Principles of Product Strategy - Assignment Example

Marketing Mix By Task Principles of Product Strategy A product strategy is generally considered as the foundation of a product life-cycle and the roadmap for further product development. The product strategy really assists firms to draw focus to the product and consumer attributes and thereby gain a great control over target audiences. The product strategy works as an important tool in strategic planning and marketing by identifying the direction of the firm’s activities. The key principles of a product strategy include keeping track of competitors, focusing on the data, identifying actual customer needs, and dedicating to the delivery of quality products (Management study Guide, n.d.). Even when marketing a product that has high demand, it is advisable for marketers to observe what competitors are doing because competitors always seek to increase their market share. In addition, it is vital to focus on the immense amount of data surrounding the product so as to formulate well-informed marketing strategies and to plan for the future effectively. Today’s consumers have good market knowledge, and hence marketers cannot meet customer satisfaction unless they identify the actual needs of consumers. Finally, production managers must deliver superior quality products as consumers have wide range of choice today. Principles of Product Major principles of product include core product, product lifecycle, and branding. Under the core product principle, a uniform core product is designed that is capable of integrating a number of standard attachments, parts, or components. The integration of these attachments to the core product benefits companies to meet the preferences of local consumers in country. It is relevant to note that the value of the core product is higher when compared to the total value of the finished product. Hence, it is clear that the core product constitutes a notable proportion of the total value of the finished product. In addition, this product approach may assist firms to take advantages of economies of scale and thereby cut down production costs. The product lifecycle principle posits that there are four major steps in the development of a product, including introduction, growth, maturity, and decline (Zimmerman & Blythe, 2013, p.173). The introduction stage is characterised with start-up sales growth, and generally firms spend more on production and marketing than what they receive in sales revenues. Sales significantly increase in the growth stage and firms begin to enjoy a positive return on their investment. In the maturity stage, the longest period of the product lifecycle, sales level off because the level of market penetration is high and revenues remain fairly constant. In the final stage (decline), the sales gradually drop and it is the point at which investment really pays off. Here, marketers seek to develop alternative uses for the product. Branding can be simply defined as the process of creating a unique name and image for a product in the consumers’ mind. Marketers commonly rely on advertising campaigns to perform this task. Through branding, firms strive to establish a differentiated presence in the market so as to attract and retain loyal customers. Task 2 Role and Importance of Pricing Strategies Pricing strategy has several roles to perform in running a business, and this strategic management tool is inevitably important to manage sales volume, profit margins, market position, and market share of the organisation. To illustrate, Toyota is the globally leading manufacturer of automobiles, and the company has its pricing strategies to gain a competitive edge over market rivals. In the perspective of the Toyota management, its pricing strategy is the crucial element influencing the firm’s sales volume. The Law of Demand justifies this relationship. Naturally, the company’s pricing strategy can determine its profit margins because higher prices lead to higher profits given that sales remain constant. In addition, the price Toyota sets for its car models would send some messages to consumers about the product, creating a perceived value. Finally, the company’s pricing strategy can directly affect its market competitiveness, leading to a subsequent gain or loss in its market share. Current pricing strategy While analysing the current pricing strategy of Toyota, it seems that the company follows the cost leadership strategy to market its products. “The cost leadership strategy is an integrated set of actions taken to produce goods or services with features that are acceptable to customers at the lowest cost, relative to those of competitors” (Hitt, Ireland & Hoskisson 2014, p.113). The authors say that companies adopting this pricing strategy market standardised goods or services having competitive levels of differentiation to the most typical customers in the industry (Ibid). It is obvious that Toyota’s automobiles maintain a superior level of differentiation and the company mainly focuses on the industry’s typical customers. Hence, this pricing strategy is really appropriate for the organisation. Alternative Pricing Strategies Market-oriented pricing, premium pricing, and penetration pricing are three alternative strategies that may be used by Toyota. Under the market-oriented pricing, the firm sets its price based upon the analysis and research of the target market (Cherunilam, 2007, p.576). The major benefit of this pricing strategy is that it considers consumers’ price perceptions. The potential challenge of this approach is that the firm practicing this strategy may fail to confront with competitors effectively (Ibid). Premium pricing is that practice of setting the price of a product unreasonably high so as to encourage favourable perceptions among potential buyers. Although this policy may generate more sales from customers who believe that costly items have high quality, it would not meet the interests of ordinary customers (MIT Sloan Management Review, 2012). Finally, penetration pricing is the practice of keeping the price of a product low initially with the objective of attracting more customers and gaining market share, and raising the price eventually. Masterson and Pickton (2010, p.373) reflect that although the penetration pricing may assist Toyota to earn more profits initially, customers are likely to become disloyal to the brand once the company raises its price. Task 3 Role and Importance of Distribution Policies A distribution policy simply refers to the management plan to move finished goods from the point of production to the point of consumption. Toyota has a well developed distribution policy to ensure the timely delivery of products to customers. A distribution strategy is the last element of executive action and a well-integrated distribution approach can contribute to more competitive market positions (Tesar & Kuada, 2013, p.72). Distribution strategies can really benefit the company to influence the way its production processes are designed and operated. Finally, the distribution policy is important for the organisation to determine the average delivery time and to regulate its operations accordingly. Current Strategy Toyota has a comprehensive distribution policy and the company’s distribution network is the largest one in Japan. As of 2009, the firm’s distribution network comprised of 290 dealers employing roughly 40,000 sales personnel and operating over 4,800 sales and services outlets (Prezi.com). Among these 290 dealers, Toyota owns 19 the remaining dealers are independent (Ibid). It is interesting to see that Toyota salespersons who visit consumers in their homes or office contribute to a considerable percent of sales in Japan. However, today Toyota gives more emphasis to showroom sales as the company management realised that modern customers have greater product knowledge. Alternative Methods The company may depend on alternative distribution methods including going online or franchising. The concept of going online is really beneficial for the company to cut down its operating expenses and to offer a more convenient shopping experience to clients. This strategy may also assist the company to get rid of physical space limitations and hence to display more number of car models. However, this distribution policy may not be practical in the case of an automobile company like Toyota because many people would like to test drive cars before they actually order it. Although the franchising approach may benefit the company to get rid of many operating risks, this distribution policy would limit the company’s control over its product sales (Tassiopoulos, 2008, pp.76-77). Task 4 Importance of Promotion Strategies To define, a promotion strategy “is an integrated programme of promotion mix elements designed to present an organisation and its products to prospective customers; to communicate need-satisfying attributes of products; to facilitate sales; and thus contribute to long-term profit performance” (Strydom, 2005, p.136). Today people have a wide range of choices and many of them have established brand preferences. Hence, promotion efforts are vital for Toyota to persuade people to influence their buying habits and to earn profits for the company. Current Strategy When it comes to the promotion strategy of Toyota, it is identified that the firm’s promotional efforts are based on traditional TV Ads and social media marketing. For instance, the company created short branded-videos in 2014 as part of its Tundra promotion and promoted these videos through paid Facebook ads (‘what small...’). In addition, the company performs extensive social media monitoring in order to be in touch with recent market trends and changing consumer preferences. The company also depends on different online campaigns to promote its products. In addition, the company relies on other common promotion methods such as advertising, sales promotions, sponsorships, public relations, direct marketing, and exhibitions. The company has sponsored many events like Dew Tour, Supercross, Bass Pro Shop Events, Monster Energy Cup, and various music festivals and military events (News Toyota, 2013). Evidences suggest that this promotional strategy has aided the company to improve its sales volume. Finally, exhibitions have also benefited the company to attract prospective customers and to contribute to its sales efforts significantly. References Cherunilam F (2007) International Business: Text and Cases. NEW Delhi: PHI Learning Pvt. Ltd. Hitt M et al (2014) Strategic Management: Concepts: Competitiveness and Globalization. US: Cengage Learning. Management study Guide. What are Successful Principles of Product Management. Available at: http://managementstudyguide.com/successful-principles-of-product-management.htm Masterson R & Pickton D (2010) Marketing: An Introduction. US: SAGE. MIT Sloan Management Review (2012) Is It Time to Rethink Your Pricing Strategy? Available at: http://sloanreview.mit.edu/article/is-it-time-to-rethink-your-pricing-strategy/ News Toyota (2013) Build Something With the 2014 Toyota Tundra. Available at: http://news.toyotaofkilleen.com/build-something-2014-toyota-tundra/ Prezi.com (2012) "The Best Built Cars in the World". Available at: https://prezi.com/s_4i_aaa216i/the-best-built-cars-in-the-world/ Strydom J (2005) Introduction to Marketing. Cape Town: Juta and Company Ltd. Tesar G Kuada J (2013) Marketing Management and Strategy: An African Casebook. UK: Routledge. Tassiopoulos D (2008) New Tourism Ventures: An Entrepreneurial and Managerial Approach. SA: Juta and Company Ltd. What small businesses can learn from Toyota’s social media marketing strategy? (2014) available at: http://smallbusinessbc.ca/growing-a-business/what-small-businesses-can-learn-toyota%E2%80%99s-social-media-marketing-strategy Zimmerman A & Blythe J (2013) Business to Business Marketing Management: A Global Perspective. US: Routledge. 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