2. Product & Branding Nov 2008Presentation Transcript
The Marketing Mix
To market or sell its product successfully, a business must develop a strategy based on four key elements.
MARKETING MIX PRODUCT PROMOTION PLACE PRICE How the elements are combined in the marketing strategy is called the marketing mix
The actual item that a customer purchases, including the packaging, image, guarantee and after-sales service.
It is the means by which a business provides benefits for its customers. It is useless unless it provides a benefit for the user.
A good or service that the business is trying to sell must be one that actual or potential customers want, meets their needs and they are willing and able to buy.
Tends to be most important part of marketing mix as it determines price, how it will be promoted and where it is sold.
Core, actual and augmented product
Level 1 - Core
this is the basic product or service - consists of the benefits customers are provided with when they buy and use a product
Level 2 - Actual
This consists of 5 elements - brand, quality, styling, features and packaging
Level 3 - Augmented
This includes additional features which help to enhance the product’s attractiveness and give a competitive edge - extended warranty, after-sales service, 0% credit
Product Life Cycle
In a modern industrial society changes are continually occurring in the market place.
Many other factors
The consequence - products sooner or later become obsolete!
Product Life Cycle
Changes dictate that their will always be demand for new products while, at the same time, others will be in decline.
Product life cycle helps organisations anlalyse process by which products emerge, grow, stabalise and decline over time.
Product Life Cycle
Product undergoing research & development
Costly and time-consuming period
Development of prototypes & extensive testing
No revenue generated and high costs
volume of sales low
limited awareness of product
necessary to create demand - heavy advertising
The Product Life Cycle
higher product awareness
rapid increase in sales
highest unit profits
fully established product
sales level out
new marketing strategy required to hold market share (cut prices, increase advertising)
development costs should have been paid back and product at its most profitable
The Product Life Cycle
Supply starts to outstrip demand
sales and profit in decline
new products enter market
consumers may switch loyalty
Marketing Task 1
Describe the three levels of product.
Explain how the product life cycle can help organisations analyse their products.
Solution Question 1
The core product is the basic product or service and consists of the benefits customers are provided with when they buy and use a product
The actual product is what the consumer actually buys and consists of elements such as brand, quality, styling, features and packaging
The augmented product includes additional features which help to enhance the product’s attractiveness and give a competitive edge - extended warranty, after-sales service, 0% credit
Some brands seem to go on for ever without any sign of decline:
Heinz Baked Beans
Methods employed to prolong life of the product and stop them going into decline stage - may lead to periods of sales growth.
Promoting more frequent use of product
Developing new markets for existing products
Finding new uses for existing products
Develop a wider range of products
Developing style changes
Altering packaging to appeal to different market
Changing channels of distribution
Altering methods of promotion and advertising
The Product Mix/Portfolio/Range
A firm’s product mix or portfolio is the range of products that it produces.
Very few single-product organisations
No need for a direct relationship between items in an organisation’s product mix.
e.g. Unilever - large multinational organisation with approx 400 brands worldwide. 40 in UK including Persil, Domestos, Birds Eye, Lynx, Knorr & Slim-Fast.
Advantages & Disadvantages
Meets needs of different market segments
Raises profile of firm to become market leader
If firm only produced one product and it failed, firm would fail.
The Product Mix/Portfolio/Range
Doesn’t make sense to wait until products go into decline before launching a replacement.
Loss of sales & profits.
Launch new products before existing ones become unprofitable.
Different stages in the life cycle allows profit levels to be relatively stable.
Profits can support development and launch of new products.
Marketing Task 2
Explain why a good product mix would help a business to remain successful
Explain how an organisation can extend the life of a product.
The business can spread the risk of failure among a range of products which means that should one product fail, they would have other profitable backups to take the financial impact.
Profit levels will be more stable and easier to manager as the business does not have to contend with financial peaks and troughs which makes it difficult to budget.
Profitable products can support the development and launch of new products as they profits can be reinvested into this area rather than the business having to seek external sources of finance which could be risky.
A business could extend the life of a product by changing the price of it. If it reduced the price, it could lead to an increase in sales and sale revenue as more people are likely to buy it.
They could also extend the life by developing new markets for existing products . This would give the business access to a whole new market segment which would in turn increase sales.
They could also alter the packaging to appeal to a different market. This could renew the products popularity amongst a different market segment e.g. teenagers, and extend the products life.
The product mix may contain product lines.
These are groups of products that are similar.
For example, Procter & Gamble manufacture a hair care product line that includes Pantene, Herbal Essences and Head & Shoulders.
Costs & benefits of having a product line
Spreads the risk
Gives consumers impression that organisation is a specialist producer in particular line of products
Allows new products to be launched as existing customers willing to try them
Bad publicity for one product could affect sales across range
Complicated operations with different machinery and processes for each different product
Adding new product lines
Tends to happen over time:
In response to new trends e.g. healthy eating
To make more profits
To show innovation to retailers
To add interesting new tastes for consumers
Products may also be dropped to increase profitability if product line is too long!
Keeping product line fresh…
Important that organisations invest in research & development.
New products give competitive edge
Improve quality and safety of products
If product first on the market, allows monopoly situation for a period and higher prices.
Very important to meet changing needs of customers
Development of new products is essential if businesses are to replace those in decline.
Generation of idea from research or brainstorming
Produce a prototype and test it
Adapt product - solve any problems
Extremely high failure rate - 50:1 and costs huge sums of money and time
Marketing Task 3
Distinguish between a product mix and a product line.
Explain the costs and benefits of a business having a product line.
A product mix is the range of products that a business produces whereas a product line is a group of products that are similar.
Having a product line allows new products to be launched as existing customers are more willing to try them which increases the chance of them being successful.
It also spreads the risk because if one product is unsuccessful and ultimately fails, the business has other lines to fall back on.
A cost of having a product line is that any bad publicity for one product could have a detrimental affect on affect sales across range.
Another cost is that complicated operations with different machinery and processes for each different product would have a huge financial impact on the business.
This can be a very successful marketing tool.
Business chooses a word or symbol then registers them so they can only be used on its products.
A brand is a product with a ‘ personality’
The aim of branding is to
distinguish a product from it’s competitors
make it instantly recognisable to the consumer
Well known brands
Name of the company
Name of the product
Benefits of branding
Allows instant recognition
Increased brand loyalty
Stable level of demand allows for better production planning
Possibility to charge premium prices
Opportunity to enter new markets
Can convey image to consumer - ‘snob value’
Money value of brand as an intangible asset on balance sheet
Drawbacks of branding
Takes a great deal of time to establish
High promotion costs to establish and maintain
Bad publicity can affect whole brand
Possibility of imitators and ‘fake’ products - premium priced goods most vulnerable
Danger of fashion change
Explain the costs and benefits of branding.
Solution - Positives
Branding allows instant recognition of the product which means consumers are more likely to buy the product instead of a competitors ensuring sales are maintained.
A branded product enables a business to charge premium prices as it is seen by the consumers as being of higher quality and thus worth paying a little bit extra for.
Branding encourages increased loyalty from consumers who are less likely to be enticed away by rival products, in turn ensuring sales remain high.
Solution - Negatives
It takes a great deal of time to establish a brand name and during this time, sales may remain low which could have a detrimental financial impact on the business.
There is also a danger of fashion changing and the product no longer being regarded as worth having. This in turn would lead to reduced demand and reduced sales.
High promotion costs to establish and maintain the product could outweigh the possible income from sales and put negative financial pressure on the organisation.
Types of brands
There are 2 main typs of brands:
Own brands: Tesco, Boots, Sainsburys
Unique Selling Point (USP)
A feature that allows a product to stand out from its rivals.
Should offer the consumer some unique benefit that may motivate them to switch brands.
Most major supermarket and retail chains offer a wide range of products under their own brand name.
High-volume selling products would be considered.
Retailers have reputation for value and/or quality e.g. Sainsburys, Boots
Offers customers an additional choice.
Benefits & costs
They can have goods made to their specification and price
Own-brands often cheaper and attract more customers and therefore sales.
May be seen as lower quality than established brand
Bad publicity will be associated with the supermarket or retailers name, not the manufacturer
Describe the advantages of selling:
own label goods
for the supermarket and its consumers
Selling branded products will enable the supermarket to charge premium prices.
Consumers will enjoy the image of using branded products which give an additional ‘snob’ value.
Own label goods
Selling own label products will enables the supermarkets to put higher mark ups on the products.
Consumers will benefit as they will have access to cheaper alternatives.