1. Products & Product Portfolios
3.3 Decision making to improve marketing performance

2. What you need to know
What is a product and where it sits within the extended marketing mix
Difference between consumer and industrial products
Value of product portfolio analysis (including Boston Matrix)
Value of product life cycle model and extension strategies
Influences on and the value of new product development

3. Importance of Product in the Traditional Marketing Mix
Price
Promotion
Place
Products are at the heart of marketing
The product needs to exist for the other elements of the mix to happen

4. Products Link Closely With
Segmentation
Target Market
Market Research
Positioning
Product Life Cycle
Adding Value

5. Products in the Extended Marketing Mix
Price
Promotion
Place
People
Process
Physical

6. A product is anything that is capable of satisfying customer needs
What is a Product?
A product is anything that is capable of satisfying customer needs

7. The Layers of a Product Core Value Augmented Product Actual Product
Pre-sale
Support
Brand Name
Core
Value
Quality
Warranty
Design
Features
Packaging
After-sale service
Source: Kotler, Armstrong, Harris & Piercy;
Principles of Marketing

8. Consumer and Industrial Products
Consumer Products
Bought by final consumers for personal consumption
Differ in they way consumers buy them
Industrial Products
Bought for further processing or for use in conducting a business
Bought by other businesses, not consumers

9. Three Main Categories of Consumer Products
Convenience Products
Bought frequently
Little planning or shopping effort
Low customer involvement
Shopping Products
Bought less frequently
Customers careful on suitability, quality, price, brand, style etc.
Speciality Products
Unique characteristics or brand
Buyers make a special effort when buying

10. Shopping Products: Emphasis of Marketing Mix
Convenience Products
PRICE
Tends to be low
PLACE
Widespread distribution
PROMOTION
Mass promotion
Bought frequently
Little planning or shopping effort
Low customer involvement

11. Convenience Products: Emphasis of Marketing Mix
Shopping Products
PRICE
Tends to be higher
PLACE
Selective distribution (fewer outlets
PROMOTION
Advertising by producer and resellers
Bought less frequently
Customers careful on suitability, quality, price, brand, style etc.

12. Speciality Products: Emphasis of Marketing Mix
PRICE
High
PLACE
Exclusive distribution or limited outlets
PROMOTION
More carefully targeted
Unique characteristics or brand
Buyers make a special effort when buying

13. Three Main Kinds of Industrial Products
Materials & Parts
Raw materials, components etc.
Mostly sold to other industrial users
Price and service key issues
Capital Items
Industrial products used in production or operations
E.g. IT systems, buildings infrastructure
Supplies and services
Operating supplies (e.g. energy) and business services (e.g. maintenance, security)

14. Key Features of Marketing Industrial Products
EXPLANATION
Specialist buyers and sellers
Buyers are businesses – will have specialist requirements and more experience. Often dealing with professional “buyers”
Buyer-seller relationship
Strong emphasis on customer relationship management and repeat business
Transaction value
Purchase value often substantial in a single transaction (e.g. bulk purchase contract)
Quality and Price
Greater emphasis on product quality and price (where there are acceptable alternative products). Price is often negotiated by the buyer
Support
Greater requirement for after-sales support

15. Product Life Cycle
A theoretical model which describes the stages a product goes through over its life

16. Key Uses of the Product life Cycle Model
Forecast future sales trends
Help with market targeting and positioning
Help analyse & manage the product portfolio

17. Stages in the Product Life Cycle
Development
Introduction
Growth
Maturity
Decline / End
Product Life Cycle
model can be applied to a:
Product category
Style
Brand or model

18. Product Life Cycle Chart
SALES &
CASH FLOW (£)
Sales
Cash
Flow
DEVELOPMENT
GROWTH
MATURITY
DECLINE
INTRODUCTION
TIME

19. Development Stage Often complex Absorbs significant resources
May not be successful
May involves a long lead time before sales are achieved

20. New Product Development
Time –consuming but CAD is reducing product development times
The cost of development rises as it approaches launch
Market research including a test launch often done to reduce the risk of product failure
Most new product ideas do not reach the launch phase

21. Why New Products Are Scrapped Before Launch
Inadequate demand
Action of competitors
Change in the external environment
Production problem
High costs
Does not fit in the firm’s product range
Life cycle expected to be too short

22. Introduction Stage New product launched on the market
Low level of sales
Low capacity utilisation
High unit costs
Usually negative cash flow
Distributors may be reluctant to take an unproven product
Heavy promotion to make consumers aware of the product

23. Strategies at the Introduction Stage
Aim – encourage customer adoption
High promotional spending to create awareness and inform people
Either skimming or penetration pricing
Limited, focused distribution
Demand initially from “early adopters”

24. Growth Stage Expanding market but arrival of competitors
Fast growing sales
Rise in capacity utilisation
Product gains market acceptance
Cash flow may become positive
Unit costs fall with economies of scale
The market grows, profits rise but attracts the entry of new competitors

25. Strategies in the Growth stage
Advertising to promote brand awareness
Increase in distribution outlets - intensive distribution
Go for market penetration and (if possible) price leadership
Target the early majority of potential buyers
Continuing high promotional spending
Improve the product - new features, improved styling, more options

26. Maturity Stage
Slower sales growth as rivals enter the market = intense competition + fight for market share
High level of capacity utilisation
High profits for those with high market share
Cash flow should be strongly positive
Weaker competitors start to leave the market
Prices and profits fall

27. Strategies for Mature Products
Manage capacity & production
Promotion focuses on differentiation
Persuasive advertising
Intensive distribution
Enter new segments
Attract new users
Repositioning
Develop new uses

28. Market saturation and/or competition
Decline Stage
Falling sales
Market saturation and/or competition
Decline in profits & weaker cash flows
More competitors leave the market
Decline in capacity utilisation –switch capacity to alternative products

29. Reasons Why Products Enter the Decline Stage
Technological advance
Changes in consumer tastes and behaviour
Increased competition
Failure to innovate and develop the product

30. Strategies for the Decline Stage
Maintain market share
Harvest by spending little on marketing the product
Rationalise by weeding out product variations
Price cutting to maintain competitiveness
Promotion to retain loyal customers
Distribution narrowed

31. Extending the Product Life Cycle
Lower price
Change promotion (e.g. new promotional message)
Change product - re-styling and product improvement
Look for alternative distribution channels
Develop new market segment
Find new uses for the product
Reposition the product

32. Weaknesses of the Product Life Cycle Model
The shape and duration of the cycle varies from product to product
Strategic decisions can change the life cycle
It is difficult to recognise exactly where a product is in its life cycle
Length cannot be reliably predicted
Decline is not inevitable

33. Example of the Product Life Cycle: Apple iPod
Global Apple iPod sales from 2006 to 2014 (in million units)

34. Examples of the Different Stages in the Product Life Cycle: Consumer Electronics
Development
Launch
Growth
Maturity
Decline
Consumer drones developed out of sophisticated military use

35. Examples of the Different Stages in the Product Life Cycle: Consumer Electronics
Development
Launch
Growth
Maturity
Decline
Apple’s launch of iWatch expected to fuel growth of global wearable technology market

36. Examples of the Different Stages in the Product Life Cycle: Consumer Electronics
Development
Launch
Growth
Maturity
Decline
Sales of Ultra HD displays (TVs, monitors etc) are one of the fastest-growing segments of the display market

37. Examples of the Different Stages in the Product Life Cycle: Consumer Electronics
Development
Launch
Growth
Maturity
Decline
LED TV sets are a well-established and mature product – the global market is now growing quite slowly

38. Examples of the Different Stages in the Product Life Cycle: Consumer Electronics
Development
Launch
Growth
Maturity
Decline
The number of DVDs bought in the UK is in sharp decline as consumers switch to online streaming

39. Product portfolio
Product Portfolio is the range of products or brands provided by a business

40. Product Portfolio Analysis
Product portfolio analysis assesses the position of each product or brand in a firm’s portfolio to help determine the right marketing strategy for each

41. Boston Consulting Group developed this as a tool of portfolio analysis
Boston Matrix
Boston Consulting Group developed this as a tool of portfolio analysis
It can be applied to the portfolio of products produced by a firm or the portfolio of businesses owned by a firm
Portfolio is the collection of businesses or products that make up a business

42. Boston Matrix in Summary
Firms should analyse their portfolio (collection) of products
Products are categorised as:
Question marks (also known as problem children)
Stars
Cash cows
Dogs
The ideal is that firms should aim for a balanced portfolio with some products in each category

43. Drawing the Matrix

44. Comparison with the Product Life Cycle
Is concerned with individual products
Is concerned with sales over time
The Boston Matrix
Is concerned with the firm’s portfolio of products
Focuses on cash flow from products

45. Axes of the Boston Matrix
Relative market share
This is expressed not as a % but share in relation to other firms in the market
A measure of the firm’s/product’s strength in the market
Market growth
% rate of growth of sales in the market
Measure of market attractiveness
From this we derive four cells as a means of analysing products

46. “Question mark” Products
Low share of a rapidly growing market
Cash flow is negative
Have potential but the future is uncertain
Could become either a star or a dog

47. Strategy for “Question Marks”
Invest to increase market share
Substantial investment to achieve growth at the expense of powerful competitors
Invest in promotion and other aspects of marketing
Build selectively

48. High share of a rapidly growing market
Star Products
High share of a rapidly growing market
Position of leadership in a high growth market
The product/business is relatively strong and the market is growing
Require high marketing spending
Net cash inflow is neutral or at best modestly positive

49. Investment to sustain growth Build sales and/or market share
Strategy for Stars
Investment to sustain growth
Build sales and/or market share
Spend to keep competitors at bay
Invest to maintain or increase leadership position
Repel challenges from competitors

50. High share of a slowly growing market
Cash Cow Products
High share of a slowly growing market
Mature stage in the product life cycle
Mature, successful product
Dominant share
Little potential for growth
Large positive cash inflow

51. Aim for short term profits Little need for investment
Strategy for Cash Cows
Defend market share
Aim for short term profits
Little need for investment
Little potential for further growth
Reduce investment in order to maximise short term cash flow and profits
Use profits from cash cows to invest in new products

52. Dog Products Dogs are either Low share of a slowly growth market
Products that have failed or
Products that are in the decline phase of their life cycle
Low share of a slowly growth market
Not going anywhere & no real potential

53. Phase out or sell off (divest) Not worth investing in
Strategy for Dogs
Phase out or sell off (divest)
Not worth investing in
Any profit made has to be re-invested just to maintain market share
Uses up more management time and resources than can be justified
Divest or, at most, focus on a defendable niche

54. How Valuable is the Boston Matrix Model?
A useful tool for analysing product portfolio decisions
But it is only a snapshot of the current position
Has little or no predictive value
Focus on market share and market growth ignores issues such as developing a sustainable competitive advantages