The four P’s – product, price, promotion and place.
This mix varies according to:
 Stage of the product’s life
 Company’s financial situation
 Corporate strategies
 External influences e.g. competition. Marketing is used to gain competitive advantage.
Product orientation - businesses developed products that they thought would sell profitably then endeavoured to sell them using advertising and sales people. Often businesses were left with stock, which they couldn’t sell due to lack of customer demand.
Market orientation - uses market research to determine the requirements of the consumer. Products are developed to meet this.
Market research - used to obtain information on the market for the products, both new and existing and focuses on
The product
 Who buys it?
 How often?
 Life cycle of the product
 Extension of lifecycle
 Place of the product in the company portfolio
 Can the product be improved?
 Is it price competitive?
 Promotion and distribution
 Testing, packaging and launching
The Market
 Size of total market
 Segmentation
 Expanding or contracting?
 Market trends
 Other factors influencing market demand
 Barriers to market entry
The competition
 Main competitors
 Pricing and promotion strategies
 How do they compete?
 Strengths and weaknesses
Cadbury Schweppes used extensive market research to position Café Cadbury in the market

The Product
 Either goods or services
 Products also defined in terms of benefits they bring to the consumer – appearance, purpose and status
 Selling price should exceed production costs.
The Product Mix
Product mix – the complete range of a company’s products in all markets and segments.
The mix width - the number of products in the product mix – the wider the mix width the more diversified the company.
The mix depth - the number of products in a product line. The deeper the mix depth, the more segments the company needs to operate in to avoid competing with itself.
Product Life Cycle
Recognises that products have a finite life. Businesses must have a balanced product mix replacing products in their maturity and decline with newer products.
Introduction
After planning and development the product is introduced onto the market. Features of this stage are
 Low initial sales – limited consumer awareness
 Heavy promotion – introduce and inform about product, build customer confidence
 Low profits – low sales, high research and development costs
 Product modifications – product may be trialled and refined after customer feedback
 Limited distribution channels – high stockholding for manufacturer, distribution channels not fully established
 Strong likelihood of product failure
 Penetration pricing to gain market share.
Growth

Consumer awareness develops, sales increase and product moves into growth stage. Increasing volume means unit costs fall - economies of scale. If the product is successful competitors may develop similar products or existing competitors may adopt different pricing policies, which may reduce rate of growth.
Maturity
Characterised by slowing growth. Most potential customers reached. Profits maximised but the company has to fight to retain market share. Sales maintained through customer loyalty, promotions and product differentiation, new packaging or reduced price.
Decline
Product becomes old and sales fall. The company may reduce price or decide to maintain production when competitors leave the market to gain larger share of smaller market or try niche marketing.
Extending Product Life Cycle
A company can attempt to extend the maturity phase of a product by extending the product life by:
 Modifying/improving the product
 Changing product image/appeal
 Altering distribution patterns
 Extending the product into other formats/market segments.
The Heinz case study illustrates how the life cycle of icon products such as baked beans and salad cream can be successfully extended
Criticisms of product life cycle analysis
 Product may reach maturity but not decline
 May reach maturity rapidly and burn out
 May flop on introduction
 May reach maturity, decline but still maintain market share.
New Product Development
Product can be classed as new if it is:
 Innovative -eg clockwork radio
 Imitative – copy an innovative original
 Replacement – new models of existing product.
The proactive approach - innovative products result from the producer creating or manipulating a market. This strategy carries the highest risk but chances of highest rewards.
Imitative and replacement product development is cheaper. This is the reactive approach.
Stages of new product development
 Assess the demand – gap in the market?
 Develop ideas - research and development

 Analyse the market – potential markets, competitors, potential market volume, limiting factors e.g. launch cost, break-even point
 Product development – use marketing information to create test product
 Testing – testing product and test marketing
 Launch – promotion, pricing, launch area
 Evaluate – consumer reaction
Branding
Assures customers that their next purchase of a product will be identical to the last.
Brand loyalty created through guarantee of quality and consistency.
Benefits to producers of branding:
 Assistance in selling new products – respected brand name reflects on new products in terms of quality, reliability, value for money etc.
 Repeat purchases – brand loyalty
 Differentiates product
 Greater chance of gaining display space for accepted brand
 Brand extension into another market e.g. Heinz baked bean pizzas
 Reduces price competition – popular brands sold at higher price.
Many brands are recognisable by their brand name or logo. The McDonald’s logo is one of the most recognised logos in the world.
Packaging is initially to protect the product but now carries logos, legally required information and manufacturers’ messages to help sell the product.
Own-label brands
Carry the retailer’s logo, not the producers. Producers use excess production capacity to produce ownbrands whilst hoping that brand loyalty maintains sales of the branded product. Retailers offer ownbrand products at lower prices than branded goods.
Price sensitivity
Consumers are becoming more sensitive to price than brand loyalty due to:
 Power of retailers
 Consumer mistrust in advertising claims
 Increased consumer sophistication
 Shopping abroad
 Perceived product parity – there is little difference between rival brands.