Product strategy is one of the components of a business plan and marketing strategy generally centered on developing a particular good and service in response to existing or forecasted market demand. The strategy is essentially a roadmap that outlines the end-to-end goals and objectives of a product. Nonetheless, within a product strategy are specific components or elements.
The Elements of a Product Strategy
It is essential to understand the major components or elements of a product strategy to develop a comprehensive roadmap for a marketable good or service. Take note of the following:
1. Research and Development
Research and development or R&D activities collectively represent a focused processed aimed at developing a new product, improving an existing good or service, or refining operational procedures and systems such as production capabilities. This process does represent not only the first stage of product strategy but also the assessment stages of the entire product lifecycle, as well as the entire lifespan of an organization.
Take note that R&D is a science-based approach. When applied to product development or improvement, it includes identifying the features and benefits of a particular good or service. Some examples of organizations notable for spending heavily on R&D activities include pharmaceutical companies, consumer electronics manufacturers, software developers, automakers, food and beverage manufacturers, and consumer packaged goods producers, among others.
It is important to highlight the fact that R&D is not only involved in the actual development or improvement of a product or operational producers and systems. Other activities within this element of product strategy include market research, situational analysis such as the SWOT model, and market testing aimed at identifying possible sources of competitive advantage and existing needs in the market or a potential market demand in the future based on progress in technology, social and industrial trends, and consumer preferences.
2. Positioning and Branding
Within the context of marketing and as one of the elements of product strategy, positioning is the process of establishing the image or identity of a product or brand in relation to the identified target market, as well as to other products or brands from competitors. Its purpose is to promote a favorable perception from the customers.
There are specific activities involved in positioning. These include the identification of the unique selling proposition based on the reevaluation of product features and benefits, target market definition, conceptualization of the central marketing message, and development of pricing strategy and tactics.
On the other hand, branding has some overlaps with positioning. However, it involves more specific activities aimed at creating a distinct identity or demonstrating the positioning of a product through outward verbal and nonverbal cues such as the brand or product name, design specifications, logo, slogans and packaging and labeling. Branding is also associated with intellectual properties such as trademark and trade dress, as well as design patent. Note that some aspects of positioning and branding can also take place within the research and development process.
3. Development of Complementary
A product strategy does not rest alone in the development of a marketable good or service. Business organizations have demonstrated the development or identification of other goods or services that can complement the newly developed or improved product.
Guarantees or warranties are examples of complementary services aimed at enhancing further the confidence of consumers toward the promised features and benefits of a product. A warranty is also a value-added service because it increases the value of a product by highlighting it as a subcomponent of positioning. Other types of value-added services include inclusions of freebies, free after-sales support, and loyalty membership and discounts, among others.
Some organizations develop or improve a product with standalone complements in mind to create a product range or product mix. An example would be a consumer electronics manufacturer that produces computers and laptops, smartphones, and corresponding accessories or peripherals. Product complements are evident in the product and business strategy of Apple. The product range of food and beverage companies, as demonstrated in the marketing strategy of Coca-Cola, is also another example.
4. Production Strategy
Manufacturing a particular good or delivering a specific service is also a critical element of the product strategy. Central to “production” strategy is the need to effectively and efficiently produce a product through sound operational procedures and systems, and production capabilities, as well as the proper integration and management of the different factors of production.
Remember that research and development can also be a subcomponent of production strategy. Hence, within this context, the goal of R&D activities is to develop systems or apply innovative solutions aimed at improving the production capabilities of an organization in consideration of time, cost, and quality.
Outsourcing is also a production strategy. Several organizations have outsourced their manufacturing requirement from other companies to reduce production costs and focus on the different aspects of their respective business activities.