Last week, Marka and the FEI tribe discussed the importance of developing strategic product line extensions that benefit your customers and prospects. This week, they discuss the why, when and how of entering a new product. Remember, fire = print.
Zoot was late for FEI’s morning marketing meeting. He strolled sheepishly into the conference room, a container of soup in his hand.
“Is that from Pompei Bakery?” Lucy asked.
“You bet,” Zoot said. “Sorry I’m late, but I just had to stop off. Pompeii’s Bakery is offering a new sundried tomato soup, and it’s selling out fast.”
“We’ll excuse your tardiness, Zoot,” Lucy said, “because you’ve inadvertently made a good point about product strategy that pertains to our discussion today. Pompeii’s used to only sell bread, until it discovered that consumers also wanted soup, salad and other food items. Similarly, FEI would also do well to enter new product categories based on what our customers and prospects desire.”
“Unlike product line extensions, a product entered into a new category contains features not available in any existing product we offer, right?” Zoot asked.
“That’s right,” Lucy replied. “And product line extensions and categories should both be entered according to perceived market need.”
“Our market research indicated that demand for matches greatly outstripped the available solutions, so we entered that product category,” Marka added. “Lo and behold, Lucy’s new matches are selling like grog-cakes.”
“But ample demand is not the sole condition for new product category entry,” Lucy pointed out. “With rare exceptions, we should only enter product categories that properly align with our core competencies.
“For example, before entering the matches category, we evaluated our production and distribution capabilities and determined that they would enable us to efficiently provide matches in great quantities at a competitive price point. Similar evaluations, undertaken before any new product category entry, will help ensure we don’t commit substantial resources into entering a new product category that we simply can’t compete in.”
“What if we identify a product category that’s a fit for our core competencies, but already saturated with numerous competitors?” Zoot asked.
“Regardless of current competition, any potential product category can be viable as long as FEI’s core competencies guarantee that our product will be one of the top two sellers,” Lucy answered.
“Reminds me of ol’ Hercules Welch,” Org mused.
“Enlighten us,” Lucy said, sensing a story coming from the wise Org.
“Hercules was the chairman of General Chariots,” Org explained. “He became a ‘million-drachma-aire’ by creating carts with top speeds of 12 miles per hour. Welch’s philosophy was ‘I’ll enter any market in which I’m confident my product will be the #1 or #2 choice.’
“So he entered the oversaturated sports chariot market by creating a sporty line that offered faster speeds, a built-in six-year warranty, and a rent-or-buy option,” Org continued. “This new ‘Spartacus’ chariot rose to the top of its product category on the strengths of these benefits, which weren’t offered by any pre-existing competitors.”
“There you go,” Lucy remaked. “Products that are differentiated enough can be competitive regardless of category competition.”
“Product strategy is very interesting,” Zoot said, spooning soup into his mouth. “Who knew soup could be so complex?” Today’s FIRE! Point
Product line extensions and categories should both be entered according to perceived market need and your company’s core competencies. Printing companies should not be afraid of entering a new product or service category as long as they’re confident they can be #1 or #2 in that category.FIRE! in Action“Green” Can be a Product Category
Clorox identified a market need for “green” cleaning products and entered several new product extensions into its “Green Works” brand. The result? Each Clorox product immediately jumped to the head of the product category, and even grew the overall naturals market by 300 percent.Next week: The FEI tribe discusses product “cannibalization”—when to avoid it, and when to risk getting “chewed on.”