and determine how well the firm is positioned to serve the needs of each.
- Topline and Bottomline: The manager must calculate the percentage contribution of each item to total sales and profits. A high concentration of sales in a few items means line vulnerability. On the other hand, the firm may consider eliminating items that deliver a low percentage of sales and profits unless they exhibit strong growth potential.
II. Product-line length
Companies seeking high market share and market growth will carry longer lines while companies emphasizing high profitability will carry shorter lines of carefully chosen items. A company lengthens its product line in two ways: line stretching and line filling:
- Line stretching is when a firm lengthens its product line. With a down-market stretch, a firm introduces a lower price line. However, moving down-market can be risky, as it can result in brand dilution or even cannibalizing the sales of the core brand. This strategy generally works when the market to be captured produces entirely different opportunity than the one a brand is already serving. This is common with Automobile brands which entered India market with sedans and have now entered hatchback segment as well.
With an up-market stretch, a company enters the high-end of the market for more growth, higher margins, or to position itself as a full-line manufacturer. Most of the industries like FMCG & Personal care are nowadays are taking this position where they are introducing premium variants of their offering.
A market research can help brands take informed decisions by identifying market opportunity as well as consumer perception/acceptability for a brand which decides to go down-market or up-market.
- Line filling is when a product line is lengthened by adding more items within the present range. There are several motives for line filling:
- reaching for incremental profits
- trying to plug holes to keep out competitors
- trying to satisfy dealers who complain about lost sales because of missing items in the line
- trying to utilize excess capacity
- trying to be the leading full-line company
A consumer research must precede line filling strategies to identify unmet needs of the consumers and accordingly introduce relevant products.III. Line featuring and pruning
The product-line manager typically selects one or a few items in the line to feature in order to attract customers, lend prestige, or achieve other goals. If one end of its line is selling well and the other end is selling poorly, the company may use featuring to boost demand for the slow selling variants, especially if those items are produced in a factory that is idled by lack of demand. In addition, managers must periodically review the entire product line for pruning, identifying weak items through sales and cost analysis. They may also prune when the company is short of production capacity or demand is slow.
Apart from financial metrics, it is extremely essential to identify consumer perception and usage satisfaction for the said product lines where pruning decisions are required. A retail research might also reveal problems with product distribution & availability, giving actionable items to work upon instead of line pruning.
Channelplay is a market research firm which conducts a lot of consumer, competition and channel & trade research, thereby enabling product strategies.