AS3 Marketing MODULE 3.03 MARKETING STRATEGY AND PRODUCT
The Marketing Mix The marketing mix forms the basis of the marketing plan which is set to achieve both marketing and corporate objectives of the business. Whenever the objectives of business change or if the external environment changes, it is likely that the business will have to alter its marketing mix.
The Marketing Mix • The 4 P’s of the basic marketing mix are: • Product • Price • Place • Promotion
Market Segmentation Dividing the market into segments with similar needs and wants and common characteristics, and tailoring the marketing mix to meet the needs of a particular segment.
Methods Geographic Demographic/Socio-Economic Geo-demographic lifestyle
Methods Geographic Countries, regions, neighbourhoods.
Methods Demographic/socio-economic Age, gender, income, education, occupation, religion, race, marital status,family life cycle.
Methods Geo-demographic • Classification of small geographical areas according to age, race, social class – links purchasing power with how people live and where people live.
Methods Lifestyle/Psychographic • Lifestyles - • activities, interests,opinions. YUPPIES – young upwardly progressing professional DINKY-double income no kids household
Methods • Personality Trendsetter Environmentalist Risk-taker Eg
Strategies for Marketing a product 3 main strategies • Undifferentiated marketing • Differentiated marketing • Concentrated marketing
Undifferentiated This is a single marketing mix offered to the total market after market research has been carried out
Differentiated This involves dividing the market into different segments and, as a result of market research, having separate marketing mixes for each segment.
Concentrated This is choosing one segment of the market and developing the best marketing mix for this segment only. It is often the best strategy for the smaller firm and is also known as niche marketing.
Niche Marketing A corporate strategy which focuses on identifying and satisfying a relatively small segment of the market.
Niche Marketing A corporate strategy which focuses on identifying and satisfying a relatively small segment of the market. Often used by smaller firms unable to compete with larger.
Niche Marketing Benefits Limitations
Niche Marketing Benefits Limitations • Fewer resources. • Can enable smaller firms to operate in markets dominated by larger.
Niche Marketing Benefits Limitations • Lack of economies of scale - prices / profit. • Vulnerable to market changes. • Large business in several niches - requires flexible production.
Mass Marketing A strategy which involves firms aiming products or services at whole markets rather than particular market segments.
Mass Marketing Benefits Limitations
Mass Marketing Benefits Limitations • Less vulnerable – spreading risk • Economies of scale • Greater sales and profits
Mass Marketing Benefits Limitations • Greater investment - mass production. • Greater competition likely.
Product Positioning • Firms position themselves in their market with regard, for eg, • Price • Quality • Reliability • And use a positioning map to show this. The map can help identify gaps in the market where new products/services can be provided High Price Low Alcohol Content High Alcohol Content Low Price
Portfolio Analysis Relevant Terms Product Line Group of products with similar characteristics or uses or sold to the same type of customer. Eg Ormo bakery produces a line of white loaves – thin, medium, thick cut
Portfolio Analysis Relevant Terms Product Mix/Product Portfolio The combination of all a firm’s product lines. Eg Ormo bakery produces a wide variety of breads (loaf, soda, wheaten etc) and cakes/buns. This is known as its product mix/portfolio
Deciding upon Product Mix • 1. Likely to meet a defined need? • 2. To what segment(s)? • 3. What position in the market place? • 4. Fit in with objectives? • Improve or diminish image / reputation? • Cost?/has business resources
Product Life Cycle The different stages through which a product passes and the levels of sales experienced at each stage.
Product Life Cycle Like humans, products have a life cycle: • Development (conception -pregnancy) • launch / introduction (birth). • growth (childhood - adolescence). • Maturity & saturation (adulthood). • Decline (old age).
Extension strategies SALES Growth Introduction Development Maturity Saturation Decline Time Product Life Cycle Stages of development shown in relation to sales over time:
Product Life Cycle • No 2 products identical. Depends on: • nature of product • marketing • customer tastes & income • competition • technology.
The Stages Involved Development Ideas investigated, designed, tested & selected. Involves:: a) product research. b) customer research. Marketing plan prepared. High costs, no sales, cash, profit. The more novel the longer the development.
The Stages Involved Introduction Product launched into market place. • Price - high / low depending on uniqueness. • Promotion - informative to educate. • Profit - unlikely as sales low, promotion costs high.
The Stages Involved Introduction Many go no further.
The Stages Involved Growth More & more customers aware of product. • Sales & Profits - rapidly rise. • Profits - attract customers. • Competitors - enter the market.
The Stages Involved Growth Changes required to marketing strategy: • Price - rises or falls. High to recover costs / maximise profits; low to discourage competition. • Promotion - persuasive - special offers to build loyalty.
The Stages Involved Maturity & Saturation Maturity • Sales - rise but rate slows, level off due to competition. • Promotion - defensive - emphasis on branding & packaging. • Extension strategies - planned.
The Stages Involved Maturity & Saturation Saturation • Competition - too many firms competing for customers. • Sales - level off.
The Stages Involved Decline • Sales & Profits - rapidly decline. • Can be a lucrative stage if marketing effort withdrawn. • Product withdrawn if damaging company’s image.
Extension Strategies Definition Methods to extend the life of a product. Implementedduring maturity or early decline.
Extension Strategies Examples • Change design, image, appearance, packaging. • Increase frequency of product’s use. • Attract new users / target new markets.
Extension Strategies Examples • Develop alternative / new uses. • Introduce additional models / wider range. • Extend products into other formats.
Extension Strategies NB Advertising and sales promotion alone not extension strategies: can be used to boost sales at any stage.
Use of the product life cycle Can help a firm to: • analyse present position. • Identify action to fulfil objectives.
Use and make decisions regarding... • promotion & price • extension strategies • when / how to withdraw a product
Potential Problems / Limitations Knowledge of what is currently happening - not guarantee success: marketing manager still needs to select the right strategies and implement them successfully.
Product Portfolio Analysis Boston Matrix • Allows firms to analyse their product mix / portfolio. • Visual means of showing route new product might take in terms of market growth and share.
Portfolio Analysis Boston Matrix • Products placed into 4 categories, usually move from problem children to stars to cash cows.
1. STAR- Growth stage 2. QUESTION MARK-intro stage 4. DOG- Decline stage 3. CASH COW- maturity stage Portfolio Analysis Boston Matrix Market Share High Low High Market Growth Low