ORDINARY LEVEL-BUSINESS STUDIES MS.

PROMODHI FERNANDO

3.3 Marketing mix

• Marketing mix refers to the different elements involved in the marketing of a
good or service- the 4 P’s- Product, Price, Promotion and Place.

3.3.1 Product
❖ Product is the good or service being produced and sold in the market. This
includes all the features of the product as well as its final packaging.

❖ Types of products include: consumer goods, consumer services, producer

goods, producer services.

New Product Development

➢ As the markets are dynamic and competitive in nature, businesses need to

develop new products.
➢ The survival and continuity of the business will depend on the developing
new products in order to satisfy the changing needs and wants of people.
Advantages
• Can create a Unique Selling Point (USP) by developing a new innovative
product for the first time in the market. This USP can be used to charge a
high price for the product as well as be used in advertising.
• Charge higher prices for new products (price skimming as explained later)
• Increase potential sales, revenue and profit
• Helps spreads risks because having more products mean that even if one
fails, the other will keep generating a profit for the company

Disadvantages
• Market research is expensive and time consuming
• Investment can be very expensive

1
ORDINARY LEVEL-BUSINESS STUDIES MS.PROMODHI FERNANDO

Why is brand image important?

Brand image is an identity given to a product that differentiates it from

competitors’ products.

Brand loyalty is the tendency of customers to keep buying the same brand
continuously instead of switching over to competitors’ products.

• Consumers recognize the firm’s product more easily when looking at similar
products- helps differentiate the company’s product from another.
• Their product can be charged higher than less well-known brands – if there
is an established high brand image, then it is easier to charge high prices
because customers will buy it nonetheless.
• Easier to launch new products into the market if the brand image is already
established. Apple is one such company- their brand image is so reputed
that new products that they launch now become an immediate success.

The role of packaging

Why is packaging important?

• It protects the product

• It provides information about the product (its ingredients, price,
manufacturing and expiry dates etc.)
• To help consumers
recognize the product
(the brand name and
logo on the packaging
will help identify what
product it is)
• It keeps the product
fresh

The product life cycle

leave 2 pages

2
ORDINARY LEVEL-BUSINESS STUDIES MS.PROMODHI FERNANDO

Product life cycle

The product life cycle refers to the stages a product goes through from it’s
introduction to is retirement in terms of sales.

The stages of a product life cycle

1. INTRODUCTION

Profits are low in this stage because things such as research and development,
production and marketing costs are high. Prices are set high on the product or
service to recoup some of the development and introduction costs (but may also
be low as a way to more quickly build market share).

For example, microwave ovens that can now be purchased for $50 were priced
between $2,000 and $3,000 when they were first introduced. In this stage, you’ll
want to keep a close watch on the market’s reaction to your products and services
and be ready to make changes. It sometimes helps to experiment with several
different product and service configurations to see what resonates most strongly
with customers, especially in the early stage.

2. GROWTH

Sales generally increase with the demand for the product. Cash flow improves and
profits are at their peak.

3
ORDINARY LEVEL-BUSINESS STUDIES MS.PROMODHI FERNANDO

Although competition may be minimal in this stage, it’s important to continually

make refinements and stay ahead of the competitive curve. Build product and
service development capabilities with the cash you get from increasing sales.

3. MATURITY

Sales may continue to increase or level off. Profits decrease since prices are
continually lowered to compete. Still, a great amount of cash flow is generated
through sales.

Conduct market research to determine trends. Adapt your product or service to

meet the coming trends — this is the stage in which differentiation is more
important than ever.

If you don’t look for new opportunities in new markets and new products, the
coming decline stage will leave you with products and services that no longer sell.

4. DECLINE

Sales drop even though prices continue to fall. Profits are extremely low at this
stage, but the product or service has generated sufficient cash flow during its life.

When a product or service hits this stage, many entrepreneurs reintroduce it with
a new feature or create a new benefit. Simply increasing the size of a candy bar by
33 percent can re-start its life cycle.

Consider making changes to your product or service and/or the way you market it.
You may decide to discontinue your product or service before losses eat into the
cash flow generated by sales.

4
ORDINARY LEVEL-BUSINESS STUDIES MS.PROMODHI FERNANDO

At these different stages, the product will need different marketing

decisions/strategies in terms of the 4Ps.

5
ORDINARY LEVEL-BUSINESS STUDIES MS.PROMODHI FERNANDO

Extension strategies
These are the marketing techniques used to extend the maturity stage of a
product (to keep the product in the market).
A business can extend the life cycle of a product in the following ways:
• Finding new markets for the product
• Finding new uses for the product
• Redesigning the product or the packaging to improve its appeal to
consumers
• Increasing advertising and other promotional activities

The effect on the PLC of a product of a successful extension strategy: