Using the Marketing Mix: Product

• PRODUCT- the good or service provided by a business.
• PRODUCT DESIGN- the planning of a new good/service, deciding upon its features, functions and appearance.
• PRODUCT DEVELOPMENT- selling new or improved versions of products into existing markets.
• PRODUCT PORTFOLIO- the range of products or brands provided by a business.
• BOSTON MATRIX- a tool of product portfolio analysis that classifies products according to their market share and the growth of the market in which they are sold.
• PRODUCT LIFE CYCLE- the stages that a product passes through during its lifetime i.e. development, introduction, growth maturity and decline.
• EXTENSION STRATEGIES- methods used to prolong the life of a product by preventing it from reaching the decline stage of its life cycle.

a product is the good/service that a business provides for their customer. These can be tangible (e.g. an actual product) or intangible (e.g. brand name or service such as a hair cut).

Businesses invest in research & development to improve their products so as to satisfy the market.

They will also attribute great importance to their product design so that it maximises its appeal to the customer and minimises production costs.

1. Ideas Generation

using a combination of their own market research, investment in research and development and brainstorming activities new ideas for products are generated.

2. Analysis of Ideas

the next stage is to analyse whether the new idea for a product will fit in with the overall objectives of the business.

3. Product Development

at this stage, the product is created in prototype form and tested via simulation using computer technology.

4. Test Marketing

This saves the business the costs of a full scale launch and allows them to identify potential modifications. However, it also allows the competition to see your product at an early stage and to respond to your ideas.

5. Launch

After all modifications have been made, the final product might eventually make it to the market. However, even then over 70% of new products will fail 3 years!

technology

• significant advancements in new technology in recent years have meant more efficient production systems allowing for the creation of new and innovative products, stronger communication channels with suppliers and customers and the development of individualised products based upon customer requirements.

• technology has meant that the market is now changing even faster as the consumer is much more informed about their choices than ever before.

Competitor's Actions

• Another side effect of the growth of technology has been the rise of e-commerce. This has led to competition not just on a local scale but potentially globally!

• The competition might also launch new products onto the market which can take away some of a firm's market share.

• This might also be an indication of changing tastes and fashions within the market, all of which the business will need to respond to.

Entrepreneurial Skills of Managers and Owners

• the managers or owners can be a critical factor in encouraging an entrepreneurial culture within a business
• Spotting an early gap in the market can mean that a firm can benefit from 'first-mover advantage'.
• Some firms will actively encourage continual development of new ideas via schemes such as kaizen groups and will sometimes offer reward incentives for the best ideas that are adopted within a business.
• Those businesses that are most likely to consistenly benefit from the development of new products are those which invest for the long-term in research and development. Whilst results are not guranteed, it does ensure that new processes are being continually thought through and tested.

• a business is able to emphasise the features of their USP through their promotional activities in an effort to attract extra customers.

• The creation of a USP in product, can create consumer loyalty and allow for the charging of a higher price in certain circumstances.

• A USP will also increase the price inelasticity of demand for a product and it is very important in highly competitive markets.

what is it?

• It helps a firm to identify the position of each of their products within the market. It includes both the boston matrix and product life cycle.
• The information can then be used by a business to inform their marketing strategies for each product.

Issues for Evaluation

• the model is theorectical and in reality dogs can make profits and cash cows can lose money!
• The diagram illustrates the existing position of a firms products but it requires the skills and experience of managers to make decisions about the future direction and strategies.
• firms might be falsely attracted to invest heavily in apparently fast growing markets whih can just as suddenly slow leaving underused capacity.
• Firms in fast changing markets might be concerned if they have too many cash cows and not enough new products coming through.

STAR

• a fast growing market section
• attracts increasing competition
• require heavy promotional spending
• expensive to maintain
• generate profits that can support other products
• they will burn-out quickly

PROBLEM CHILD

• requires a large investment in promotional activity to stimulate additional demand
• potential to become a cash cow
• is it worth the time and money to invest in the problem child?

DOG

• limited growth potential
• low market share
• unlikely to be kept by a firm
• can generate profits though e.g. cadburys whole nut bar only has 1% of the confectionery market but this equates to £40m

CASH COW

• generate a constant stream of profit but require little promotional expenditure
• products are 'milked' for profit
• little attraction for new competition in the market as low market growth
• money used to reinvest in new product ideas

Issues for evaluation

• the diagram only shows what has happened in retrospect to a firm's products and not what stage they are currently in.
• Fast moving and rapidly changing markets are almost impossible to accurately portray upon a product life cycle diagram.
• No decisions should be made upon this diagram on its own. Further market research is required.
• There is a risk of the diagram becoming self-fulfilling if a firm follows it to closely.

RESEARCH & DEVELOPMENT

• this involves the product development & design process
• requires large scale cash injections
• generates no income
• no gurantee of success

INTRODUCTION & LAUNCH

• usually intially slow sales
• consumer uncertainty
• stores reluctant to stock unknown or untested brands
• heavy promotional spending required to generate interest
• negative cash flow
• might use penetration pricing

GROWTH

• product more established
• consumer and business interest starts to grow and develop
• requires additional promotional to maintain interest
• higher brand recognition
• increased competition
• profits might start to be made

MATURITY

• higher profits are being made
• lots of competitors
• defend market share
• ensure product is in as many outlets as possible
• aim to maintain this stage for as long as possible
• launch of extension strategies?

DECLINE

• sales fall (temp/permanent?)
• promotional costs are minimised
• falling number of competitors
• product might be withdrawn but might still be able to make a profit, especially if the level of competition declines significantly

EXTENSION STRATEGIES

• attract new market segments
• widen consumer appeal
• widen usage of product
• modify the product
• target new markets
• promotions and special offers