Professional Documents
Culture Documents
Products and Markets
Products and Markets
Products and Markets
Markets
Dipjoy Das
(MBA 4th Semester)
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Weak Strong
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Market Gap
Sweet
Bases for Segmentation
Way of distinguishing one customer type
from another
Common criteria before segmentation can
occur:
Market size
Identifiability of the segment
Measurability of the segment
Accessability to the segment
Buying behavioral characteristics of the
segment
Typical Bases for
Segmentation
Demographic variables (age, stage of
family life cycle, gender, income,
occupation, education, race, religion)
Geographic variables (country, region, type
of housing/neighborhood)
Psychographic variables (lifestyle,
personality, intelligence)
Behavioral variables (brand loyalty,
frequency of use, consumption occasion)
Examples of
Segmentation
McDonalds – products target to children (age
segmentation), health conscious (psychographic
segmentation based on lifestyle)
FHM magazine – targeted to men (demographic
segmentation based on gender) who are ages @ 20
-30 (demographic segmentation based on age)
Ferrari – products targeted to rich (demographic
segmentation based on income), risk-taking types
(psychographic segmentation based on lifestyle)
Products: Definition
Anything offered for sale
How Value Might Be Added:
Kotler’s 5 Levels of Product
Benefit
Core benefits
Basic benefits
Expected benefits
Augmented benefits
Potential benefits
Competition of Augmented
Benefits
In mature markets, competition
normally occurs at the augmented
product level or above (over time,
the augmented product may become
the expected one)
Example: Kotler’s 5 levels
of product benefit
Mobile phones
Core benefit – wireless phone calls
Basic benefit – touch pad, mouthpiece, earpiece,
screen
Expected product – customers expect phones to have
hands-free ability, a place to store contacts, SMS ability
Augmented product – games, download capability, MP3
capability
Potential product – social status from owning a certain
phone
Copeland’s Product
Classification
Common view – different types of
products need to be managed and
brought to market in different ways
By classifying types of products,
organizations can easily identify how to
market a product
Copeland’s classification:
Convenience goods
Shopping goods
Specialty goods
Copeland’s Classification:
Convenience Goods
Convenience goods – products purchased
frequently, at low prices, and the customer
sees little interest or risk in the purchase
Businesses selling convenience goods
should make the product available
everywhere, because customers buy at the
most convenient place
Examples: bottled water, soft drinks, pens,
notebooks, chips
Copeland’s Classification:
Shopping Goods
Shopping goods are generally more expensive,
of more interest to the customer, and some risk
is seen in the purchase
Customers will shop around for this good
Goods don’t have to be available in all outlets
Promotional material should have high
information content
Examples: computers, mobile phones, TVs,
common clothes
Copeland’s Classification:
Specialty Goods
Specialty goods are products that are very
differentiated and often carry high levels of
prestige
Customers may insist on only one brand
For businesses, high levels of service, high
prices and restricted distribution is
appropriate
Specialized computers, cameras, watches
Limitations of Copeland’s
Classifications
Circular logic – the classification is
based on how a product is marketed,
and businesses, in turn, will use the
classification as a basis for marketing
the product
Companies that only adopt this
classification system will never lead
with new product strategies
Product Life Cycle
Introduction stage
Growth stage
Maturity stage
Decline stage
Introduction Stage:
Characteristics
Low production volume, high per unit cost
Price elasticity of demand will determine pricing strategy
(skimming or penetration pricing strategies)
Skimming – price is high, is appropriate for products that are
price inelastic
Penetration – price is low, is appropriate for products that are
price elastic and when gaining market share is more important
than recovering development costs
High risk for entrants, because cash flows will likely be
negative for awhile, and imitators will enter the market
Growth Stage:
Characteristics
Sales for the market as a whole
increase
New competitors typically enter the
market
Market becomes profitable
Strategies: enter the market and win
market share; develop new segments
of the market
Maturity Stage:
Characteristics
High proportion of people who will
purchase the product have already
purchased it once
May be expensive or risky to enter the
market now or challenge for more
market share
Strategies: hold existing customers,
compete hard for new customers,
develop niches
Decline Stage:
Characteristics
Market is shrinking
Strategies: develop new uses for the
product, find new users, reposition
the product for parts of the market
that will remain
“Milking” strategy – low investment
and take market share left by
departing competitors
Product Portfolio Theory
Product portfolio – the array of products a
company provides
Assembling a portfolio is based on the idea of
minimizing risk
Broad portfolio – company has a presence in a
wide range of product and market sectors
Narrow portfolio – company operates in only a
few or even one product market or sector
BCG Matrix: A way to view
the entire product range
The BCG matrix is a way of identifying where a
company’s products are in the market and how
they should be treated in internal analysis
Helps identify which product to push or drop,
and when
The horizontal axis measures market share in a
particular way (market share measure)
The vertical axis measures the rate of market
growth (market growth measure)
Relative Market Share
High Low
10x 1x
High
A B C
Market Attractiveness
Medium
D E F
Low
G H I
Competitive Strength
Understanding the GEC
Matrix
Cell A Strategy – invest strongly
Cell B Strategy – either build strength to
challenge, or build selectively
Cell C Strategy – here is a dilemma, either
sell or differentiate
Cell D Strategy – investment and
maintenance of competitive position
Cells E & F Strategy – minimize risk and
expand carefully
Cells G & H Strategy – management for
earnings
Cell I strategy – sell or minimize investment