1. Product
Product – is any good or service that serves to satisfy the needs or wants of customers. It can be tangible or intangible.

2. Every product must have a USP
Better service
Brand image
Color
Size
shape
USP – unique selling point = a factor that differentiates a product from its competitors

3. Classification of products
Product line – group of closely related products (ex. all the different sizes of Macbooks)
Product mix – different products that a business makes (ex. Honda builds cars and motorbikes)
Product Range – all the products sold by the business (Apple computers, Ipod, Ipad, accessories)

5. Task... Go to: http://www.unilever.com/
Use the terms below to classify their products:
Product Line
Product Mix
Product Range

6. Consumer Products
Products purchased by private individuals for their own personal use
Fast-moving consumer goods (FMCG) – everyday convenience products (ex. Groceries, HBA, newspapers etc.)
Consumer perishables – products that do not last very long (ex. flowers, food that must be consumed right away)
Consumer durables – products that tend to last for a relatively long time (ex. cars, furniture)
Specialty consumer products – exclusive and highly expensive products (ex. designer jewelry, exclusive sports cars)
LIP and HIP products (low involvement and high involvement products)
LIP – FMCG, consumer perishables
HIP – durables and specialty products

7. Producer Products (Industrial goods)
Products purchased by businesses, rather than by private consumers
They are used in the production process to help the running of a business
Ex. raw materials, components, purchase of fixed assets

8. Stages of new product development (NPD)
Market research
Product development and testing (making prototypes)
Feasibility study – look for legal and financial viability
Launch – introductory stage of its product life cycle

9. Sources of NPD Market research
Product extensions – use of existing brands to develop new products
R&D
Me-too developments – relying on other firms to be innovative and then simply copy their ideas in a legal manner

10. The Product Life Cycle
Page

11. The Product Life Cycle
Introduction: sales are low as consumers are not yet aware the product exists; marketing costs are high; product is unprofitable at this stage; consumers who buy at this stage are called innovators
Growth: sales volumes rise as more consumers become aware of the product due to persuasive marketing efforts; profits may begin, but will attract competitors; consumers are called early-adopters
Maturity: sales rise but at a slower rate; economies of scales give a competitive advantage; promotions are aimed at reminding consumers of the product

12. 4. Saturation: sales start to fall; many competitors in the market; promotions are aggressive to get any new customers to buy the product; managers search for new market segments. 5. Decline: sales and profit decrease due to new technology, changing tastes, competitors; promotional spending is cut; prices are reduced

13. Task : Do some internet research and see if you can find 5 products that have “failed” i.e. they have not made it to the market.

14. Extension strategies for the Product Life Cycle
Change the packaging
Price reduction
Redesigning – introduce special features
Change the promotion message
Find new markets (users) for the product
Find new uses for the product
Extension strategies can be implemented to prolong their sales revenue. It is a means of lengthening the product’s life cycle and delaying its decline. (see page 442)

15. Extension Strategies

16. Product Differentitaion
Is a marketing strategy that involves making a product stand out from others especially those offered by rival firms.
Benefits:
Price advantages (can add value thus can charge higher prices)
Recognition and loyalty (brand recognition is a valuable source of competitive advantage)
Distribution advantages (due to limitation on retail space, vendors only stock best selling brands)
Samples of product differentiation – see Box 4.3 page 444

17. Methods of product differentiation
Color
Size
Quality
Design
After-sales care
Packaging
Purchase terms
Customer relations management
See page 395 Box 4.5.b

18. Boston Consulting Group (BCG) Matrix
Devised by Bruce D. Henderson (1970)
It’s a marketing tool that helps managers to plan for a balanced product portfolio (ex. the variety of products owned by a business)
Product portfolio can also contain the various ‘strategic business unit’ (SBUs) of an organization. Example: PepsiCo owns Gatorade, Pizza Hut and KFC.
BCG looks at 2 dimensions: market share and market growth in order to assess new and existing products in terms of their market potential.
Another examples of SBU – Unilever (see page 396 case study)

19. Product portfolio analysis:
Allows a business to decide which products should receiver more (or less) investment.
Products that do not have high market share may be withdrawn or remarketed.
The analysis allows a business to develop growth strategies by adding new products to an existing or new product range.
Possible outcomes: Question marks (problem children), Stars, Cash Cows, or Dogs products.

20. Boston Matrix
Market growth: Low (Mature); High (Growing)

23. Q4 = Cash Cow; Q3 = Stars; Q2 = Question Marks; Q1 = Dogs
Guerilla marketing – unconventional marketing tactic often used by small business (see page 428 – investing energy instead of money); it aims to catch the attention of customers through unusual and/or shocking techniques. See page 428 for examples.

24. Boston matrix ....
Question Marks (problem children): beginning point for every new product -- they have an uncertain future!
Stars: generate high income/profit for the business
Cash Cows: generate more than what is invested in them and have a strong position in the market
Dogs: products which have little prospect of growth

25. Question Mark
Products that operate in high growth markets, but have low relative market shares.
Common when a new product is launched in an existing high growth market.
Requires a lot of cash due to market expansion, and to become more competitive.
Company should think carefully about further investment, especially if several such products exist.

26. Strategies for Question Marks
Build market share so that the product can become a Star.
Increase short term cash flows by reducing expenditure.
Divest. Sell the product or liquidate the business if chance of future success is negligible.

27. Stars A successful Question Mark will become a Star.
Stars are market leaders in fast growing markets.
Stars are usually profitable, and can go on to become Cash Cows.
Successful businesses need Stars in their portfolio if they are to remain successful.

28. Cash Cows A large market share of a slow growing market.
Generates lots of money for the company that can be used to invest in Stars and Question Marks.
Limited finance needed to maintain the product (no new factories, high economies of scale, low marketing costs).
Firms may be vulnerable if they only have one Cash Cow and its market share starts to fall. Cash needed to maintain market share will not be available for other uses.

29. Strategies for Cash Cows
Preserve market share so that a large positive cash flow continues to be available to the company.
Increase cash flows of weak Cash Cows by reducing expenditure eg on advertising.

30. Dogs Products with low market shares in low growth markets.
Generate low profits or even losses.
Managers need to consider phasing out Dog products if there are no good reasons for keeping them.

31. Strategies for Dogs
Increase short term cash flows by reducing expenditure.
Divest. Sell or liquidate the business because resources would be better used elsewhere in the company.

32. Product Life Cycles & The Boston Matrix
Successful products tend to start as question marks, become Stars, the Cash Cows, and finally become Dogs at the end of their product life cycles.
Companies must therefore review their portfolios on a regular basis.

33. Some Common Strategic Mistakes
Over-milking the Cash Cows so that they have insufficient resources to remain competitive.
Under-milking Cash Cows so that insufficient cash is made available for investment in other products.
Making large investments in Dogs, hoping to turn them around, and failing.
Maintaining too many Question Marks, and under-investing in each.

34. Boston matrix...
Firms should have a balanced product mix ie a few products in each category.
Cash cows need to be managed into mature and established brands.
Question marks need to be managed into the next Star products.
Dogs need to be eliminated or a way needs to be found to extend their life.

35. BIC Case Study on Boston Matrix
See Schoology

36. BRANDING

37. Definition
A term, logo, name, symbol or design that identifies the product or service within particular markets

38. The role and advantages of branding
Branding as a legal instrument – gives lawful ownership to the business and protects it from limitations.
Branding as a risk reducer – can give a new product a better chance of survival in the marketplace; encourage brand loyalty.
Branding as an image enhancer – allows a business to charge a premium price.
Branding as a sales generator – reduces the price elasticity of demand (consumer demand is less sensitive to changes in prices)

39. Brand Awareness Brand Development Brand Loyalty Brand Value
Aspects of branding
Brand Awareness
Brand Development
Brand Loyalty
Brand Value

40. Brand names
Coined brands – these are simply names that may or may not have an obvious meaning Eg google, FedEx
Acronyms – abbreviations that stand for the name of the business Eg KFC; CNN; HSBC
Numbers – Eg 7-Eleven; Chanel No 5
Personal names – Eg Michael Dell; Ford Motors
Place names – Eg Air China; New York Times
Brands are often supported with slogans – McDonald’s “I’m loving it”; Nike “just do it”

41. This logo appears to be very simple, but if you look at the white space between the "E" and "x" in “Ex," you'll find it is more complex than you thought. Can you spot the arrow?

42. Amazon. com has become a go-to source for electronic commerce
Amazon.com has become a go-to source for electronic commerce. Clearly there is an arrow under Amazon, but have you ever thought about its significance? Take a look at where the arrow begins and ends: a and z. This secret message seems to conveys that Amazon offers everything from A to Z!

43. There’s a slightly obscured bear within the Matterhorn Mountain if you look closely. That’s because the candy bar hails from Bern, Switzerland, a city supposedly named for a bear.

44. Customer benefits OF BRANDS
Assists identification of preferred products and so reduces shopping time
Reduce level of perceived risk (is it a genuine article)
Easier to gauge the level of product quality

45. Supplier benefits of brands
Permits premium pricing as customers are prepared to pay for the added value that the brand carries, such as reliability, quality etc
The price elasticity of demand is reduced – consumers are less sensitive to price changes
New products can be launched under the same brand name, increasing the chance of success.
Encourage brand loyalty and repeat purchase opportunities

46. Supplier benefits ...continued
Legal protection, as the name and logo may not be copied by competitors
Brand loyalty serves as a high barrier to entry, making it difficult for new firms to enter the market

48. Packaging
Refers to the ways in which a product is presented to the consumer
It is a form of product differentiation
Profound impact on consumer perceptions of a product or brand
Protects the product against damage during transportation and distribution
Labeling can be used to provide information
Makes distribution of products easier
Can be used to encourage impulse buying
Used to promote the brand or the business
Drawback is its cost which consumers are the ones who ultimately pay for the privilege of attractive packaging