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From AQA
• Product• Product differentiation:
– unique selling point (USP)– brand image.
• The product life cycle:– research and development– introduction– growth– maturity– decline
• extension strategies:– updating packaging– adding more or different features– changing target market– advertising– price reduction.
• Product portfolio
Lesson objectives
Students should 1. understand the benefits and risks of developing new products2. understand the importance of product design, image and the
needs of the target market when designing new products3. appreciate the significance of having a USP in a competitive
market and the importance of a good brand image4. have an understanding of the product life cycle and demonstrate
how demand for a product or service might change over time.5. be able to evaluate the effectiveness of extension strategies and
when they would be suitable6. understand how and why businesses might broaden and balance
their product portfolio using the Boston Matrix7. be able to identify and explain the four categories of the Boston
Box
Starter
• What do you think this is? How does it work? What does it cost?
Developing new products
Benefits Risks
give customers something fresh and new
take advantage of new technology outsmart competitors fill a gap in the market even out peaks and troughs in demand gain new customers develop the business’s reputation as an
innovator
Many products fail New products require investment It may be a long time between
development and return on investment
Research and development is important but needs to be based on market research, otherwise products may not sell well
For example: birthday candles that you can eat which are made from white chocolate
Product design - image
• Image – this is how a product presents or appears to customers
• A positive and up-to-date product image will increase sales, increase revenue and increase profits
• Businesses will need to keep investing in R&D to keep producing products that customers want
• Try this Nike site to customise the Nike Air trainers
Product design – meeting needs of target market
• A business will need to research the market, find out what the wants and needs of their customers are and then satisfy them
• This is a customer driven marketing strategy
• Have a look at Kellogg’s site HERE
Product differentiation defined
• Defined as: When a business makes their products or service different from the competition
Ways to differentiate products / services
1. Branding
2. USP
3. Location
4. Design
5. Customer Service
6. Quality
7. Product mix
Branding
• A brand is a name, logo, slogan, and/or design scheme associated with a product or service
• Advertising and marketing builds a brand
• Customers will buy a product just because its their favourite brand
USP
• This stands for unique selling point*
• This is the secret ingredient that makes one business different from all the others that are similar
USP of greeting
card retailer
scribbler is that all
their greetings
cards are full face
to the front -0
think about
Clintons how is it
different?
Location
• Differentiation can be achieved by having the best location, for example a petrol station on a busy road
Customer service
• Virgin is a full service airline with on-plane WIFI, touchscreen seatback entertainment, and full service meals available with roomy cabins.
Product Mix
• Some businesses differentiate themselves from the competition through their product mix –e.g. Costa and Starbucks range of coffee and snacks
Product lifecycles
• Like humans products go through a lifecycle
• From research and development at the start to launch (birth) and through to decline (death)
• Some products take longer than others to go through the lifecycle
• The marketing mix will change depending on the stage of the lifecycle the product is at
Watch the cradle to
grave XBOX ad
Development
• This is the first stage of the product lifecycle where a product is designed and market research is analysed to produce a product which will satisfy customer needs
• This is a very expensive phase and at this point the product is not making any revenue
• ARTICLE HERE
Microsoft Project Scorpio is
the codename for the next
XBOX update, which gives
customers new 4K gaming
Project Scorpio's CPU will
feature 8 custom x86 cores
clocked at 2.3GHz -- well
above the original system's
1.75GHz, and even higher
than the PS4 Pro's 2.1GHz
Introduction
• The introduction phase will involve high costs in research and development and the product may have been test marketed before launching, so profits may be negative
• Sales will be low as customers may to yet be aware of the products
• Advertising will be informative to let customers know about the product
Growth
• Growth phase products are enjoying rapid growth in sales and profits
• At this stage the customers are aware of the product and demand is high
• A business may advertise the product to take advantage of the high demand
Maturity
• Maturity phase products face intense competition now all the producers have joined the market
• Sales are high but profits are starting to fall
• Products have to be discounted to keep sales high
Decline
• Decline phase products may be limited in production
• At this stage profits and sales have fallen
• The product may be withdrawn from sale
• The business may decide to heavily discount to get any last sales before the product becomes obsolete
Extension strategies
• There are ways that a business can extend the lifecycle of the product, the most popular ways are:
• updating packaging
• adding more or different features
• changing target market
• advertising
• price reduction
Product life cycle - extension
Introduction
Growth
Maturity
Decline
Time
Reve
nu
e £
Development
Extension
Watch these two videos and decide if you think they are
lifecycle extension strategies
Product lifecycle extension- adding features
• Jaguar land rover regularly update their models
• This picture shows two range rovers, one slightly newer than the other, the engine and chassis are the same the styling has changed to extend the brand
• Land Rover have been making Range Rovers since 1970
• This strategy ensures that the car remains in the maturity stage of the product life cycle rather than going into decline and being withdrawn
Daily Mail article – on colouring books for adults
here
Product lifecycle extension – new target market
The North Face has found a new target market in
teenagers
Product portfolio defined
• A product portfolio is the collection of all the products and services offered by a company
• This is just some of the products in the portfolio of Unilever – see more here
Boston Matrix
• The Boston matrix is a marketing planning tool which helps managers to plan for a balanced product portfolio
• It looks at two dimensions: market share and market growth, in order to assess new and existing products in terms of their market potential
• It helps marketing managers work out how much to spend on each product
Market share
High market share Low market share
Market
Growth
High
Market
Growth
Low
Market
Growth
Boston matrix
Boston matrix - star
• Star products:
– Have high market share
– Are in a high growth market
• Star products need to maintain their current marketing spend to keep sales high
• Stars should become cash cows in time – if managed correctly
Stars can
become
cash cows
in time
Boston matrix – question mark
• Question mark products:
– Have low market share
– Are in a high growth market
• Question mark products have lots of potential to become a star if they are managed correctly
• Question marks will need lost of investment in marketing and promotion – if they are to succeed
Question
marks can
become stars
in time
Boston matrix – cash cow
• Cash cow products: – Have high market share
– Are in a low growth market
• Cash cow products are good sellers and need little or no new investment
• The product just need to be “milked” for cash (hence the term)
• Cash cows need monitoring in case they become dogs
Cash cows can
become dogs in
time
Boston matrix - dog
• Dog products:
– Have a low market share
– Are in a low growth market
• Dog products require no investment as they are in the decline phase of their lifecycle
• Product may have become obsolete or replaced
• Product should be discontinued
Uses of the Boston matrix
• The Boston matrix is a good starting point when reviewing an existing product line to decide future strategy and budgets
• The conclusions drawn from such an analysis are to transfer the surplus cash from cash cows to the stars and the question marks, and to close down or sell off the dogs
• In the end, question marks reveal themselves as either dogs or stars, and cash cows become so drained of finance that they turn into dogs
White chocolate
Pringles – dog ,
star, problem
child or cash
cow?
Limitations of Boston Matrix
• Products may not be low or high market share they could be medium
• High market share does not always lead to high profits, there are high costs also involved with high market share
• Many people argue this matrix is too simple
What do you think– dogs, stars, cash cows or question
marks?
Yoga
trousers
for men
Beer holder
Emoji hat
Phone holder
Sweet corn drink