Product Strategy

Session 5
Product strategy begins with a strategic vision
that states
where a company wants to go,
how it will get there, and
why it will be successful.

Product strategy is like a roadmap, and like a

roadmap its useful only when you know where
you are and where you want to go.

(McGrath 2001)
 What is a Product?
Anything that can be offered to a market for attention,
acquisition, use, or consumption and that must satisfy a want or
need.
Includes: physical objects, services, events, persons, places,
organizations, ideas, or some combination thereof.
Banking Product: Any satisfaction the customers gets from the
performance of the Banks Services.
Two extreme definition of bank-product might be:
Each individual service the bank offers!
the entire banking service the bank offers!

Thus bank-product might be the service or the package of

services that
is typically provided for any one customer by one bank only, and
is aimed at a particular market
Levels of a Product

Banks are in the business

of marketing cash security,
cash accessibility,
monetary transfers, and
time to enable customers
wants to be satisfied today
without waiting until
tomorrow.
 Product Strategy
Product Hierarchy (how products relate)
need - core need FC
product family - all products satisfying a core need L
product class - functional coherence within family CL
product line - closely related within a class STL
{same customers, outlets, prices}
product type - different forms of same product 30D
brand - one manufacturers offering EBL30

item - one unit within a brand

Product and Service Decisions

Key Decisions Product attributes

Quality, features, style, design
Individual Product Branding
Product Line Packaging
Labeling
Product Mix
Product support services
Product and Service Decisions

Key Decisions Product line length

Line stretching: adding
products that are higher or
Individual Product lower priced than the existing
line
Product Line Line filling: adding more items
Product Mix within the present price range
Product line width:
number of different product
lines carried by company
Product line depth:
Number of different versions
of each product in the line
Product and Service Decisions

Key Decisions
Product line consistency
how closely related the
Individual Product various lines are in terms of
Product Line production and/or marketing.
Product Mix
Strategic Reason for Product Development
In a competitive market where businesses have easy access
and profits are worth while pursuing, the market will be lively &
active
but at the end of the day the profit will decline and the market
will be less attractive
also consumers have different and ever-changing tastes &
habits that can quickly change the demand for a product
to overcome these, like any other businesses banks need to
continuously develop products, through either of the ways:
adding new services to the range
recombining and repackaging services
modifying or extending existing services
some combination of the above
 Challenges of Service Design
As services are intangible, they are difficult to communicate. While
delivered over a long period of time, their complexity increases.
Also as they are delivered by employees, they are heterogeneous.
People frequently use words to describe thus creates four risks:
Oversimplification
Words are simply inadequate to describe a whole complex service
system
Portfolio Mgt as buying & selling stocks is like space shuttle as
something that flies: a bird/helicopter/angel
Incompleteness
Omitting unfamiliar details/elements of services.
Subjectivity
Biased by personal experience & degree of exposure
Different depts staffs may describe the same service differently
Biased Interpretation
No two people will define responsive or flexible in exact same way.
 Product Development Strategies
A number of options open to the bank:
1. The Expansion Strategy:
This consists of the expansion of the services offered
within the core banking service, with the aim of
increased cross-selling. The logical outcome of this
strategy is the development of one-stop-financial center.

2. The Differentiation Strategy:

This involves dividing the core banking service range
into packages of services aimed at chosen market
segments, with the aim of increasing market share in
these segments at the expense of competitors.
 Product Development Strategies
3. The Satellite Product and Janus Product Strategies:
The Satellite Product Strategy involves the creation
of separate, stand-alone products, marketed independently
of the core account, with the aim of generating sales to
non-account holders without requiring that these switch or
open an account.

The Janus product strategy is an extension of

satellite product strategy where the same services or the
package of services are marketed both as stand-alone
product to non-account holders and as elements of the
core banking service for cross-sale to existing customers.
Product/Market Expansion Grid
Four strategies recommended for Growth in business and profit:
Current Customers New Customers

Existing Market Market

Services Penetration Development
A B

New Service
Diversification
Services Development
D
C
 Product/Market Expansion Grid
1. Market Penetration
increasing the current rate of usage of a product
attracting competitors customers
attracting non-users of a product

2. Market Development
increasingmarketing effort for existing products in
new markets by
either attracting new customers for existing
products
or expanding areas (branch expansion policy)
3. New Bank-Product Development
Development of original products, product improvements,
product modifications, and new brands through the Banks own
R&D efforts.
Can be developed for completely new markets, old markets and
adapted markets
New products are needed
to extend the product life-cycle,
to take advantage of growth markets,
to reverse a trend in loss market share,
to be and remain a brand-leader
Example: product/services innovation, accepting lower risk
services, specialization etc.
can be obtained via acquisition or development.
Usually suffer from high failure rates having several reasons for
so.
Usual Process of Product Development
Idea Generation and Screening
Potential for new product
Selecting a new product from number of options
determine acceptability by Bank
determine acceptability by Customers
determine the price
determine advertising position
decide as most effective method of promotion
properly timed launching of new product
 4. Diversification

The bank may follow a policy to conglomerate

growth or diversification by establishing services
(where regulations permit) that are clearly outside
the normal scope of commercial bank-operations,
but that are complementary and are likely to further
the use of other bank services.

Example: Travel agency operations, insurance, real

estate and housing services etc.
 Product Life-Cycle Strategies
The Typical Product Life Cycle (PLC) Has Five Stages
Sales and
Profits (Tk.)

Sales

Profits

Time
Product Introduction Growth Maturity Decline
Develop-
ment

Losses/
Investments (Tk.)

Not all products follow this cycle!!

Product Life-Cycle Strategies

PLC Stages Begins when the Bank

develops a new-product
Product development idea
Introduction Sales are zero
Growth
Investment costs are high
Maturity
Decline
Profits are negative
Product Life-Cycle Strategies

PLC Stages Low sales

High cost per customer
Product development acquired
Introduction Negative profits
Growth Innovators are targeted
Maturity Little competition
Decline
 Marketing Strategies:
Introduction Stage

Product Offer a basic product

Price Use cost-plus basis to set
Marketing Objectives Create product awareness and
trial
Distribution Build selective distribution
Advertising Build awareness among early adopters
and dealers/resellers
Sales Promotion Heavy expenditures to create trial
Product Life-Cycle Strategies

Rapidly rising sales

PLC Stages Average cost per
customer
Product development
Rising profits
Introduction
Early adopters are
Growth
targeted
Maturity
Growing competition
Decline
Product/services are
fine-tuned
Marketing Strategies:
Growth Stage

Product Offer product extensions, service, warranty

Price Penetration pricing
Marketing Objectives Maximize market share
Distribution Build intensive distribution
Advertising Build awareness and interest in the mass
market
Sales Promotion Reduce expenditures to take advantage
of consumer demand
Product Life-Cycle Strategies

PLC Stages Sales peak

Low cost per customer
Product development High profits
Introduction Middle majority are
Growth targeted
Maturity Competition begins to
Decline decline
 Marketing Strategies:
Maturity Stage
Product Diversify brand and models
Price Set to match or beat competition
Marketing Objectives Maximize profit while
defending market share
Distribution Build more intensive distribution
Advertising Stress brand differences and benefits
Sales Promotion Increase to encourage brand
switching
Product Life-Cycle Strategies

PLC Stages Declining sales

Low cost per customer
Product development Declining profits
Introduction Laggards are targeted
Growth Declining competition
Maturity
Decline
 Marketing Strategies: Decline
Stage

Product Phase out weak items

Price Cut price
Marketing Objectives Reduce expenditure and
get the most out of the brand
Distribution Use selective distribution: phase out
unprofitable outlets
Advertising Reduce to level needed to retain
hard-core loyalists
Sales Promotion Reduce to minimal level
 Product Mix Management
A branch manager typically manages to market a number of
different products which are in different stages of their life-cycle.
This needs manage a good mix of the products as:
there is an ever growing number of new products each requiring
the development of specific marketing plans to manage them
through their life-cycle
the manager needs to prioritize the products with respect to
resources available in the branch to be allocated toward their
management
the manager needs to market an existing product with a newer one
as they are so related

The branch manager should review the matrix once in every 3-

months as its his job to manage these moves rather let time,
competition and environmental changes do it for him.
Product Portfolio
Relative Competitive Position
Strong (Mkt Share) Weak
High
Stars Question Marks
Market Attractiveness

A Selected Few Rest Divest

(Growth Rate)

Cash Cows Dogs Liquidate

Low
BCG Growth-Share Matrix, 1970
 Managing the Mix of Products
Question marked products are branch
managers dilemma
a push may convert it to a star
Examples may be of professional loan or loans for
CNG Conversion etc.

Stars are the products making an important

contribution to the branch business in a growing
market, having
having very high potentials
Examples may be of cash/fund management of
different organization by the bank, Islamic banking
products, Credit cards etc.
 Managing the Mix of Products
Cash Cows often forms the core of the business
they are always in demand
produces high revenue in a stable market
not supports itself but allows R&D in new opportunities
Examples may be of saving deposits, current accounts,
short term deposits, trade services etc.
Dogs are the products mostly on decline stage having
a little potentiality
Examples may be of fixed deposits, consumer loan linked
deposit schemes etc.
can absorb part of the cost of branch operation
might attract customers who might then be attracted to more
profitable services
 Branding
Brand is something emotional, psychological having an added
dimension created over the years often with the help of creative
and imaginative advertising.
brands are not just products, but creating, maintaining,
protecting, and enhancing products.
A brand is a name, term, sign, symbol, or design, or a
combination of these, that identifies the maker or seller of a
product or service.
Marketing is at its peak when powerful brands are created
Brand Equity is the positive differential effect that the brand
name has on customer response to the product or service.
Provides:
More brand awareness and loyalty
Basis for strong, profitable customer relationships
 A Brand Name for a Bank-product
Usually for banks, the brands are by the name of the
bank itself may be because
various products offered differed little between banks, thus
the point of difference is through the name of the bank.
of the need to reassure the strength & viability of the bank
While selecting a brand name, a bank should:
choose a short and simple one
prefer one that is easy to pronounce & remember
avoid confusing or negative connotations
ensure that it suits the characteristics of the product
market
if the banks name is highly established and accepted
the brand name should include that (banks name) like
Citicard or ICB Mutual Fund
 Beneficial to both Bank & Customers
To Customers To the Bank
ensures repeat sales through
dependable guides to
identification
contents, processes,
ensures product stability
qualities etc.
through customer loyalty
feasible & convenient
helps segmenting market
shopping
higher revenue for branded
assured satisfaction
items
symbol of status shields from price competition
if successful, adds to the
corporate image of the Bank