1.

Product
A product is any good or service that serves to satisfy the needs or
wants of customers.
Products can be tangible (computer) or intangible (education).
Products must have added value in order to stand any chance of
success. Marketing has a large role in adding value to a product.
Products can be classified as consumer or producer goods.
Classification of products: fast moving products, consumer
perishables, consumer durables, specialty products.
Product Life Cycle
The use of a product life cycle
(PLC) allows managers to identify
any necessary changes & to take
appropriate action as part of an
improved marketing strategy.
Generally PLC consists of 5 stages,
each stage is likely to have a
different marketing mix & affect
cash flows & profits in different
ways.
A. Research & Development Stage
The research & development (R&D) stage of a product’s life cycle
involves designing & testing the product.
A prototype is often produced along with detailed market research
to assess the potential success of the product.
Test marketing will usually take place. It can be expensive &
competitors might find out about the product before its launch.
Products that are commercialized must be priced competitively yet
high enough to recover the R&D costs of both the successfully
launched product & all those products that failed.
B. Launch (Introduction) Stage
Sales will be relatively low as customers are not fully aware of the
product’s existence. However costs are very high due to the
expenses involved in the launch.
The product is unprofitable at this stage & the business may face
cash flow problems.
Customers who tend to buy products during their launch are
referred to as innovators.
C. Growth Stage
Sales revenue increase during this stage.
Growth is partly due to the business using wider channels of distribution
to get the product to different customers in numerous locations.
Customers at this stage are called early adopters.
Profits may materialize due to sales revenue rising & the possibility of
lower unit costs from economies of scale in production.
Businesses strive to prolong this stage as far as possible.
Profits will attract rivals to the industry, to remain competitive marketing
mix needs to be reviewed.
D. Maturity Stage
Sales revenue continue to rise but at a much slower rate.
The business may have obtained significant market share as sales
revenues are at their peak.
Saturation occurs when there are too many competitors in the market &
sales have peaked or have started to fall.
The marketing mix will focus on promotional activities to remind
customers, rather than to persuade them in an attempt to increase brand
loyalty & repeat purchases.
Marketing managers might look to exploit new market segments for the
product.
E. Decline Stage
It is the final stage of the PLC (before its withdrawal or “death” happens).
Sales & profit of the product fall & cash flow is less favorable.
This could be due to lower customer demand caused by change in taste &
fashion.
Investment for the product, including promotional expenditure is cut.
In reality new products are likely to be launched before the previous
product enters decline as this helps a business to maintain its cash flow &
profitability.
Extension Strategies and the PLC
Extension strategies are any means of lengthening the product’s life
cycle & delaying its decline.
Common extension strategies include:
1) Price reductions.
2) Redesigning.
3) Repackaging.
4) New markets.
5) Brand extension.
6) Product differentiation (color, size, quality, after sales care, packaging, etc..)
Boston Consulting Group (BCG) Matrix
The BCG matrix is a marketing planning tool that helps managers to plan
for a balanced product portfolio (the variety of products owned by
business).
A product portfolio can also contain the various strategic business units
(SBUs) of an organization (ex. KFC, Pizza Hut, Taco Bell).
Boston matrix looks at two dimensions: market share & market growth
rate in order to asses new & existing products in terms of their market
potential.
Product portfolio analysis allows a business to decide which products
should receive more (or less) investment.
1) Dogs do not generate much cash for the business
as the market tends to be stagnant or declining, so
business may use product extension strategies or
try to dispose of the dogs.
2) Question marks (problem children) can be a
concern as this may suggest inferior marketing or
product quality.
The business should analyze reasons for its low
market share & then develop strategies to gain a
higher share of the growing market.
Problem children are the main users of cash in the BCG matrix.
Question marks are also known as wild cards as it’s not always clear whether a
business should invest more in these products.
3) Stars are successful products that tend to generate high amounts
of cash for business
Businesses tend to invest money to develop & promote their stars.
The cash generated from stars can be used in an attempt to turn
some of the question marks into stars.
It is hoped that stars would eventually turn into cash cows.
4) Cash cows generate large amounts of profits. However some cash
cows run the risk of becoming dogs, so businesses tend to use
extension strategies to prolong their high earning potential. (Coca
Cola)
The BCG matrix shows that the ideal product portfolio for a business
is to have a balanced portfolio, i.e include some of each.
The term rising star is often used to describe problem children
turning into stars.
Stars may become cash cow, appropriate marketing strategies need
to be devised to foster these changes.
A diverse product portfolio is important for an organization’s cash
flow because only selling to a single market limits the revenues of
the business.
A diverse product portfolio also helps to spread risks because a
decline in sales for one product may be offset by favorable sales of
other products in the portfolio.
BCG matrix strategies:
1) Building strategy
2) Harvesting strategy
3) Holding strategy
4) Divesting strategy
A criticism of this model is the assumption that higher profits come
from higher sales or market share.
It focuses on the current market position of the firm’s product, with
little advice or information for future planning.
It may be a time consuming & complex exercise for businesses to
define or classify their products according to market share & market
growth rate.
Branding
Branding is a form of differentiating an organization’s products from
those of its competitors.
A brand refers to a name that is identifiable with a product of a
particular business.
Importance of branding:
Branding is a legal instrument.
Branding is a risk reducer.
Branding is an image enhancer.
Branding is a revenue earner.
Some argue that a brand is more important than the product itself,
because they differ in several ways:
1) Intangibility - Brands represent the intangible value that customers place
on the actual physical products. Marketers argue that it is the brand itself
that sells the product, not the other way around.
2) Uniqueness - Brands are unique whereas a product is quite easily copied.
3) Timeless – Successful brands are timeless, whereas products can become
obsolete (reach the end of their life cycle……Sony’s Walkman)
There are several advantages of successful branding:
1) Price advantages.
2) Recognition & loyalty.
3) Distribution advantages.
Aspects of Branding
1. Brand Awareness
Brand awareness measures the extent to which potential customers
or the general public recognize a particular brand.
Creating brand awareness is a key part of promoting a product or
business, it plays a major part in the buying decision of consumers.
Brand awareness gives the business a competitive edge over its
rivals, resulting in greater market share.
Raising brand awareness is also of particular importance during the
launch stage of a product’s life cycle.
2. Brand Development
Brand awareness is a prerequisite to brand development.
Brand development refers to the marketing process of improving &
enlarging the brand name in order to boost sales revenue & market
share.
Successful brand development helps to extend a product’s life cycle.
The costs of brand development can be extremely high.
Some brands have become so famous that they are often mistaken
for the name of the product itself, such brands are known as generic
brands. (Kleenex)
3. Brand Loyalty
Brand loyalty occurs when customers buy the same brand of a
product time & time again.
Brand loyalty is important for several reasons:
1) It helps businesses to maintain or improve their market share.
2) It allows businesses with brand loyalty to charge premium prices for their
products.
3) It acts as a barrier to entry in highly competitive markets.
4) It plays a major role in the future success of a business, prolong life cycle.
The opposite of brand loyalty is brand switching, i.e consumers turn
to alternative brands mainly because the original brand has lost
some of its former appeal.
Customers might switch to rival brands that are more competitively
priced or because the competing product might offer better
functions & services.
To prevent brand switching, businesses often use customer loyalty
schemes.
Customer loyalty schemes are a form of sales promotion used to
entice customers to stick to the brand by rewarding devoted
customers. (Airlines)
4. Brand Value
Brand value refers to the premium that customers are willing to pay
for a brand name over & above the value of the product itself.
Brand awareness, brand development & brand loyalty all have a role
in improving an organization’s brand value.
Advantages for businesses that try to boost their brand value:
1) Higher market share.
2) Premium prices.
3) Higher barriers to entry.
Packaging
Packaging refers to the ways in which a product is presented to the
consumer.
Packaging can be very important in the marketing mix due to its
varied functions:
1) Packaging has a profound impact on customer perceptions of a product or
brand.
2) It acts as a form of product differentiation. (Free gift wrapping)
3) Packaging protects a product against damage during transportation &
distribution of the product.
 4) Labelling can be used to provide information. (this might be to
meet legal obligations or for promotional purposes)
5) Packaging makes the distribution of products easier.
6) Packaging can be used to encourage impulse buying. (eye
catching packaging).
7) It is used to promote the brand or the business.
One drawback of packaging is its cost. Customers are the
ones who ultimately pay for the privilege of attractive
packaging.
Product & CUEGIS Concepts
Successful products provide customers with added value;
1) Functional value. What the product actually does for customers.
2) Emotional value. The psychology & feel good factor behind the purchase
of a product.
Brand extension strategies: Developing new products under the
same brand name.
Global brands: The same product is sold using exactly the same (or
very similar) marketing strategies in overseas markets.
Glocalization: Catering for local preferences while retaining the core
elements of the global brand.
Marketing Myopia: Exists when businesses become complacent
about their product strategy, thereby failing to keep up with market
changes.
Multi brand strategy: Involves a business developing two or more
brands in the same product category.
Product cannibalization: When brands from the same business
directly compete with each other.