Essay: Products: Marketing Mix

Introduction to Product

What is a product?

A product is anything that is capable of satisfying customer needs.

Products can be goods or services that can be traded for in a market. Products can be tangible, something you can hold, or intangible, a product that has no physical presence.

Products can be split into another two areas, consumer goods and producer goods.

• Consumer goods: Products that are made and used by normal people, an iPhone.
• Producer goods: Goods such as raw materials and capital that is used to produce consumer goods.

The Marketing Mix (7 P’s)

• Product: The good or service that the customer buys
• Price: The sum of money paid by consumers for a unit of a product
• Place: How the product is distributed to the customer
• Promotion: In the context of marketing, promotion is the process of communicating with customers or potential customers. Promotion can also describe communication with other interested groups, such as shareholders and suppliers
• People: The people who make contact with customers in delivering the product
• Process: The systems and processes that deliver product to a customer
• Physical: The nature and appeal of the physical evidence a customer will observe during a transaction, such as the company stationery and brochures, delivery lorries and staff uniforms

Product Portfolio

What is a product portfolio?

Product portfolio is the collection of products and brands owned and operated by a firm.

Examples:

There are many corporations that have a large product portfolio. Some examples are:

• PepsiCo
• Unilever

Why would companies have a large marketing mix?

• Spread the risk – a decline in one product may be offset by the sales in one product
• Selling one product may not produce enough profit or generate enough returns for the business (e.g. the market segment may be too small to earn a living or continue with business operations)
• A range can be sold to different segments of the market.
• To offer a wider range of goods and services to support the original product. To offer a wider range of goods and services to support the original product. A florist may offer a variety of pots and vases for the flower arrangements so that the customer spends more in any one visit.
• To attract new consumers by aiming at a different target market.

However, having a greater range of products can create many problems for a firm:

Having a greater range of products could mean that marketing resources and finances for products may be spread out if the business has a cash flow problem.

• Many managers have to be employed to take decisions about the products.
• Bad publicity for one product may harm the company’s whole image.
• The cost of developing and selling so many products is high.
• Some products may fail if the company has not done sufficient market research.

Product Life Cycle

What is product life cycle?

The product life cycle is an important concept in marketing. It describes the stages a product goes through from when it was first thought of until it finally is removed from the market. Not all products reach this final stage. Some continue to grow, and others rise and fall. The product life cycle will affect a business’s marketing strategy, thus impacting the marketing mix

The main stages of the product life cycle and how it affects the marketing mix:

Research and Development: researching and developing a product before it is made available to the market.

Introduction: this is where a firm launches a product and introduce it into the market:

• Product: Branding and the quality of the product is established at this stage. Also, patents and trademarks are obtained at this point
• Pricing: Product pricing strategies would be implements, for example, low penetration pricing may be implemented to build market share
• Process: Shops (online or physical) or distributors are contracted so consumers can buy the products
• Promotion: Firm tries to build product awareness and tell consumers about the product

Growth: When sales of a product are increasing at their fastest rate:

• Product: Quality of the product is improved as firm has more finances due to increase in sales
• Pricing: This is when a firm maintains prices as the firm enjoys increasing demand due to a growing industry and little competition
• Process: Different ways to distribute product as there is an increase in demand.
• Promotion: Marketing has increased as the product has potential and is aimed at a broader audience.

Maturity: This is when a product has the highest ever sales but the rate at which the sales are growing has slowed down:

• Product: Products may be given additional features to differentiate product from competitors.
• Pricing: May be lower because of new competition
• Process: Becomes more intensive and incentives may be offered to encourage preference over competing product
• Promotion: Firms would use product differentiation to appeal to customers over different competitors.

Decline: The final stage of a product on the product life cycle, this is when sales would begin to decline. Eventually, the market for a product will start to decrease. This decrease in market sales could be due to the market becoming saturated or because the consumers are switching to a different type of product. An example of this is Nokia. During the introduction stage of smartphones, Nokia was number one in terms of market share. However, while this decline may be inevitable, it may still be possible for companies to make some profit by switching to less-expensive production methods and cheaper markets.

• Firms can maintain the product to rejuvenate the product and extend the product life cycle. They can do this by adding new features and finding new uses.

Removal: This is where a business decides to remove a product from the market and stop production. This is where the product life cycle of a product ends.

Product life cycle graph

Example:

1. Introduction – Self-driving cars. Self-driving cars are still at the testing stage, but firms hope to be able to sell to early adopters relatively soon.
2. Growth – Electric cars. For example, the Tesla Model S is in its growth phase. Electric cars still need to convince people that it will work and be practical. As there are more electric charging points and more people adopt, it becomes easier to sell to those who are more skeptical of new technology like electric cars.
3. Maturity – Ford Focus. The Ford Focus is a well-established car. It has a good brand reputation and has reached its peak level of market penetration. It would be difficult to gain a significantly greater market share. The product life cycle of the Ford Focus has been extended by constant upgrades and redesigns to keep the car on top of the market.
4. Decline – Diesel cars. Since governments have expressed concern at the level of pollution from diesel cars. Some cities have threatened to ban diesel cars within a few years. Sales have fallen considerably and the market for diesel cars may be in terminal decline.

Extension Strategies

Extending the Product Life Cycle

For any successful product a firm would want to anything they can to extend the growth and the maturity phases of the product life cycle. Firms would also like to delay the decline phase.

To achieve this objective, businesses have a few strategies,

• Advertising: to try and gain a new audience and convince people to buy a certain product. Apple can advertise the MacBook to encourage people to buy the MacBook or keep it on trend to increase a products life cycle.
• Price Reduction: Businesses could try to reduce the cost of their products to increase the demand for a product and be more attractive to customers. Firms would use this marketing strategy to persuade consumers. Reducing prices would encourage consumers to buy the product over its competitors. Reducing the price of a product is the response to declining sales. Price reductions can accomplish more than postponing a product’s decline stage in the product life cycle. A lower price, especially for luxury items, can entice new customers to indulge in a brand name without the need to justify a high price. A good way to accomplish this is by offering a “basic” version of the product. Before computer laser printers became affordable to nearly everyone, manufacturers could sell slower black-and-white versions of their signature models. BMW is one car maker that has employed this strategy, giving buyers a lower sticker price in exchange for the chance to own a Beemer.
• Adding value: Firms could try to add new and innovative features into a product. This is so that consumers would be encouraged to buy the newer version of the product. Product sales tend to decrease few years after it would be introduced into the market. Many reasons for that is because of innovation. As a product gets older, competitors in a market would try to improve a product and add new features in a similar product. This would cause the sales of a firm’s product to decrease as consumers may want to buy the latest product in the market. An example is Apple in the smartphone industry. If Apple don’t continue to add new features to their products like the iPhone, consumers would be less likely to buy the iPhone. This is due to the fact that competitors like Samsung may introduce a new version of the Samsung Galaxy that would have better features. This would cause a decrease in iPhone sales. This is because consumers would want to buy the latest technology can offer.
• Explore new Markets: selling a product into new geographical areas or creating a version of the product to target at different age groups or genders. The main benefit of globalisation is the fact that smaller businesses have access to newer markets due to social media and large distribution companies like Amazon. This ensures that even though a business operates and sells in one country, they can have access to new customers around the world. Because of this, firms have to make products that fit the market segments. Their products could feature things that may help old people or be target towards a specific culture.
• New packaging: Research has found that clever product packaging can help your target audience feel more loyal to your brand. In fact, one study found that 33 percent of buyer decision-making is based on product packaging. Another study found that 40 percent of buyers would share pictures of an attractive product package on social media. Repackaging your product can help it seem new and improved to your target audience, and it can also appeal to prospects that haven’t yet become buyers. Packaging includes the colors you choose, the design elements, the size of the package, the words and images you display on the package and the type of font you use. Incorporating recycled material to capitalize on the “green” movement is a common and growing tactic. Automobile manufacturers such as Toyota or Honda make subtle changes to their products every model year. Sleeker designs and new color schemes are aimed at attracting reluctant buyers. This would persuade customers to buy their product, extending the product lifecycle

Boston Matrix

The Boston Matrix is a model which helps businesses analyse their portfolio of businesses and brands. The Boston Matrix is a popular tool used in marketing and business strategy.

What is the Boston Matrix?

The Boston Matrix is a graph that takes an organizations product portfolio. This would assess every single product into four different segments, as shown below, the products would be put on the graph based on 2 factors, market share and market growth:

• Market share: Market share represents the percentage of an industry, or market’s total sales, that is earned by a particular company over a specified time period. Market share is calculated by taking the company’s sales over the period and dividing it by the total sales of the industry over the same period.
• Market growth: An increase in the demand for a particular product or service over a period of time. Market growth can be slow or declining for a product if consumers do not adopt a high level of demand or find a better product for the same price level. For example, new technology would only be demanded by a specific set of consumers. However, if the dependability or usefulness of the product increases, more consumers would need the product, increasing market growth.

How does the Boston Matrix work?

• Stars: Stars are high growth products competing in markets where they are most likely market leaders. However, the product also has potential to grow even more. In most cases, stars need high levels of investment to keep growing. An example of this is the Artificial Intelligence industry. Companies like AIBrain, who are the leading company in the A.I industry, are in an industry where they would have high market share and high market growth as their products like TYCHE would have quite a lot of potential to increase their market growth rate
• Question Mark: Question Marks are products with low market share in an industry that can have a high growth rate industry. This would mean that the product has potential to become a star. However, these products may need high levels of investment, there is also a possibility that the product may not live up to its potential and the business may not make the money they have invested into the product back. Businesses need to think whether the question mark product should be invested into. An example of this may be Apple’s AirPods. The AirPods, when introduced, had lots of potential to have a high market share and have a high growth rate. Two years late, the funds Apple invested into the product may have worked out as it is one of the leading products in the wireless earphones market.
• Cash Cow: Cash cows are low-growth products with a high market share. These products have usually been around for a long time, some for more than 100 years. These products are relatively successful products that need relatively little amount of investment. They usually stick around the market to give the firm continued profit levels. An example of a product that is a cash cow is Pepsi. Pepsi is a product that has a relatively high market share. However, the soft drink industry can’t really grow as much because people now days are more health conscious. This has meant Pepsi has a low market growth rate.
• Dog: The term dog refers to products that have a low market-share in an unattractive low growth market. Dogs are the type of product that may generate enough money to break-even. However, companies would be foolish to try and invest any money into these products as they may not get their money back from sales. Dogs are usually sold or put out of the firm’s product portfolio.

The main values of the Boston Matrix:

• A useful tool for analysing product portfolio decisions
• Only a snapshot of the current position
• Has little or no predictive value
• Does not take into environmental factors

Criticism of the Boston Matrix model:

• Market growth is an inadequate measure of the market’s attractiveness
• Market share is an inadequate measure of a products ability to generate cash
• The focus on market share and market growth ignores issues such as developing a sustainable competitive market

The Boston market can be simplified:

Product Development

The process involves in creating/bringing a new product into the market from conceptualization to release.

The value of product development:

• Enables a business to revitalise/replace products in decline phase

• Enter new markets

• Improve brand image

• Create USP/differentiation

• Motivation of staff

• Satisfy customers

• Increase profitability

Stages of development of new goods and services:

Every new product or service will pass through certain stages before it is launched. Each stage is designed to reduce the level of risk. However, even after the stage is completed, most new products will not survive. The stages of new product development are:

1. Generation of ideas. For some products, ideas are likely to come from within the company. This might take the form of research and development, leading to the introduction of a new product. Alternatively, in industries such as broadcasting, ideas are likely to be generated through meetings or suggestions from staff. For other products, ideas will normally come from external market research that will identify the types of new product that customers wish to buy.

2. Analysis of data. The next step is to look at the feasibility of the idea, to consider whether it meets the firm’s objectives and it fits with the image of the company.

3. Product development. The working of the product may be tested through a prototype or by simulation on a computer.

4. Test marketing. The use of test marketing (a small-scale release of the product, usually in a limited area) is helpful as it can avoid heavy financial losses if a product proves to be unpopular.

5. Launch. The launch will take place after the business has made modifications suggested by the previous activities. Evidence suggests over 70% of new products that are launched will fail within three years, so firms will want to look closely at the likely future success of a product before its launch. The vast majority of ideas for new products never reach the launch stage

Example of product development for Apple when developing the iPhone:

Generation of ideas: Apple wanted to create a product to increase the appeal of a smartphone and also create a product that would appeal to the world. This is because traditional smartphones were not really selling.

Analysis of data: Apple conducted research on consumers. This was to ensure that Apple knew the main problems with smartphones and why people were not buying it. The aim of the new product was to increase the sales of smartphones and make Apple the leader in the smartphone market. At this point, different designers in Apple submitted ideas on how to solve the main problems the smartphones were having. An example was that most people didn’t like the physical keyboard that was always there on a smartphone during their R&D period. A solution one of the employees came up with was to use a touch user interface, with a digital keyboard that would eliminate the need to place a physical keyboard that takes up most of the smartphone surface. At this point, Apple would have come up with a design and test product to see if the product would solve the problems people has with traditional smartphones. They would then give the product to testers to see if the product was useful in day to day situations.

Product development: The specialist machinery needed to make the new style of smartphone was tested and a production line was established. This step was important for Apple. A reason was this was to ensure that the iPhone was able to be produced while keeping the costs low. If the cost of production was too high, Apple would need to go back to the Analysing of Ideas stage to try and cut costs and make it so that the product can go into mass production.

Launch: The iPhone was launched June 29, 2007. It was unveiled in an Apple convention and met with quite a lot of applause. The iPhone was a huge success and instantly jumped as the leader in the smartphone industry, blowing past all the competitors like BlackBerry. Some people say that it was the phone that revolutionized the mobile phone. A reason for this was that Apple listened to the main problems with the traditional smartphone and acted upon it, creating a product that people liked.
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