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Flashcards in 4.5 - The 4 P's Deck (43)
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Describe product

The end result of the production process sold on the market to satisfy a customer need


Describe consumer durables

Manufactured products that can be reused and are expected to have a reasonably long life, such as cars


What is the product life cycle?

The pattern of sales recorded by a product from launch to withdrawal from the market


What are the 5 stages of the product life cycle?


- When the product has just been launched after development and testing
- Sales are quite low at the beginning (there are exceptions to this depending on fame)

- Effective promotion + well received → sales should grow significantly
- Does not last forever
Reasons for declining growth:
- Increased competition
- Technological changes
- Changes in consumer tastes
- Market saturation

maturity / saturation
- Sales fail to grow
- However, they do not decline significantly either
- Stage can last for years (eg coca cola)
- Recent example: mobile phones
- Saturation of consumer durables markets caused by consumers who have a product wanting a new one

- Extension strategies used to stop sales from falling so steadily


What are extension strategies?

marketing plans that extend the maturity stage of the product before a brand new one is needed


Name the 5 main extension strategies

adding features to the product
repackage a product
discount the price
sell into new markets


What are the benefits and limitations of adding features?

- can be developed or marketed quickly and at lower cost than a new feature
- the original product is still ageing so consumers still might not want a slightly different product


What are the benefits and limitations of repackaging?

- relatively cheap and quick method
- consumers might feel misled once they realise it is the same product


What are the benefits and limitations of discounting the price?

- low income consumers can now get the product
- impact on long term image of the company (can be seen as cheap)


What are the benefits and limitations of rebranding?

- opens up new market segments, can be presented as a substantially 'new product'
- expensive - is it worthwhile if this product will eventually be replaced anyway?


What are the benefits and limitations of selling into new markets?

- can increase sales, especially since a product is not perceived as old or matured in these markets
- product and promotion may need to be redesigned based on culture and local laws


Describe the marketing mix during the introduction phase

price: depends on pricing strategy
promotion: high levels of informative advertising
place: restricted outlets
product: new model launched


Describe the marketing mix during the growth phase

price: if successful: can raise prices
promotion: brand identification to help establish consumer loyalty
place: growing number of outlets
product: planning of product improvements / developments to maintain appeal


Describe the marketing mix during the maturity phase

price: need to keep price at competitive levels as competitors enter the market
promotion: brand imaging continues - differentiate from competitors
place: highest amount of geographical outlets possible
product: extension strategies utilised


Describe the marketing mix during the decline phase

price: lower prices to sell off stock
promotion: limited advertising
place: eliminate unprofitable outlets
product: prepare to replace with other products


describe the relationship between the product life cycle investment, profit and cash flow

check google document.


What is the BCG Matrix?

A method of analysing the product portfolio of a business in terms of market share and market growth


Describe a cash cow

high market share / low market growth

Creates high positive cash flow
Is profitable
Sales are high (relative to the market)
Promotional costs are probably low (due to high consumer awareness)
Cash can be ‘milked’ and invested into other products (hence the name)
Business wants to maintain cash cow as long as possible
Particularly if high market share can be maintained with little additional promotional costs


Describe a star

High market share / high market growth

Company keen to maintain position of this product
Successful product
Promotional costs are high → differentiate product and reinforce its brand image
A star will generate high amounts of income
If status and market share can be maintained → become cash cows in the future
Market matures, market growth slows


Describe a question mark

low market share / High market growth

Consumes resources but generates little in return (at least in short term)
If a newly launched product → heavy promotional costs needed to help it get established (finance could come from cash cow)
Future of the product is uncertain
Quick decisions made if sales fo no improve (relaunch, redesign, or withdrawal from market)
Has potential → selling in a growing market sector
Businesses must analyse which problem children are worth developing and investing in and which ones to drop


Describe a dog

low market share / low market share

Offer little to the business in terms of existing sales + cash flow and future prospects
May need to be replaced shortly
Firm could decide to withdraw from this market sector altogether
Position itself into faster growing sectors


What 4 actions can be done to maximise the effects of the BCG matrix?

Building → supporting question marks with additional advertising or other distribution outlets
Finance obtained from established cash cow products

Holding → continuing support for stars so they maintain their market position
Can work to freshen a product in eyes of consumers to sustain high sales growth

Milking → taking positive cash flow from established products and investing in other products

Divesting → identifying worst performing dogs and stopping production/supply of these
Not a decision to be taken lightly → other issues such as impact on workforce and whether new capacity from stopped production can be used profitably for another product


Define brand

an identifying symbol, name, image or trademark that distinguishes a product from its competitors


Define brand awareness

extent to which a brand is recognised by potential customers and is correctly associated with a particular product – can be expressed as a percentage of the target market


Define brand loyalty

the faithfulness of consumers to a particular brand as shown by their repeat purchases irrespective of the marketing pressure from competing brands


Define brand development

measures the infiltration of a product’s sales, usually per thousand population; if 100 people in 1000 buy a product, it has a brand development of 10


Define brand value

the premium that a brand has because customers are willing to pay more for it than they would for a non-branded generic product


What is the importance of branding?

Promotes instant recognition of the company and product (especially through logos and images)

Helps differentiate the company and its products form rivals → important when products themselves might be difficult to differentiate (eg. petrol)

Aids in employee motivation → commitment to the brand
Generates referrals from customers (through social media especially)

Customers know what to expect from the company and products

Emotional attachment can develop between a brand and customers → increased customer loyalty

Increases the value of the business above the value of its physical assets (brand equity)


What is family branding?

a marketing strategy that involves selling several related products under one brand name (also known as umbrella branding)


What is product branding?

each individual product in a portfolio is given its own unique identity and brand image (also known as individual branding)


What is company branding?

the company name is applied to products and this becomes the brand name


What is own label branding?

retailers create their own brand name and identity for a range of products


What are manufacturers’ brands?

producers establish the brand image of a product or a family of products, often under the company’s name


What factors influence pricing?

Cost of production
Competitiveness of market
Competitor prices
Marketing objectives
Price elasticity
New product


What is cost plus pricing?



What is penetration pricing?

Setting a relatively low price often supported by strong promotion in order to achieve a high volume of sales


What is market skimming?



What is psychological pricing?



What is loss leaders?



What is price discrimination?



What is promotional pricing?



What is price leadership?



What is predatory / destroyer pricing?