Transcript File - Mrs. Dill`s Weebly

4.5 – THE FOUR P’S
IB Business
PRODUCT LIFE CYCLE
Research and Development
Generating Ideas; Screening Ideas; Creating a Prototype; Test Marketing; Commercialization
Launch (Introduction)
Growth
Maturity
Saturation
Decline
PRODUCT LIFE CYCLE
EXTENSION STRATEGIES
DONE AT THE MATURITY OR SATURATION STAGES
New Markets
New uses for a product
Repackaging/Redesigning
Target different market segments
Promotion
These strategies are essential to long-term business success
PRODUCT LIFE CYCLE & MARKETING MIX
Strategies
Introduction
Growth
Maturity
Saturation
Decline
Product
Basic product
marketed
Product
improvements or
new product
development
New product
Extension
development;
strategies critical
extension strategies to maintain sales
Weak products
withdrawn from
market
Price
Cost-plus, skimming
or penetration
pricing used
Penetration prices
slightly increase
Competitive or
promotional pricing
used
Competitive
pricing used
Price cuts are
made.
Promotion
Informative
advertising used
Persuasive
advertising used
Extensive
advertising to
remind customers
of product
Aggressive
advertising
carried out to
emphasize
benefits
Advertising
reduced to a
minimum
Place
Selective or
restricted
distribution takes
place
Intensive
distribution or
more distribution
outlets are used
More intensive
distribution or a
wide range of
distribution outlets
Widest range of
geographical
distribution
outlets used
Selective
distribution and
unprofitable
outlets are
eliminated
RELATIONSHIP BETWEEN PRODUCT LIFECYCLE,
INVESTMENTS, PROFIT & CASH FLOW
Product Life
Cycle Stage
Development
Introduction Growth
Maturity
Saturation
Decline
Investment
Level
High R & D
costs
High costs
on
promotion
Average to Lower costs
Cost focus is
high costs on on promotion on extension
promotion
strategies
Profit
None
None or
negative
Some profit
and rising
High profit;
reaches its
peak
High and
Decreasing
mostly stable profit
profit
Cash flow
Negative
Negative
but
improves
with sales
Positive
Positive
Positive
Very low
costs on
promotion
Positive but
decreasing
cash flow
PRODUCT PORTFOLIO ANALYSIS – BCG MATRIX
High
(Growing)
Low (Mature)
Market Growth
Market Share
High
Low
Stars
Problem Children or
Question Marks
??????
Cash Cows
Dogs
BCG MATRIX STRATEGIES
Holding strategy –
focus here is on products with a high market share, to ensure they maintain current position
Building strategy –
turning problem children into stars
Harvesting strategy –
milking the benefits of products with a positive cash flow
Divesting strategy –
poor-performing dogs are phased out or sold off.
LIMITATIONS OF BOSTON MATRIX
Focuses on current market position
May be a time consuming and complex exercises for businesses
High market share doesn’t necessarily equate to high profits.
BRANDING
Branding A name, symbol, sign or design that differentiates a firm’s product from its
competitors
Can add value to a product, and can have a strong influence on how consumers view
a product.
Brand Awares
ASPECTS OF BRANDING
Brand Awareness
Ability of consumers to recognize a firm’s goods or services
Major step; very important when promoting a product.
Brand Development
Any plan to strengthen or improve the product image
Brand Loyalty
When consumers are committed to a firm’s brand; willing to make repeat purchases
A result of brand preference
Brand Ambassadors – consumers who are positive about a particular brand
Brand Value
How much a brand is worth – reputation, potential income, market value
IMPORTANCE OF BRANDING
One of the most important tasks of marketers
Branding gives customers a clear image with which they can associate the business
A well-known brand can command a higher price
Customers make judgments about certain product and services based on the way
they are presented
A firm’s brand can provide legal protection
Effective branding results in a sense of personal identification & emotional
connection among consumers
IMPORTANCE OF PACKAGING
Provides physical protection
Offers convenience
Provides information
Can help reduce security risks
Aids promotion
Should be eye-catching and appeal to the customer
Color and shape is key to reinforce and project a brand image
PRICE
Plays a significant role in the marketing mix – only “P” that generates revenue for a
business; businesses need to set an appropriate pricing strategy
Cost-plus pricing (Mark-up pricing)
Adding a mark-up to the average cost of producing a product – p. 303
Penetration pricing
Setting a low initial price to attract a large number of customers quickly – p. 303-304
Price Skimming
Setting a high price when introducing a new product – usually for a limited period – p. 304
Psychological Pricing
When firms consider how pricing affects consumers’ perception of their product’s value – p. 305
Consumers may associate a higher price with high quality
Also reducing prices to make us believe we’re getting a deal – 9.95 instead of 10.00
PRICE - CONTINUED
Loss Leader
Charging a low price for a product, below average cost
Aim is to attract customers; usually associated with supermarkets p. 305
Price Discrimination
Charging different prices to different groups of consumers
Business has to have price-setting ability
Elastic v. inelastic demand
Example – concert tickets – different price points – p. 305-306
Competitive Pricing
Takes into account what competitors are charging
Predatory pricing; Destroyer pricing – driving competitors out of the market – p. 306
PROMOTION
Communicating about your product to consumers
Objectives of Promotion
Informing consumers of a new or improved product
Persuading consumers to purchase a product
Reminding consumers that your product exists
Enhancing the brand image of the product as well as the image of the business
 Promotion categorized into two forms: above-the-line and below-the-line
ABOVE THE LINE
Paid form of communication – uses independent mass media to promote a product
or business
Advertising – central global role – categories of advertising
Informative Advertising – providing information on features, price or other specifications
Persuasive Adverting – convincing customers to buy one product over another
Reassuring Advertising – Focus on existing customers; remind them they made the right decisio
Television Radio Cinema Newspaper Magazines Outdoor Advertising
BELOW THE LINE PROMOTION
Focuses on promotional activities aimed at consumers or people interested in product
Direct Marketing – examples – direct mail sent to consumers
Has limitations – many consider it “junk mail”
Personal Selling – sale of a product through personal contact
Face to face or over the telephone – car sales as an example; personalized attention; salesperson = commission
Public Relations – promotional activities aimed to enhance the product image
Sales Promotions
Money off coupons
Point of sale displays
Free offers or free gifts
Competitions
BOGOF – Buy one get one free
PROMOTIONAL MIX
Involves a good balance of both above-the-line and below-the-line methods
Certain factors must be considered when putting together an appropriate mix:
Cost – does the marketing budget support the method you want to use?
Legal framework – must take into account any applicable laws
Target Market – what specific segment of the market is the produce aimed at?
Stage in the Product Life Cycle
Type of Product
IMPACT OF NEW TECHNOLOGY ON PROMOTIONAL
STRATEGIES
Over the last decade technology has changed rapidly, forcing marketers to
incorporate the new technology into their marketing strategy.
Social Media Marketing – the way technology is used to build relationships, drive
repeat business, and attract new customers through the sharing of information.
Promotion through word of mouth powered by technology
Viral Marketing – individuals pass on promotional messages within social networks
Use of banners, pop-ups, social media, YouTube videos.
Main goal to increase brand awareness through replicating a viral-like process
BENEFITS/LIMITATIONS OF TECHNOLOGY
Benefits of Technology on Promotional Strategies Limitations of New Technology
Wide Reach – large % of internet usage is Social
Media
Accessibility problems – if a region has no
computer of internet, opportunities may be missed
Engagement – most customers are participants
Distraction – use of pop-ups can be viewed as a
waste of time
Market Information – provide useful feedback on
trends, public opinion, brand activity, etc.
Lurkers – people who sit and absorb information.
Cost Savings – Less expensive than traditional
methods
Brand Recognition – Repeat exposure can increase
awareness of brands, leading to loyalty
Speed – ads can reach a wide audience in a short
space of time
GUERRILLA MARKETING
Marketing form using “untraditional” activities to help companies stay successful
Phrase coined from military and warfare-related terminology
Principles of Guerilla Marketing – remember with acronym of APENS
A = Activity
P = Presence
E = Energy
N = Networks
S = Smart
METHODS USED IN GUERRILLA MARKETING
Peer Marketing; Product Give-aways; text- & video-messaging; “Roach Baiting” and
Buzz Marketing; Intrigue; Liver commercials; Bill Stickers
Benefits:
Low Cost
Flexibility
Communication Tool
Simplicity
Identified target market
Interaction opportunity
Accessibility
Negative Effects of Guerilla Marketing
Denting the brand image
Negative impact on social life
high negative attitudes
Ethical issues
PLACE – HOW DOES PRODUCT GET TO
CONSUMER?
Refers to the location of the business and the customers
Helps businesses develop the best way to distribute their produce
Using intermediaries and wholesalers helps businesses store and market products
Growing use of internet makes reaching a wide range of customers possible
CHANNELS OF DISTRIBUTION
Path taken by a product from producer to consumer
Zero Intermediary – directly sold from producer to consumer
Example – vegetables at a Farmer’s Market
One Intermediary –
One person between producer & consumer
Two Intermediaries
Producer, Wholesaler, Retailer, Consumer
Look at illustrations and table, page 316
REVISION CHECKLIST
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