1. 4.5 Product

2. Learning Outcomes
To be able to draw and interpret the product life cycle for a business. A04
To understand the relationship between the product life cycle and the marketing mix and be able to apply this K&U to a business. A02
To understand and be aware of possible extension strategies and then be able to analyse and evaluate the most appropriate strategy in a given situation. A03
To understand the relationship between the product life cycle, investment, profit and cash flow. A02
To understand, interpret, analyse and draw a Boston Consulting Group (BCG) matrix on an organization’s products. A03, A04
To understand the following aspects of branding – awareness, development, loyalty and value. A02
To be able to analyse and evaluate the importance of branding in a particular context and to a particular business. A03
To be able to analyse and evaluate the importance of packaging in a particular context and to a particular business. A03

3. What makes the difference between product success and product failure?
Central Question
What makes the difference between product success and product failure?

4. The Product Life Cycle - Classic
Saturation
Sales
Sales Quantity
Maturity
Decline
Growth
Cash Flow
Introduction
Development
Time
‘Death Ride Valley’

5. The Stages
Stage 1: Development – brainstorm ideas and go through new product development process
Stage 2: Introduction – launch the product on to the market.
Stage 3: Growth – as awareness increases and more consumers adopt the new product, sales increase.
Stage 4: Maturity – sales are still increasing but slowly as most people who want or need the product are already consumers.
Stage 5: Saturation – the market is now made up of many competitors and becomes saturated. Sales level off and begin to decline
Stage 6: Decline – steady drop in sales as consumers change to newer, better or substitute products.

6. New Product Development Process
Brainstorm of product ideas
Screen Ideas for viability
Prototype
Test Market
Commercialization
Failure
SUCCESS
Failure
Market
Research
Failure
Failure

7. What is happening at each stage?
Product
Price
Promotion
Place
Investment level
Sales
Profits
Cash flow

8. PRODUCT PRICE PROMOTION PLACE STRATEGIES INTRODUCTION GROWTH MATURITY
SATURATION
DECLINE
PRODUCT
Basic product is marketed
Product improvements or new product development plans start.
New product development at an advanced stage. Extension strategies may be introduced
Extension strategies are crucial to maintain sales.
Weak products are withdrawn from the market.
PRICE
Cost-plus, skimming, or penetration pricing. Which is best?
Penetration prices begin to increase.
Competitive or promotional pricing used.
Competitive pricing used.
Price cuts are made.
PROMOTION
Informative advertising.
Persuasive advertising.
Extensive advertising to remind customers of the product.
Aggressive advertising is carried out to emphasizes the brand’s benefits and differences.
Advertising reduced to a minimum.
PLACE
Selective or restricted distribution takes place
Intensive distribution or more distribution outlets are used.
More intensive distribution or wider range of outlets used.
Widest range of geographical distribution outlets used.
Selective distribution and unprofitable outlets eliminated.

9. Relationship between PLC and investment, profits & cash flow
STAGE OF PRODUCT LIFE CYCLE
DEVELOPMENT
INTRODUCTION
GROWTH
MATURITY
SATURATION
DECLINE
INVESTMENT
LEVEL
High research & development costs.
High promotion costs.
Average to high promotion costs.
Lower costs on promotion.
Cost focus is on extension strategies.
Very low promotion costs if any.
PROFIT
None.
None or negative.
Some profit and rising.
High profit – reaches its peak.
High and mostly stable profit.
Decreasing profit.
CASH FLOW
Negative.
Negative but improving with sales.
Positive.
Positive but decreasing cash flow.

10. Task – 10 mins Apply these concepts to one of our chosen companies
You need to be able to analyse one product by applying the PLC tool and analysing how the marketing mix is adapted depending on the stage
Also consider what was likely to be happening to investment, profits and cash flow at each stage.

11. Alternative Product Life Cycle
Sales
Qty/$
Time

12. Alternative Product Life Cycle
Sales Qty/$
Time

13. Alternative Product Life Cycle
Sales Qty/$
Time

14. Alternative Product Life Cycle
Sales Qty/$
Time

15. Life Cycle Extensions
Sales Qty/$
Extension Strategies
Time

16. Extension Strategies How to extend the life of a product??
Find new uses eg:
Find new markets eg:
Find new market segments eg:
Add features eg:
Change the packaging/appearance eg:
Change the price eg:
Develop new promotional strategies eg:

17. A Balanced Portfolio
Sales Qty/$
Product B
Product C
Product A
Time

18. Benefits of a balanced portfolio
Balanced portfolios
Benefits of a balanced portfolio
Expensive launches can be financed by profits from other products.
Expensive extensions can financed by profits from other products.
All products not ‘maturing’ at the same time
Overall cash flow not over-stretched

19. Long Life – why?? Quality Enduring popularity
Dynamic product development
Brand loyalty
Cult following
Seeking new markets
Captivating advertising

20. IB Business and Management
The Boston Matrix
IB Business and Management

21. What is the Boston Matrix?
It is a tool created by the Boston Consultancy Group
It is designed to be used by multi-product firms
It is used to analyse a firm’s product portfolio and help to devise marketing strategies

22. The Boston Matrix
The Boston Matrix allows a firm to analyse its product portfolio by their market growth and market share in relation to their competitors
Products are categorised as either a:
Problem Child/Question Mark
Star/Rising Star
Cash Cow
Dog

23. Market Share
High
Low
High
Market
Growth
STAR
Problem Child
Low
CASH COW
DOG

24. Problem Child Question marks have a low share of a high growth market
Also known as Question Marks
Are often new products
The firm may decide to BUILD on existing sales by investing more in promotion and distribution

25. Stars Stars have a high market share of a high growth market
Also called rising stars
The firm may wish to use a HOLDING strategy whereby it maintains current levels of spending to keep the product in this category

26. Cash Cows Cash Cows have a high market share of a low growth market
These are well established products
Little or no investment is required
Companies may wish to adopt a MILKING strategy whereby they use profits to support other products

27. Dogs Dogs have a low market share of a low growth market
Companies do not want to have many products in the ‘dog’ category
Firms may invest in dogs or may DIVEST which means withdrawing from the market

28. Task in pairs - 10 mins
Use the blank Boston Matrix template and apply its products to one of our chosen companies.
Get ready to feedback and justify

29. BCG Matrix Strategies STRATEGY EXPLANATION HOLDING
Products with a high market share want to maintain their current position in the market. After all they are likely to be facing growing competition. Therefore investment will be needed to sustain consumer demand.
BUILDING
This strategy focuses on turning “problem children” into “stars”. Money from cash cows could be invested in promoting or distributing the product or even adapting the product to increase market share.
HARVESTING
This strategy concentrates on milking the benefits of products with a positive cash flow. These products provide the necessary finance which could be used to invest in other portfolio products.
DIVESTING
Badly performing products or “dogs” are phased out or sold off. Resources gained from this can be used to boost other products across the portfolio.

30. Limitations of the Boston Matrix
Focuses on current position no regard for future planning.
Can be time consuming and complex for a business to accurately evaluate their products according to market share and growth.
High market share does not necessarily equate to high profits. This can depend on the pricing strategy being used.

31. “The process of distinguishing one firm’s
Brand & Branding
BRAND
“A name, symbol, sign, or design that differentiates a firm’s product from its competitors”
BRANDING
“The process of distinguishing one firm’s
product from another”
BRAND AWARENESS
“The ability of consumers to recognize the existence and availability of a firm’s good or service”
BRAND LOYALTY
“When consumers become committed to a firm’s brand and are willing to make repeat purchases over time”

32. Aspects of Branding ASPECT EXPLANATION BRAND AWARENESS
To effectively promote a product creating brand awareness is vital. It can act as a USP or a way of differentiation in a market that is saturated with competition. A high level of brand awareness usually leads to higher sales and healthy market share.
BRAND DEVELOPMENT
Is any plan to improve or strengthen the image of a product. This approach aims to enhance awareness by increasing the power of its name, sign or symbol. Heavy promotion is often used – a range of above and below line methods could be used .
BRAND LOYALTY
When consumers repeatedly purchase the same product despite alternatives – brand preference. Extremely powerful and free marketing through word of mouth. (Apple)
BRAND VALUE
&
VALUES
How much a brand is actually worth in terms of reputation, potential income and market value. A high brand value is desired and can be classed as intangible asset on balance sheet. Values of a brand can also reflect a moral code by which the brand lives. Consumers may by the product because they share the same values (CSR).

33. Advantages of Branding
Provides a visual representation of the product
Can add value
Encourages loyalty
Can help generate sales
Reduces risk
Increases barriers to entry for new competitors
These hopefully lead to an increase in profits

34. The importance of branding
Initially good products will sell the brand, eventually a brand will sell the product
Products can be copied but brands can’t*
Products can take on a ‘personality’ with branding which should further enhance awareness and loyalty.
Can charge higher prices - skimming
The lifecycle of a brand lasts far longer than that of a product
Except in China of course!

35. The difficulties of branding….
Developing a brand is very costly and takes a long time
Protecting the brand can be difficult
Need regular investment and updating

36. Branding over time

38. Look at how these logos have changed over time……
Why have these logos evolved?
Which logos do you think have changed for the better?

49. The Gap Re-branding disaster
Gap launched their new Logo online in 2010
Customers took to Twitter and Facebook to voice their complaints
Within a week Gap announced they were reverting to their original logo

50. Complete re-branding

51. Importance of Packaging
Reflects the desired brand image
Provides physical protection
Can improve distribution
Differentiation from competition
Provides information
Can help reduce security risks
Helps promotion
EE/TOK
To what extent does packaging for goods contribute to the destruction of the environment?
Should/could businesses be more responsible?
Why might they not want to be more responsible?

52. Product – CUEGIS? CONCEPT RELEVANCE TO PRODUCT THEORY CHANGE CULTURE
ETHICS
GLOBALISATION
INNOVATION
STRAETEGY

53. QUIZ TIME