Product and Merchandise Strategies

15/05/2020 1 By indiafreenotes

Product Strategy

A product strategy draws from the ultimate vision of the product. It states where the product will end up. By setting a product strategy, you can determine the direction of your product efforts.

Similar to making effective use of a map, you first need a destination, and then you can plan your route. Just as a business has a strategic vision of what it wants to be when it grows up, the product has its own strategy and destination.

The product strategy forms the basis for executing a product roadmap and subsequent product releases. The product strategy enables the company to focus on a specific target market and feature set, instead of trying to be everything to everyone.

Creating your product strategy

To create your product strategy, start with identifying the market problems you would like to solve. This includes interviewing your target market, understanding the competitive landscape and identifying how you will differentiate yourself.

Your product strategy will change over time as you learn more about your market, and as (if) you decide to enter different markets. Listening to your market and developing your product strategy is a circular process; as you learn more, you will evolve your product strategy and the problems you solve.

Example of Product strategy

Here is a brief example of a product strategy. Your product strategy will vary, and will probably be longer, but should follow the theme of the five questions above.

  • We build quality kitchen hardware for residential kitchen customers.
  • Our customers are young North American families who want kitchen hardware that can stand the wear and tear of young children. They are interested in materials that are safe for children and eco-friendly.
  • We sell our products through a retail channel.
  • Our products are priced per unit, and are considered “high-end” hardware solutions.

Power of the product strategy

The power of a product strategy comes from what you define as well as what you exclude. By identifying a particular target market in your product strategy, you are also excluding other markets. This helps your company to understand which projects fall outside the product strategy and distract from strategic goals.

Merchandise Strategies

Merchandising strategies are a valuable component of any retailer’s success, but a “one size fits all” approach will not work in today’s competitive environment. Strategies should vary by category and sometimes by segment depending on the overall objective for the brand, category, and retailer. Each strategy should be carefully crafted to target a specific objective such as increasing foot traffic, inviting new customers to try your brand, developing loyal committed customers or increasing sales.

Developing and managing merchandising strategies should be a collaborative effort shared between the retailer and the manufacturer. Manufacturers are the true experts in their brand’s categories.  A smart retailer should take full advantage of the brand’s knowledge and expertise to help grow the category and sales.

The category captain role is a key factor in a savvy retailer’s success. This person is a trusted business partner and ally to the retailer. Together, the retailer and manufacturer can help satisfy a greater number of consumers, grow the category, increase consumer takeaway and beat the competition.

Strategies include a variety of components: pricing, promotion, product placement, and support, consumer education, etc. Together, the different components help achieve the retailer’s goal. Here are seven to try.

7 effective category merchandising strategies

  1. Profit Generating

Higher gross margin and higher turns. This strategy focuses on the ability of the category to generate profits. Margins can be higher in this area due to the value added, higher-quality products in these categories.

  1. Cash Generating

Higher turns, frequently purchased items. This strategy focuses on the ability of the category to generate incremental cash flow.

  1. Turf Defending

Used by retailers to draw traditional consumers. This strategy focuses on aggressively positioning the category to appeal to the consumer by highlighting comparable items with key competitors. This strategy also focuses on keeping your existing customers happy and returning. Loyalty cards, aggressive pricing and promotion strategies, consumer education, high-value coupons, etc. are all designed to help maintain a loyal customer base. For example, Organic Chicken Noodle Soup priced aggressively compared to target retailers.

  1. Traffic Building

High volume share, frequently purchased items, a high percentage of sales. This strategy focuses on drawing consumer traffic into the store and/or into the target category.

  1. Transaction Building

Higher ring/transaction size, impulse purchases. This strategy focuses on increasing the size of the average category transaction.

  1. Image Creating

Frequently purchased, highly promoted, impulse, unique and seasonal. This strategy communicates an image to the consumer in one of the following areas: price, service, quality, specialty items or assortment.

  1. Excitement Creating:

Impulse, lifestyle-oriented and seasonal items. This strategy communicates a sense of urgency or a limited-time sensitive opportunity to the consumer.