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 closely

Question 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 defended

Producers 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