Gözde Torun

4.5a. The Four Ps – Product Summary

  • Product
    • 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 quantitiesSoap, 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 expensiveUnique 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 channelsStarts to be profitable due to economies of scale in production and marketingCompetition 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 developmentPromotions (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 competitorsPromotion: high levels of informative advertising to make the consumers aware of the product’s arrival on the marketPlace: 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 pricesPromotion: consumers need to be convinced to make repeat purchases- brand identification will help to establish consumer loyaltyPlace: 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 levelsPromotion: 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 risePromotion: 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-establishedGenerate good cash flow and strong profitsNo 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 instrumentDifferentiationRisk reducerImage enhancerSales generatorGrowth platformTimeless
    • 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 rivalsQuantifies effect of marketing activities
      Brand loyalty
      • When customers buy products of the same brand repeatedlyBenefits:
        • 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
        • Design theme, color scheme,
        Carries information about the product
        • How to use the product
        • Materials/ingredients usedHighlights important features
      • Helps to promote the brand and its image

Yorum bırakın