Most Companies are in business because their owners and managers hope to make profits. They accomplish this objective through utilizing marketing skills in matching products with markets and in effecting ownership transfers. Here we will deal with product-market strategies in the attempts to improve their profitability. There are two main ways to increase a company’s profits,
- (i) through increasing the sales volume, and
- (ii) through reducing its costs.
Newly organized firms, mostly, seek increasing profits through growth in sales. As a company grows or as its size tends to stabilize, its management devotes increasing attention to the search for greater profits, not only through further sales growth but through improving marketing effectiveness and reducing costs. All this may be effected through developing product-marketing strategies. A company does not continue to produce the same line of product and it cannot afford to do so indefinitely. In this context, the relevance of product-market strategy arises.
Different Approaches of Product Marketing Strategies
Here are different combinations of product-market strategies that a company might use to improve its profitability. Each product strategy is connected with some market strategy-neither type can be set without having important implications for the other. Here we are to deal with interactions of each product strategy with each market strategy, a total of different combinations. As we study further, it will be better to refer to this.
1. Product Change-No Market Change: This is latest complex product-market strategy. It is done in two ways : (a) Simplifying the product’s design. (b) Altering the amount of integration in the products manufacturing or marketing. Both seek to improve profitability chiefly through cost reduction and both involve selling essentially the same product to the same market.
2. No Product Change Improved Market: This aims at improving the product’s market and increasing the profitability of firm by increasing sales to present markets. The process of re-merchandising is directed towards making the product more saleable. Re-merchandising, in other words, leaves basic features of the physical product unchanged but makes changes in the accompanying services.
3. No Product Change-New Market: This is significant for companies with products already in, or about to enter, the market maturity stage in the life cycle. Here, industry sales tend to reach the pack and gradually fall off, but some companies explore the possibility of rejuvenating the product’s sales and profit growth rates through finding new markets. While searching for new markets for a product that is approaching, or has already reached, the saturation levels in its present market, management should consider both (i) possible new users, and (ii) possible new uses.
4. Product Change—No Market Change: This strategy has the following three approaches (a) Product line simplification and product discontinuation. (b) New models, and (c) Planned obsolescence. Strategies involving product line simplification and product discontinuation envisage profit increases through cost reductions. Those bringing new models or planned obsolescence seek profit increases through increased sales volume.
5. Product Change—Improved Market: Two main types (i) Product customization (ii) Product Systems. Both aim to improve profitability through increasing sales volume.
6. Product Change—New Market: This seeks increased profitability through additional sales volume generated by changing certain features of the product and selling it to a new market segment. Very few products wholly satisfy the needs of more than one market segment. So companies, often, must change certain product features to match than better with the individualized needs of a few target market segments. Trading up and trading down are the chief forms of the strategy.
7. New Product No Market Change: This seeks increased profitability through selling a new product to the same market segment, the new product replacing an older product sold for the same general purpose. Thus, ‘Product replacement’ strategy aims at retaining the sales level now coming from a certain market segment where the sales of old product are in danger due to competitor’ s new product serving the same users. For companies having product in the market maturity stage, new products should be ‘waiting in the wings’ ready for market introduction at the proper time.
8. New Product—Improved Market: This means increasing profitability through adding sales volume gained from new products sold to the same market segments. Often, the new products are extensions of the present product line. Sometimes, the new products are members of related product lines sold to the same market segments as present products.
9. New Product-New Market: This seeks to increase profitability through greater sales volumes obtained from selling new products in new markets. In this way, it involves product-mix diversification-selling unrelated product lines to entirely different markets. Companies adopt this policy for certain reasons such as unexpected research break-through or discoveries of profitable opportunities for developing products for new markets.