Marketing Planning Guru

Transcription

1 This Chapter is a sample of Marketing Planning Guru e-book; which is copyrighted by Mohammed Magdy; the Author of the book, and the Founder & CEO of howtobeamarketer.com Special note: some of the hyper-links won t work with you; because they are linked to other components of Marketing Planning Guru e-book. To enjoy all of the browsing experience, you need to invest in Marketing Planning Guru e-book.

2 Product Mix 1. What is a product strategy? 2. What is a product in marketing terms? 3. What is a product portfolio in marketing? 4. What is a product portfolio analysis? 5. What are elements of product marketing? 6. What are product characteristics in marketing mix? 7. How to make a Product portfolio management? 8. Product Life Cycle: 1.1. What are Product Life Cycle Stages? 1.2. Why product life cycle is important? 1.3. What is a product life cycle management? 1.4. Examples of short and long product life Cycles How to extend the product life cycle in 5 steps? 9. B.C.G. Matrix (Boston Consultancy Group Matrix): 9.1. What is a BCG Matrix Model? 9.2. How to Make a BCG Matrix Model? 9.3. BCG Matrix Examples (Case Study no.1) BCG Matrix Examples (Case Study no.2) BCG Matrix template. 10. G.E. Matrix (General Electric Matrix): What is a GE Matrix Analysis Diagram? Factors affecting Market Attractiveness in G.E. Matrix Factors affecting Company Business Strengths or Position in G.E. Matrix How to calculate the market attractiveness in G.E. Matrix How to calculate Company Business Strengths for your company and competitors companies in G.E. Matrix? What is the recommended strategy to manage products in the G.E. Matrix? GE Matrix example (Case Study) GE Matrix template.

3 11. New Product Development: Stages of new product development process in 7 steps What are new product development process types? What is a new product development process steps used for? 12. Product Adoption Process: What is a New Product Adoption Process? Consumer Behavior in a New Product Adoption Process How to make a new product adoption with your customers? Product Adoption Process as Price Determinant. Back to Marketing Mix

4 What is a product strategy? A Product Strategy means Product Marketing Plan. So to design a good product strategy, you need to develop a marketing plan for your product; starting from situational analysis (external and internal environmental analysis), passing with marketing objectives, developing your marketing strategies, and managing the marketing tactics or marketing mix.

5 What is a product in marketing terms? When you want to open a new business and thinking about which product you could innovate, develop or imitate to get business in term of money. The questions comes to our mind is What is a product in marketing terms? Or what does product mean? or If I sold a hand watch, can I call it a product? What about selling a maintenance services for hand watches? Is it a Product? What about selling a new idea to my manager?? Is it a Product? Am I a Product?!! Is Nicholas Cage, Tom Cruise, Angelina Jolie, William Smith, Brad Pitt, and other celebrities could be Products?? Actually I knew how much this article could be basic for some learners, but I believe it s very important to understand what is product in marketing terms, because this is going to help you in finding a variety of business development ideas if you want to develop a new product for getting ahead in business world. What is a product in marketing terms? A Product is a (Physical good, service, idea, person or place) that is capable of offering a (tangible and intangible) attributes that (individuals or organization) regards as so (necessary, worthwhile or satisfying) that they are prepared to exchange (money, patronage, or any other unit of value) or in order to acquire it.

6 The Product could be: 1. Physical Good (What is a product in marketing terms?): Physical good product example: watches, clothes, cars, creams, food, shoes, pharmaceutical drugs etc anything that could be considered as physical good. 2. Service (What is a product in marketing terms?): There are two types of services: Consumer services: as educational institutes, health care centers, charities, Government, financial services, professional services, leisure, entertainment, tourism etc services that are provided to target consumers; it s called (business to customer or B2C).

7 Business Services: as repairs and maintenance services, consultancy services, leasing or contract hire, transportation, recruitment companies, advertising/marketing research agencies etc they are service provided to business companies or organizations rather than individuals; it s called Business to Business Services or B2B. 3. Idea (What is a product in marketing terms?): Example: to innovate a new idea to your company, to your manager, to any authority that you can get business in return. 4. Person (What is a product in marketing terms?): You and I are considered as Product (if there are individuals or organizations can perceive our value and give us money in return), celebrities are the perfect examples of considering the person as a product. 5. Place (What is a product in marketing terms?): Restaurants are considered as place which you can provide other products in (as food and drinks), the Zoo is a place where individuals are paying money to enter, hotels, beaches, or any other place that the consumers can consider as something of value and can pay you a money in return. So the Product is any Physical Good, Service, Idea, Person or Place who can provide Tangible or Intangible attributes wait a Minuit, what is difference between tangible and intangible products?? Let s explain what attributes means: it s the Physical good, services, idea, person, or place that is having something special (Benefits) for the consumer, those benefits called attributes. What the Tangible and Intangible attributes? Tangible attributes: are the benefits that you and I can feel it by our five senses; hands (as most of products; watches, clothes, drugs, calculators, football, etc),

8 eye (something solid you can see by your eyes, something in package and you can observe easily), Ear (as added sense to hands and eye as video games, nose (have special sense when you smell it as food, flowers), mouth (as ice cream, any type of food). Example of tangible attributes; any physical good, place, person. Intangible attributes: as services (mentioned above) and ideas. So if you are providing a product which either tangible or intangible to individuals (business to customer) or organizations (business to business), it won t be of value if your product aren t considered as worthwhile, satisfying and of added value to the customer (individuals or organizations) so they express their satisfaction in term of paying you money or any other term of value to you.

9 What is a product portfolio in marketing? The Product Portfolio is all the product lines and items that company offers for sale. What is the importance of having a good product portfolio? (What is a Product Portfolio used for?) Actually companies are always aiming for having a portfolio of products that get them good business in return. This is especially in the downturn and periods of uncertainty, where many companies withdraw their businesses for those who are depending on 1 or 2 products in their portfolio. So the first step you should consider is to make, create, innovate or develop more than one product lines, each line has its own products, so if one products line fall in sales, the others helping you and vice versa. I started this article by defining the product portfolio and telling you about how much it s important, because now I am going to tell you how to design a good products portfolio for your company:

10 How to create a product portfolio in marketing? From the above diagram you can understand that there are three main components to build a good products portfolio; having Products Portfolio Width, Depth and Consistency. The Products Portfolio Width is the number of products line. Products portfolio Depth: is the average number of items per product line. Products Portfolio Consistency: it means the closeness of relationships in product range; e.g. end users, product distribution. Consistency means you need to ask yourself Am I having problems in the distribution of my products to the end users, are all my end users or customers capable of finding my products available everywhere, and is there problems in delivery of my product in the deadlines? If my marketing strategy is providing Differentiation Marketing Strategy then Am I delivering my products in the same quality of the production?

11 Let s take the following example for illustrating what we are talking about: Product Portfolio Examples: I will illustrate the supermarket or hypermarket as an example of business to consumer (B2C): Product Width: lines for food, lines for different types of cheese, lines for drinks, lines for fashion, lines for games, lines for babies, lines for electronics etc imagine Wall Mart and you will get how much they are providing different products lines. Products Portfolio Depth: in the cheese products, how many types are there? In fashion, do we provide clothes for children, men and for women or is it specialized for special category of them? In electronics; how many companies are there in the mobile phones? And which one of them we are providing in our shop? Although the previous example is illustrating Products Portfolio Width and Depth for other companies who are promoting their products than yours, but sure if you are making your own products you will get more revenue, stable trust from the customers and capable of innovation and development for your existing products that would eventually match the dynamic changes of customers needs.

12 What is a product portfolio analysis? Product portfolio analysis has been created to help marketers to make a product portfolio management. So you start with analysis to recommend management strategy for your product portfolio. In this article I am explaining how to analyze your products and compare them to competitors products. How to make a product portfolio analysis? there are three products portfolio analysis tools; P.L.C.; Product Life Cycle, B.C.G. Matrix; Boston Consultancy Group Matrix, and G.E. Matrix; General Electric Matrix.

13 What is P.L.C.; Product Life Cycle? It s a valuable tool to help you in defining the different stages in product development; also it helps to forecast future demand about your products. Product Life Cycle (PLC) is reminding us that all products are having a limited life time, so it s helping to predict the profit levels and for tailoring marketing programs according to the demand, your product development stage, current profits and level of investments and your changing customers needs. In the product life cycle (PLC); there are four development stages for any product; Introduction, Growth, Maturity and Decline. What is B.C.G. Matrix; Boston Consultancy Group Matrix? B.C.G. Matrix is considered as both planning and analysis tools for your products portfolio (as main objective) and also it help you to understand how much your product performing from your competitors and market leader. This tool is classified the products on the basis of: 1. Their market share relative to that of their competitors. 2. According to the rate of growth in the market as a whole.

14 Products are positioned in the matrix as circles with diameter proportional to their sales revenue. The usual sequence of a new product is the problem child to begin with, then with effective marketing it become a star. As markets mature, a cash cow, finally a dog. See the full article of B.C.G. Matrix.

15 What is G.E. Matrix; General Electric Matrix? It s similar to BCG matrix, but includes a broader range of company & market factors. The matrix classifies products/businesses according to: - Industry attractiveness: market share, market growth, competitive climate, stability of demand, ease of market entry, industry capacity, levels of investment, profitability. - Company strength: relative market share, company image, production capacity, production cost, financial strengths, product quality, distribution system, control over prices/margins. See the full article of G.E. Matrix.

16 What are elements of product marketing? Sometimes we are thinking as marketers to develop a new idea, service, solution to your original product and we don t know if the new added element is essential or not. And because some marketers fall in love with their products and fall in trap of Marketing Myopia, so they love to develop and too many innovate ideas to be added to their products and they believe that those ideas could make a real difference with the consumer. What are elements of product marketing used for? So the objective of this article is to tell you if your innovative idea, added service is of real value or not. This is happening through depth understanding of the four categories of the perfect product. The perfect Product is containing four elements; Core, Tangible, Augmented, and Potential.

17 What is the Core Product? The Core Product is the basic product that the customer is considering for the most important and essential elements. It s the basic use of any product. As; the four tires in any car, as calling and receiving functions in any mobile phone, as monitor, keyboard in any laptop. What is the Tangible Product? It s the actual product; the brand identity of the product (read related articles to Branding), the package, the quality of the product. What is the augmented product? It s the extended product benefits; installation, warranty, after service. Most of the Brands ends in this step and don t go further more to the 4 th element. What is the Potential Product? The Potential product is the product that is providing potential future improvements, as car that is helping their customers to save the money of the fuel as results of new modifications added in the motor. Other example is to develop a product that protecting the consumers from car accidents in the future. So it s the new modifications you add to your product to provide potential future improvements to your customers. Some of the individuals and organizations are providing a Product that is having Core and Tangible functions only, many of them are providing Augmented Product Services to differentiate themselves from the existing competitors, but very rare % of them are providing a newly added service, idea or modification to improve their quality of their customers life in the future.

18 What are product characteristics in marketing mix? To understand what product characteristics are in marketing mix, you need to understand what a product is in marketing terms. I mentioned that your product should have tangible and intangible attributes, so the individuals or organizations can perceive it as worthwhile, satisfying and of added value to them. In this article I am explaining the attributes that your product should have to add a new value for the customer (Perceived Value). What are product characteristics in marketing mix? Any Product in the world should have Three Main Characteristics to make it special and of added value to the customer:

19 What are the Physical Characteristics of Any Product? There are three physical characteristics of any products; shape of the Product, Size of the Product, and Color of the Product. So if you didn t consider all of the three factors together, then you are missing important aspects that your customer will consider very well. I will take very well known example that will help you very much in understanding the importance of considering the shape, size and color of your product; let s take the celebrities as an example. We should consider how the product (which is person in case of celebrities) looks like, so let s say William Smith, how he looks like, someone who is body builder, awesome and bright in shape, his color is black (may be my opinion right or wrong, it s just an example). Angelina Jolie: she looks pretty woman, Tiger eyes, and having very recognizable and lovely face (shape, size and color). So when you design a Product, you need to consider how you want your product to look like in front of your customers, what is the size of your product (small, medium, large), and the color of your product (see CocaCola Colors, Addidas, Nike and other well known brands to understand what I mean). What are the functional Characteristics of any product? The functional characteristics of any product means how is your product going to perform with the customers or the usage experience of the product. Let s mention the Car Industry as an example. What is the speed of your car, the stability, the airbag functions, other accessories in the car? Other example is computers; how many rams do you have in your P.C., the processor of your PC, the DVD in your PC, the capability (20 Giga, 120, 240, 400 Giga etc).

20 So when you design a new product, you need to consider developing the benefits of your product to really make something having a functional value for your customers. What are the Psychological Characteristics of your product? The Psychological Characteristics mean how to design a product which is having a characteristics/benefits to reveal a positive psychological perception when your customers see, hear about if from the first time. In other words it could be expressed as the Psychological Perception of the customers to your products which reveals in changing their attitude. A Very well known example is NIKE Brand, we were see from long time ago the slogan of NIKE Just Do It, which is always telling us that we can do anything we want by just thinking about NIKE, so this is called Brand Association where your customers associate your brand value by something in their life (as persistence, insistence, challenges etc).

21 In the next part, the following diagram will help you in understanding what you should consider in designing a new product, and how the customer perceive each characteristic of the three essentials ones for any product.

22 The following diagram is summarizing how the customers perceive the three main characteristics of any product you are going to develop:

23 How to make a Product portfolio management? Before you understand how to make a product portfolio management, you need to learn what is a product portfolio in marketing? And what is a product portfolio analysis? In this article I am explaining very common mistakes happening between marketing and sales departments in most of companies and in most of industries worldwide. Examples of those most important mistakes: Why my market share isn t better than the competitor? (While your product just had been released this year, while the competitor s products launched from 3 years The competitor market growth is higher than me this year, so why? (And this mistake is happening although you know that your product has been launched from 10 years ago, while the competitor s product has been launched from 2 years only). The competitor is selling 200,000$ this month by using techniques like bla bla..bla bla so I will do the same and get better sales force and better techniques (marketing communication tools) and get more sales next month The previous mistake is the most stupid mistake which is happening all of the day and night among different companies and competition between different organizations and individuals. You can t even compete with companies who are depending on Cost Leadership marketing strategy while your competitive advantage strategy is Differentiation marketing strategy. You can t compare your business (market share, market growth) which has been launched from 2 years by other product which has been launched from 10 years. To understand the answer for all of the above common questions and mistakes and to protect your company employees against committing the same mistake, you need to understand these two issues:

24 1. What are the Marketing Strategies? (competitive advantage strategy, Ansoff s Matrix or Growth Strategies, Market Positioning Strategy, Segmentation, Targeting and Positioning) 2. What are the Products Portfolio Analysis Tools? There are three main Products Portfolio Analysis tools:

25 P.L.C. is Product Life Cycle (Products Portfolio Analysis tool). B.C.G. Matrix is Boston Consultancy Group Matrix (Products Portfolio Analysis tool). G.E. Matrix is General Electric Matrix (Products Portfolio Analysis tool). So to make a product portfolio management, you need to follow a process of setting your product portfolio marketing analysis and strategy, and this process should be done on a continuous basis to monitor the marketing dynamics of your product portfolio.

26 What are Product Life Cycle Stages? It s a valuable tool to help you in defining different stages in product development; also it helps to forecast the future demand about your products. Product Life Cycle (PLC) is reminding us that all products are having a limited life time. What are the Product Life Cycle (PLC) Stages used for? It helps to predict the profit levels and tailoring marketing programs according to the demand, your product development stage, current profits and level of investments and your changing customers needs. The Product Life Cycle (PLC) is one of the Products Portfolio Analysis and Planning Tools.

27 What are Product Life Cycle Stages? There are four different stages of any product from its development stage (prototype) till the product withdrawn from the market and no further demand on it. The P.L.C. means Product Life Cycle; which is helping you to understand that each product is passing with four developmental stages from the time of launch till the product die; those four stages are: 1. Introduction Stage: In this stage, your product is starting in the market. In this stage your sales grow slowly at a cost. 2. Growth Stage: This stage is the best stage that all of the companies, organizations and individuals are dreaming of their products to be in this stage. In this stage your sales are growing very well but your profits level is still small. 3. Maturity Stage: In this stage organizations and individuals starting to search for new opportunities to increase their sales, as this stage is a well established competition between your product and competitors products. In this stage you get stable market share. 4. Decline Stage: In this stage you start to lose your market share again, your customers are starting to shift to another competitor, and your loyal customers became not satisfied as before. In this stage, if you didn t manage your product well, then you can expect that your product will eventually die.

28 Why product life cycle is important? Instead of telling you why Product Life Cycle (PLC) is important, I will tell you what you are going to lose if you didn t use this tool, and to explain this, I am asking you to understand, listen and think about the following example: Imagine your dream is to be a football player, and actually you aren t skillful at all, then you got videos for most football players as Ronaldo, Ronalidino, Rony etc then you started to implement the same training techniques that they (professional players) were doing all of the time. Let s say you were implementing those techniques perfectly for six months, and you started to apply for famous and well known clubs as Manchester, Liverpool, Barcelona, intermilan etc. And you get refused from all of them!! Then you got a severe depression and become a de-motivated toward becoming a professional football player. Actually you had fallen in the Trap that most of marketers fall into. You can t compare your performance in six months (while you start your football for the first time as professional from six months) with someone performance in the last six months (who were playing football for twenty years!!). The same issues for marketers, many marketers are comparing their products performance with the best competitor in the market share, growth rate, and sales. This is totally a mistake, because the best competitor for you (Benchmark) may be in the Growth stage while you are in the Introductive stage of Product Life Cycle (PLC). So you can t compare your product performance with products which are belonging to different stages of the product life cycle (PLC). Check the following article to understand the previous issue (What is a product life cycle management?)

29 So what can you do? You can compare your product performance against the competitors who are in the same stage of the Product Life Cycle (PLC) e.g. comparing the products which are in the introduction stage together, comparing the products which are in the growth stage together, comparing the products which are in the maturity stage together and comparing the products which are belonging to the declining stage together. But take care; you need also to monitor the products which are belonging to the different stages of Product Life Cycle (PLC), because you need to understand the marketing dynamics very well and predicting what is going for your future products.

30 What is a product life cycle management? In this article I will explain what the changes that are happening in each stage of the Product Life Cycle (PLC) are, and how to manage each change to get the best profit for your business. The following diagram is representing the P.L.C.; Product Life Cycle: I will explain each stage in Product Life Cycle (PLC) separately illustrating the changes happening there and how to manage those changes effectively.

31 What is a product life cycle management? 1. The Introduction Stage (What is a product life cycle management?): Changes and marketing dynamics in Introduction Stage of Product Life Cycle (PLC): In the introduction Stage of PLC; your sales are growing slowly, with your profit didn t cover the expenses or level of investment that you are making in your product. This is important because many marketers who aren t experienced and also for sales managers who aren t studying marketing, both of them believe that you should get the profit or ROI for every investment you make. Actually this is a great mistake in the introduction stage of your product, so you should expect that you won t get the profit that covers your team expenses and level of investments in the introduction stage. This profit could be increased in the Growth stage. The Objective of Integrated Marketing Communication Mix in this stage is to INFORM your customers about your products benefits, value, use, and achieving high level of awareness about your product.

32 2. Growth Stage of Product Life Cycle (PLC) (What is a product life cycle management?): Changes and marketing dynamics in Growth Stage of Product Life Cycle (PLC): In this stage your sales are growing, and your market growth is increasing in very acceptable manner. The levels of profits are slow in this stage, because you are still investing in your product to keep your product in the growth phase and getting higher market share. Actually most of the organizations are investing thousands of thousands of money to keep their products in the growth stage and to maintain their position within the competitor, so in this stage you are investing money in advertising and sales promotion to increase your growth rate and getting higher market share. Recommending tactics and strategies to keep your product in the growth phase: 1. High advertising and sales promotion to differentiate your products from competitors. 2. Tactical and strategic retaliation, customer relationship management (CRM) with distributors and suppliers. 3. Line extension (if your product growth started to decline after good level of investment, so you look for new opportunities).

33 4. Product offers and sales promotion: so you are encouraging the customers to purchase your products through discounts, bonuses and other sales promotion techniques. 5. Increase your push strategy: to push your products in the wholesales and key areas with quantities to make your product available everywhere for your customers and preventing competitors products from getting shelf space. Actually the push strategy is playing a great rule in changing consumer behavior especially in F.M.C.G; Fast Moving Consumer Goods. E.g. Cocacola and Pepsi, many supermarkets are containing only cocacola or only pepsi, while the switching cost (what cost the consumer to shift from one brand to another) is small in the F.M.C.G. products. The objective of Integrated Marketing Communication Mix of this stage is to DIFFERENTIATE your product from competitors. 3. Maturity Stage of Product Life Cycle (PLC) (What is a product life cycle management?): Changes and marketing dynamics in Maturity Stage of Product Life Cycle (PLC): In this stage your sales levels are stable, but your profit is declining. This stage is common in the markets that are having a well established competition (existing products were competing from long time ago).

34 The Maturity stage would be acceptable if your product is achieving the highest market share among your competitors, and your product is well established product, then you suggest new market development opportunities, line extension, repositioning of your products to make your product back again to the growth stage. The maturity stage became very risky if your product is not having a high market share, or your product have been launched from small period of time (1-2 years ago). Then you need an urgent action, a risk assessment to decide are you going to invest in this product or let your product die. Recommending tactics and strategies to keep your product in the Maturity Stage of Product Life Cycle (PLC): The objective of those tactics is to extend the life cycle again and help your product to back again to the growth phase. Here some ideas about extending your product life cycle: New Product Development for your existing product (s) : Quality, style, functional modifications in the existing products. Revising your Segmentation, Targeting Strategies to make a new market development, or new product development (See Ansoff s Matrix). Repositioning of your products benefits and value to persuade your customers to buy more or gaining new customers to try your products. Re-Branding of your product to make your customers receive a unique, relevant and sustained added value from your product that match their new needs. Price-Cutting: to decrease your product price, actually this isn t favorable strategy especially if your competitive advantage strategy is Differentiation Marketing Strategy, but if you are competing through Cost Leadership Marketing Strategy then Price Cutting become a good option for extending your Product life cycle (PLC).

35 The Objective of Marketing Communication Mix in This Stage is to PERSUADE your existing customers to buy your product more (increasing the frequency of purchase), or acquiring new customers to try your product. 4. Declining Stage Of the Product Life Cycle (PLC) (What is a product life cycle management?): Changes and marketing dynamics in Declining Stage of Product Life Cycle (PLC): In this stage, you are losing your customers (your target segment), or your customers are decreasing their purchasing frequency than usual. Your market share is decreasing in this stage, and your product market growth become in minus. In this stage both your sales and profit are declining and may end to stop promotion about your product. The Declining Stage is happening in the old established products that have been launched from many years ago (may be more than 10 years), or your product service or technology become obsolete (Due to the development of the technology and changing customers needs among the time). Also the declining stage comes to the products which didn t succeed in their growth stage of PLC, or those which their Product life cycle (PLC) was very small, so the product passed with growth, maturity and declining

36 stages in very small period of time. Actually this is happening when you create a product that isn t essential of your customers, didn t create customers needs, or your product is of low quality and service delivery so your customers gave up and decided not to purchase your products again. Recommending tactics and strategies to keep your product in the Declining stage: Actually there are two recommended marketing strategies for managing your product in the declining stage of Product Life Cycle (PLC): 1. Obsolescence: To decide that you won t promote your product anymore, so you will cut the expenses, you won t invest any money in promoting your product, and just wait to gain some cash before your product die. 2. Repositioning strategy of your product: Think to reposition your product value and benefits to your existing customers segment at the start (as market penetration) and for new customer segment (as market development), allocate your resources (to control your budget) and start to rebrand your product again. If you decided to reposition your product then you need to make a high market promotion, rebranding, and consider making a new product development of your existing product to back again to the growth stage and gaining a good market share. 3. New Product Development: Actually this is happening with lot of products, as Camera films in the last 10 years, people became more comfortable to the new technology of digital cameras and transferring the photos and videos to the computer. So those companies which their business build on camera films decided to make new product development and releasing new digital cameras for the same old established brands, so the old customers will love to buy their new product rather than the competitors, and this is happening if you were having a good customers loyalty when your product was in the growth stage.

37 The Objective of Integrated Marketing Communication Mix in this stage is to REINFORCE your product again to your old customers; to remind them about how much your product was their first choice and to reassure those customers about your competitive advantages and product value.

38 Examples of short and long product life Cycles What is the Difference between Short P.L.C. (Product Life Cycle) and Long P.L.C.? In this article I am explaining why there is a product which is having a short Product Life Cycle (PLC) and other product having a long product life cycle (PLC), also to help you to understand that the industry business is affecting the PLC of the products. What are the Products with a Long Product Life Cycle (PLC)? The products with Long Product life cycle (PLC) are the successful products, the products with the right marketing strategies (competitive marketing strategies, Segmentation, Targeting and Positioning), right budget allocation, right investment, and always developing their product (product development) and penetrating new markets (Market Development) and they are the companies which are providing the appropriate marketing mix for their customers (right product mix, communication mix, place, price, people, physical evidence and process).

39 Also the products with long product life cycle (PLC) are the products which is released in a high market attractiveness in which the market industry is growing, this is helping you to understand if you are going to invest more money in extending your product life cycle (PLC) or you should obsolete your product and look for something else in another industry. What are the Products which having Short Product Life Cycle (PLC)? The product which is having a short Product Life Cycle (PLC) is the product which doesn t have the appropriate competitive marketing strategy for the target customers (as wrong positioning, wrong segmentation and targeting, or wrong competitive advantage strategy as companies which are adapting both cost leadership and differentiation marketing strategies for the same product), wrong integrated marketing communication mix, not allocating their resources effectively, for companies who aren t making a market development for their target segment or not developing their existing product, so finally their product become obsolete and their existing users became not interested to purchase their products as they were in the past.

40 Also the Short Product life cycle (PLC) found in the industries which all of their products are having the same problem as Fashion, and Movies industry. Both of the previous examples are perfect description for the products which are short in their PLC, and this is happening for most of the products in those industries. You know, when you watch a new movie in the cinema, the movie producer may be find a new market development through offering his movie in more than one country, then in the local and international TV channels, then releasing those movies in DVD and CDs. And if the cycle was perfect as planned, then may be the product starts and ends maximum by one to two years in the Cinema industry. Nowadays the torrents for downloading the recent movies through the internet became the major challenging problem for all cinema movies producers, and even if you protect your movie for couple of months, finally you found your movie uploaded in these torrents among different internet sites.

41 How to extend the product life cycle in 5 steps? The objective of this article is helping you to understand what are marketing strategies needed for each stage in the Product Life Cycle (PLC). This is very important because sometimes marketers get confused about making new product development or new market development while their product life cycles are in the Growth Stage of the PLC. Revenue & Profit Market Development Line Extension Market Penetration Diversification New Product Development McDonald, 1999 As any product should pass with Introduction stage, then Growth, Maturity and ends in declining stage of Product Life Cycle (PLC), Also the marketing strategies (Anoff s Matrix) should start by Market Penetration and ends with Diversification (as last option). So those stages are as follow (from 1 to 5): How to extend the product life in 5 steps? 1. Market Penetration: You need to make a Market Penetration first for your product to convince the existing users to use more (increasing the frequency of purchase) or encouraging the non users to try your product. Market Penetration should be your 1 st option when you release a

42 new product, don t get lost by thinking about new product development or new market development while you are in the introduction stage, so focus your time and energy in penetrating your target segment with the right positioning and appropriate marketing mix. 2. Line Extension: The 2 nd recommended marketing strategy to extend your product life cycle (when your product start shifting from growth to maturity stage) is to make a line extension of your existing product. Line extension means to release another version of the same brand, as CocaCola Zero, Pepsi Max. Both of them are clear examples of Line Extension. 3. New Market Development: The 3 rd recommended marketing strategy if your product started to shift to maturity stage for the 2 nd time is to make a new market development, so you look for new target segment to promote your products to, or New Geographical Market to penetrate your product to. Please note that the line extension came before market development in extending the product life cycle (PLC) for your product, because you will gain more revenue and profits by releasing a new version of the same brand to the existing target segment (existing customers) that you were targeted all of the time, so their behavior will be change easier than looking for new customers and start convincing them about your products value and benefits. 4. New Product Development: The 4 th recommended marketing strategy when your product starts to decline. You need to make a new product development of your existing product; as adding new technology, new modifications about your product to back again to growth phase and start gaining the market share again.

43 Please note that the cost of new product development is high and not to be considered as an easy option, as per my best knowledge P & G; Procter and Gamble are investing billions of dollars every year on their R & D; Research and Development Department. So this stage needs a money and helps in protecting your company from downturns, but again remember if you don t have enough budget to invest in R & D, then make the new product development stage your last option when your product starting to decline. 5. Diversification: The final tactic for extending your company business is to make a Diversification. Actually the diversification process isn t considered as a tool for extending your product life cycle (PLC) rather than helping your company to find a new business opportunity to make money. Diversification is to make a new product in a new market or new industry. This strategy is a risky strategy and you should understand the market that you are going to develop a new product in before start spending money in developing that new product. As overall you need to make a situational analysis (External and internal environmental analysis) again before you decide which market and which product you are going to release.

44 What is a BCG Matrix Model? In this article you will learn about: What is a BCG Matrix Model (Boston Consultancy Group Matrix) Model? What is a BCG Matrix Model (Boston Consultancy Group Matrix) Model used for? BCG Matrix (Boston Consultancy Group Matrix) Model Diagram:

45 You need to understand that in Star and Dog boxes; the profit level is very small and almost reach zero, as the cash generation is almost same as cash usage (level of investment and total cost). While in the Cash Cow; it s the highest phase that you got profit in, as the level of investment is small relatively to the cash generated. 1. QUESTION MARKET OR PROBLEM CHILD : This is happening with product which is having low relative market share and high growth rate. It s typically for the new product. In this box the brand support is limited (if question mark product) or the brand is new (problem child). Sometimes QUESTION MARK Phase called Wild Cat.

46 The recommended strategy is depending on your budget, level of competitive investments from the competitors and market opportunities (to know if you are going to invest in your brand or not). 2. STAR: It s the product that is having a high market share in a high growth industry. It has potential for generating significant earnings currently & in future. For the products which are belonging to STAR, actually the level of expenditure are equal to the profit level, so the profit here is very small and may be zero, and this is happening because you need to invest more in your product to maintain this position. 3. CASHCOW: A High market share but in a mature slow growth market. Typically a well established product with consumer loyalty. It makes good contribution to overall profitability. Strategy: will vary, if market growth is strong, then holding strategy is good. If growth is weakling, then harvesting will be more sensible (cut marketing expenses & maximize short term cash flow). Actually we use the cash generated from CASHCOW products to invest in PROBLEM CHILD and START PRODUCTS. 4. DOG: Low market share, low growth. A Typical established product but losing consumer support. Strategy: consider diversification, unless cash flow is strong, in which case the product would be harvested in the short term prior to deletion from the product range.

47 What is a BCG Matrix Model (Boston Consultancy Group Matrix) used for? Imagine a company with 20% of its products are in the high growth markets (PROBLEM CHILD OR STAR), while 80% of its products are in the low growth markets (CASH COW or DOGS), then you can expect those 80% of the company products are going to be DOGS after couple of years, which results in high risk results if the company isn t going to look for new opportunities and new products. Please note that B.C.G Matrix (Boston Consultancy Group Matrix) is applicable for planning and analyzing companies, divisions, business units, product groups, and products, so it s very effective tool and is having a wide range of applications.

48 How to Make a BCG Matrix Model? In this article you will learn about: What BCG Matrix (Boston Consultancy Group Matrix) Model used for? Why Relative Market Share in BCG Matrix (Boston Consultancy Group Matrix)? Why relative to the biggest competitor in the market? What is the market growth rate in BCG Matrix Model? What is the BCG Matrix (Boston Consultancy Group Matrix) Analysis Diagram? How to Make a BCG Matrix Model (Boston Consultancy Group Matrix) Model? What is the normal sequence of any product in the B.C.G. Matrix? BCG Matrix; Boston Consultancy Group Matrix Model is a matrix that classifies products according to their cash usage and cash generation, using market growth and relative market share to categorize them in the form of a box matrix. The Relative Market share is the indicator of Cash Generation, which indicates the ability of your product to generate cash, while the market growth is indicator of Cash Usage; which is indicator of how much cash required investing in your product (product s cash requirements). What BCG Matrix (Boston Consultancy Group Matrix) Model used for? The BCG Matrix Model can be used to forecast the market position of your products in the next five years from now, so it s very helpful and effective tool.

49 Why Relative Market Share in BCG Matrix (Boston Consultancy Group Matrix)? Because it reflect your product position in the market, so relative market share means your market share relatively to the biggest competitor in the market. Why relative to the biggest competitor in the market? Because it reflect your product s market share from the best and biggest competitor market share, so we use the biggest competitor market share to be as standard for measuring your product performance or as KPI; Key Performance Indicator.

50 What is the market growth rate in BCG Matrix Model? It s the annual growth rate of the market (that you are promoting your product in) relative to the G.N.P. growth (Growth National Product). What is the BCG Matrix (Boston Consultancy Group Matrix) Analysis Diagram?

51 The previous 2 diagrams are representing the BCG Matrix for analyzing and planning your product performance against the competitors. Before I start to explain what the four boxes are shown above in the BCG Matrix, I am going to explain how to calculate the relative market share in BCG Matrix Model Diagram.

52 How to Make a BCG Matrix Model (Boston Consultancy Group Matrix) Model? It s the % of the market share of your product relative to the % of the market share of the biggest competitor in your market. Example: if your product market share is 10% and the biggest competitor s market share is 20%, then your relative market share is 10:20 which equal to 1:2, then we balance the equation again to make the competitor market share as 10%, so your relative market share will be 5:10 or 0.5:1. Please note that the VERTICAL Axis in the B.C.G. matrix is representing the biggest competitor s market share that you are comparing your product to. So it s common to make the vertical axis as 1 which equal to 10% of competitor market share, then you are comparing your product relatively to this %, to be more than 1 or less than 1. I will explain this more in the examples. What is the normal sequence of any product in the B.C.G. Matrix? Any new product is a problem child or question mark (as market penetration strategy), then with effective marketing strategies and tactics it become star. As the Market become mature (stable market) then your product become a Cash Cow, and finally your product becomes a Dog (declining phase of the PLC; Product Life Cycle).

53 BCG Matrix Examples (Case Study no.1) The BCG Matrix (Boston Consultancy Group Matrix) helps to analyze and plan the position of your products in the next five years. So it could be applied to Companies, Business Units, Group of Products and for individual products. The following case study is from my imagination to help you in understanding how to apply the B.C.G. Matrix very well. In this case study, I will create example to analyze your product position from competitors products. In another case study, I will apply the B.C.G. matrix on analyzing the company position for all its products. BCG Matrix Examples (Boston Consultancy Group Matrix Examples): Case Study: Let s say you have a company called SuperCola which is responsible for production of Cola Products to the end consumers. Your company product is also called SuperCola which have achieved 40% market share in MAT 2009 (for 12 months assessment), and 50% growth rate in the last 12 months. You have 5 competitors in your industry: CocaCola; which have achieved 30% market share for the last 12 months. Pepsi; which have achieved 10% market share for the last 12 months. BeCola; which have achieved 5% market share for the last 12 months. ColaHero; which have achieved 10% market share for the last 12 months. KokaKola; which have achieved 5% market share for the last 12 months. The Market Growth Rate is 20% of all Cola Products Market.

54 The growth rates of your five competitors are: CocaCola; 15% growth rate. Pepsi; 20% growth rate. BeCola; 40% growth rate. ColaHero; with 10% growth rate. KokaKola; with 10% growth rate. The answer of the above Case Study of BCG Matrix: 1. Who is the biggest competitor for you in market share? The highest competitor s market share is CocaCola Brand. Then we are going to compare all products market share to this CocaCola market share. We are going to put CocaCola Market Share on the vertical axis of the BCG Matrix. CocaCola Market Share is 30%, so as I explained in other articles about BCG Matrix, I am going to balance any product ration to be (any product Market share: 1 (which is the CocaCola Market Share)). Please note that the biggest competitor s market share for you doesn t mean that competitor should have higher market share than you, because the theory says The Biggest Competitor for you in Market Share and not said The Biggest Product Market Share among all products Don t worry I will explain more now: 2. Calculating the Relative Market share for each product: Relative Market share of SuperCola: Relative market share of SuperCola to CocaCola = 40% to 30% = 40:30 = 4:3. But as I said, we should make the biggest competitor market share = 1, so the Supercola Relative Market Share is 1.33 (for SuperCola): 1 (for CocaCola).