6. Product After carefully studying this chapter, you should be able to: Explain the different natures of product offers; Illustrate the relationships between product features and consumer benefits; Explain the product life cycle; Use the BCG matrix.

6.1 The 3 features of a product offer Physical The tangible part (physical presence) of a product offer. As materials, components might not be worth much. But when assembled as a product, it’s worth a lot more. E.g. A watch may be worth from $50 to $10,000. But its components might just be worth $10. So, what adds the value?  function

Function What a product offer can do for us. Symbolic The psychological or emotional value of a product offer. Luxury goods. Brand loyalty.

6.2 Features, advantages, and benefits We buy what a product offer can do for us. In other words, we buy its consumer benefits. Some people call it features  a functional view Some call it advantages  a symbolic view The term benefits is better, it covers them all.

6.3 Product life cycle Every living creature goes through a series of stages from conception to death  animal life cycle This is the same for a product offer.  Product life cycle (PLC)

DevelopmentIntroductionGrowthMaturityDecline $ Volume Time Test Marketing 1 2 Launch Product Life Cycle

Development The original concept is developed into a marketable product offer which fits to the needs of an target market. Then it is test marketed to see if it would be successful. Any problem can be identified and fixed. Unsuitable projects can be stopped.

Introduction Introducing the new product offer to the trade. Getting stocks available at the point of sales. Introducing the offer to the target audience.

Growth The new product offer gradually establishes itself in the market. Market share expands with the acquirement of loyal users.

Maturity This stage is likely to last for a long time. Constant marketing is needed to keep a product offer alive for as long as possible. Profits come from mature products.

Decline Why do a product offer go into decline? It may be overtaken by new technology (video tape and recorder) Changes in social/economic conditions. Fashion changes are more frequently. A product offer can remain profitable whilst in decline. They need little support. They may have a loyal user base.

1. Go/no go Throughout the development stage (design and testing), a series of decisions need to be made. Is the product offer good enough? Can it be fixed to meet the expectations? Is it likely to be successful? Shall it “Go” (continue)? PLC decision points

2. Launch/introduction The launch decision comes at the end of the development stage. A marketing plan is needed. Enough funding must be provided. Many launches have failed because not enough support had been given.

3. Launch and growth strategy After a successful launch, consistent support is still needed in order to secure and expand market share. Long-term profits come from volume. Volume is measured in market share. Many product offers have failed to reach full potential because of the lack of support.

4. Convert to maturity strategy Maturity strategy is about maintaining market share. To consolidate and protect the market share. Profits begin to come out from the product offer. The profits then can fund new product offers. 5. Maturity decisions To maintain the product offer in the minds of the target audience – keeping the product up-to-date.

6. Convert to decline strategy When a mature product can no longer be supported, there are several alternatives: (a) Support can be reduced to just enough for reminding loyal users that the offer still exists. The profit per unit will increase (although total volume will fall). (b) All support can be removed. The product will decline, but profits per unit will increase for a time. (c) A competitor’s declining product(s) can be bought – or yours can be sold. The combined volume of the two (or more) products can extend their profitable life.

7. Termination When a product offer has to be withdrawn from the market. But ongoing support will be needed for existing users for as long as reasonable. Stopping sales should not mean stopping responsibility for the product offer in use.

6.4 The BCG matrix The Boston Consulting Group is a business consultancy. The BCG has developed a matrix for marketing needs. This BCG matrix has been used worldwide.

？ High Low Market share High Market growth rate Low StarsQuestion marks Cash cowsDogs

High Low Market share * The bigger the circle, the larger the sales volume. High Market growth rate Low 3A 2A ?