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4.1 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Understanding Organisational Context 2e Slides by Claire Capon Chapter 4 Marketing Marketing mix Product lifecycle Customer growth options Boston consulting group matrix
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4.2 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 The Marketing Mix Product Price Promotion Place
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4.3 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Figure 4.3 The marketing mix
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4.4 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Introduction to the 4Ps 4ps can be: - manipulated to increase sales and profitability -altered or improved as a product declines
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4.5 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Product The manufacturer will aim to: -make as much of the product for as long as possible without further investment being required
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4.6 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Product -manipulate product features at little cost to give a newer, fresher face if sales go into decline -attract new customers and keep existing customers
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4.7 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Product Product aspects which can be manipulated are: - style, performance and quality - branding, packaging and after-sales service
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4.8 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Product Manipulation of the product: -allows the manufacturer to claim continual innovation and improvement -requires co-operation between the marketing and operations management departments
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4.9 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Price Price can be: - reduced during product decline or introduction - increased when sales start to become buoyant
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4.10 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Price Price manipulation: - can be done by use of special offers and finance deals - requires co-operation between the marketing and finance departments
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4.11 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Promotion Advertising and promotional activity are required to: - create an awareness of and interest in the product and to ensure acceptance by the marketplace - support a successful product
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4.12 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Promotion Promotion and advertising support a product by: -attracting new customers -reminding consumers making repeat purchases to buy the same brand of product as before (crucial if customer loyalty low)
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4.13 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Place Manipulation of place is to ensure the right amount of the product is in the right place at the right time Applies to all stages of the distribution process
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4.14 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Place Examples Manufacturer to wholesaler Wholesaler to retailer Retailer to customer Manufacturer to consumer
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4.15 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Place careful positioning of goods in shops is to improve sales e.g. sweets by the supermarket checkout e.g. perfume next to the main doors in department stores
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4.16 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Figure 4.4 The extended marketing mix
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4.17 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 People ‘People’ includes: - staff inside the organisation - customers and consumers outside the organisation
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4.18 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 People ‘Manipulation’ of people covers: - effective use and management of staff - sales staff building good relationships with customers
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4.19 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Product lifecycle Introduction Growth Maturity Saturation Decline
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4.20 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Figure 4.5 The product lifecycle
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4.21 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Introduction High costs, low sales - and no profit is made Aim to recover development costs Successful new product will move to growth phase
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4.22 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Growth Steady costs, sales increase rapidly and high profits can be made by pioneering firms Aim to attract first-time customers and build market share
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4.23 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Maturity Steady costs, sales increase more slowly and profits peak Aim to keep existing customers and persuade other consumers to switch from competing brands
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4.24 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Saturation Steady costs, sales peak (no more growth) and reasonable profits Profit margins start to decline, owing to increased price competition
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4.25 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Decline Low costs, falling sales and falling profits - maybe loss making Withdraw loss-making product Keep decline product if it makes a profit in a niche market
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4.26 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Figure 4.6 Product lifecycle and extension strategies
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4.27 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Extending the product lifecycle Extend lifecycle by: - selling more product to existing customers - market development, which is to seek new customers in home country or abroad
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4.28 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Extending the product lifecycle - product development which is minor product modification or improvement e.g. new model of a car - Vauxhall Corsa
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4.29 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Extending the product lifecycle Aim to keep the product in the saturation phase of lifecycle as: - profits are reasonable - sales peak - costs are steady
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4.30 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Customer growth matrix Customer loyalty Customer extension Customer acquisition Customer diversification
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4.31 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Figure 4.7 The customer growth matrix Source: Jenkins, M (1997), The Customer Centred Strategy, Prentice Hall. Reproduced with permission.
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4.32 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Customer loyalty Loyal customers will bring greater profitability by: -making frequent repeat purchases - telling friends of the benefits of the company’s products
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4.33 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Customer extension Customer extension is: - extending the range of products and services available to customers - achieved via product development & diversification
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4.34 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Customer extension Product development is used by companies: - structured around product divisions - with strong R & D and design functions
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4.35 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Customer extension - whose products have short lifecycles e.g. consumer electronic companies like SONY
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4.36 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Customer extension Product diversification occurs when a company moves away from current products Related diversification - remains in same industry Unrelated diversification - changes industry
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4.37 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Customer acquisition Customer acquisition is: - expanding the number of customers for existing products - easiest in growing markets - difficult in mature markets
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4.38 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Customer acquisition If home markets are mature, then seek new customers in overseas markets Engage in IB activities, e.g. Exporting or locating production or marketing activities overseas
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4.39 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Customer diversification Customer diversification: - is achieved by selling a new product or service to new customers -often involves innovative use of technology
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4.40 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 The BCG matrix Question marks Stars Cash cows Dogs
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4.41 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Figure 4.8 The Boston Consulting Group matrix Source: Henderson, B (1970) The Product Portfolio, Boston Consulting Group. Used with permission of The Boston Consulting Group.
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4.42 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Question marks High growth markets Low market share Another product is current market leader
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4.43 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Question marks Unlikely to be profitable High investment is required if a question mark is to become a market leader
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4.44 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Stars Successful question marks become stars Stars are market leaders in growth markets
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4.45 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Stars Stars: - require investment to maintain market leadership in a high growth market -are marginally profitable
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4.46 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Cash cows Cash cows: -are mature products -occupy slower growth markets -need less investment
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4.47 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Cash cows -are the most profitable products in a portfolio -are used to fund products in other quadrants
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4.48 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Dogs Dogs: -Occupy no growth markets -Have low market share -May be previous cash cows -May be marginally profitable -Should be withdrawn before they become loss making
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4.49 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 A successful product A successful product moves around the BCG matrix A question mark to … a star to … … a cash cow to … a dog or back to a question mark
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4.50 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 A less successful product A less successful product remains in right-hand side of the BCG matrix, and is therefore a low cash generator A question mark may move to … a dog
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4.51 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 BCG matrix and product lifecycle links BCG ----------- plc Q marks -------introduction Stars ----------- growth Cash cow ----- maturity and saturation Dogs ----------decline
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4.52 Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004 Balanced BCG matrix Tomorrow's products: - question marks and stars Today's products: - cash cows Yesterday’s products - dogs
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