Competition and Product Strategy

Chapter 15 Managing maturityIt is this idea of planning in advance of the actual launching of a new product to takespecific actions later in its life cycle actionsdesigned to sustain its growth and profitability which appears to have great potential as an instrument of long-term product strategy.(Levitt) In the rapid growth phase market leaders will seek to stay ahead of the game through further improvements while less innovative firms try to win market share by discounting, offering lower prices for direct sale, and so on.

As the market approaches saturation rivalryand competition will intensify and the lessefficient firms will be forced out of the market.

Reasons for decline in Profit MarginIncreasing number of competitive products Competition from smaller companiesStrong increase in R & D for better versionsCost economies used upDecline in product distinctivenessDealer apathy Innovator loyalty waiver

Surviving firms will seek to prolong the mature phase using one of four basic strategies:

An offensive or take-off strategyA defensive strategyA recycle strategyA stretching and harvesting strategy.Offensive strategies include:

RemerchandizingNew useReformulationProduct improvementMarket extensionProduct line extensionA defensive strategy usually involves incentives to intermediaries and end users (price cuts, promotions etc.) which reinforce customer loyalty and make the market less attractive to new entrants.Recycling strategies usually involve attemptsto reposition the product, usually with a newmarket segment, so as to initiate a newgrowth cycle. Stretching and harvesting strategies usuallyinvolve some form of reformulation orproduct line extension Extending Product Life Cycle

Active product policyLong term plan designed to infuse new life into productWider viewManaging the relationshipStrengthen account management practices.Augment the product.Improve customer service.Lower prices.

Customer Relationship Management - problemsImplementing CRM before creating a customer strategyRoll out CRM before changing your organization to matchAssuming that CRM technology is betterStalking, not wooing customers