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4.5: The four P's – product, price, promotion and place PART 1…

- - - - extension strategies: marketing plans that extend the maturity stage of the product before a brand new one is needed
      - during the ‘decline’ phase, sales will fall steadily
      - developing new markets for existing products
      - Adding features to original product
      - Repackage product
      - Discount price
      - Rebrand
      - Sell in new markets
    - - a key application of the product life cycle is as guide to make changes to elements of the marketing mix
    - - Product Life Cycle VS Investment
        
        investment: capital spending which aims to return a profit
        
        heaviest at the end of a product's life cycle
        
        time period to research & develop new products determines timing of new investment
      - Product Life Cycle VS Profit
        
        profit will vary during life cycle
        
        high profit margins most likely during growth and maturity phase
        
        towards the end of maturity, prices made more competitive :arrow_right: lower margins
        
        decline stage, prices could fall further, hitting gross profit margins
      - Product Life Cycle VS Cash Flow
        
        cash flow is vital to business survival
        
        ignoring the link between cash flow and product life cycles could lead to lack of liquidity for the business
    - - Introduction
        
        when the product has just been launched after development and testing
        
        low sales and slow increase
      - Growth
        
        effective promotion & market recieves product well sales should grow
        
        this stage cannot last forever
        
        sales growth will begin to slow and might stop altogether
        
        reasons for declining growth
        
        increasing competition
        
        technological changes
        
        changes in consumer tastes
        
        saturation of the market
      - Maturity or Saturation
        
        sales fail to grow, but they do not decline
        
        saturation of consumer durables markets is caused by most consumers who want a certain product having already bought one
  - - - "Cash Cow"
        
        :arrow_down: Low Market Growth
        
        :arrow_up: High Market Share
        
        well established product in mature market
        
        creates a high positive cash flow
        
        high sales
        
        promotional costs are low
        
        cash from this product can be injected into some of the other products in the portfolio
      - "Star"
        
        :arrow_up: High Market Growth
        
        :arrow_up: High Market Share
        
        successful product in expanding market
        
        promotional costs high
        
        generate high amounts of income
        
        may become cash cows
      - "Problem Child"
        
        :arrow_up: High Market Growth
        
        :arrow_down: Low Market Share
        
        consumes resources but generates little return
        
        heavy promotional costs
        
        future of product uncertain
      - "Dog"
        
        :forbidden: existing sales, cash flow or future prospects
        
        replace product or withdraw it
    - - identify position of ALL products
      - Building
        
        support problem child
        
        additional advertising
        
        further distribution of outlets
        
        finance could be obtained from cash cows
      - Holding
        
        support star products
        
        work to freshen the product
        
        sustain high sales
      - Milking
        
        take advantage of :heavy_plus_sign: cash flow
        
        from established products
        
        invest in other products in portfolio
      - Divesting
        
        identify worst performing dog
        
        stop production & supply
        
        consider impact on workforce
      - undertaken only if balanced portfolio
    - - it is of little use in ‘predicting’ future success or failure
      - tool useful when
        
        analysing performance & current position of existing products
        
        planning action with existing products
        
        planning the introduction of new products
  - - - promotes instant recognition
      - helps differentiate company from rivals
      - aids in employee motivation
      - generates referrals from clients
      - customers know what to expect
      - emotional attachment between brand & customer
      - increased value of business
    - - family branding: a marketing strategy that involves selling several related products under one brand name
      - :umbrella:
      - product branding: each individual product in a portfolio is given its own unique identity and brand image
      - :silhouette:
      - corporate branding: the company name is applied to products and this becomes the brand name
      - own-label branding: retailers create their own brand name and identity for a range of products
      - manufacturers’ brands: producers establish the brand image of a product or a family of products, often under the company’s name
    - - Protection
        
        protect product from damage
        
        protect during transport & on retailer's shelves
      - Attracting Customers
        
        key factor that attracts undecided consumer
        
        extensive market research on colour schemes, designs and different materials for product packaging
      - Promotion & Information
        
        directions on how to use or make the product
        
        details of ‘special offers’ or competitions
        
        support other promotional material
        
        list ingredients and nutritional information
      - Differentiation & Brand Support
        
        display company names, logos and the colour scheme of the company and its brands
        
        identify the product on shop shelves
        
        consumer may identify with the company brand
        
        If product packaging changes, it may alter the brand perception of the company
- - - - cost-plus pricing: adding a fixed mark-up for profit to the unit price of a product
      - often used by retailers
      - take the price that they pay the producer then just add a percentage mark-up
      - mark-up depends on a combination of strength of demand, the number of competitors and the age and stage of life of the product
    - - Penetration Pricing
        
        penetration pricing: setting a relatively low price often supported by strong promotion in order to achieve a high volume of sales
        
        use mass marketing to gain large market share
        
        price can then slowly increase
      - Market Skimming
        
        market skimming: setting a high price for a new product when a firm has a unique or highly differentiated product with low price elasticity of demand
        
        maximise short-run profits
        
        project an exclusive image for the product
      - Psychological Pricing
        
        psychological pricing: setting prices that take account of customers’ perception of value of the product
        
        set prices just below key price levels in order to make the price appear much lower than it is
        
        use of MR to avoid setting prices that consumers consider inappropriate for the style and quality of the product
      - Loss Leaders
        
        loss leader: product sold at a very low price to encourage consumers to buy other products
        
        widely used by supermarkets
      - Price Discrimination
        
        price discrimination: occurs when a business sells the same product to different consumers at different prices
        
        markets where sub-groups of consumers exist
        
        different groups of consumers with different price elasticities of demand
        
        avoid resale between the groups
      - Promotional Pricing
        
        promotional pricing: special low prices to gain market share or sell off excess stock
        
        operate for limited periods only to boost sales at times of low demand
        
        support the opening of a new store
        
        encourage the purchase of ‘multiple buys’
    - - exists when a company is the dominant firm in the market
      - dominant company aggressively lowers prices because it knows the smaller companies in the industry cannot sustain a lower price
      - Predatory Pricing
        
        predatory pricing: deliberately undercutting competitors’ prices in order to try to force them out of the market
        
        an illegal pricing strategy in certain places
        
        very difficult to prove, businesses claim they are adopting a loss-leader strategy
        
        a sign when the price of a product gradually becomes lower
        
        price war can be beneficial for consumers