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4.5 THE FOUR P’s

LOGOS ACADEMY.
 INTRODUCTION

? So far, we covered Marketing Mix 101 as we can

identify the basics of each element in the marketing
mix.

? Each element (product, price, place, promotion)

contains new features to undercover throughout
the unit.
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PRODUCT
 PRODUCT
? A product is any good (tangible item) or service (intangible
offering) that is offered in the market with the aim of satisfying
consumer needs and wants.

? In this element, we are studying four sub topics:

? Product Life Cycle
? Product Portfolio Analysis
? Branding
? The 8th P
 THE PRODUCT LIFE CYCLE
? A cycle that shows the course that a product takes from its
development to its decline.
 THE PRODUCT LIFE CYCLE
Stage 1: Development

? During this stage the product is designed, following these steps:

1. Generate ideas.- Brainstorming session where stakeholders are consulted to come up
with ideas for new products.
2. Screening ideas.- Involves deciding which ideas are left out (poor ideas) and which
need further research (good ideas).
3. Creating a prototype.- The first form or trial form of a product.
4. Carrying out test marketing.- after making necessary changes to the products,
samples are developed to be launched in a small market to assess potential demand.
5. Commercialization.- After a successful test marketing, a full launch of the product to
the market takes place.

? Note 2 take: During this stage, the R&D costs are VERY HIGH as a lot of time, money
and effort is invested in developing the product. No profit is experienced and cash
flow is also NEGATIVE.
 THE PRODUCT LIFE CYCLE
Stage 2: Introduction

? Launch stage of the product into the market.

? Sales are low because most consumers are not yet aware of the product’s existence.

? Cost incurred in the launch are high, therefore no profits are normal on this stage. Cash flow is
negative.

? If a product uses brand-new technology, price skimming is applied.

Stage 3: Growth

? Sales volume and value start increasing significantly. Therefore, profits are rising and cash flow
becomes positive.

? Consumers are attracted by products as advertising becomes persuasive.

? Pricing strategies must be set as competition tends to appear.

 THE PRODUCT LIFE CYCLE
Stage 4: Maturity

? Sales continue to rise but they do so slowly

? Product is well established with a stable and significant market share with positive cash flow.
Sales revenue is at its peak and profit is high.

? Competitors want to take part of the market share, while the business starts thinking about
introducing extension strategies.

Stage 5: Saturation

? By this time, competitors have entered the market and saturated it.

? Sales are at their highest point and begin to fall. Cash flow is still positive.

? Some businesses were forced out of the market as a result of stiff competitions.

? Prices will have to be reduced.

? Firms use extension strategies to stabilize market share.

 THE PRODUCT LIFE CYCLE
Stage 6: Decline

? The steady drop in sales begin and, through this, the profits of a product.

? Cash flow begins to fall but it is still positive.

? Product may have lost its appeal in the eyes of the consumers because new models of product
have been introduced to replace old model.

? If sales become too low, the product is slowly withdrawn from the market.

? Prices are lowered in most cases to sell off any existing stock. (Stock Liquidation)
 THE PRODUCT LIFE CYCLE /
EXTENSION STRATEGIES
? These are attempts by firms to stop
sales from falling by lengthening or
extending the product’s life cycle.
This is normally done in the maturity
or saturation stage.
? Sell existing products to new
markets.
? Find new uses for products. i.e.
cellphones.
? Change product packaging (new
design, appearance, color to
stimulate interest in customers).
? Develop new promotional
strategies. In simple terms, they
could create new advertising
campaigns to encourage consumers
to continue using heir products).
? Target to different market segments.
 WRAPPING UP PRODUCT LIFE CYCLE

•The basic product is

Growth •New product
Saturation •Weak products are
marketed. development is at an withdrawn from the
•Product advance stage. •Extension strategies market.
improvements or are critical to
new product maintain sales.
development plan
starts.
Introduction Maturity Decline
 WRAPPING UP THE RELATIONSHIP BETWEEN
PRODUCT LIFE CYCLE WITH MONEY

Stage Development Introduction Growth Maturity Saturation Decline

Average to Cost focus is

Lower cost Very low
High R&D High cost on high costs on
Investment on cost on
costs promotion on extension
production promotion
promotion strategies
High profit; High and
None or Some profit Decreasing
Profit None reaches mostly
negative and rising profit
peak stable profit
Negative but
Positive but
Cash flow Negative improves Positive Positive Positive
decreasing
with sales
 PRODUCT PORTFOLIO ANALYSIS

? Product portfolio analysis is a process that evaluates the

products making up a business.

? A business will want to invest more resources into its profitable

products and phase out the weaker ones.
 THE BOSTON CONSULTING GROUP
(BCG) MATRIX
? The BCG is the most common tool for businesses to analyze
their product portfolios.
? It was developed in the 1970s by the Boston Consulting Group.
? This matrix works with two variables measuring the market
growth rate (vertical axis) and the market share (horizontal
axis)
? Market growth rate shows how attractive is a product in the
market while relative market share looks at how much of the
market a product has captured.
THE BCG MATRIX
 THE BCG MATRIX

Stars

? A star has high market share and high market growth.

? They are successful products in the market and generate high

amounts of income to the business. However, they need a high
level of investment to sustain their rapid growth and status in
the market.

? Once these products get matured and their market growth

slows down, they eventually turn into cash cows.
 THE BCG MATRIX
Cash Cows
? A cash cow is a product with low market growth and high market share.
? Cash cows are to be milked.
? They are well-established products in a mature market and, as a result,
businesses invest less to hold on to their market share.
? The sales are really high and very profitable so they generate good
amounts of cash for the business.
? A good strategy for cash cows is that, as they have strong presence in the
market, firms can even charge slightly higher prices to increase profit
margins.
 THE BCG MATRIX

Question Marks (aka. Problem Children)

? A question mark product has low market share and high market growth.

? They are considered a problem because of the large amount of money

needed to increase the share in the market. Despite being a problem, the
high market growth could mean that these products are operating in a
fiercely competitive market and need a good strategy if they are to
succeed.

? Businesses should think hard and be very selective about which problem
children they should develop. If they invest money and succeed at
developing an increased level of market share, these problem children will
become stars.
 THE BCG MATRIX
Dogs
? A product classified as a dog has low market share and low market growth.
? Very few businesses want to have dogs in their portfolios.
? These products generate low income for the business and also their
chances of them to gain market share are very limited as the market itself is
not growing.
? If a business has many “dog” products may face cash-flow problems.
? Businesses tend to get rid of dogs unless the products have secondary
benefits, such as being a necessary part of product line that is profitable
overall.
 THE BCG MATRIX

Source: http://dunkindonutsnews.blogspot.com/2014/01/boston-matrix.html
 FLASH ACTIVITY

? Using the following product catalog, identify which products can

be placed in each of the BCG matrix elements:

? Apple Product Summary

Value Q1’12
Product Summary Volume Q1’14
(in millions)
iPhone 51 025 32 498
iPad 26 035 11 468
Mac 4 837 6 395
iPod 6 049 973
iTunes/Software 4 397
Accesories 1 863
Source: www.macrumors.com
 BCG MATRIX STRATEGIES

? In an effort to support the elements of the BCG matrix, the following

strategies could be used.
? Holding Strategy.- Focus on products with a high market share to
ensure that these products maintain the current position in the
market. (Investment needed)
? Building Strategy.- Centers on turning problem children into stars.
Money from the cash cows could be invested in promotion and
distribution of the product in order to increase market share.
? Harvesting Strategy.- Focus on milking the benefits of a product with a
positive cash flow in order to provide finance for products that do not
have the appropriate finance.
? Divesting Strategy.- In simple terms, we need to eliminate dogs. The
resources from the eliminated products will be used in boosting the
performance of other products.
 LIMITATIONS OF THE BCG MATRIX

? Focuses on the current market position of the firm’s products,

with little advice or information on future planning.

? May be time-consuming and complex exercise for businesses to

define or classify their products according to the two variables.

? High market share does not necessarily equate to high profits.

 WRAPPING UP BCG MATRIX

? Provides an engaging way to link our understanding of the

product portfolio of the organization to identify possible tactics
and strategies to be made.

? Powerful tool that assists a firm in decision-making strategies

when analyzing portfolios.
 BRANDING

? A brand may be defined as a

name, symbol, sign, or design
that differentiates a firm’s
product from its competitors.

? Branding is a marketing
technique used to give a
product or business a unique
name or identity.
 The role, or purpose, of branding includes:

? To create an original identity for a good, service or

organization
? To differentiate a business and/or its products from those
of rivals in the industry
? To build brand awareness (knowledge and recognition of a
particular brand)
? To build brand loyalty (customer devotion to a particular
brand)
? To create a particular or desired corporate image.
ASPECTS OF BRANDING

? When talking about brands,

we may refer to different
terms associated with
branding. These are:
? Brand Awareness
? Brand Development
? Brand Loyalty
? Brand Value
 BRAND AWARENESS

? The ability of consumers to recognize the

existence and availability of a firm’s good or
service.
? The best promotion of a product is creating
brand awareness. The highest level of brand
awareness is when products become
brandnomer.
? Higher levels of brand awareness often leads
to higher sales and can serve as a strong
indicator to competitors when measuring
market share.
 BRAND DEVELOPMENT

? is part of a firm’s marketing strategy in communicating the value

of a brand and what the brand stands for. It is ultimately about
building sales by making more people attracted to the brand.

? Spending on promotional activities such as advertising, sales

offers and free samples can help to develop a brand and get it
into consumer minds.
? The downward to a brand development strategy is that it can
prove to be highly expensive (such as the costs of using
celebrities to endorse and develop a brand), yet there is no
assurance that the strategy will succeed.
 BRAND LOYALTY
? The better known, the more brand loyalty there is likely to be.
? Brand loyalty is the willingness of consumers to purchase the same brand
repeatedly, despite higher prices of some products.
? Brand loyalty is the result of brand preference.
? Loyal customers become so committed that they start acting as brand
ambassadors, and they always give positive references by providing free
marketing to the business using word-of-mouth advertising.
? Example: Apple and Samsung are a good example of companies that have
successfully built large brand loyalty among its consumers through their
electronic devices and benefiting significantly from consumer
recommendations or marketing by word-of-mouth.
 BRAND VALUE

? Refers to how much a brand is worth in terms of its reputation,

potential income and market value.
? Brand value also refers to the extra money a business can make
from its products because of its brand name.
? Brands with high value are regarded as considerable assets to a
business. This happens because consumers are willing to pay a
higher price to obtain a product from those brands.
? Example: A consumer purchasing a higher-priced coffee at
Starbucks instead of a coffee at another café.
? Most valuable brands
Coca-Cola is one of the world’s most valuable brands.
Watch this video about Coca-Cola’s marketing strategy.
When the non-technology company was founded back
in 1886, only 7 drinks were sold on average per day.
Coca-Cola now enjoys over 1.9 servings each day.

The secret behind Coca Cola Marketing Strategy

 IMPORTANCE OF BRANDING

? Branding is one of the most important task of marketers.

Despite the heavy initial investment required, it is an essential
factor for any type of business.
? Starting-up businesses need to give customers a clear image with
which they can associate the business.
? Businesses with well-known brands can use price skimming
because of the image the brands has in the minds of consumers.
(i.e. Mercedes Benz, BMW, Apple, etc.)
? A firm’s brand name can provide legal protection. (trade marks)
 IMPORTANCE OF BRANDING

? Be careful with the first presentation of your product or

services.
? Something as simple as choosing a color, choosing a slogan can
have a massive impact on the way it is perceived by the general
public.
? Effective branding can enable a sense of personal identification
and emotional connection. If the impression is positive, brand
levels can increase.
“The first impression can become the lasting impression”
 SOME EPIC FAILS ON BRANDS

PISS… Australian Beer Brand

SOME EPIC FAILS ON BRANDS
 SOME EPIC FAILS ON BRANDS

? Gerber marketed baby food in Africa with a cute baby on the

label without knowing that, in Ethiopia, for example, products
usually have pictures on the label of what's inside since many
consumers can't read.
 SOME EPIC FAILS ON BRANDS

? Nike had to recall thousands of products when a decoration

intended to resemble fire on the back of the shoes resembled
the Arabic word for Allah.
SOME EPIC FAILS ON BRANDS
 SOME EPIC FAILS ON BRANDS

MAZDA LAPUTA?
SOME EPIC FAILS ON BRANDS
 SOME EPIC FAILS ON BRANDS

MITSUBISHI PAJERO?
 Did you know?

● Starbucks is named after the character Starbuck in Moby

Dick, authored by Herman Melville. Starbuck was in charge
of the ship's cargo and deck crew in the novel.
● Many brands are simply named after their founder.
(Ferdinand Porsche, William Colgate)
● Nike (named after the Greek goddess of Victory) was
originally branded as “Blue Ribbon Sports”.
● Google was originally branded as "BackRub".
 PACKAGING – THE 8th P

? Packaging refers to the art of presenting a product in an

advantageous way. Hence, packaging is an importance source of
product differentiation. It typically includes the brand name and
corporate logo.

?
 IMPORTANCE OF PACKAGING

? Provides physical protection.

? Offers convenience (consumers and suppliers)

? Provides information (includes CSR on some products)

? Can help reduce security risks

? Aids promotion (Eye-catching package)

 Back to you

1. Why is it important for a business to have a

balanced product portfolio?
2. What is branding and why is it important for
businesses?
3. What is the difference between 'brand loyalty' and
'brand development'?
4. Explain how brand value depends of brand
awareness, brand development and brand loyalty.