An effective marketing mix is one which..,
- Meets customer needs
- Achieves marketing objectives
- Is balanced and consistent
- Creates a competitive advantage for the business
- The MM for each business and industry will vary
Most businesses will sell more than one product. Often they will produce several similar products that appeal to diff customers.
Advs to having a product range:
- Spread the risk- a decline in one product may be offset by sales of other ones
- Selling a single product may not generate enough returns
- A range can be sold to different segments of the market
Managing Product Portfolio
Owning a product portfolio often poses problems, it must decided how to allocate investment. Portfolios of proudcts can be analysed using the Boston MAtrix. This categorises the products into one of four different areas based on:
- Market share
- Market growth
...are high growth products competing in markets where they are strong compared with competition. Often, stars need heavy investment to sustain growth. Eventually growth will slow and assuming they keep their market share, will become cash cows.
are low growth products with a high market share. These are mature, successful products with relatively little need for investment. They need to be managed for continued profit so that they continue to gernerate strong cash flows
Problem Child is a product with low market share operating in high growth markets. This suggests that they have potential but need substantial investment to grow market share at the expense of large competitors.
Dog refers to a product that have a low market share in low growth markets. Dogs may generate enough cash to break even, but they are rarely, if ever, worth investing in. Dogs are usually sold or closed.
Product Life Cycle
The product life cycle describes the stages a product goes through when it was first thought of until its removal.
- Introduction; researching, developing and launching the product
- Growth; when sales are increasing at their fastest rate
- Maturity; sales are near their highest but the rate of growth is slowing down.
- Decline; final stage of the cycle when sales begin to fall.
- New product launched
- Low level of sales
- Low capacity utilisation
- High unit costs
- Usually negative cashflow
- Heavy promotion
- Aim-to encourage customer adaptation
- High promotional spending to create awareness
- Either skimming or price penetration
- Limited focused distribution
- Expanding market but arrival of competitors
- Fast growing sales
- Rise in capacity utilisation
- Product gains market acceptance
- Cash flow may become postive
- Economies of scale
- Advertising to promote brand awareness
- Increase in distribution outlets
- Market penetration and price leadership
- Target the early majority of potential buyers
- High promotional spending
- Improve the product
- Slower sales growth as rivals enter the market
- High level of capacity utilisation
- High profits for those with high market share
- Cash flow should be positive
- Weaker competitors start to leave the market
- Prices/profits fall
- Product differentiation and product improvements
- Rationalisation of capacity
- Competitor basd pricing
- Promotion focuses on differentiation
- Persuasive advertising
- Intensive distribution
- New segments
- Develop new uses
- Falling sales
- MArket saturation and competition
- Decline in profits, weaker cash flow
- More competitors leave market
- Decline in capacity utilisation
- Saving by spending little on marketing
- Price cutting
- Promotion to retain loyal customers
These extend the life of the product before it goes into decline.
- Advertising; try to gain a new audience or remind the current audience
- Price Reduction; more attractive to customers
- Adding value; add new features to the current product
Criticism of the PLC
- Shape and duration of the cycle varies
- Strategic decisions can change the life cycle
- Difficult to recognise exactly where a product is in its lifecycle
- Length cannot be reliably predicted
Product differentiation and USP's
PD is the process of making a product differ from a competitors, can be achieved through:
- Distinctive design
- A USP is a feature or benefit that separates a product from its competitors
- Could be a lower price, a smaller version of the product, offering extra functions
- A business needs a USP to make their product seem attractive to customers.
Influences on the development of new products
Advancements in tech can help firms with opportunities to produce new products that offer consumers new benefits. E.g. advancements in computers has enables companies to develop new and improved mobile phones and laptops.
- Entrepreneurial skills
Need to be good at spotting gals; develop systems within their business that enable it to react to changes in market trends. Launch new products quickly to benefit from first mover advantage, charge premium prices.
- Competitors actions
Operating in competitive markets may try to emulate a successful new product produced by one of their rivals by launching their own version.