COMPILED BY: DERICK MWANSA

FUNDAMENTALS OF MARKETING MANAGEMENT

ASSIGNMENT A

Question One

Answer

The product life cycle model is a useful tool for managers as it is used for technical appraisal of product performance. It analyses different stages in the product life including the sales and profits of each respective stage. The cyclical changes in sales and profits of a product shows the life characteristics of a product which can be likened to that of the human being. Just like humans the product life goes through infancy, youth, adulthood and old age. A product in normal course has four stages of life history namely introduction, growth, maturity and decline.

Philip Kotler defines product life cycle as “The product life cycle is an attempt to recognise distinct stages in the life history of the product, the sales histories pass through four stages known as introduction, growth, maturity and decline”.

Even though its validity is questionable, it can be a useful model for managers so that they are mindful of the stage in which their product is and perhaps take action to increase the life of the product. Some brands have held their positions for decades and almost monopolising the market. For example Coca cola.

Many factors affect product life cycle. Joe Dean statement is very important in this regard. He said “the length of a product life cycle is governed by the rate of technical change , the rate of market acceptance and the easy of competitive entry” below are some factors affecting product life cycle.

Rate of technical change

If the rate of technical change in the country is very high the life of the products will be limited by the new and improved products which will take place of old and existing products. On the other hand, if the rate of change is not so high the life of the product in that country may be longer. For example the life cycle of products in Zambia (where rate of technical change is not so high) is longer as compared to the life cycle of products in developed countries (where technical change is at high rate).

Rate of market acceptance

The rate of customers also affect the life cycle of the products. If the rate of market acceptance is high, the life cycle of product in that country is limited. The customers who

have accepted the new product will soon stand out of the market. Similarly if customers accept the product at a slow rate, the life cycle of the product may be quite long. For example in Zambia, the market acceptance is very slow and therefore, here the life of the product is very long.

Easy of competitive entry

If the entries of competition are easy and unchecked, the life of the products will be shorter as the new products will enter the market. As a result the existing products will be influenced out of the market. Hence if the entry of competitors is not easy the life cycle of the product will be longer.Below is the brief life cycle of a product:-

Introduction

The first stage of the product life cycle is the introduction stage. Under this stage prices are relatively high and competition is very less. Substantial research and development costs are spent to bring the product to this stage. The sale grows at a lower rate because consumers are unaware about the product. Heavy promotional expenditures are made by marketers.

Growth stage

This is the second stage of product life cycle. In this stage competitors enter the market and the company may have to resort to product improvement and innovation. It may enter new market segment and try new distribution channels. The prices may remain static or fall slightly for meeting competition. Advertising can be helpful to create brand image.

Maturity stage

This is the second stage of product life cycle. As the competition becomes keen and market becomes saturated with product brands, the maturity stage sets in. In this phase of product life cycle, the sales increase at a decreasing rate. The firm has to combat competition by cutting prices, increasing promotional efforts and modifying products, markets and marketing mix. Consequently profits will fall. Product differentiation, identification of new segments and product improvement are emphasised during this stage.

Decline stage.

It is the last stage in the product life cycle. In this stage sales will drop down heavily and product or brandy will go out of market. The price will fall, profits will decline. Eventually the product line incurs losses. Decline may occur due to technological changes, shift in consumer taste, introduction of new sophisticated products, severe competition. If the product fails to stand the competition the company may remain with no option but stop the product line.

ASSIGNMENT A

Question Three

Answer

Market segmentation is a concept used by economists and marketers. A market segment is a subset of the market and the market could be made up of people or organisations. The segment is comprised of customers whose characteristics are similar causing them to demand for a similar product or service.

A market segment is distinct from other segments, homogeneous within the segment, responds in a similar fashion and can be satisfied by a market intervention. A market can be segmented on different basis such as geographical, demographical, psychological and behavioural segmentation.

Prior to choosing a segment an organisation has to analyse its capabilities to satisfy its targeted segment, that is its internal strength intems of technology and external weaknesses in relation to competition and the legal obligations in line with statutory requirements if any.

The following are five primary reasons of market segmentation.

1. Adds competitive advantage

By segmenting you are adding a competitive advantage to your product or service. You are specialising in an area. You are being the expert. You are diving deeper and doing it better than anyone else. You respond faster. You are more accurate. You understand opportunities and can react accordingly. You pin point an audience.

For example an academician in business studies can segment his market by choosing to offer tuitions only to students pursuing marketing.

2. Identify new markets

This is not obvious. The reason is that on the surface you many times don’t see these new market niches. They do not necessarily jump at you. By segmenting your market you can find new markets. They may be small, only a few locations, very specific or very particular.

For example you aim to reach chief financial officers of major insurance companies and later realise that you can use the same approach to reach those in banking industry.

3. Reduce your costs

Obviously, if you select carefully and only reacts into the market place for a smaller segment of all that is there, you cost will be less.

This applies to all media, but particularly direct mail and telephone marketing, where lists represent such a large part of segmentation.

Saving on lists is only the beginning. Production is a major part of all marketing campaigns. It includes paper, printing and letter shops for direct mail, people and time for telemarketing.

If you do not mail as many or call as many you definitely enjoy large savings.

4. Reduces credit risks

You get handle on credit. Some companies do not pay their bills. Using market segmentation allows you to eliminate those who cause credit problems or handle them “cash only”. You can reduce bad debt ratios and consider offering extended credit to your good customers.

Only by segmenting your market into units do you have these options.

5. Purge your list

By eliminating those who have lesser probability of buying from you today, or soon, and concentrating solely on those prime prospects who are most likely to turn into customers today, your marketing efforts will bring rewards more quickly and a higher profit level. And the opportunity for second and continuing orders also comes faster.

With speed of sales comes a lowering of costs. You don’t take the extra time to sell. Instead you begin profitable service immediately which reduces your costs, all of which falls to the bottom line and becomes those very nice increased profits.

6. Technology

With rapid change in technology the manufacturing units are producing products at the lower costs. Technology has made possible the production of goods as per the requirement of different market segments.

For example China is able to produce same product with different quality standards, different price and for different markets. Superior products for the developed countries and inferior products for the developing countries.

The segmentation theory says that those people most likely to buy from you are exactly like those already buying from you. It is relatively easy to divide markets into two main groups. Those that buy and those who do not.