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Marketing. The 4 P’s / The Marketing Mix Product. Learning Objectives. Be able to classify products by line, range and mix To be able to describe the importance of new product design and development - PowerPoint PPT PresentationTRANSCRIPT
MarketingThe 4 P’s / The Marketing Mix
Product
Learning Objectives Be able to classify products by line, range and mix To be able to describe the importance of new product design and
development To be analyse the stages of a typical product life cycle and the
relationship between this and the marketing mix, profit and cash flow
To understand product portfolio analysis and the application of the Boston Consulting Group matrix
To be able to discuss the importance and role of branding HL – Use the Boston Matrix to develop future strategic direction HL – Distinguish between different types of branding and analyse
the role of branding in a global market
The marketing mix
The marketing mix is also known as the 4Ps:• Product• Price• Place• Promotion
Key Terms
- Product – The end result of the production process- Consumer durables – manufactured products that
can be re-used and are expected to have a reasonably long life (cars, washing machines)
- Product line – A set of related products sold by a business
- Product mix – The variety of product lines that a business produces or a retailer stocks
- Product range – All the types of products made by a business
Product
• You can sell any product once, but to establish loyalty and good customer relationships, the product must be right
• A business must meet customer expectations of– Quality– Durability– Performance– Appearance
Product
• ‘Product’ refers to the functions and features of a good or service
• Should satisfy the needs of the customer• May have a Unique Selling Point (USP)• ‘Product’ also includes a range of factors such as
packaging, quality, warranties, after-sales service and branding
• Products and brands may suggest certain images e.g. sporty, sophisticated, value
New Product Design / Development
• Crucial to the success of some businesses operating in markets with constant changes
• E.G. Technological change – video games• Other industries can sell the same products for
years with only slight adjustments• E.G. Pepsi• Financing NPD can be a major problem as you
do not see a return on your investment for years
http://www.telegraph.co.uk/finance/festival-of-business/10246113/How-to-successfully-launch-a-new-product.html
Generating new ideas
Idea screening
Concept testing
Business analysis
Product testing
Test marketing
Commercialisation
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E.G Market research, brain storming, adapting
existing products
Eliminate those ideas that have the least chance of
being successful Establishing consumers, possible costs, specific features of the product
Analysing the impact of new product on revenue,
costs and profits
Developing prototypes to assess performance and
to obtain feedback
Launching developed product in a small but representative
section of the market
Full scale launch of the product with appropriate
promotion and distribution
A very small proportion of new ideas ever reach
the 7th stageNPD process reduces the
risk of failure by eliminating unsuitable
and unprofitable products before they reach the final stage
Product lifecycle
The product lifecycle looks at the sales of a product over time
Stages of the product lifecycle
Introduction – high costs but no salesLaunch – high expenditure on promotion and product
development, low salesGrowth – sales increase and product should break-evenMaturity – sales stabilise, less expenditure on
promotion needed, revenue & profit should be highDecline – sales decline, extension strategies can be
adopted or the product withdrawn
Extension strategiesExtension strategies should maintain or increase
sales. They include:• Modifying the product• Reducing the price• Adding a feature• Promoting to a
different market sector
Extension strategies
Uses of the product life cycle
• Two main uses1. Assisting with the planning of marketing mix
decisions2. Identifying how cash flow might depend on the
product life cycle
1. Assisting with the planning of marketing mix decisions
Product life cycle phase
Price Promotion Place (Distribution)
Product
Introduction • Maybe high compared to competitors (skimming) or low (penetration)
• High levels of informative advertising to make consumers aware of the product
• Restricted outlets • Basic model
Growth • If successful, an initial penetration strategy could now lead to rising prices
• Consumers needs to be convinced to make repeat purchases - branding
• Growing number of outlets in areas indicated by strength of consumer demand
• Planning of product improvements and developments to maintain consumer appeal
Maturity • Competitors likely to be entering the market – need to keep prices competitive
• Brand imaging continues
• Highest geographical range of outlets as possible
• New models, colours, accessories as part of extension strategies
Decline • Lower prices to sell off stock, or if a product has a following then maybe raise prices
• Advertising likely to be limited
• Eliminate unprofitable outlets for the product
• Prepare to replace with other products, slowly withdraw from certain markets
2. Identifying how cash flow might depend on the product life cycle
• Cash flow closely linked with the product life cycle
Costs high nothing has been sold yet
Promotional expenses, factory capacity
Most positive cash flow, high sales
The Boston Matrix
• The Boston Matrix:– A means of analysing the product portfolio and informing
decision making about possible marketing strategies– Developed by the Boston Consulting Group – a business
strategy and marketing consultancy in 1968– Links growth rate, market share and cash flow
What do these terms mean?
• Devised by the BOSTON MARKETING GROUP
• FOUR Basic Types of product
• Each has different characteristics
• NOT GOOD to have just one type of product
The Boston Matrix (questions marks = Problem children)
The ‘Problem Child’ (Question Mark)Exciting but unpredictable product
Could be the next big thing
Could be a flop
Requires careful investment
Must be monitored closelyQuestion Mark or Problem Child:
-Products having a low market share in a high growth market
-Need money spent to develop them
-May produce negative cash flow
-Is there potential for the future?
-Introduction stage of the PLC
The ‘Rising Star’Established and growing in the market
Starting to pay back on investment
Needs careful management
Needs a developed marketing strategy
Stars:
– Products in markets experiencing high growth rates with a high or increasing share of the market
- Potential for high revenue growth
- Growth stage of the PLC
The ‘Cash Cow’Established Market Share
Highly Profitable
Stable Cash flow
Cash Cows:- High market share- Low growth markets – maturity stage of
PLC- Low cost support
Shrinking market share
Falling profitability
Time for rethink/revival of fortunes?
The ’Dog’
Dogs:- Products in a low growth market- Have low or declining market share (decline
stage of PLC)- Associated with negative cash flow- May require large sums of money to
support
Development
Introduct ion
Gr owt h
Maturi ty
De cli ne
Sales / Popularity
Time
The Balanced Portfolio
Your Task
Draw a Boston matrix and put 8 products of your own choice from the same company.
Your matrix should include a title, headings for each of the 4 areas and title along the sides of the matrix.
Using terminology from the Product Life Cycle and Boston Matrix, describe the stage of development at which each product is currently located and how this may affect the business.
USING YOUR EXAMPLES WE ARE GOING TO DISCUSS THE
FOLLOWING QUESTIONS:
The Boston Matrix• Implications for STARS:
– Huge potential – how?– May have been expensive to develop – why?– Is it worth spending money to promote?– What issues are there with the product life cycle?
The Boston Matrix• Implications for CASH COWS:
– Why are they cheap to promote?– Generate large amounts of cash – are these used for
further R&D?– Do you think there are any costs of developing and
promoting these products?– Is there a need to monitor their performance – in the
long term?– What stage of the PLC are these at?
The Boston Matrix
• Implications for PROBLEM CHILDREN / QUESTION MARKS:– What are the chances of these products securing a
hold in the market?– How much will it cost to promote them to a
stronger position?– Is it worth it?
The Boston Matrix
• Implications for DOGS:– Are they worth persevering with?– How much do they cost?– Could they be revived in some way?– How much would it cost to continue to support such
products?– How much would it cost to remove these products
from the market?
The Product Life Cycle and the Boston Matrix
Sales
Time
AB C
D
The product portfolio – four products in the portfolio
(1)
(1) ‘A’ is at maturity stage – cash cow. Generates funds for the development of ‘D’
(2)
(2) Cash from ‘B’ used to support ‘C’ through growth stage and to launch ‘D’. ‘A’ now possibly a dog?
(3)
(3) Cash from ‘C’ used to support growth of ‘D’ and possibly to finance extension strategy for ‘B’?
Importance of maintaining a balance of products in the portfolio at different stages of the PLC – Boston Matrix helps with the analysis
Boston Matrix & Strategic Analysis
Stars Problem Child / ?
Cash Cows Dogs
Market Growth
Market Share
High
LowLow
HL
BUILDING – Supporting problem child products with additional advertising or further distribution outlets. Finance could be taken from established cash cow products
HOLDING – Continuing support for these products so they can maintain their good market position. May need to ‘freshen up’ the product so sales growth can be sustained
MILKING – Taking the positive cash flow from established products and investing elsewhere in the portfolio
DIVESTING – Identifying worst performing dogs and stopping production. Not a decision to be taken lightly
High
Boston Matrix – An evaluation
• This tool is relevant when:– Analysing the performance and current position of
existing products– Planning action to be taken with existing products – Planning the introduction of new products
No technique can guarantee success – depends of the accuracy of the marketing managers
Boston Matrix – An evaluation
• Helps to establish current situation, but is of little use in ‘predicting’ future success or failure– Detailed and continuous market research will help– It is only a planning tool
Branding
• One of the most powerful concepts a business can achieve • Brand – An identifying symbol, name, image or trademark that distinguishes a
product from its competitors • Brand awareness – Extent to which a brand is recognised by potential customers and
is correctly associated with a particular product• Brand development – Measures the infiltration of a products sales. If 100 people in
1000 buy a product, it has a brand development of 10• Brand loyalty – the faithfulness of consumers to a particular brand as shown by their
repeat purchases irrespective of the marketing pressure from competing brands
Read NY Times article too
Types of branding
• Different types of branding
HL
Family branding
• Example – Heinz (Ketchup, soup, beans)• Benefits
– Marketing EoS– Makes new product launches easier
• Limitations– Poor quality of one product under the brand name may damage them all
HL
A marketing strategy that
involves selling several related
products under one brand name
Own label branding
• Example – Walmart has numerous brands
• Benefits– Often cheaper than name
brand products– Each own label brand appeals
to different groups– Often little spent on
advertising – in store promotions
• Limitations– Consumers often perceive
products to have a lower quality image
HL
Retailers create their own brand name and identity for a range of
products
Individual / Product branding
• Example – Proctor & Gamble• Benefits
– Each product is perceived as its own unique and separate brand• Limitations
– Loses the positive image of a strong company brand
HLEach individual
product in a portfolio is given its own unique identity
and brand image (unrelated products)
Company / corporate / global branding
• Example – Disney Products• Benefits
– Similar points to family branding but now applies to all products produced under the company’s brand name
• Limitations– Could lose positive image of a strong company brand
HL
Company name is applied to products and this becomes the brand name
globally
Manufacturers' brands HL• Example - Coca Cola• Benefits
– Successful branding establishes a unique personality which many consumers want to be associated with and will often pay a premium price for
• Limitations– The brand has to
be constantly promoted and defendedProducers establish the
brand image of a product or a family of products,
often under the company’s name
Role of branding in a global market
Globalised branding can have substantial benefits