Carrying out a study to measure the profitability of a project should not be seen as a requirement imposed by a financial institution to provide financial resources, but mainly as an instrument that provides important information to investors regarding their own convenience in carrying it out. cape.
It is clear that the result of a feasibility study constitutes another precedent to help the investor to make the decision to carry out a certain investment initiative. Its anticipated nature even determines that its result may be totally wrong, since it depends on the behavior of the variables that condition the project. In any case, the evaluation follows a series of phases that have the primary objective of guaranteeing a reduction in uncertainty, trying to convert it into a measured risk.
This assumes vital importance since in many cases an investment has been materializing a technological innovation project, the risk is always high, but especially when it is a radical innovation, rather than an incremental innovation.
In general, the study on the project pursues the following objectives:
- Verify that there is an unsatisfied market and that it is feasible, from an operational point of view, to introduce the product under study in that market Show that it is technologically possible to produce it, once it has been verified that there is no impediment in the supply of all the necessary inputs for its production Demonstrate that it is economically profitable to carry out its realization.
The fundamental support for the design of the marketing strategy linked to a project is the market study, which must provide sufficient information on the opportunities that the products obtained from the execution of the project have, whether or not to position themselves in the market.
The market study is in charge of determining and quantifying the demand and supply of the product, verifying the real possibility of penetration of the product in a given market.
The analysis carried out by Professor Nassir Sapag Chain suggests the determination of other important market variables added to the determination of the price or demand of the project results.
It is about studying the general framework in which the forces of competition move in the microenvironment that surrounds the business in question in which it is intended to enter, that is, the competing market formed in part by companies that satisfy the same need and desires of consumers with greater or lesser efficiency, input suppliers, identified as the project's supplier market, intermediaries, that is, the different distribution channels to bring the product to the consumer and the actual and potential consumers who may demand the products or services from the competing market or from the project itself.
Figure 1 shows the relationship between these elements:
Decision-making on each of these elements when defining the marketing strategy has a decisive influence on the profitability of the project being evaluated, each of these aspects is detailed below..
The analysis of the demand projection occupies a relevant place in the evaluation of a project, especially considering that, the variable with the greatest incidence in the rejection of applications for the granting of loans by banks, to finance new investment initiatives, It is constituted by the little confidence that they have regarding the effective possibilities of success in the proposed sales levels.
What are the reasons behind the project to ensure that from its execution the demand that until now has not been covered by existing companies will be covered? Here the strategy to follow with the products that exists plays a determining role. generates the new investment, taking into account the attributes that make it different and constitute an attractiveness for the market, thus becoming a competitive advantage.
Not in all cases has a study and prospective reflection been carried out that allows discovering what the reaction of the different market players will be to the appearance of a new product, also sometimes even though investors have had a good idea and have been advised For project formulation, they do not always have the skills required for proper management.
There are different ways already studied on how to quantify the demand between them:
Demand Projection Models, of which some of the most used are statistical ones, which are supported by historical quantitative antecedents such as the regression model that shows how several variables are related, the correlation model that determines the intensity of this correlation, Econometric and Purchasing Intention Surveys.
Market research is also used regularly. "Market research is the systematic and objective approach to the development and provision of information for the decision-making process by marketing management"
Therefore, in terms of project evaluation, it is fundamentally that market research provides information and not data for decision-making at the managerial level.
As it is known, this research is supported by the application of experiments, the observation of potential consumers in test markets, the application of surveys to a representative sample of the population to seek arguments that allow validating or refuting a certain hypothesis.
The application of these methods must complement each other, as forecasts finally have their degree of uncertainty, however, as their application becomes more rigorous and their diversity is used, their veracity increases.
The starting point for defining projects is strategic marketing, which is based on the analysis of the needs of individuals and organizations. Its function consists of following the evolution of the reference market and identifying the different current or potential product-markets and segments, based on the analysis of the diversity of needs to be found.
When identifying a market opportunity it is necessary to evaluate its attractiveness, this is measured in quantitative terms by the size of the potential market, and in dynamic terms by its economic duration, which is represented in its life cycle.
The attractiveness of a product depends on its competitiveness, this is the ability it has to attract buyer demand better than competitors, this competitiveness will be given by the competitive advantage that this product offers in the face of consumers' perception, given by its differentiation, that is, what differentiates it from others, which satisfy the same need in the market in terms of product attributes, or because of its lower cost.
The function of strategic marketing, says Lambin, is therefore to guide the company towards attractive economic opportunities for it, that is, fully adapted to its resources and its know-how, its purpose is to specify the mission of the company, define its objectives, develop a development strategy and ensure a balanced strategy of the product portfolio.
It differs substantially from operational marketing, since this is a management of conquest of existing markets, in the medium and short term, based on the definition of the controllable variables, product, price, distribution and communication, which constitute the media. tactical. Its action is specified in market share objectives to be achieved and in marketing budgets authorized to achieve these objectives.
The fundamental function of operational marketing is to sell, using the most effective means that allow achieving high results while reducing sales costs.
Both functions of strategic marketing and operational marketing are completely complementary, one is taxed on the other and of course the actions of one cannot be defined without establishing its interdependence with the other.
The strategy for the launch of a product will of course depend on the corporate strategy of the company, its mission and the field of activity in which it operates, particularly the position of its business portfolio, although it may happen that the Investment project obeys the creation of a new business, the creation of a new company.
In any case, commonly a new product is located in the question mark position, that is, it starts with a low market share and will need to be built, which means increasing its participation levels by investing in marketing efforts.
Thus, following the logic of the process, the mission, objectives and strategies of the company, the mission, objectives and strategies of the strategic business unit will be derived, which in turn will determine the marketing objectives and strategies for the launch of the product. that has been defined in the project
It has been said previously that the first step in deciding to launch a new product is to clearly identify the market opportunities, for this it is necessary to select the target market.
Design logic of a marketing strategy
The selection of the target or objective market is preceded by segmentation that consists of dividing it, evaluating it and selecting those that can be served in the best conditions.
The heart of modern strategic marketing can be described as SBP marketing, that is, segmentation, targeting and positioning.
Nowadays companies direct their attention to marketing focused on the target audience, which allows developing the offer, in correspondence with the needs and desires of this particular market.
Thus, the steps to follow are: market segmentation, the art of dividing the market into different groups of consumers that react in a similar way to marketing stimuli, using different variables, the second step is the definition of the market target, This requires defining measures to assess the attractiveness of each group and selecting the target or targets of the market that it is intended to conquer. The third step consists of the positioning of the product or the act of establishing the competitive position of the product.
The objective of market segmentation is to achieve differentiated market segments to which it is possible to direct a specific product offer, in such a way that there is a product that occupies a privileged position in each segment, by adapting to a greater extent to the consumer needs, thereby obtaining greater benefits.
The necessary compatibility that must be achieved between the profit objectives proposed by the company and the satisfaction of the needs from which a market could be divided infinitely, imposes a limit to this process that will be given by the same size of the segment, whose volume justifies from the economic point of view a differentiated treatment, since otherwise the segmentation would be inefficient.
Market segmentation is understood to be a group of homogeneous buyers, according to previously defined characteristics, in such a way that each group can be differentiated for the purposes of the commercial strategy of the product.
Its advantages are in the following order:
- It allows discovering business opportunities It allows to better satisfy the needs of consumers Companies will obtain higher income as a result of a higher volume of sales, or higher profits.
It also has some disadvantages like:
- High costs as a consequence of the breadth of the product range and the need to implement different commercial programs. It is not always possible to take advantage of economies of scale.
It requires special importance for the project to evaluate the attractiveness of the segment, considering first, the size and growth of the market and secondly, the structural attractiveness of the segment.
In this analysis, it is important to take into account the successes and failures of the strategies followed by the companies that may become eventual competitors for the project.
Porter has identified 5 forces that determine the long-term attractiveness of a market or a segment within it, each of which can constitute a threat to the development of the project.
- Threat of Intense Rivalry: A segment is unattractive if it has numerous, strong or aggressive competitors, this competition is accentuated by the following causes:
- Large number of equally balanced competitors Slow growth in industrial sector High fixed costs Lack of differentiation Significant increases in capacity Diverse competitors Strong exit barriers Among them: Specialized assets, fixed exit costs, emotional barriers, social and governmental restrictions.
- Threat of substitute products: A segment is unattractive, if there are current or potential substitutes for the product, because they place limits on the prices and potential profits that can be earned in a segment Threat of the increasing bargaining power of buyers: A segment is unattractive if Buyers have strong and / or growing bargaining power, this power grows if:
- There are large-volume buyers The raw materials they buy represent a significant fraction of the buyer's costs or costs The products are undifferentiated They face low costs due to changes in the supplier Threat of backward integration The product is not important to the quality or service of the buyer.The buyer has full information.
- Bargaining power of suppliers: A segment is unattractive, they are capable of increasing prices and reducing the quantity and quality of the goods and services demanded, their power is increased when:
- It is dominated by few companies They are not obliged to compete with substitute products The company is not an important customer That suppliers sell a product that is an important input for the buyer's business That the products are differentiated Threat of integration towards in front.
- Threat of new revenue: A segment is unattractive, if new competitors are likely to enter it and develop new capabilities and even a desire for new market shares. The main question is, analyze whether or not new competitors can enter easily. This is perhaps one of the most important elements to take into account, to analyze the possibility that the project will have of entering a particular market, which will depend to a large extent on the existing entry barriers in it.
One of the entry barriers is constituted by the economies of scale developed by the companies that are already represented in the segment, this will force any new investor to also enter on a large scale, with high levels of investment, ensuring the availability of products and the necessary financing and with the requirement to counteract the effect of a productive and commercial experience among others, to compete with some success.
If the investor intends to start his business on a small scale to later grow, he will have to face higher costs than those of established competitors and if he sets up a large-scale factory to compete with production costs, he will face a greater risk, since to comply With its objective, it will have to ensure a high market share, facing the natural reaction of existing companies.
If there is high differentiation by the companies that manufacture the product, it will impede the new project's successful entry to the market, Even if it does so with equal costs, it is likely that it will have to lower the price or incur heavy advertising investments to compete in appropriate form. Generally, the success or profitability of a new project will be achieved as the market becomes more imperfect and a successful business strategy is decided.
Another important factor to take into account as a barrier to entry is access to distribution channels, in fact already existing companies in the sector have selected the most feasible channels to bring their product closer to the consumer.
Once this analysis has been carried out, it must be defined whether the strategy will be based on developing an undifferentiated, differentiated or concentrated marketing mix.
On the basis of these elements, the differentiation and positioning strategy will be decided, developing the competitive advantage based on the different elements that make up the product value chain, so it may be due to their attributes, the services based on the which the product is extended, by the people, by the image, the important thing is to design a significant offer to distinguish it from the competition, the positioning strategy consists of what a product wants its target audience to grant it, in such a way that it occupies a special place in the mind of the same.
Once the product concept has been developed, the positioning and the target market have been determined, one is in a position to proceed to quantitative evaluations of the number of sales likely to be made, of the marketing means to be put into operation and of the risk involved in the product launch.
The methods explained at the beginning may be used for this, delving into those aspects that the preliminary study did not address using subjective methods, collecting missing information by directly questioning potential consumers, distributors, suppliers and if possible own competitors, using test markets in which purchasing behaviors are observed, as well as potential sales of the new product.
Now it is a question of delving into the selected market segment to find the best possible way to satisfy its needs with the development of products through projects, this constitutes a task of each project team, involving of course the marketing specialists. It is not enough to carry out an initial market study, it is necessary to maintain a constant link with it throughout the project formulation and execution process.
If the product is really new, there is no historical data on which a sales forecast can be supported, however when it comes to a technology transfer or the combination of different components related to a product with which it is intended To substitute imports, the extrapolation, multiple regression and econometric methods are valid.
To evaluate the market attractiveness, it is also necessary to apply a series of instruments that contribute to the judgment on the possible success of the product; It is not a question of using all the instruments listed below, but rather those that can provide more information on the possibility of carrying out the project or not according to its commercial feasibility should be selected; Among these instruments is the General Electric matrix (also called McKinsey Matrix) by its author, whose objective is to identify the areas of activity that show the greatest capacity to generate resources, in this case the product is considered as an area of activity.
To proceed with its elaboration, the attractive factors and strengths of the product that are going to be used as evaluation criteria are identified; the specific relationship of factors to be evaluated will vary from one sector to another and even within one organization to another within the same sector; The attraction factors correspond to the characteristics that one would like to find in the market or that one would like to avoid, and the strengths indicate the factors inherent to the organization with respect to the product that could decisively influence its market success.
A relative weight is assigned to each factor depending on its importance, then the factors are evaluated for the different alternatives. Finally, the relative weight is multiplied by the relative evaluation and the totals are obtained by factor; With the sum of these factors, the global average of the attraction factors is obtained. Once these numerical evaluations are obtained for each of the alternatives, they are placed in the corresponding box, according to the following scheme:
|
I |
IV |
VII |
| II | V | VIII |
| III | SAW | IX |
Depending on the boxes where the product is located, it is suggested to follow the strategy of maintaining the idea of developing the new product or discarding it according to its location:
- Green area. Strong - High, Strong - Medium and Medium - High. Immediate development of the new product Yellow zone. Strong - Low, Medium - Medium and Weak - High. Postpone, needs further analysis Red zone. Medium - Low, Weak - Medium and Weak - Low. Abandonment of the idea.
Details regarding the strategies appear below:
- Strategic implications of the general electric matrix.
| Box I | Invest to grow.
Provide maximum investment. Consolidate the position. Accept moderate profitability levels. |
| Box II | Invest to grow.
Selectively grow based on the strengths of the company. Grow in defined areas. Grow by increasing market share. Reduce weaknesses. Analyze the implications of the leadership challenge. |
| Box III | Selectively invest to:
Identify market niches. Seek product specialization. Identify areas to increase strengths. |
| Box IV | Invest to grow.
Invest heavily in selected segments. Progressively decrease investments to increase profitability. Identify new and attractive segments that correspond to the strengths of the company. |
| Box V | Selectively invest to:
Seek market segmentation. Establish plans for weaknesses. |
| Box VI | Invest to:
Prepare for the disappearance of the area. Try to preserve the flow of resources. Look for new sales opportunities. Rationalize to increase strengths. |
| Box VII | Protect and refocus the area.
Selectively reinvest to:
Defend the fortresses. Refocus activity on new segments. Evaluate a possible revitalization of the sector, Control carefully to identify the moment of departure or conversion of the area. |
| Box VIII | Restructure.
Invest to:
Switch to more attractive segments. Prepare for the disappearance of the area. |
| Box IX | Prepare for:
Invest moderately to avoid greater risks, Withdraw or squeeze the product line. Identify the precise time of departure to maximize current value. |
Here is an example that illustrates the use of this technique :
- Application of the general electric matrix to the product: tobacco stem particle board
Indicators that make up the attractiveness of the product:
- Product quality:
The analyzed product complies with the established parameters, it is also superior, in some physical-mechanical properties, to the bagasse particle board, a similar product that has been produced in the country for some years, so internally its attractiveness can be considered as high (5).
- Available technology:
The technology exists, obtained in the laboratories of the University, it is not a complex technology, its attractiveness is considered high (5).
- Experience effect:
There is no production culture that allows the improvement of the production process and affects the quality and results of these productions, so this low attractiveness is evaluated (2).
- Distribution channels:
MINIL (Ministry of Light Industry) and MINAZ (Ministry of Sugar), as possible producers of the product, would be in charge of distributing it, attending to growing needs, which is why this attractiveness is considered high (4).
- Financing capacity:
It is an objective reality, the impossibility that the country presents in MLC (freely convertible currency), so there is no certainty in the undertaking and execution of the investment necessary to produce the product analyzed and, in addition, to guarantee the necessary import component for this production, so this indicator is valued with a weak attractiveness (2).
- Registration and patent:
Its author was awarded the Investment Author Certificate # 21929 for the technology of obtaining and for the product obtained, both by the ONIITEM 1990, Copyright Patent. Therefore, this attractiveness is evaluated as strong (5).
Indicators that make up the attractiveness of the market:
- Sector growth rate:
This indicator can be defined as the growth that the demand of the market sector will experience, in quantitative terms, towards which the analyzed product will be directed and this growth would be a function of the use of capacities annually. The demand for this product in the sector is unsatisfied, so the growth rate of the sector would experience an upward growth. This indicator is evaluated with high attractiveness (5).
- Market size:
The product analyzed is aimed at satisfying the needs of the entire market at the national level, a demand that is completely unsatisfied, due to the fact that imports of particle board have been reduced and the production of bagasse boards is paralyzed. Therefore the attractiveness of this indicator can be evaluated as high (5).
- Bargaining power of suppliers:
Given the impossibility of acquiring raw materials that these suppliers can supply, due to the lack of MLC, it is necessary to resort to buying where you can and not where you want. This refers to the import component needed to produce dashboards. The other raw material is the tobacco stalk, which remains in the field, once the harvest is done and a viable system for the collection, handling and stockpiling of said raw material has not yet been established. Therefore this indicator is evaluated as low (2).
- Bargaining power of customers:
With respect to the national market, the clients are known in advance, the fundamental ones being MINAGRI (Ministry of Agriculture) and the Popular Power, as well as 150 companies in the national sphere, which consume the product on a smaller scale. This indicator is rated high (4).
- Differentiation:
After analyzing the comparison between the product obtained and its similar, the bagasse particle board, it is concluded that there are no significant differences in relation to the parameters and physical-mechanical properties, considering the attractiveness of the low market (2).
- Entry barriers:
Nationally, there is no impediment to the production and marketing of the product, so the attractiveness of the high indicator is considered (5)
Product appeal.
|
Indicators |
Relative weight | Relative evaluation | Total |
| Product quality | .25 | 5 | 1.25 |
| Available technology | .two | 5 | one |
| Experience effect | .one | two | .two |
| Distribution channels | .one | 4 | .4 |
| Financing capacity | .two | two | .4 |
| Registration and patent | .fifteen | 5 | .075 |
| TOTAL | one | 3,325 |
Position: Middle
Market appeal.
| Indicators | Relative weight | Relative evaluation | Total |
| Sector growth rate | .two | 5 | one |
| Market size | .fifteen | 5 | .75 |
| Bargaining power of suppliers | .fifteen | two | .3 |
| Bargaining power of customers | .fifteen | 4 | .6 |
| Differentiation | .fifteen | two | .3 |
| Types of competitors | .one | 5 | .5 |
| Entry barriers | .one | 5 | .5 |
| TOTAL | one | 3.95 |
Position: Medium-High
The product would be in a medium-high position, quadrant II, within the green zone that indicates development possibilities.
Another of the matrices used is the Omeara test, to use this technique the opinion of experts in the product and market in question is taken into account, each expert performs weights according to a scale that goes from very good to assigned value from 10 points to very bad with an assigned value of 2 points.
A set of factors associated with the proposed idea is considered that must be adapted to each specific situation.
The experts grant a rating, as each factor or subfactor does not have the same importance, it is necessary for each specialist to give a weighting that reflects how each of them influences the success of the product.
With this information, a comparison module of the different ideas for new products is developed, by means of the elaboration of an index that combines the qualification of the idea with respect to each subfactor with a weighting of it. Thus, the following index can be established for each new product idea i:
S i = å W j F ij
Where: S i = result or final score of idea i.
W J = rating or weight associated with subfactor j, where:
0 £ W j £ 1
å W j = 1
F ij = score of idea i with respect to subfactor j.
The ideas with the greatest chance of success will be the ones with the highest score.
Below is an example that illustrates the use of this technique:
Application of the o'meara test to the chlorophyll carotene pulp product.
|
factors |
pond. |
mb | b | r | m | mm | total |
|
.08 | x | .8 | ||||
| Product exclusivity | , 07 | x | .56 | ||||
| Synergy with other research | .05 | x | .5 | ||||
| Value for money | .08 | x | .16 | ||||
| Possibilities of legal protection | .07 | x | .14 | ||||
| Distinctive qualities | .05 | x | .30 | ||||
| Possibilities of creating capacities for your production | .05 | x | .30 | ||||
| Availability of raw materials and materials | , 04 | x | .32 | ||||
| · Availability of human resources | .05 | x | .5 | ||||
| Availability of financial resources | .06 | x | .12 | ||||
| Management capacity | .05 | x | .4 | ||||
| Magnitude of the potential market | .10 | x | one | ||||
| Substitute products | .06 | x | .12 | ||||
| Characteristics and behavior of consumers | .07 | x | .14 | ||||
| Access to distribution channels and the market | .03 | x | .18 | ||||
| · Bargaining power of suppliers | .03 | x | .18 | ||||
| Competitive strength | .06 | x | .12 | ||||
| Total | 1.0 | 5.84 |
The scale used is the same as proposed by O'meara:
| SCALE | ASSIGNED VALUE |
| Very good | 10 |
| Okay | 8 |
| Regular | 6 |
| Bad | 4 |
| Very bad | two |
The acceptance criterion is as follows: Continue developing the products with a criterion greater than 8 points, carefully analyze the continuation or stoppage when it is between 6-7.9 and reject the products with scores lower than 5.9.
When evaluating the chlorophyll carotene pulp product in this table, a score of 5.84 points was obtained, a score that falls in the rejection range.
Another of the matrices used and perhaps one of the best known is the SWOT.
This matrix enables the combination of the positive and negative aspects of the introduction of the new product internally with the risks and possibilities it would face externally.
The internal analysis provides information that makes it possible to identify the strong and weak products of the business, that is, those that can constitute sources of competitive advantages or aspects on which the competition can focus the action. Some of the factors that should be reviewed in the internal analysis are: organizational structure, situation of production and distribution costs, availability of financial resources, novelty of the product, attributes that distinguish it to satisfy certain needs, available technology, etc.
The external analysis is aimed at detecting the opportunities and threats that are present in the environment in relation to the product.
A threat is a challenge posed by an unfavorable trend in the environment that, if the appropriate measures are not taken, will have an unfavorable impact on the development of the product, on the contrary, an opportunity is a favorable force, which if properly used will cause competitive advantages for the product. In this field, the action of competition, the dynamics and size of the market, the general economic, legal, technological factors, the possibilities of cooperation, etc. are studied.
According to the results, depending on which quadrant the product is located in, proceed according to the following scheme No. 10:
| OPPORTUNITIES | THREATS | |
| STRENGTHS | ||
| WEAKNESSES |
We emphasize that to differentiate a product it is necessary to rely on the determinants of added value for the customer.
The determinants of value are the following:
To differentiate the product, the following must be taken into account:
Product. New features that support the basic function of the product or totally new product to satisfy a need, are taken into account:
- Quality level: Level of operation of the main characteristics of a product Uniformity: Degree to which the design and operational characteristics of a product are close to an average quality standard Duration: Measure of the expected life of a product. Reliability: A measure of the likelihood that a product will break down or fail within a specified period of time Repairability: A measure of the ease of getting a failed product back into operation Style: The degree to which a product is tailored to taste and feeling of a buyer. Design: Integrates all of the above.
Services:
- Delivery.Installation.Customer training.Technical consulting services.Repairs.Others.
Persons. Competence, courtesy, credibility, trust, responsibility, communication.
Image. Symbols, written and audiovisual media, atmosphere and events.
For the selection of differentiation ideas, it must be evaluated that:
- Be important to customers Be distinctive, set yourself apart from the competition Be superior Communicable Non-imitable Affordable Profitable
When introducing a new product to the market, it is necessary to evaluate the reasons why some have failed, including:
- Undervaluing the results of market research or not conducting it Overestimating market size Inappropriate chosen positioning Lack of good ideas in some areas Fragmented markets Government and social constraints High cost Product life cycles each shorter and shorter.
When analyzing the competition, the product evaluator should ask the following questions:
- Who does the competition sell their products to? What is the description of your target markets? What are the marketing objectives and strategies? What is the positioning of the competition? What products are the competitors selling? What are the strengths and weaknesses of the product in relation to its attributes? What is the price of the competitor's products? What is the price structure like? What distribution channels does the competition use? Where do you sell your products? What are your strengths and weaknesses in this regard? What is the sales philosophy used by the competition? What has been the sales performance? What type of promotion does the competition use? What results have you obtained? What has been the total spending for promotional media? Does any medium dominate the competition? What customer service policyuse the competition?
The expected level of a new product depends on the intensity and continuity of the operational marketing support, therefore it is necessary to define the strategies in relation to the mix.
Product strategy:
In the definition of the characteristics that will be given to the product that is produced when the project is implemented, an important part of its responsibility for its success or failure falls.
For this reason, it is necessary to devote greater efforts to addressing this aspect in the formulation of the project.
The need to be satisfied, the concept of an object, product or service to satisfy the detected need and the technology that makes the concept operational must be clearly identified, which will determine the technical specification of the product generated by the project.
When defining decisions about the product, not only the product itself must be taken into account, but also the expected product, which consists of a set of attributes and conditions that buyers usually expect and with which they agree when they buy the product.
The next level is the increased product, it is the one that incorporates a series of services and benefits that distinguishes the product from the competition, then we find the potential product to say all the increases and transformations that this product should ultimately incorporate in the future This is based on monitoring the evolution of the product over time, being consistent with the transformations that the needs and desires of consumers are undergoing and the various forms that the competition even assumes to cover them.
The product goes through a life cycle and consequently the strategies to keep it on the market will vary. Every effort must be made to keep the product on the market, to extend the life of the product and its profitability even knowing that the product will not last forever.
The life cycle of the product must be taken into account by analyzing the variation in needs, expressed in the demand curve and the cycle of technological demand specified in a series of products that satisfy it.
For this reason, the marketing strategy for the product introduction phase, growth, maturity and decline has to be considered.
For launch, you can set a high or low level for each marketing variable, such as price, promotion, distribution, and product quality. Taking into account the price and the promotion, one of the following strategies can be followed:
- Quick skimming. Launch the product at a high price and with a high level of promotion, to quickly recover the gross margin and convince the market of the excellence of the product. Low-level skimming. Launching the product at high prices and with a low level of promotion, High price to recover the highest possible unit gross margin and the low level of promotion allows low marketing expenses Fast penetration. Launch the product at a low price and spend large amounts on promotion Slow penetration. It consists of the launch of a new product at a low price and with reduced promotional costs. The lower price will encourage or increase the acceptance of the product; reduced promotional expenses will enable higher profit
Another important aspect to take into account in the product strategy is the packaging. In recent times the packaging has become a powerful marketing tool. Well-designed packaging can create a very important image about the convenience of the product for the consumer and a decisive promotional value for the manufacturer, hence the person in charge of the project must necessarily take this aspect into account to define their own competitive characteristics.
Obviously, when formulating a project whose product must differentiate sizes and packaging to compete, it will be essential to consider the costs that this would involve, given the effect that it could reflect on the results of measuring its profitability.
The quality of the product will influence the costs and financial results of the project evaluation. Quality responds to the demand and expectations of a group of target buyers, it constitutes the degree of conformity of the set of characteristics and attributes of a product with respect to the needs and expectations of the consumer, taking into account the price that this consumer is willing to pay, in short, it is the value perceived by the consumer to the extent that it satisfies his demand.
The starting point of a quality strategy is found in the market segmentation analyzes described above.
The definition of quality that the product will have will be decisive both in the sales volumes that could be expected and in the production and distribution costs that would be incurred for its preparation, It will be the basis of the information that is investigated for the technical study of the project.
Another important element in the product strategy is the brand, brand loyalty becomes an important barrier to entry, competing with established brands can cost a lot of money, so in many cases the best decision is to join forces to an already prestigious brand.
In the case of agricultural products, the denomination of origin of the product acquires singular importance for the brand.
The product that the project would develop introduces an innovation with respect to the existing one, the risks that it may involve must be considered, which will depend on the degree of originality and complexity of the concept and the degree of technological innovation that it incorporates. The first because it will determine both the receptivity of the market as well as the cost of real psychological change that the buyer must face to adopt the new concept. The second because it will determine the technical viability of the innovation.
The importance of a new product idea lies in the real possibility of taking advantage of a market opportunity, the innovation may be technological dominant or commercial or marketing dominant.
Price Strategy.
The strategy that the competition follows regarding the price of its products will directly influence the one that is sought to be defined for the project.The
amount of the price must be sufficiently competitive, without this meaning that it must necessarily be lower than that observed in the market. In many cases people are willing to pay high prices to differentiate themselves from others.
It is important to analyze here not only the value to be assigned to the product, but also the credit conditions and discount policies.
The price depends on costs, what consumers are willing to pay, and the average price that the competition has set.
The strategies in which the different prices at which the product must be launched are combined are detailed above, when the positioning strategies were explained.
Distribution strategy.
How to reach consumers is also a very important factor in the marketing strategy, in fact it is also a barrier to entry to the project.
Observing what the competition has done regarding the distribution channels will help define the market strategy for the project, taking into account of course the particularities of the consumers.
A company that starts new, uses the existing channels motivated by the lack of capital, the problem is in convincing one or more of the existing intermediaries to accept the products that the company has created.
If the project is successful, the product can establish itself or penetrate new markets, it will be necessary to work with the help of existing intermediaries, even if this means using different types of marketing channels in different areas. In smaller markets, it can be sold directly to retailers; In the older ones, you will have to use distributors, you could use exclusive franchises, another option to sell through all those establishments that wish to accept the product. Consequently, the manufacturer's channel system is mediated by local conditions and opportunities.
Three strategies can be decided: Intensive, Selective and Exclusive.
The importance of this aspect lies not only in the costs involved in the decision made in this regard and its effect on profitability, but also because a good decision in this regard will help make the project profitable and a bad decision can make the project is not attractive.
Promotional Strategy.
One of the basic questions to take into account here is the amount of expense that this involves and its effects on the profitability of the project.
The evaluator does not need to define this strategy in detail in order to pay for it. For this reason, it is frequent that they resort to a quote from an advertising agency, to estimate the magnitude of the annual expense that the project will have to face once it has been transformed into a company or included in the business portfolio of an existing one.
It is important to bear in mind that the different communication variants have to be used depending on the life cycle of the product, so in the introduction it is much more feasible to use advertising to arouse interest in the new product, then the promotion of sales that lead to testing the product and later personal selling aimed at obtaining distribution.
In the growth phase all communication actions can distribute their budget because the demand has already been created.
In the maturity stage, the order of importance of the different actions is: sales promotion, advertising and personal sales. In the decline stage, sales promotion remains important, while advertising is less important and the sales force devotes minimal attention to the product.
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