The Marketing Mix. Marketing is usually said to consist of 4 key elements, known as the marketing mix They are:

Transcription

1 The Marketing Mix Marketing is usually said to consist of 4 key elements, known as the marketing mix They are: PRODUCT PRICE PLACE PROMOTION Often referred to as the 4 P s They need to be mixed carefully Be aware that some people argue about the existence of a 5th P Packaging, whilst others argue that this is part of Product Business Studies Online: Slide 1

2 Product Every product (= goods & services) has a number of dimensions Generic Dimensions Its main purpose Sensual Dimensions How the product affects the senses Extended Dimensions Additional benefits that producers may provide Business Studies Online: Slide 2

3 Example of Product Dimensions Typical product dimensions will include: Generic Shoe polish cleans shoes Freezers store frozen food Sensual Design Colour Taste Extended After Sales Service Warranties Guarantees Smell Credit Facilities Texture Business Studies Online: Slide 3

4 Product There are 10 factors that can be used to change a product: Quality (including hidden qualities) Features Optional extras Style Brand name & logo Packaging Size After sales services Warranties Returns Business Studies Online: Slide 4

5 The Life of A Product Every product has a life span just like us! Firms must be aware of where each of their products are in their life in order to manage their PRODUCT PORTFOLIO There are 2 ways of assessing the position of a product: The amount of profit being generated The sales of a product There are 2 ways of managing a product portfolio: The traditional Product Life Cycle The Boston Matrix Business Studies Online: Slide 5

6 The Product Life-Cycle This assumes that all products follow a similar pattern This can be shown graphically: Sales Introduction Growth Maturity Decline Sales are low Profits will be negative Sales increase rapidly Profits will reach their highest point at the end of this stage Sales reach their highest point Profits will begin to fall as competition increases Sales are falling Profits continue to fall and may become negative Time Business Studies Online: Slide 6

7 Alternative Life-Cycles (1) In reality the classic product life cycle is simplified, and there are many alternatives, including: Rapid Growth Then stability Little/No Introduction Seasonal Growth Straw on fire Business Studies Online: Slide 7

8 Alternative Life-Cycles (2) Flop False Start Long Introduction Extended Life Business Studies Online: Slide 8

9 Injecting Life Into A Product A product can go through it s life cycle in a few weeks or many years However, there are a number of ways to prolong it s life This can be done using the 4 P s : Product: This can be changed ie launch of limited editions Price: This can be reduced to reflect competition ie PS2 Place: Distribution patterns can be changed ie use of internet to sell Promotion: Undertake new promotional campaign ie advertising or sales promotion Business Studies Online: Slide 9

10 Managing a Product Portfolio A product portfolio refers to a range of products produced by a company or brand A portfolio can be managed using the product life cycle approach: Business Studies Online: Slide 10

11 The Boston Matrix This is an alternative method of managing a product portfolio It was developed in the US by the Boston Consultancy Group It assumes: there is a close relationship between market share and market growth This in turn is linked to profitability The group developed a matrix, which classifies products into 4 groups Business Studies Online: Slide 11

12 The Boston Matrix Market Growth High Low High Stars Cash Cows Market Share Low Problem Child Dogs Business Studies Online: Slide 12

13 Explaining The Boston Matrix Stars Tend to yield neutral cash, as they require investment. Equivalent to growth stage of product life cycle Cash Cows Dogs Yields large amounts of cash to invest in other products Equivalent to maturity stage of product life cycle Generally negative cash flows Equivalent to decline stage of product life cycle Problem Children Sometimes known as Question Marks May become stars, but investment is required Equivalent to introduction stage of product life cycle Business Studies Online: Slide 13

14 Problems of Using the Boston Matrix Only uses market share and growth to assess the strengths and weaknesses of a product portfolio Current market share information tells us very little about the prospects for the future It is not always preferable to be in high growth markets due to instability Business Studies Online: Slide 14