products and brands

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GCSE Business Studies Revision Presentations 2004

Products and Brands



tutor2u™ GCSE Business Studies

What is a Product?

A product is “anything that is capable of satisfying

customer needs”. This definition therefore includes both:

Physical products

Cars

Washing machines

DVD players

Services

Dental treatment

Accountancy

Travel agents

Products are at the heart of marketing. The product needs toexist for the other elements of the mix to happen.




Parts of a Product

For someone doing marketing, the product has various partsthat need to be considered:

Product specifications and materials

Product design or styling

Product functions and benefits

Product packaging

Product range




Product Differentiation

Products that are the same – tend to get the same price

Challenges for a business

To make products different from competitors

Ensure that customers recognise that product is different!

Ways of differentiating a product

Distinctive design – e.g. Dyson; Apple iPod

Branding - e.g. Nike, Reebok

Performance - e.g. Mercedes, BMW




Launching a New Product

Marketing research – find out what customers want, who they are,

and where the gaps are in the marketplace Product development and testing – make prototypes; experimentby allowing a sample of potential customers to trial the productbefore it is launched

Distribution of product to outlets – the product cannot be soldunless it is in a position for customers to buy it – books will need to

be in the bookshops and hammers in the hardware stores Promotional launch to inform customers features of new product – this might be done locally, nationally or internationally – thecustomers need to know that the product is ready, available and thatit might be the sort of thing they want to buy

At the first two stages (marketing research and productdevelopment/testing) many products are rejected because thefindings of research shows that it will not be successful, or theycannot make a satisfactory prototype. Product testing might showthat customers react badly to the product.

The new product launch needs all the elements of the mix to be inplace to be successful.




Product Range

Product range – a collection of similar products offered by thesame business

Helps spread risk – a decline in one product may be offset bysales of other products

A range can be sold to different segments of market e.g.

family holidays and activity holidays

Selling a single product may not generate enough returns forbusiness (e.g. market segment may be too small to earn aliving)


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Marketing Services

Services are mainly marketed through product differentiation

Similar products are adjusted to target audience

Businesses then use heavy promotion to highlight thesedifferences.

Differs from goods marketing, because goods have greateropportunity to use packaging and physical product design




Brands

A product with a unique character for instance in design orimage

It is consistent and well-recognised.

Benefits

Inspires customer loyalty leading to repeat sales

Can charge higher prices, especially if brand is market leader

Retailers or service sellers want to stock brands

Own label brands

A retailer which uses their own name on product rather than

manufacturer’s Examples: Tesco tea or Sainsbury Cola




Examples of “Global” Brands

Microsoft

Coca Cola

Disney

Mercedes

Hewlett Packard




Brand Extension & Stretching

Brand extension

When a business uses a brand name on a new product that hassome of brand’s characteristics

Examples include:

• Dove soap and Dove shampoo (both contain moisturiser)

• Mars Bar and Mars Ice CreamBrand stretching

Where brand is used for a diverse range of products, notnecessarily connected.

E.g. Virgin Airlines and Virgin Cola; Marks and Spencer clothes

and food




Packaging

Packaging has several functions:

Protection of contents

Distribution – getting product from manufacturer to customer

Selling – design and labelling provides information and alsoconveys a certain image

Customer convenience – e.g. multi-pack

Important to understand the role that packaging plays in“selling”

If a product cannot be differentiated by its features or designs,then packaging becomes really important

Help to advertise and promote brand image

Help maintain quality standards (important)

Designed to encourage impulse buying (e.g. crisps, snacks)

Packaging also needs to appeal to distributors (e.g. shops)




Product Life Cycle (1)




Product Life Cycle (2)

Overview

Product Life Cycle is a “model” that tries to predict what will

happen to products over time

Model asserts that products are introduced (born), grow o reachmaturity and then enter old age and decline

Implications If the model is right…

The sales and profitability of products change over time

Different kinds of customer buy the product at various stages – e.g. certain kinds of customer like to buy things when they are

new (“early adopters”) whereas others only buy things wheneveryone else has already got one

Marketing decisions (e.g. price, promotion) change as theproduct goes through its life cycle




Product Life Cycle - Stages

Introduction

Researching, developing and then launching product

Note – many new products fail to get past this stage

Need to promote heavily

Growth

When sales are increasing at their fastest rate Likely to attract competitors into the market

Maturity

Sales are near their highest, but rate of growth is slowing down,e.g. new competitors in market or saturation

Usually the best time to make profits from the product

Decline

Final stage of cycle, when sales are falling

Product may be withdrawn if it is loss-making




Extending the Life of a Product

Advertising – try to gain a new audience or remind currentaudience

Price reduction – more attractive to customers

Added value – add new features to current product

Explore new markets – try selling abroad

Re packaging – brightening up old packaging, or subtlechanges such as putting crisps in foil packets




Managing Portfolios of Products

What is a product portfolio?

All the product lines and product ranges that a company offersfor sale

What is involved in managing the product portfolio

Decisions about how to allocate the promotional budget

Decisions about pricing strategy

Decisions about whether to invest in new / improved products

Decisions about whether to withdraw or close a product




BCG Matrix (2)

Stars are high growth products competing in markets where they

are strong compared with the competition. Often Stars need heavyinvestment to sustain growth. Eventually growth will slow and,assuming they keep their market share, Stars will become CashCows

Cash cows are low-growth products with a high market share.These are mature, successful products with relatively little need forinvestment. They need to be managed for continued profit - so that

they continue to generate the strong cash flows that the companyneeds for its Stars

Question marks are products with low market share operating inhigh growth markets. This suggests that they have potential, but mayneed substantial investment to grow market share at the expense oflarger competitors. Management have to think hard about “QuestionMarks” - which ones should they invest in? Which ones should theyallow to fail or shrink?Unsurprisingly, the term “dogs” refers to products that have a lowmarket share in unattractive, low-growth markets. Dogs maygenerate enough cash to break-even, but they are rarely, if ever,worth investing in. Dogs are usually sold or closed.




SWOT Analysis and Products

SWOT analysis stands for present Strengths andWeaknesses, future Opportunities and Threats

By categorising business situation under these headings,managers can analyse clearly what strengths to build on andweaknesses to put right

Then they can see which opportunities they might want totake and which threats they may want to react to.

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