1000 Business Lessons Every Businessman Must Know

Chapter 19 Product Decision-Making: Starting from Development and Using Positioning and Combination as Means (2)
The four dimensions of the product portfolio provide the basis for the company to determine its product strategy.There are four ways a company can develop its operating business.Companies can add new product lines to increase the breadth of the product portfolio.It can also extend its existing product line to become a company with a more complete product line, and can increase the variety of each product to increase the depth of product portfolio.It is also possible to make product lines more or less relevant, to open up new territories or to shrink them.

142. Product mix analysis
When analyzing product mix, the following factors are generally considered.

1. Analysis of product situation
To analyze each product of the enterprise one by one, you can use Durak's "six-level" product situation analysis method.These six levels are: first, the main product of the enterprise in the future, that is, a new product, which may also be improved from the current main product; second, the main product of the enterprise at present; The main profitable products of the enterprise; the fourth is the main product of the enterprise in the past, the product with large production and sales volume but the market is shrinking day by day;

After the enterprise judges the "situation" of all product items in the product portfolio, it decides to eliminate, retain and develop each item.The analysis of products should be combined with the research on the economic life cycle of products.

2. Product positioning analysis
Analyze the advantages and disadvantages of the company's product positioning, and put forward the idea of ​​product repositioning.

3. Product item relationship and analysis of its contribution to the enterprise

It mainly examines the overall combination of products and the impact of each product on the business operation, so as to clarify the relationship between primary and secondary in the management of product items, so that there are primary and secondary, primary and secondary support, so as to give full play to the advantages and potential of the enterprise.

4. Improvements to the Enterprise Product Portfolio
Enterprises should proceed from the actual situation and determine according to their own marketing objectives, marketing scope, marketing capabilities (human, financial, material advantages and disadvantages) and other factors.Expanding the product portfolio of an enterprise is to produce or operate more items or varieties, which can make full use of the human, material and financial resources of the enterprise and reduce the risk of operation, but at the same time it increases the complexity of the operation. Reducing the product portfolio of the enterprise means more Fewer items and more professional management are conducive to enterprises adopting advanced production technology and marketing methods, improving efficiency, reducing costs and expenses, and improving product quality and service levels. However, they have to bear a greater risk of business failure.

Therefore, relevant decision-makers of enterprises are required to be good at combining multiple items with specialization, properly handle the following contradictions, make the product portfolio of the enterprise unique, and maintain the best state through continuous adjustment.

143. Regarding the length of the product line
One of the main issues facing product line decisions is the optimal length of the product line.If profits can be increased by increasing product categories, it means that the existing product line is too short; if profits can be increased by reducing product categories, it means that the existing product line is too long.

The scheduling of product line lengths is influenced by company goals.A company that is seeking a higher market share will want to have a complete product line; at the same time, market growth will require the company to have a longer product line.If some items do not provide profit, they are ignored.A company pursuing high profits would rather have a product line consisting of "carefully selected" items.

Generally speaking, the company's product line has a tendency to continue to extend.Excess production capacity will prompt companies to develop new product lines.Sales forces and distributors also want a more comprehensive product line to meet customer needs.In order to pursue higher sales volume and profits, the company will also hope to increase the product items on the product line.

However, it must be noted that when the number of product items increases, the costs of several categories also increase accordingly.These costs include: design and engineering fees, warehousing fees, order processing fees, shipping fees, and promotional fees for new product categories.As a result, there will be calls to curb the rapid development of the product line.Due to the shortage of funds and insufficient production capacity, the top management of the company may freeze some things.Executives may ask questions about the profitability of a product line and request research on those issues.After research, a large number of loss-making product lines may be discovered, and a major effort should be made to remove these product lines from the product line in order to improve the profitability of the product line.The pattern of haphazard product line growth followed by massive product cuts will repeat itself many times over.Therefore, whether to increase the product line depends on the matching result of future benefits and possible costs.

144. Methods of increasing the length of product lines

There are four ways a company can systematically increase the length of its product line.

1. Scale down
Many companies start out with high-end products and then expand their product lines downward.The approach is usually to add some new varieties at the lower end of its product line.Sears, for example, produced a room air conditioner that sold for only $240, and General Motors produced a new "Chevrolet" car that sold for only $7000.A company's decision to expand its product line downwards may have multiple reasons, such as slow growth in the market for premium products or the use of low-end products as a tool to avoid or counter competition.

Taking the strategy of scaling down, the company will encounter some risks.New low-end products may change the company's original established image.Parker had already established the image of a manufacturer of high-end products. Later, its leadership decided to produce popular pens. This decision to expand downward caused consumers to doubt the image of Parker, thus affecting the sales of its original high-end products.

2. Scale up
This refers to companies that originally produced low-end products switching to high-end products.The reason for upward expansion is nothing more than that the manufacturer wants to have a complete product line for long-term development, or is attracted by the higher growth rate and profit margin of high-end products.

Scaling up is also risky.First of all, it will lead to the counterattack of high-end product manufacturers, and because of the original low-end image, consumers may doubt its production capacity, which will affect its market development.

3. Two-way expansion
Vendors producing mid-end products expand in both upward and downward directions.This strategy has higher requirements on the strength of the company, but the benefits of this expansion are obvious.Successful two-way expansion can enable mid-end product manufacturers to establish their market leadership.

4. Padding strategy
The expansion of this product line has no obvious upward or downward characteristics, but only increases some product items.The reason for adopting this strategy is mainly to make full use of the remaining productivity or to fill the gap in the market and prevent the invasion of competitors.

Product line reductions are also an important aspect of product line decisions.Different product categories contribute differently to corporate profits. Some product categories are even the cause of profit reduction. Such product categories should be reduced.In addition, if the company lacks production capacity or the demand is relatively tight, the company should also cut some product lines.Whether it is an increase or a reduction, it is necessary to judge the favorable or weak product items through the analysis of sales or costs.

[-]. Product life cycle
145. Product life cycle
The product life cycle refers to the whole process of a product going through growth, maturity and decline stages from being put on the market until it is eliminated by the market.

A typical product life cycle can be divided into five stages: development, introduction, growth, maturity, and decline.

1. Development period
Refers to a period of slow sales growth when a product is introduced into the market.At this stage, profits are almost non-existent because of the huge fees paid to bring the product into the market.

2. Introductory period

It means that the product has just been launched on the market, there is little popularity, and the sales growth is slow.Due to the high cost of development research and marketing, and the production batch is small, there is almost no profit, and it may even be a loss.

3. Growth period

Refers to the period when a product is quickly accepted by the market and profits increase substantially.

4. Maturity period

A period of slow sales growth because the product has been accepted by most potential buyers.In order to fight against competition and maintain the status of products, marketing expenses are increasing day by day, and profits are stable or declining.

5. Recession period

Refers to a period of increasing downward trend in sales and declining profits.

Not all products exhibit an S-shaped product life cycle.For example, the study found a "growth-decline-maturity" pattern for small kitchen equipment.

146. Marketing strategy during the product introduction period
From the product point of view, the product has been preliminarily developed and put on the market. The structure and process of the product have not yet been fully finalized, and the product needs to be further improved. At this time, it cannot be mass-produced. In addition, the sales cost is high and the product cost is high. Only Only a small number of innovators can accept this product, so sales are small, growth is slow, profit margins are low, and even losses.The sales channels are narrow and not stable enough, and the competition is not yet fierce. It is likely that only a few companies sell this product and may even be exclusive.

From the point of view of consumers, when a product appears in the market with a brand new image, only a few consumers who seek new and different products will take the lead in buying it.For most consumers, they know very little about the relevant information of this product, so they are only interested in this new product, and hope to continue to know and know it.Before they get more sufficient information about the product, they generally will not buy rashly.

Based on the above characteristics, enterprises generally adopt the following strategies during the introduction period:
(1) Focus on solving the problems that people do not know or are not familiar with the products, and do everything possible to make people familiar, so that the products they operate are tenable.One is that the product at this time is not yet firmly established, and a large number of advertisements must be made to expand the publicity of the product and establish product reputation.For an enterprise, to establish a long-term image, proper advertising is very important at this time.

(2) Using the method of auxiliary development, use the company's brand-name products or other companies' brand-name products to promote the social acceptance of new products.

(3) A trial method can be adopted.This approach is more common abroad.Recently, enterprises in our country have also begun to adopt this method, and some enterprises have achieved great success as a result.

(4) Increase discounts for wholesale, retail or other types of follow-up distribution companies to stimulate the enthusiasm of middlemen and make middlemen work harder to sell.

147. Marketing strategy in product growth period
This is the period when the product opens up the market, and it is also the period when the market needs to develop rapidly.The characteristics of this period are that the products have been basically finalized after trial sales and improvements, and new products have begun to be transferred to mass production.The vast number of consumers and users have begun to accept new products quickly, and the demand has increased. In addition, the distribution channels have been dredged, and the sales volume has increased rapidly. Mass production has reduced the production cost of unit products, and mass sales have reduced the ratio of promotional expenses to sales. , thus bringing higher profits, high profits are bound to attract more and more competitors to influx, making the competition increasingly fierce.

The marketing strategy that should be adopted at this stage should be:

(1) Expand the target market.

(2) Advertisements are shifted to brand and trademark promotion, so that people have a good impression of the product, and have a good impression and preference.

(3) Increase sales channels or strengthen sales channels.

148. Marketing strategy in product maturity stage
This is the heyday of the best-selling products. At this time, consumers have developed a sense of trust in the products and formed consumption habits. The output and sales volume of the products are the largest, and the profits are the highest.Consumers are increasingly selective about product styles, designs, varieties, and specifications. Competition among the same industry has also reached a climax. The market has begun to appear saturated, and the growth rate of sales volume has slowed down.

Marketing strategies at this stage include the following:
(1) Do everything possible to stabilize the target market, let the original consumers consume your products, and increase the loyalty of consumers to the brand, mainly adopting the strategy of stabilizing the target market.

(2) Increase product series, diversify products, increase designs, specifications, grades, expand target markets, at least maintain the original market share, and change the focus of advertising and service measures.

(3) It is necessary to focus on publicizing the reputation of the enterprise.At this time, the advertising campaign is different from the trial sales stage, and it is not possible to simply introduce a certain product.At this time, there are many similar products in the market, and if there is a slight mistake in such publicity, it will cost others advertising fees.At the same time, we must strengthen after-sales service.

(4) Develop the second generation of products to prepare for the demise of the original products. This is the foresight that enterprises should have in this period.Once this product fails, a new product will come out immediately.

149. Marketing strategy during product decline
This period is the period when the product will be eliminated from the market and the life cycle is coming to an end.Product sales growth and profits fell sharply, product inventory began to backlog, and competitors withdrew from the market one after another.

What is the strategy at this stage?A relatively common method is to transfer and withdraw from the existing market. Experienced marketers have summed up three words, which are called: "withdrawal", "transfer", and "attack".

(1) "withdrawal". "Sale sale" is a kind of "withdrawal", and "withdrawal" also needs to pay attention to methods and strategies.

(2) "Turn".It contains several meanings: one is to transfer the target market, including geographical "transfer".If there is no market in big cities, turn to small and medium-sized cities, towns and even villages. Sometimes a product is no longer popular in a certain area, but it may be filled with customers when it is transferred to another area; the second is to transfer the use of products, which is actually to find and develop products. new uses.

(3) "Attack".It refers to the introduction of new products while withdrawing from the old market.It is relatively late to launch new products at this stage, because the cash flow of the enterprise is not much at this time, and there is no continuous cash inflow compared with the mature stage. Therefore, the development of new products seems to be rushed and often powerless for the enterprise, but If you can successfully launch new products, it is also a good way to get rid of the decline period of old products.

(End of this chapter)