Product strategies specify market needs that may be served by different product offerings. It is a company’s product strategies, duly related to market strategies, that eventually come to dominate both overall strategy and the spirit of the company. Product strategies deal with such matters as number and diversity of products, product innovations, product scope, and product design. In this article, different dimensions of product strategies are examined for their essence, their significance, their limitations, if any, and their contributions to objectives and goals. Each strategy will be exemplified with illustrations from marketing literature.

DIMENSIONS OF PRODUCT STRATEGIES The implementation of product strategies requires cooperation among different groups: finance, research and development, the corporate staff, and marketing. This level of integration makes product strategies difficult to develop and implement. In many companies, to achieve proper coordination among diverse business units, product strategy decisions are made by top management. At Gould, for example, the top management decides what kind of business Gould is and what type it wants to be. The company pursues products in the areas of electromechanics, electrochemistry, metallurgy, and electronics. The company works to dispose of products that do not fall strictly into its areas of interest. In some companies, the overall scope of product strategy is laid out at the corporate level, whereas actual design is left to business units. These companies contend that this alternative is more desirable than other arrangements because it is difficult for top management to deal with the details of product strategy in a diverse company. In this article, the following product strategies are recognized:

• Product-positioning strategy

• Product-repositioning strategy

• Product-overlap strategy

• Product-scope strategy

• Product-design strategy

• Product-elimination strategy

• New-product strategy

• Diversification strategy

• Value-marketing strategy Each strategy is examined from the point of view of an SBU.

PRODUCT-POSITIONING STRATEGY

The term positioning refers to placing a brand in that part of the market where it will receive a favorable reception compared to competing products. Because the market is heterogeneous, one brand cannot make an impact on the entire market. As a matter of strategy, therefore, a product should be matched with that segment of the market in which it is most likely to succeed. The product should be positioned so that it stands apart from competing brands. Positioning tells what the product stands for, what it is, and how customers should evaluate it. Positioning is achieved by using marketing mix variables, especially design and communication. Although differentiation through positioning is more visible in consumer goods, it is equally true of industrial goods. With some products, positioning can be achieved on the basis of tangible differences (e.g., product features); with many others, intangibles are used to differentiate and position products. As Levitt has observed: Fabricators of consumer and industrial goods seek competitive distinction via product features some visually or measurably identifiable, some cosmetically implied, and some rhetorically claimed by reference to real or suggested hidden attributes that promise results or values different from those of competitors’ products. So too with consumer and industrial services what I call, to be accurate, “intangibles.” On the commodities exchanges, for example, dealers in metals, grains, and pork bellies trade in totally undifferentiated generic products. But what they “sell” is the claimed distinction of their execution the efficiency of their transactions in their client’s behalf, their responsiveness to inquiries, the clarity and speed of their confirmations, and the like. In short, the offered product is differentiated, though the generic product is identical. The desired position for a product may be determined using the following procedure:

1. Analyze product attributes that are salient to customers.

2. Examine the distribution of these attributes among different market segments.

3. Determine the optimal position for the product in regard to each attribute, taking into consideration the positions occupied by existing brands.

4. Choose an overall position for the product (based on the overall match between product attributes and their distribution in the population and the positions of existing brands). For example, cosmetics for the career woman may be positioned as “natural,” cosmetics that supposedly make the user appear as if she were wearing no makeup at all. An alternate position could be “fast” cosmetics, cosmetics to give the user a mysterious aura in the evenings. A third position might be “light” cosmetics, cosmetics to be worn for tennis and other leisure activities. Consider the positioning of beer. Two positioning decisions for beer are light versus heavy and bitter versus mild. The desired position for a new brand of beer can be determined by discovering its rating on these attributes and by considering the size of the beer market. The beer market is divided into segments according to these attributes and the positions of other brands. It may be found that the heavy and mild beer market is large and that Stroh and Budweiser compete in it. In the light and mild beer market, another big segment, Miller and Anheuser- Busch are the dominant competitors. Management may decide to position a new brand in competition with Miller Lite and Bud Light. Disney stores demonstrate how adequate positioning can lead to instant success. 3 Disney stores earn more than three times what other specialty stores earn per every square foot of floor space. Disney has created retail environments with entertainment as their chief motif.

As a customer enters the store, he/she sees the Magic Kingdom, a land of bright lights and merry sounds packed full of Mickey Mouse merchandise. From a phone at the front of each store, a customer can get the Disney channel or article a room in a Disney World hotel. Disney designers got down on their hands and knees when they laid out the stores to be sure that their sight lines would work for a three-year-old. The back wall, normally a prime display area, is given over to a large video screen that continuously plays clips from Disney’s animated movies and cartoons. Below the screen, at kid level, sit tiers of stuffed animals that toddlers are encouraged to play with. Adult apparel hangs at the front of the stores to announce that they are for shoppers of all ages. Floor fixtures that hold the merchandise angle inward to steer shoppers deeper into this flashy money trap. Managers spend six weeks in intensive preparatory classes and training before being assigned to a store. Garnished with theatrical lighting and elaborate ceiling displays, the stores have relatively high start-up and fixed costs, but once up and running, they earn high margins. Six different approaches to positioning may be distinguished:

1. Positioning by attribute (i.e., associating a product with an attribute, feature, or customer benefit).

2. Positioning by price/quality (i.e., the price/quality attribute is so pervasive that it can be considered a separate approach to promotion).

3. Positioning with respect to use or application (i.e., associating the product with a use or application).

4. Positioning by the product user (i.e., associating a product with a user or a class of users).

5. Positioning with respect to a product class (e.g., positioning Caress soap as a bath oil product rather than as soap).

6. Positioning with respect to a competitor (i.e., making a reference to competition, as in Avis’s now-famous campaign: “We’re number two, so we try harder.”). Two types of positioning strategy are discussed here: single-brand strategy and multiple-brand strategy. A company may have just one brand that it may place in one or more chosen market segments, or, alternatively, it may have several brands positioned in different segments.

Positioning a Single Brand

To maximize its benefits with a single brand, a company must try to associate itself with a core segment in a market where it can play a dominant role. In addition, it may attract customers from other segments outside its core as a fringe benefit. BMW does very well, for example, positioning its cars mainly in a limited segment to high-income young professionals. An alternative single-brand strategy is to consider the market undifferentiated and to cover it with a single brand. Several years ago, for example, the Coca-Cola Company followed a strategy that proclaimed that Coke quenched the thirst of the total market. Such a policy, however, can work only in the short run. To seek entry into a market, competitors segment and challenge the dominance of the single brand by positioning themselves in small, viable niches. Even the Coca-Cola Company now has a number of brands to serve different segments: Classic Coke, Diet Coke, Fanta, Sprite, Tab, Fresca, and even orange juice. Consider the case of beer. Traditionally, brewers operated as if there were one homogeneous market for beer that could be served by one product in one package.

Miller, in order to seek growth, took the initiative to segment the market and positioned its High Life brand to younger customers. Thereafter, it introduced a seven-ounce pony bottle that turned out to be a favorite among women and older people who thought that the standard 12-ounce size was simply too much beer to drink. But Miller’s big success came in 1975 with the introduction of another brand, low-calorie Lite. Lite now stands to become the most successful new beer introduced in the United States in this century. To protect the position of a single brand, sometimes a company may be forced to introduce other brands. Kotler reports that Heublein’s Smirnoff brand had a 23 percent share of the vodka market when its position was challenged by Wolfschmidt, priced at $1 less a bottle. Instead of cutting the price of its Smirnoff brand to meet the competition, Heublein raised the price by one dollar and used the increased revenues for advertising. At the same time, it introduced a new brand, Relska, positioning it against Wolfschmidt, and also marketed Popov, a low-price vodka. This strategy effectively met Wolfschmidt’s challenge and gave Smirnoff an even higher status. Heublein resorted to multiple brands to protect a single brand that had been challenged by a competitor. Anheuser-Busch has been dependent on Bud and Bud Light for more than two-thirds of its brewery volume and for over half of its sales revenues. It was this dependence on a single brand that led the company to introduce Michelob. This brand, however, is not doing as well as expected, and at the same time, rivals are showing signs of fresh energy and determination, making it urgent for the company to diversify.

Whether a single brand should be positioned in direct competition with a dominant brand already on the market or be placed in a secondary position is another strategic issue. The head-on route is usually risky, but some variation of this type of strategy is quite common. Avis seemingly accepted a number two position in the market next to Hertz. Gillette, on the other hand, positioned Silkience shampoo directly against Johnson’s Baby Shampoo and Procter & Gamble’s Prell. Generally, a single-brand strategy is a desirable choice in the short run, particularly when the task of managing multiple brands is beyond the managerial and financial capability of a company. Supposedly, this strategy is more conducive to achieving higher profitability because a single brand permits better control of operations than do multiple brands. There are two requisites to managing a single brand successfully: a single brand must be so positioned that it can stand competition from the toughest rival, and its unique position should be maintained by creating an aura of a distinctive product. Consider the case of Cover Girl. The cosmetics field is a crowded and highly competitive industry. The segment Cover Girl picked out sales in supermarkets and discount stores is one that large companies, such as Revlon, Avon, and Estee Lauder, have not tapped. Cover Girl products are sold at a freestanding display without sales help or demonstration. As far as the second requisite is concerned, creating an aura of a distinctive product, an example is Perrier. It continues to protect its position through the mystique attached to its name. In other words, a single brand must have some advantage to protect it from competitive inroads.

Positioning Multiple Brands

Business units introduce multiple brands to a market for two major reasons: (a) to seek growth by offering varied products in different segments of the market and (b) to avoid competitive threats to a single brand. General Motors has a car to sell in all conceivable segments of the market. Coca-Cola has a soft drink for each different taste. IBM sells computers for different customer needs. Procter & Gamble offers a laundry detergent for each laundering need. Offering multiple brands to different segments of the same market is an accepted route to growth. To realize desired growth, multiple brands should be diligently positioned in the market so that they do not compete with each other and create cannibalism. For example, 20 to 25 percent of sales of Anheuser-Busch’s Michelob Light are to customers who previously bought regular Michelob but switched because of the Light brand’s low-calorie appeal. The introduction of Maxim by General Foods took sales away from its established Maxwell House brand. About 20 percent of sales of Miller’s Genuine Draft beer come from Miller High Life. Thus, it is necessary to be careful in segmenting the market and to position the product, through design and promotion, as uniquely suited to a particular segment. Of course, some cannibalism is unavoidable. But the question is how much cannibalism is acceptable when introducing another brand. It has been said that 70 percent of Mustang sales in its introductory year were to buyers who would have purchased another Ford had the Mustang not been introduced; the remaining 30 percent of its sales came from new customers. Cadbury’s experience with the introduction of a chocolate bar in England indicates that more than 50 percent of its volume came from market expansion, with the remaining volume coming from the company’s existing products. Both the Mustang and the chocolate bar were rated as successful introductions by their companies.

The apparent difference in cannibalism rates shows that cost structure, degree of market maturity, and the competitive appeal of alternative offerings affect cannibalism sales and their importance to the sales and profitability of a product line and to individual items. An additional factor to consider in determining actual cannibalism is the vulnerability of an existing brand to a competitor’s entry into a presumably open spot in the market. For example, suppose that a company’s new brand derives 50 percent of its sales from customers who would have bought its existing brand. However, if 20 percent of the sales of this existing brand were susceptible to a competitor’s entry (assuming a fairly high probability that the competitor would have indeed positioned its new brand in that open spot), the actual level of cannibalism should be set at 30 percent. This is because 20 percent of the revenue from sales of the existing brand would have been lost to a competitive brand had there been no new brand. Multiple brands can be positioned in the market either head-on with the leading brand or with an idea. The relative strengths of the new entry and the established brand dictate which of the two positioning routes is more desirable. Although head-on positioning usually appears risky, some companies have successfully carried it out. IBM’s personal computer was positioned in head-on competition with Apple’s. Datril, a Bristol-Myers painkiller, was introduced to compete directly with Tylenol. Positioning with an idea, however, can prove to be a better alternative, especially when the leading brand is well established. Positioning with an idea was attempted by Kraft when it positioned three brands (Breyers and Sealtest ice cream and Light ‘n’ Lively ice milk) as complements rather than as competitors. Vick Chemical positioned Nyquil, a cold remedy, with the idea that Nyquil assured a good night’s sleep.

Seagram successfully introduced its line of cocktail mixes, Party Tyme, against heavy odds in favor of Holland House, a National Distillers brand, by promoting it with the Snowbird winter drink. Positioning of multiple brands and their management in a dynamic environment call for ample managerial and financial resources. When these resources are lacking, a company is better off with a single brand. In addition, if a company already has a dominant position, its attempt to increase its share of the market by introducing an additional brand may invite antitrust action. Such an eventuality should be guarded against. On the other hand, there is also a defensive, or sharemaintenance, issue to be considered here even if one has the dominant entry. A product with high market share may not remain in this position forever if competitors are permitted to chip away at its lead with unchallenged positions. As a strategy, the positioning of multiple brands, if properly implemented, can lead to increases in growth, market share, and profitability.