The Marketing Mix "The 7 P's"

PRODUCT

PRODUCT Product involves the factors that influence our purchases – appearance, performance, fashions, etc. Customers won’t buy something they don’t want. Every product has a lifespan (from conception to demise) which is unique. The stages/phases a product lives through are:

The PRODUCT LIFE CYCLE

Stages – n5 recap Development Market research, test marketing, prototype developed Introduction Product is launched, heavily advertised and sales begin to increase Growth Greater awareness of product and sales are growing rapidly

Stages - continued Maturity Sales peak and product is well known. Extension strategies may be used. Saturation everyone has the product – no longer demanding it Decline Sales decline, product is no longer wanted and is eventually withdrawn

Profitability in the Product life cycle Stage Profit Levels Development No profit Introduction Very little, if no, profit Growth Profits begin to increase Maturity High profits Saturation High profits before they drop Decline Profits fall and losses may be made

Extension strategies Products need to be kept at the maturity stage for as long as possible (most profitable at this stage) Extension strategies are used to inject new life into products to keep it selling

Extension strategies Change the packaging Change the size, variety and shape of product Improve the quality of the finished product Change the method of promotion Change the method of advertising – reach a larger number of people Change the price – appeal to different segments

Think of products examples where extension strategies have been used Continued … Change the place the product is sold Change the name of the product Change the use of the product Think of products examples where extension strategies have been used

Product Change the product ingredients Change the packaging Rebrand Limited time reductions Credit deals Encourage more frequent use New use for a product Develop a product range Introductory offers

Promotion – Extension Strategies Competitions Celebrity endorsement Create a new advert Sponsorship Target a new segment

Place – Extension Strategies Globalisation Internet – e-commerce Agents Catalogues

PRODUCT PORTFOLIO Many organisations sell more than one product – this a product portfolio What’s in Cadbury’s product portfolio? Why do they have a product portfolio?

Why? Reduce the risk of failure Appeal to a number of market segments To increase sales/profits – customers will buy a variety of products from the organisation Introducing new products is easier Increase awareness To cope with seasonal products

Boston matrix This is used to plot the range of products an organisations offers. It looks at the market share and market growth of a product. It identifies when products might need to be introduced or changed An organisation wants as many “stars” as possible

THE BOSTON MATRIX Market Growth Market Share Problem Child/ Star HIGH LOW Market Share Market Growth Problem Child/ Question Mark Star Dog Cash Cow

Problem Child/Question Mark New product (introduction stage) Needs money to ensure success (usually taken from a cash cow) Will grow into a star only if looked after properly Needs promotion Loss making The future of the portfolio?

Star In growth stage Earning revenue - reinvested to support new products Gaining customer loyalty Still requires promotion Potential cash cow

Cash Cow In maturity stage Earning constant revenue to support other products Extension strategies needed? Has customer loyalty – less promotion required Without careful planning – dog!

Dog In decline stage Losing customer interest – tired product Loss leader? Decision-making time – let die or revive?

Analyse and comment on the following combinations: BAD Star, star, dog Problem child, star, cash cow Cash cow, cash cow, dog Problem child, problem child, cash cow GOOD BAD BAD

Disadvantages of a product portfolio What are they? Cost of promoting and advertising a number of products can be high One products bad reputation may tarnish the others High research and development costs Production costs for a range of products may be high Staff training needed to deal with different products