A product is any good or service that satisfies the needs or wants of consumers
Either tangible (physical products) or intangible (services)
Must have value added (either functional value or emotional value)
Functional – Useful
Emotional – Appeals to emotion (instills pride, happiness, etc.)
Types of products
Consumer products – products sold directly to consumers
Fast-moving consumer goods (FMCG)
Sells by large quantities
Soap, shampoo, pencils, etc.
Usually cheap
Consumer perishables
Seasonal products
Products with limited shelf-life
Can be sold at a higher price compared to FMCG since they are a premium
Consumer durables
Long lasting and relatively expensive products
Since they are long lasting, not as many are sold, so they are more expensive
Specialty goods
Most expensive
Unique products
Can also be classified by purchase consideration
Low Involvement Product (LIP)
Opposite of HIP
High Involvement Product (HIP)
Consumer will take a while to decide when purchasing
Producer Products
Goods purchased by businesses for production process (raw materials & inputs)
Product life cycle
Pertains to the different stages of a product’s lifespan
Measured in terms of sales level and growth phases over a period of time.
Used to identify necessary changes in marketing strategies
Each stage will usually need a different marketing mix
Product life cycle stages
Research and development
Design, development and testing
Requires a large investment in resources and time
Creation of prototype with feedback from target market
Alpha and Beta releases for testing
Launch/introduction
Product will be priced HIGH to cover
Costs of heavy marketing
Cost of research and development
Product is not very profitable at this moment
Growth
Rapid volume increase due to better awareness and expansion of distribution channels
Starts to be profitable due to economies of scale in production and marketing
Competition begins becoming attracted to the market
Maturity/saturation
Sales may begin to peak/stabilize (no significant changes)
Achieve highest market share, while competition continues to pour into the market
Companies will employ price reductions, product differentiation and extension strategies very aggressively to protect their market share
Decline
Sales and profits decline due to shifts in demand, new technology, or new models
Price levels fall (to get rid of inventory) prior to withdrawal
Phasing out the product
Extension strategies
Price reduction
Redesigns (e.g. special features, limited edition, etc.)
Repacking (e.g. new colors, materials)
New markets/market development
Promotions (advertising and special tie-ups)
Aside from demographic/psychographics, speed of adoption is also affected by
Relative advantage
Compatibility
Testability
Observable feature
Convenience
Product life cycle and the marketing mix
Launch
Price: may be high or low compared to competitors
Promotion: high levels of informative advertising to make the consumers aware of the product’s arrival on the market
Place: restricted outlets – possibly high-class outlets if a skimming strategy is adopted
Product: basic model
Growth
Price: if successful, an initial penetration pricing strategy could now lead to rising prices
Promotion: consumers need to be convinced to make repeat purchases- brand identification will help to establish consumer loyalty
Place: growing numbers of outlets in areas indicated by strength of consumer demand
Product: planning of product improvements and developments to maintain consumer appeal
Maturity/saturation
Price: competitors likely to be entering market – there will be a need to keep prices at competitive levels
Promotion: brand Imaging continues growing – need to stress the positive differences with competitor’s products
Place: highest geographical range of outlets as possible – developing new types of outlets where possible
Product: new models, colors, accessories, etc. as part of extension strategy
Decline
Price: lower prices to sell off stock-or if the product has a small ‘cult’ following, prices could even rise
Promotion: advertising likely to be very limited – may just be used to inform of lower price
Place: eliminate unprofitable outlets for the product
Product: prepare to replace with other products – slowly withdraw
Boston Consulting Group (BCG) matrix
Planning tool used to classify a portfolio of products based on market share and market growth
Problem child/question mark
High growth market but low market share
More resources must be used (cash absorbing) to gain higher market share
Alternative is to divest and use resources to help other products
To do nothing will make this a dog
It can become a star or dog
Star
High growth market with high market share
Generate a lot of cash and profit but require marketing support
If position is maintained, it may turn into a cash cow
If not, may become problem child
Cash cow
Low growth market but high market share
Products that command a high share of the market despite maturity
Well-established
Generate good cash flow and strong profits
No further investments required although extension strategies may be used to delay decline
May be used to pay dividends, debts, support problem child products, stars or new product development
Dog
Low growth market with a low market share
Product in a mature market
Does not generate much revenue
Ties up cash (capital), may be withdrawn or repositioned to niche market where more premium price can be demanded
Strategic analysis
Used to support your products
Building – support problem childs
Holding – try to maintain the position
Milking – using cash cows
Divesting – getting rid of dogs
Can only be undertaken if business has a balanced portfolio of products.
All 4 quadrants must be filled
Dogs or problem children outnumbering stars and cash cows may lead to a cash shortage preventing the firm to take appropriate action
Branding
Name identifiable to a product or a mixture of tangible and intangible attributes symbolized in a trademark in order to differentiate the product from competitors
Role and benefits
Legal instrument
Differentiation
Risk reducer
Image enhancer
Sales generator
Growth platform
Timeless
An effective brand name can be a stimulus for positive association with the product; should be memorable, recognizable, and portray the desired image
Aspects of branding
Brand awareness
An important aspect in being able to successfully promote a product
Essential in markets with products that have very few tangible factors that differentiate products from one another
Brand development
Long term marketing strategy meant to build and strengthen the image
A strong brand can extend maturity or cash cow position of a product (sustain and increase sales)
Brand preference
Customers favoring a brand over rivals
Quantifies effect of marketing activities
Brand loyalty
When customers buy products of the same brand repeatedly
Benefits:
Higher market share
Premium pricing by keeping loyal customers
Demand is more price inelastic
Customers are not sensitive to price changes
Brand extension and growth strategies
Raises barriers to entry
New players find it hard to gain a market
Brand value
The value added premium that customers are willing to pay for a product of a well known brand as opposed to a generic equivalent
Mass promotion campaigns are essential to help create brand value
Is important if a business would like to expand its product line
Can help assure sales if current products within the brand have experienced relatively good success/popularity with customers
Packaging
Serves as protection for the product before reaching the end consumer
Makes it easier, more efficient, and safer to transport
Attraction, promotion, and differentiation
Makes it eye-catching, amongst dozens of other similar products on a shelf
