Innovation Management

Product and Brand Strategy

Kevin O’Brien

Learning Objectives

Appreciate the importance of product and brand strategy in competitive markets

Identify alternative product strategies Examine the concept of product

platforms Introduce issues of product portfolio

management

Marketing Strategies

Strategy Product Price Distribution Promotion

Undifferentiated Standardised Low Intensive Mass

Differentiated Different for each market segment

What the market will bear

Extensive Targeted by segment

Concentrated Customised Premium Highly selective

Direct

Product-Based Competition

Five basic strategies: Product proliferation (e.g. Sony, Honda)

Many new products simultaneously or in close succession

Market response determines support Cover all segments & block new entrants

Value (e.g. Toyota/Lexus) New quality/cost trade-off curves Continuous improvement/re-engineering Re-thinking the business system

(Deschamps & Nayak, 1995)

Product-Based Competition

Design (e.g. Braun, Harley-Davidson) Aesthetics, touch, ease of use etc. Engineering design + aesthetic design

Innovation (e.g. Canon, 3M, Merck) Technological & marketing innovation Market pioneers/fast-followers Radical/incremental innovation

Service (e.g. Otis Elevators, SAS) Customer relations, physical distribution, after-

sales service

(Deschamps & Nayak, 1995)

Product Differentiation

Form size, shape, physical

structure Features

supplements basic function

e.g. car CD player, trim level, child seats

Performance quality appropriate to target

market and competitor performance levels

Conformance quality each product identical,

meets the promised specification & performance

Durability expected operating life balanced with

technological obsolescence

Reliability probability of

malfunction/failure Repairability

ease of repair, cost, technical support

Style aesthetics – look and feel distinctive and difficult to

copy

(Garvin, 1987)

Product Planning

What are the strategic goals for new products? What product development projects will be

undertaken? What will be the portfolio of projects?

New product platforms Derivatives of existing platforms Incremental improvements to existing products Fundamentally new products (discontinous)

What will be the timing and sequence of projects? What will be the balance of risk? Considers opportunities from marketing, R&D,

customers, project teams, competitor analysis etc….. Regularly updated to reflect competitive environment

Differentiation vs Standardisation

Key questions: How to deliver distinctive products to market whilst

building on core capabilities and conserving development, production and marketing resources?

How to balance the needs of high volume manufacturing/service delivery with the needs of individual customers?

Product platforms: Shared components, production processes,

knowledge, people & relationships Brand platforms:

Brand extensions, products conform to brand strategy

(Robertson & Ulrich, 1998)

Product Platforms

Research &technologyactivities

Platform A

Platform B

B1

B2

B3

Competitorproduct

Competitorproduct

Productpositioning

Competitorproduct

Competitorproduct

Time

Internal organisational activities External market

Development ofProduct platforms

Derivativeproductdevelopment

(Trott, 2005, p358)

Product Platforms

ProductPrice

Generic StrategyOverall cost leadership Differentiation

Low

High

Skoda Oktavia

Seat Leon

VW Golf

Audi A3

Audi TT

VAG Inter-firm Product Platform Development

Product Platforms

The benefits of product platforms include: Increased product variety and ability to serve

multiple market segments (mass customisation) Greater speed to market Improved management of demand and uncertainty Accommodating differential technology change Reducing production costs Supports late-stage differentiation of products Reduces service infrastructure requirements Greater speed and efficiency in technological

learning and knowledge creation

(Sanchez, 1999)

Brands and Products

Product item

africa mirage java tempest oriental nevada

Body spray

Shower gel

Aftershave

Roll-on deodorant

Deodorant stick

Aftershave gel

The Lynx brand

Fragrance

Portfolio Management

Low Market Newness High Market Newness

Low Product

Newness

Improvements to existing products

(35%)

Additions to existing product lines

(20%)

Medium Product Newness

Cost reductions

(20%)

New product lines

(15%)

High Product

Newness

Repositioning

(6%)

New-to-the-world products

(4%)

Strategic portfolio model for one SBU in Exxon Chemical:

(Adapted from Cooper et al., 1997)

Portfolio Management

Enhancements

Next generation/platform

Breakthrough

L

A

H K

G F

J

BI E

C D

Extent of Product ChangeLarge Small

Ext

ent

of

Pro

cess

Ch

ang

e

Small

Large

Portfolio diagram used by a division of Hewlett-Packard:

Size of bubble = size of project (Englund & Graham, 1999)

Product Replacement Strategies

No change

Remerchandising RelaunchConspicuoustechnologicalsubstitution

Intangiblerepositioning

Tangiblerepositioning

Neo-innovation

FaceliftInconspicuoustechnologicalsubstitution

Product

Mar

keti

ng

Remix

No change

Nochange

New/marketsegment

Technologychange

Modified

(Saunders & Jobber, 1994)

Product Turnover

Evidence from innovative industry (laser printers): High levels of competition speed product exit and

delay product entry Firms with high market share keep products on the

market for longer than those with lower share Innovative firms bring products to market more

frequently but withdraw products at average rates Firms with strong brands tend to introduce few

products and withdraw their products slowly

(Figueiredo & Kyle, 2006)

Product Turnover

Entry: AverageExit: Average

STAGNATOR

Entry: LowExit: Slow

MARKETER

Entry: HighExit: Average

INNOVATOR

Entry: HighExit: Slow

PRODUCTPROLIFERATOR

No Yes

No

Yes

Firm with strong brand?

Inn

ova

tive

firm

?

(Figueiredo & Kyle, 2006)

References

Cooper, R.G., Edgett, S.J. and Kleinschmidt, E.J. (1997) Portfolio management for new products, Hamilton Ontario: McMaster University.

Deschamps, J-P. and Nayak, P.R. (1995) Product Juggernauts, Boston: Harvard Business School Press.

Englund, R.L. and Graham, R.J. (1999) From experience: linking projects to strategy, Journal of Product Innovation Management, 16(1), 52-64.

Figueiredo, J.M de and Kyle, M.K. (2006) Surviving the gales of creative destruction: the determinants of product turnover, Strategic Management Journal, 27, 241-264.

Garvin, D.A. (1987) Competing on the eight dimensions of quality, Harvard Business Review, Nov-Dec, 101-109.

Robertson, D. and Ulrich, K. (1998) Planning for product platforms, Sloan Management Review, Summer, 19-31.

Sanchez, R. (1999) Modular architectures in the marketing process, Journal of Marketing, 63 (Special Issue), 92-111.

Saunders, J. and Jobber, D. (1994) Product replacement strategies: occurrence and concurrence, Journal of Product Innovation Management, 11(5), 433-450.

Trott, P. (2005) Innovation management and new product development, Harlow: FT Prentice Hall.