Marketing
The 4 P’s / The Marketing Mix
Product
Learning Objectives
 Be able to classify products by line, range and mix
 To be able to describe the importance of new product
design and development
 To be analyse the stages of a typical product life cycle and
the relationship between this and the marketing mix, profit
and cash flow
 To understand product portfolio analysis and the
application of the Boston Consulting Group matrix
 To be able to discuss the importance and role of branding
 HL – Use the Boston Matrix to develop future strategic
direction
 HL – Distinguish between different types of branding and
analyse the role of branding in a global market
The marketing mix
The marketing mix is also known as the 4Ps:
• Product
Key Terms
• Price
- Product – The end result of the production
process
• Place
- Consumer durables – manufactured products that
can be re-used and are expected to have a
• Promotion
reasonably long life (cars, washing machines)
- Product line – A set of related products sold by a
business
- Product mix – The variety of product lines that a
business produces or a retailer stocks
- Product range – All the types of products made by
a business
Product
• You can sell any product once, but to establish
loyalty and good customer relationships, the
product must be right
• A business must meet customer expectations
of
– Quality
– Durability
– Performance
– Appearance
Product
• ‘Product’ refers to the functions and features of a
good or service
• Should satisfy the needs of the customer
• May have a Unique Selling Point (USP)
• ‘Product’ also includes a range of factors such as
packaging, quality, warranties, after-sales service
and branding
• Products and brands may suggest certain images e.g.
sporty, sophisticated, value
New Product Design / Development
• Crucial to the success of some businesses
operating in markets with constant changes
• E.G. Technological change – video games
• Other industries can sell the same products
for years with only slight adjustments
• E.G. Pepsi
• Financing NPD can be a major problem as you
do not see a return on your investment for
years
http://www.telegraph.co.uk/finance/festival-ofbusiness/10246113/How-to-successfully-launcha-new-product.html
E.G Market research,
brain storming, adapting
existing products
Generating
new ideas
Eliminate those ideas that
have the least chance of
being successful
Idea
screening
Concept
testing
Business
analysis
Product
testing
Test
marketing
Commerciali
sation
A very small proportion
of new ideas ever reach
the 7th stage
NPD process reduces the
risk of failure by
eliminating unsuitable
and unprofitable
products before they
reach the final stage
Establishing consumers,
possible costs, specific
features of the product
Analysing the impact of
new product on revenue,
costs and profits
Developing prototypes to
assess performance and
to obtain feedback
Launching developed product
in a small but representative
section of the market
Full scale launch of the
product with appropriate
promotion and distribution
Product lifecycle
The product lifecycle looks at the sales of a
product over time
Stages of the product lifecycle
Introduction – high costs but no sales
Launch – high expenditure on promotion and product
development, low sales
Growth – sales increase and product should breakeven
Maturity – sales stabilise, less expenditure on
promotion needed, revenue & profit should be
high
Decline – sales decline, extension strategies can be
adopted or the product withdrawn
Extension strategies
Extension strategies should maintain or increase
sales. They include:
• Modifying the product
• Reducing the price
• Adding a feature
• Promoting to a
different market
sector
Extension strategies
Uses of the product life cycle
• Two main uses
1. Assisting with the planning of marketing mix
decisions
2. Identifying how cash flow might depend on the
product life cycle
1. Assisting with the planning of marketing
mix decisions
Product life
cycle phase
Price
Promotion
Place
(Distribution)
Product
Introduction
•
Maybe high compared
to competitors
(skimming) or low
(penetration)
•
High levels of
informative
advertising to
make consumers
aware of the
product
•
Restricted outlets
•
Basic model
Growth
•
If successful, an initial
penetration strategy
could now lead to
rising prices
•
Consumers needs
to be convinced to
make repeat
purchases branding
•
Growing number
of outlets in areas
indicated by
strength of
consumer demand
•
Planning of
product
improvements and
developments to
maintain consumer
appeal
Maturity
•
Competitors likely to
be entering the
market – need to keep
prices competitive
•
Brand imaging
continues
•
Highest
geographical range
of outlets as
possible
•
New models,
colours,
accessories as part
of extension
strategies
Decline
•
Lower prices to sell off
stock, or if a product
has a following then
maybe raise prices
•
Advertising likely
to be limited
•
Eliminate
unprofitable
outlets for the
product
•
Prepare to replace
with other
products, slowly
withdraw from
2. Identifying how cash flow might depend
on the product life cycle
• Cash flow closely linked with the product life
cycle
Costs high
nothing
has been
sold yet
Promotional
expenses, factory
capacity
Most positive
cash flow, high
sales
The Boston Matrix
• The Boston Matrix:
– A means of analysing the product portfolio and informing
decision making about possible marketing strategies
– Developed by the Boston Consulting Group – a business
strategy and marketing consultancy in 1968
– Links growth rate, market share and cash flow
What do
these terms mean?
• Devised by the BOSTON MARKETING GROUP
• FOUR Basic Types of product
• Each has different characteristics
• NOT GOOD to have just one type of product
The Boston Matrix
(questions marks = Problem children)
The ‘Problem Child’ (Question Mark)
Exciting but unpredictable product
Could be the next big thing
Could be a flop
Requires careful investment
Must be monitored closely
Question Mark or Problem Child:
-Products having a low market share in a high
growth market
-Need money spent to develop them
-May produce negative cash flow
-Is there potential for the future?
-Introduction stage of the PLC
The ‘Rising Star’
Established and growing in the market
Starting to pay back on investment
Needs careful management
Needs a developed marketing strategy
Stars:
– Products in markets experiencing high
growth rates with a high or increasing share of
the market
- Potential for high revenue growth
- Growth stage of the PLC
The ‘Cash Cow’
Established Market Share
Highly Profitable
Stable Cash flow
Cash Cows:
- High market share
- Low growth markets – maturity stage of
PLC
- Low cost support
The ’Dog’
Shrinking market share
Falling profitability
Time for rethink/revival of fortunes?
Dogs:
- Products in a low growth market
- Have low or declining market share (decline
stage of PLC)
- Associated with negative cash flow
- May require large sums of money to
support
The Balanced Portfolio
Sales / Popularity
D
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In
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Gr
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M
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D
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Time
Your Task
Draw a Boston matrix and put 8 products of your own choice from the same
company.
Your matrix should include a title, headings for each of the 4 areas and title along the
sides of the matrix.
Using terminology from the Product Life Cycle and Boston Matrix, describe the stage
of development at which each product is currently located and how this may affect
the business.
USING YOUR EXAMPLES WE ARE
GOING TO DISCUSS THE
FOLLOWING QUESTIONS:
The Boston Matrix
• Implications for STARS:
– Huge potential – how?
– May have been expensive to develop – why?
– Is it worth spending money to promote?
– What issues are there with the product life cycle?
The Boston Matrix
• Implications for CASH COWS:
– Why are they cheap to promote?
– Generate large amounts of cash – are these used for
further R&D?
– Do you think there are any costs of developing and
promoting these products?
– Is there a need to monitor their performance – in the
long term?
– What stage of the PLC are these at?
The Boston Matrix
• Implications for PROBLEM CHILDREN /
QUESTION MARKS:
– What are the chances of these products securing a
hold in the market?
– How much will it cost to promote them to a
stronger position?
– Is it worth it?
The Boston Matrix
• Implications for DOGS:
–
–
–
–
Are they worth persevering with?
How much do they cost?
Could they be revived in some way?
How much would it cost to continue to support such
products?
– How much would it cost to remove these products
from the market?
The Product Life Cycle and the Boston Matrix
(3) Cash from ‘C’ used
to support growth of ‘D’
and possibly to finance
extension strategy for
‘B’?
Importance of
maintaining a balance
of products in the
portfolio at different
stages of the PLC –
Boston Matrix helps
with the analysis
Sales
(1)
(2)
(3)
(1) ‘A’ is at
maturity stage –
cash cow.
Generates funds
for the
development of
‘D’
(2) Cash from
‘B’ used to
support ‘C’
through growth
stage and to
launch ‘D’. ‘A’
now possibly a
dog?
D
A
B
C
Time
The product
portfolio – four
products in the
portfolio
Boston Matrix & Strategic Analysis
Market Growth
Stars
High
HOLDING – Continuing support
for these products so they can
maintain their good market
position. May need to ‘freshen
up’ the product so sales growth
can be sustained
Cash Cows
MILKING – Taking the positive
cash flow from established
products and investing elsewhere
in the portfolio
Problem Child / ?
BUILDING – Supporting problem
child products with additional
advertising or further distribution
outlets. Finance could be taken
from established cash cow
products
Dogs
DIVESTING – Identifying worst
performing dogs and stopping
production. Not a decision to be
taken lightly
Low
High
Low
Market Share
Boston Matrix – An evaluation
• This tool is relevant when:
– Analysing the performance and current position of
existing products
– Planning action to be taken with existing products
– Planning the introduction of new products
No technique can guarantee success – depends of
the accuracy of the marketing managers
Boston Matrix – An evaluation
• Helps to establish current situation, but is of
little use in ‘predicting’ future success or
failure
– Detailed and continuous market research will help
– It is only a planning tool
Branding
• One of the most powerful concepts a business can achieve
• Brand – An identifying symbol, name, image or trademark that distinguishes a
product from its competitors
• Brand awareness – Extent to which a brand is recognised by potential customers
and is correctly associated with a particular product
• Brand development – Measures the infiltration of a products sales. If 100 people in
1000 buy a product, it has a brand development of 10
• Brand loyalty – the faithfulness of consumers to a particular brand as shown by
their repeat purchases irrespective of the marketing pressure from competing
brands
Read NY Times article too
Types of branding
• Different types of
branding
Family branding
A marketing
strategy that
involves selling
several related
products under
one brand name
• Example – Heinz (Ketchup, soup, beans)
• Benefits
– Marketing EoS
– Makes new product launches easier
• Limitations
– Poor quality of one product under the brand name may damage them all
Own label branding
• Example – Walmart has
numerous brands
• Benefits
– Often cheaper than name
brand products
– Each own label brand
appeals to different groups
– Often little spent on
advertising – in store
promotions
• Limitations
Retailers create their
own brand name and
identity for a range of
products
– Consumers often perceive
products to have a lower
quality image
Individual / Product branding
Each individual
product in a
portfolio is given its
own unique identity
and brand image
(unrelated
products)
• Example – Proctor & Gamble
• Benefits
– Each product is perceived as its own unique and separate
brand
• Limitations
– Loses the positive image of a strong company brand
Company / corporate / global branding
Company name is
applied to products
and this becomes
the brand name
globally
• Example – Disney Products
• Benefits
– Similar points to family branding but now applies to all
products produced under the company’s brand name
• Limitations
– Could lose positive image of a strong company brand
Manufacturers' brands
• Example - Coca Cola
• Benefits
– Successful
branding
establishes a
unique
personality which
many consumers
want to be
associated with
and will often pay
a premium price
for
• Limitations
– The brand has to
be constantly
promoted and
defended
Producers establish the
brand image of a product
or a family of products,
often under the
company’s name
Role of branding in a global market
Globalised branding can have substantial
benefits