Marketing LB

Product Portfolio- the range of products that a business offers and as the business grows, it will become likely to offer different products.

Advantages:

• Appeals to more market segments = wider customer base = increase sales revenue.
• Spreads risk, doesn't rely on a single product.
• Ensure constant sales throughout the year = consistent cashflow.
• Increase of brand identity and brand awareness.

Disadvantages:

• Failing product can damage entire brand.
• Possible loss of focus on core products.
• Expensive research + development costs.
• Expensive promotion costs.
• New managers have to be employed.

Product Life Cycle- a diagram that shows the various stages that ALL products will go through at some point. It measures sales over time from the introduction of the product until it is removed from the market.

1. Research & Development:

• No sales as product isn't launched yet.
• May be some marketing to raise initial awareness.
• No profit but very expensive R + D costs.

2. Introduction:

• Sales are starting off steadily. Lack of awareness and product may be tested in a regional area.
• Advertising needed to raise awareness and needs to be focused on target market.
• Revenue is being earnt, but will not cover R + S costs.

3. Growth:

• Sales are increasing quickly and some repeat custom established. Curiosity effect of product.
• Heavy promotion and advertising is done here to maintain growth and keep raising awareness.
• Revenue is high and may have paid back R + S costs and start to make a profit.

4. Maturity:

• Sales have levelled off and reached their peak. Higher repeat custom and brand loyalty.
• Promotion and advertising needed but only enough to keep awareness and market share.
• All R + D costs paid off and higher profit being made. Lower costs due to EoS.

5. Decline:

• Sales reach a saturation point and begin to fall. Businesses try to stop it before removing it.
• Either increase promotion as extension strategy or stop advertising before withdrawing it.
• Decrease in profits.

Extension Strategies- method or tactics a business uses in order to prolong the product lifecycle and even delay or prevent decline.

1. Spin Offs- a new product that is based on success of original product. (Coco-Cola flavours)

2. Face Lifts- invloves modernising the design/packaging of the product. (Walkers tear 'n' share).

3. New advertising campaigns- using more targeted and modern advertising. (John Lewis Xmas)

4. Lowering Price- reducing price if demand is elastic to boost sales. (Mobile Phones).

5. New Markets- Getting new/current customers to use the product at different times.(Cereal Bars)

6. Updated Designs- involve bringing out a new version, updating its quality. (Mobile Phones).

Cost Plus Pricing- adding all production costs and adding a fixed amount as a mark-up for profit.

Advantages: Easy to understand and calculate. Ensures profit on each unit.

Disadvantages: Ignores what customers want to pay. Ignores competitor pricing.

Contribution Pricing- adding all variable costs and adding mark-up for profit.

Advantages: Allows pricing to be more flexible to gain customer base and pay fixed cost later.

Disdvantages: Still have to pay fixed costs in the end.

Market penetration- for a new product/brand. Sets a deliberately low price and raises price later.

Advantages: Enables you to establish sales revenue and customer base in a competitive market.

Disadvantages: Lower profit margins. When price increases = loss of most customers.

Psychological- Involves rounding prices down to make them appear cheaper than they are.

Advantages: May increase sales as it looks cheaper than it is.

Disadvantages: Lower profit margins. Less repeat custom as it doesn't fool many people.

Premium Pricing- setting a very high price to create an image of quality and luxury.

Advantages: Very high profit margins. Creates a brand reputation for quality.

Disadvantages: Limit yourself to a small market segment. Only works if product is clearly better.

Skimming/Creaming- Setting a high price initially to take advantage of the 'must have' status of a new product. Over time you can lower prices because R + D costs paid off and EoS.

Advantages: Higher profit margins = helps recoup expensive R + D costs.

Price Discrimination- when firms charge different prices to different consumers for the same product, NOT due to differing degrees of cost.

Methods: Split into categories according to time, age, place, income,

Benefits for business:

• Charge higher prices = higher profit margins.
• Customers have a higher willingness to pay higher prices (peak time commuters)
• Guarentees some sales during quiet periods.

Benefits for customers:

• Customers with more flexible demand are able to get better deals.
• Prices customers into the market.
• Cross-subsidisation = charging more for some products to use other products.

Above the Line- use of mass media for larger businesses.

Below the Line- Use of smaller media for smaller businesses.

Advertising:

Benefits: Raise Awareness. Inform customers how to use the product. Persuade them to buy.

Ideal advert:

• Show the product being used.
• Give information- focus on possible USP.
• Show logo and use slogans.
• Make it memorable.

ASA- Advertising Standards Authority. Investigate complaints about adverts and can ban or make businesses edit them if they break advertising laws.

Sales Promotion- the short term methods that a business can use to boost sales and cashflow.

Methods: 2 for 1. Extra products. Money off. Free gifts. Loyalty cards. Vouchers/coupons.

Benefits:

• Increases sales from current and new customers.
• Instant boost of cashflow.
• Gets rid of excess stock.

Problems:

• Decrease profit margins.
• Can damage brand image if used excessively.

Sales promotions are only effective if you get the customer to increase usage of the product.

Public Relations- PR involves communications and use of media in order to develop favourable opinions about a brand and its product - NOT advertising.

Methods: Social Media. Newspaper/Magazine articles. Celebrity endorsement. Sponsorships.

Advantages: Raises awareness subtly. More believeable than advertising. Creates better opinions

Disadvantages: Can be expensive. Can damage the brand image.

Sponsorship- supporting an event/activity/organisation by providing money or other resources that is of value to the sponsored event. This is usually in return for advertising space at the event.

• Television/radio programme sponsorship.
• Sports sponsorship.
• Arts sponsorship.
• Educational sponsorship.

Celebrity endorsement- business pay famous people to wear/use/advertise their product.

Direct Selling- this is where a manufacturer sells to the consumer without the use of middle men such as retailers. It also involves selling to existing customers- loyalty cards.

Methods: Loyalty cards. Sales promotions. Catalogues/Email updates.

Advantages:

• Gain repeat custom.
• Focused purely on repeat custom.
• Cheaper than advertising.

Disadvantages:

• Excessive use can annoy customers.
• Catalgues and postages are expensive to run.
• Lower profit margins if free gifts are given.
• Doesn't help widen customer base.

Channels of Distribution- how the finished product gets from the manufacturer to the consumer.

Direct Selling- Manufacturer > Consumer.

Advantages:

• Keep selling price + no transportation costs = higher profit margins.
• USP- freshness and authenticity.
• Guarenteed place to sell product.

Disadvantages:

• Cost of rent, shop and sales staff.
• Lack of exposure and lack of convenience for consumer.

Selling via agents: often a good idea when you expand into new markets in which you lack experience, knowledge, contacts and lanaguage barriers. The expertise of agents can set up meetings with wholesalers and retailers.

Selling via Retailers: Manufacturer > Retailer > Consumer

Advantages:

• Bigger Exposure and wide choice for consumers = higher sales revenue.
• Increased brand awareness.

Disadvantages:

• Competition with other brands and lack of control over sales.
• Loss of possible USP + lower profit margins.

Selling via wholesalers: Manufacturer > Wholesaler > Retailer > Consumer

Advantages: Wholesaler buys in huge quantities = benefit from bulk buying and EoS.

Disadvantages: further loss of profit margin. Loss of control from who sells product = brand image.

Benefits for businesses:

• No cost of store = no sales staff = lower costs
• Ability to sell 24/7 = wider customer base = higher sales revenue = increased profit.

Benefits for customers:

• Ability to order 24/7 = better efficiency.
• Wider product range with customer reviews and price comparison websites.

Problems for businesses:

• High cost of transport/storage/delivery and high costs of website maintenance.
• Poor reviews and mistakes can be costly financially and damage reputation.

Problems for customers:

• Inability to test product = cost and inconvenience of possible return.
• Sometimes have to pay for delivery.