Industrial marketing firms have to adopt the following three important steps for developing long term product strategies for existing individual products and products lines.
- Assessing the performance of all the existing products or product lines by using product evaluation matrix.
- Examining the relative strengths and weakness of the firm’s products in comparison to competitors’ products by using perceptual mapping technique.
- Deciding the product strategies for the existing products based on the above analysis.
Product Evaluation Matrix
Yoran Wind & Henry Claycamp have developed a technique called product evaluation matrix to be used to assess the product performance. Performance parameters of a product such as industrial sales, company sales, market share and profitability are combined in the matrix. Industry sales are represented on vertical axis and are grouped as growth, stable or decline. Company sales are assessed on horizontal axis and are grouped as growth, stable or decline. In the same manner profitability is classified as below target and above target and market share as dominant, average or marginal. These classification need to be defined by the marketing manager depending on the situation prevailing in the industry. For example, if the market share is less than 10 percent, it is evaluated as marginal, market share between 10 and 30 percent is considered as average, and more than 30 percent as dominant. Let us apply the same classification of market share to a company having two products. Product P has a dominant market share of 50 percent. The average growth of company sales in the past three years is 40 percent. Industry sales have grown at the rate of 35 percent per year for the past three years and profitability is as per expectations. The marketing strategy for product P is to continue or maintain the leadership position by expanding the total market demand, protect the present market share, and try to increase its market share, if the Industry sales remain constant. Product S has an average market share of 13 percent, the growth of company sales by 16 percent in the past three years is considered stable compared to industry sales growth of 17 percent, and profitability is below the expectations. The company’s sales, market share, and profitability of product S needs to be improved to position S1. For this, the industrial marketer should use the perceptual mapping technique to compare the relative strengths and weaknesses of product S with that of the competitors products. At the time of deciding the suitable market—challenger strategies, environmental factors such as political, legal, economical and technology should be considered.
Perceptual Mapping Technique
To study the strengths and weaknesses of a firm’s product in comparison to that of the competitors’ products, the perceptual mapping technique is used by industrial marketers. The concept of perceptual mapping technique has been explained here under with an example. The position of three manufacturers of product ‘A’ based on market research study conducted by the firm ‘X’, customer service and product quality are the two purchase attributes considered most important by the industrial customers. The ratings on these two attributes based on the customers’ perception of the three leading supplier firms are shown below.
Firm x’s quality is perceived inferior to the competitors y & z. However, firm x’s after sales services is perceived for superior to its two major competitors. Firm x can reposition itself from position ‘x’ (old) to x1 (new position) by improving its product quality substantially and maintaining its superior service. After improving its product quality, firm x can fix its price little higher than its competitors. This would improve the performance of the product in terms of profitability.
Choice of Product Strategies
The industrial marketer can decide one of the strategic options based on product evaluation matrix and perceptual mapping as given below:
- To continue the product with its existing marketing strategy
- To modify the product and change the marketing strategy
- With draw the product
- Add new Product
It is very vital to identify the causes of unsatisfactory product performance. Sales, market share and profitability are important quantitative performance parameters but they cannot indicate the reasons for poor product performance. It will be useful to understand the perceptions of customers, specifically opinions on R&D, design, sales, production, finance and marketing team. By such an understanding the industrial marketer will develop number of factors for the unsatisfactory performance of the product. Cost reductions, improving the product quality, enhancing the product features are some of the corrective measures with which the product performance can be improved.
Credit: Industrial Marketing-MGU