Marketing Planning - How could you get there with Product?
So - this must be step 3b (you can read the others on the earlier blogs, and summarised here). The first of our 4 Ps to tackle in our planning is product. Before I go any further can we agree to use the word PRODUCT when we might mean SERVICES? It makes the language and writing simpler to follow!
Products are what you sell to your customers in order to generate revenue - and you define exactly what that product comprises in terms of functions, delivery, terms & conditions etc. There are a myriad of ways you can specify and differentiate your service from others in the same market.
If you've done your competitive analysis well you'll have a good idea of how you match up against the competition and which aspects customers value most so that you can determine where you can flex the options in the product anatomy (see right) to make yourself stand out.
You need to know what products you offer, of course, in order to be able to describe your portfolio (see more below). So I suggest you list those out now. Our definition of a product is:
Anything you can describe with a value proposition and which you aim to sell to a particular customer segment.
Remember - in this step we are seeking to answer the question 'how could you get there' in relation to the objectives you have set. Let's assume that, in common with most businesses, you have an objective to grow. The growth targets may be modest, but standing still is generally not an option as it is all too easy to slide backwards. Your objectives may be to sell more of a more profitable service or to sell more in a more profitable market.
Companies have four directional options in searching for growth. These are presented in a 2x2 matrix developed by strategist Igor Ansoff. It is called, not unsurprisingly, Ansoff’s Matrix!
Ansoff identified that companies can either sell more of existing products or launch new products. They can sell into existing markets or into new markets. This creates 4 strategic options:
Market Penetration – selling more of the existing products into the existing market.
Market Development – selling existing products into new markets.
Product Development – selling new product into existing markets
Diversification – selling new products into new markets.
Generally the further to the bottom right you are moving, the more challenges that exist in successfully executing the strategy since there are more unknowns.
Building on your understanding of your strategic direction you can analyse further what specific options you might want to take to develop your products.
There are 4 key questions you should be asking yourself about your portfolio:
- Are there products I am selling that I shouldn’t?
- Can I change my products to increase sales or profitability?
- What products should I be selling next year?
- Are there products I should be selling that I’m not?
There are two main ways to create future revenue from a product perspective – two forms of product development:
- launch new products – the new products can be aimed at the same or different needs or segments. It is sometimes argued that new products may cannibalise (take business away from) mature products. The simple response to this is that it’s better to eat your own lunch than let someone else do it! This is an argument for careful planning NOT against innovation.
- rejuvenate existing products – some products can have new life breathed into them by developing new features/functionality/design etc. For example iPhone 3G -> iPhone 3GS -> iPhone 4.
A balanced portfolio
The idea of a balanced portfolio is really to guard against having all your eggs in one basket - the aim is to have some products that are mature enough to provide you with your main cash income now, with younger products coming through to take over as the mature ones decline.
The Boston Consulting Group (BCG) Model was developed by the Boston Consulting Group (no surprises there) as a diagnostic model. It aims to identify the action which must be taken to create a balanced portfolio. It places each product into a 2x2 matrix the position determined by the market growth rate and the market share. The size of the circle representing each product reflects the absolute revenue generated by that product.
Cash Cows are your mature products, that will decline but for now are very profitable as they need little investment. The trick is to manage them well and avoid them crossing over to the right side of the matrix!
Stars are your high growth products, still requiring some investment and ultimately destined to become Cash Cows.
Problem Children need work - you've got a low share of a high growth market so with the right action you should be able to develop another Star!
Dogs, sadly, need managing out. They are not paying for their keep and will divert valuable resources from other areas of the portfolio.
Possible product actions
Having taken a long, hard look at your product portfolio you should have a list of action that you could take to meet your objectives. Right now you don't need to decide which you will definitely do (we'll address that in 'Which way is best') but keep this list safe. Next time we'll be looking at Pricing!