module 3.03

MODULE 3.03

MARKETING STRATEGYAND PRODUCT

AS3 Marketing

The marketing mix forms the basis of the marketing plan which is set to achieve both marketing and corporate objectives of the business. Whenever the objectives of business change or if the external environment changes, it is likely that the business will have to alter its marketing mix.

The marketing mix forms the basis of the marketing plan which is set to achieve both marketing and corporate objectives of the business. Whenever the objectives of business change or if the external environment changes, it is likely that the business will have to alter its marketing mix.

The Marketing Mix

The 4 P’s of the basic marketing mix are:

1. Product

2. Price

3. Place

4. Promotion

The 4 P’s of the basic marketing mix are:

1. Product

2. Price

3. Place

4. Promotion

The Marketing Mix

Dividing the market into segments with similar needs and wants and common characteristics, and tailoring the marketing mix to meet the needs of a particular segment.

Dividing the market into segments with similar needs and wants and common characteristics, and tailoring the marketing mix to meet the needs of a particular segment.

Market Segmentation

Methods

Demographic/Socio-Economic Demographic/Socio-Economic

GeographicGeographic

lifestyle lifestyle

Geo-demographicGeo-demographic

Methods

GeographicGeographic

Countries, regions, neighbourhoods.Countries, regions, neighbourhoods.

Methods

Demographic/socio-economic Demographic/socio-economic

Age, gender, income, education, occupation, religion, race, marital status, family life cycle.

SEG Social Class Type ofOccupation

Examples UK%

A Upper / upper– middle

High managerial,administrative,professional

chief executive of largecompany, surgeon, judge.

3-5

B Middle Middle manager,administrative,professional

bank manager, head-teacher, doctor, solicitor,architect.

12-13

C1 Lower middle Junior manager /administrative,clerical

Teacher, nurse, estateagent, journalist,policeman, senior shopassistant, bank clerk.

22

C2 Skilledworking

Skilled manuallabour

Electrician, butcher, miner,tailor, train driver.

32-33

D Working Semi-skilled &unskilled

Driver, postman, waiter,road sweeper.

19-20

E Lowest paid Casual workers,unemployed

Casual farm labourer,pensioner, unemployed,student.

10

Socio-Economic Groupings

• Classification of small geographical areas according to age, race, social class – links purchasing power with how people live and where people live.

Methods

Geo-demographic Geo-demographic

• Lifestyles - activities, interests,opinions.

YUPPIES – young upwardly progressing professional

DINKY-double income no kids household

Methods

Lifestyle/Psychographic Lifestyle/Psychographic

• Personality • Personality

TrendsetterEnvironmentalistRisk-taker

Methods

Eg

3 main strategies3 main strategies

Strategies for Marketing a product

1.Undifferentiated marketing

2.Differentiated marketing

3.Concentrated marketing

1.Undifferentiated marketing

2.Differentiated marketing

3.Concentrated marketing

Undifferentiated

This is a single marketing mix offered to the total market after market research has been carried out

MARKET FIRM

market research

marketing mix

This involves dividing the market into different segments and, as a result of market research, having separate marketing mixes for each segment.

This involves dividing the market into different segments and, as a result of market research, having separate marketing mixes for each segment.

Differentiated

FIRM

SEGMENT 1

SEGMENT 2

SEGMENT 3

mix 1

mix 2

mix 3

market research

market research

market research

This is choosing one segment of the market and developing the best marketing mix for this segment only. It is often the best strategy for the smaller firm and is also known as niche marketing.

This is choosing one segment of the market and developing the best marketing mix for this segment only. It is often the best strategy for the smaller firm and is also known as niche marketing.

Concentrated

SEGMENT 2 FIRM

market research

marketing mix 2

A corporate strategy which focuses on identifying and satisfying a relatively small segment of the market.

A corporate strategy which focuses on identifying and satisfying a relatively small segment of the market.

Niche Marketing

Often used by smaller firms unable to compete with larger.Often used by smaller firms unable to compete with larger.

Niche Marketing

A corporate strategy which focuses on identifying and satisfying a relatively small segment of the market.

A corporate strategy which focuses on identifying and satisfying a relatively small segment of the market.

BenefitsBenefits LimitationsLimitations

Niche Marketing

• Fewer resources.

• Can enable smaller firms to operate in markets dominated by larger.

Niche Marketing

BenefitsBenefits LimitationsLimitations

• Lack of economies of scale - prices / profit.

• Vulnerable to market changes.

• Large business in several niches - requires flexible production.

Niche Marketing

BenefitsBenefits LimitationsLimitations

A strategy which involves firms aiming products or services at whole markets rather than particular market segments.

A strategy which involves firms aiming products or services at whole markets rather than particular market segments.

Mass Marketing

Mass Marketing

BenefitsBenefits LimitationsLimitations

• Less vulnerable – spreading risk

• Economies of scale

•Greater sales and profits

Mass Marketing

BenefitsBenefits LimitationsLimitations

• Greater investment - mass production.

• Greater competition likely.

• Greater investment - mass production.

• Greater competition likely.

Mass Marketing

BenefitsBenefits LimitationsLimitations

Product Positioning

Firms position themselves in their market with regard, for eg,

•Price

•Quality

•Reliability

And use a positioning map to show this. The map can help identify gaps in the market where new products/services can be provided

Firms position themselves in their market with regard, for eg,

•Price

•Quality

•Reliability

And use a positioning map to show this. The map can help identify gaps in the market where new products/services can be provided

High Alcohol Content

Low Alcohol Content

High Price

Low Price

Portfolio Analysis

Relevant Terms

Product LineProduct Line

Group of products with similar characteristics or uses or sold to the same type of customer. Eg Ormo bakery produces a line of white loaves – thin, medium, thick cut

Group of products with similar characteristics or uses or sold to the same type of customer. Eg Ormo bakery produces a line of white loaves – thin, medium, thick cut

Portfolio Analysis

Relevant Terms

Product Mix/Product PortfolioProduct Mix/Product Portfolio

The combination of all a firm’s product lines. Eg Ormo bakery produces a wide variety of breads (loaf, soda, wheaten etc) and cakes/buns. This is known as its product mix/portfolio

The combination of all a firm’s product lines. Eg Ormo bakery produces a wide variety of breads (loaf, soda, wheaten etc) and cakes/buns. This is known as its product mix/portfolio

1. Likely to meet a defined need?

2. To what segment(s)?

3. What position in the market place?

4. Fit in with objectives?

5. Improve or diminish image / reputation?

6. Cost?/has business resources

1. Likely to meet a defined need?

2. To what segment(s)?

3. What position in the market place?

4. Fit in with objectives?

5. Improve or diminish image / reputation?

6. Cost?/has business resources

Deciding upon Product Mix

Product Life Cycle

The different stages through which a product passes and the levels of sales experienced at each stage.

The different stages through which a product passes and the levels of sales experienced at each stage.

Like humans, products have a life cycle:Like humans, products have a life cycle:

1. Development (conception -pregnancy)

2. launch / introduction (birth).

3. growth (childhood - adolescence).

4. Maturity & saturation (adulthood).

5. Decline (old age).

Product Life Cycle

Stages of development shown in relation to sales over time:Stages of development shown in relation to sales over time:

SALES

Time

Developm

ent

Introduction

Maturity

Grow

th Saturation

Decline

Extension strategies

Product Life Cycle

No 2 products identical. Depends on:

• nature of product

• marketing

• customer tastes & income

• competition

• technology.

No 2 products identical. Depends on:

• nature of product

• marketing

• customer tastes & income

• competition

• technology.

Product Life Cycle

Ideas investigated, designed, tested & selected.Ideas investigated, designed, tested & selected. Involves:

:a) product research.

b) customer research.

Marketing plan prepared. High costs, no sales, cash, profit. The more novel the longer the development.

Marketing plan prepared. High costs, no sales, cash, profit. The more novel the longer the development.

The Stages Involved

Development

Product launched into market place.Product launched into market place.

• Price - high / low depending on uniqueness.

• Promotion - informative to educate.

• Profit - unlikely as sales low, promotion costs high.

• Price - high / low depending on uniqueness.

• Promotion - informative to educate.

• Profit - unlikely as sales low, promotion costs high.

Introduction

The Stages Involved

Introduction

The Stages Involved

Many go no further.Many go no further.

More & more customers aware of product.More & more customers aware of product.

Growth

The Stages Involved

• Sales & Profits - rapidly rise.

• Profits - attract customers.

• Competitors - enter the market.

• Sales & Profits - rapidly rise.

• Profits - attract customers.

• Competitors - enter the market.

Changes required to marketing strategy:Changes required to marketing strategy:

• Price - rises or falls. High to recover costs / maximise profits; low to discourage competition.

• Promotion - persuasive - special offers to build loyalty.

• Price - rises or falls. High to recover costs / maximise profits; low to discourage competition.

• Promotion - persuasive - special offers to build loyalty.

Growth

The Stages Involved

MaturityMaturity

• Sales - rise but rate slows, level off due to competition.

• Promotion - defensive - emphasis on branding & packaging.

• Extension strategies - planned.

• Sales - rise but rate slows, level off due to competition.

• Promotion - defensive - emphasis on branding & packaging.

• Extension strategies - planned.

Maturity & Saturation

The Stages Involved

SaturationSaturation

• Competition - too many firms competing for customers.

• Sales - level off.

• Competition - too many firms competing for customers.

• Sales - level off.

Maturity & Saturation

The Stages Involved

• Sales & Profits - rapidly decline.

• Can be a lucrative stage if marketing effort withdrawn.

• Product withdrawn if damaging company’s image.

• Sales & Profits - rapidly decline.

• Can be a lucrative stage if marketing effort withdrawn.

• Product withdrawn if damaging company’s image.

Decline

The Stages Involved

Methods to extend the life of a product.Methods to extend the life of a product.

Implemented during maturity or early decline.

Extension Strategies

Definition

Extension Strategies

Examples Examples

• Change design, image, appearance, packaging.

• Increase frequency of product’s use.

• Attract new users / target new markets.

• Change design, image, appearance, packaging.

• Increase frequency of product’s use.

• Attract new users / target new markets.

Extension Strategies

Examples Examples

• Develop alternative / new uses.

• Introduce additional models / wider range.

• Extend products into other formats.

• Develop alternative / new uses.

• Introduce additional models / wider range.

• Extend products into other formats.

Extension Strategies

NB

Advertising and sales promotion alone not extension strategies: can be used to boost sales at any stage.

NB

Advertising and sales promotion alone not extension strategies: can be used to boost sales at any stage.

Use of the product life cycle

Can help a firm to:Can help a firm to:

• analyse present position.

• Identify action to fulfil objectives.

• analyse present position.

• Identify action to fulfil objectives.

Use

and make decisions regarding...and make decisions regarding...

• promotion & price

• extension strategies

• when / how to withdraw a product

• promotion & price

• extension strategies

• when / how to withdraw a product

Potential Problems / Limitations

Knowledge of what is currently happening - not guarantee success:Knowledge of what is currently happening - not guarantee success:

marketing manager still needs to select the right strategies and implement them successfully.

marketing manager still needs to select the right strategies and implement them successfully.

Product Portfolio Analysis

Boston Matrix

• Allows firms to analyse their product mix / portfolio.

• Visual means of showing route new product might take in terms of market growth and share.

• Allows firms to analyse their product mix / portfolio.

• Visual means of showing route new product might take in terms of market growth and share.

Portfolio Analysis

Boston Matrix

• Products placed into 4 categories, usually move from problem children to stars to cash cows.

• Products placed into 4 categories, usually move from problem children to stars to cash cows.

1. STAR-

Growth stage

2. QUESTION

MARK-intro stage

3. CASH COW-

maturity stage

4. DOG-

Decline stageLow

High

High Low

Market GrowthMarket Growth

Market ShareMarket Share

Portfolio Analysis

Boston Matrix

Portfolio Analysis

Boston Matrix

2. Star/Prospect (Growth Stage)2. Star/Prospect (Growth Stage)

• Large share of high growth market.

• Generate lots of cash but probably require lots of cash to maintain dominant position.

• Large share of high growth market.

• Generate lots of cash but probably require lots of cash to maintain dominant position.

Portfolio Analysis

Boston Matrix

2. Question Mark – Intro stage2. Question Mark – Intro stage

• Low share of rapidly growing market.

• Need high investment to gain market share.

• Low share of rapidly growing market.

• Need high investment to gain market share.

Portfolio Analysis

Boston Matrix

contdcontd

• New products but also those previously strong.

• Hope - becomes stars or cash cows, most become dogs.

• New products but also those previously strong.

• Hope - becomes stars or cash cows, most become dogs.

Portfolio Analysis

Boston Matrix

3. Cash Cow/Yielder (Maturity Stage)3. Cash Cow/Yielder (Maturity Stage)

• Considerable share in low growth market.

• Need little investment, excellent cash generators.

• Considerable share in low growth market.

• Need little investment, excellent cash generators.

Portfolio Analysis

Boston Matrix

Cash Cow/Yielder contdCash Cow/Yielder contd

• Resemble products in mature stage of life cycle.

• Part of profit they make often used to finance new products.

• Resemble products in mature stage of life cycle.

• Part of profit they make often used to finance new products.

Portfolio Analysis

Boston Matrix

4. Dog (Decline Stage)4. Dog (Decline Stage)

• Small share of low growth market.

• Resemble products in decline.

• Should be dropped unless essential part of product range.

• Small share of low growth market.

• Resemble products in decline.

• Should be dropped unless essential part of product range.

Portfolio Analysis

Boston Matrix

Firms don’t want lots of dogs, need to avoid lots of stars (drain resources). Balance with cash cows:

R & D costs probably recovered + promotion cost low relative to sales.

Firms don’t want lots of dogs, need to avoid lots of stars (drain resources). Balance with cash cows:

R & D costs probably recovered + promotion cost low relative to sales.

Ansoff’s Matrix – strategies for growth

Ansoff’s matrix shows the 4 options a business can choose if it wants to grow:

1. Market Penetration 2. Market Development3. Product Development4. Diversification Explained in diagram overleaf.

Ansoff’s matrix shows the 4 options a business can choose if it wants to grow:

1. Market Penetration 2. Market Development3. Product Development4. Diversification Explained in diagram overleaf.

Market penetrationopps – try

selling more of present products

in present markets

Product development

opps- try bringing out new products in

present market

Market development

opps- try looking for new

markets for present products

Diversification opps- try looking

at completely new products

and new markets

new

present

present New

MarketsMarkets

ProductsProducts

Ansoff’s Matrix – strategies for growth

Adding Value through Branding

A strategy used by businesses to differentiate its products from others in the market place and influence customer purchasing patterns.

A strategy used by businesses to differentiate its products from others in the market place and influence customer purchasing patterns.

Branding

Adding Value through Branding

Brand

Any distinctive name, term,symbol, image, design or packaging given to a product (or group of products) which enable it to be easily recognised and differentiates it from other products.

Any distinctive name, term,symbol, image, design or packaging given to a product (or group of products) which enable it to be easily recognised and differentiates it from other products.

Adding Value through Branding

Brand

Significant advertising often required to build positive image.

Largely depends on packaging.

Significant advertising often required to build positive image.

Largely depends on packaging.

Adding Value through Branding

Types

• Family• Family

• Line• Line• Individual• Individual

• Company name• Company name

• Own Brand / Own Label• Own Brand / Own Label

• Sub-brands• Sub-brands

• Repeat purchase - Brand loyalty• Repeat purchase - Brand loyalty

• Recognition• Recognition• Differentiation• Differentiation

• Brand promotion• Brand promotion

• Intangible fixed asset-adds value to business worth

• Intangible fixed asset-adds value to business worth

• Pricing flexibility• Pricing flexibility

Adding Value through Branding

Purpose & Benefits

Only successful if product lives up to customers expectations & image built through advertising.

Only successful if product lives up to customers expectations & image built through advertising.

Can have adverse affects - bad press with one branded product can negatively affect another.

Can have adverse affects - bad press with one branded product can negatively affect another.

Adding Value through Branding

Purpose & Benefits

• Suggests benefits.

• Suggests use or special feature.

• Easy to pronounce, spell, remember, recognise.

• Suggests benefits.

• Suggests use or special feature.

• Easy to pronounce, spell, remember, recognise.

Adding Value through Branding

Qualities of a Good Brand

Adding Value through Branding

Qualities of a Good Brand

• Distinctive.

• Versatile (apply to new products).

• Capable of legal protection.

• Does not break the law!

Adding Value through Branding

Qualities of a Good Brand

Really successful brand names become generic, eg

Biro (ballpoint pen).

Hoover (vacuum cleaner).

Really successful brand names become generic, eg

Biro (ballpoint pen).

Hoover (vacuum cleaner).

•FMCG’s – fast moving consumer goods bought by consumer for immediate consumption eg food, petrol,

•Consumer durables- goods bought for intention of keeping and using for a considerable period of time eg cooker, fridge, car, carpet etc

•FMCG’s – fast moving consumer goods bought by consumer for immediate consumption eg food, petrol,

•Consumer durables- goods bought for intention of keeping and using for a considerable period of time eg cooker, fridge, car, carpet etc

Consumer Goods

Classification of Products

•Industrial consumables – raw materials that business buys in and uses daily

•Capital goods- these goods will last for a considerable period of time eg machines, computers, vehicles etc

•Industrial consumables – raw materials that business buys in and uses daily

•Capital goods- these goods will last for a considerable period of time eg machines, computers, vehicles etc

Industrial goods

Classification of Products

Services

Things other people do for you eg cutting your hair, looking after your money, prescribing treatment. They are intangible, ie cannot be seen or touched.

Things other people do for you eg cutting your hair, looking after your money, prescribing treatment. They are intangible, ie cannot be seen or touched.

Services

• Trade.

• Services to trade.

• Direct Services.

• Trade.

• Services to trade.

• Direct Services.

Services

NB Not just a good or service:NB Not just a good or service:

• a place eg holiday destination.

• a person eg popstar.

• a place eg holiday destination.

• a person eg popstar.

• Inadequate market/product research.

• Product defects.

• Greater costs than expected

• Poor pricing policy/strategy

• Inadequate marketing effort eg promotion

• Inadequate salesforce.

• Weaknesses in distribution.• Too much Competition

• Inadequate market/product research.

• Product defects.

• Greater costs than expected

• Poor pricing policy/strategy

• Inadequate marketing effort eg promotion

• Inadequate salesforce.

• Weaknesses in distribution.• Too much Competition

Common Reasons for Failure of product/service

- END -

MARKETING STRATEGY

AS Marketing