1.3.5 Marketing Strategy Flashcards
What is the product lifecycle?
- Describes the different stages a product goes through from its conception to its eventual decline in sales
What are the 5 stages involved in the product lifecycle?
Development
focus is on designing and developing the product
Business usually incurs high costs for research & development, market research, and product testing
Introduction
Stage begins when product is launched
Characterised by slow sales growth as product is still new & unknown to most consumers
Growth
Product enters this stage when sales begin to increase rapidly
Business focus shifts to building market share and increasing production to meet the growing demand
Maturity
Characterised by slowing sales growth as product reaches its peak in terms of market penetration
Decline
Starts when sales begin to decline as product becomes obsolete or replaced by newer products
Businesses focus shifts to managing the product’s decline &reducing costs
What is the implication of development for the businesses cash flow & marketing strategies in the Product lifecycle?
- Cash flow is usually negative during this stage, as company is investing heavily in product without generating any revenue
- The marketing strategy during this stage is focused on creating awareness & generating interest in the product
What is the implication of introduction for the businesses cash flow & marketing strategies in the Product lifecycle?
- Cash flow is usually negative as the business usually incurs high costs for promotion, advertising and distribution
- Marketing efforts are focused on creating awareness and generating interest in the product
What is the implication of growth for the businesses cash flow & marketing strategies in the Product lifecycle?
- Cash flow usually turns positive during this stage as sales revenue increases & costs are spread out over a larger volume of production
- The marketing strategy is to differentiate the product from its competitors and build brand loyalty
What is the implication of maturity for the businesses cash flow & marketing strategies in the Product lifecycle?
- Cash flow- usually positive during this stage as sales revenue continues to come in & costs are reduced through economies of scale & efficient production processes
- The marketing strategy aims to maintain market share & increase profitability by cutting costs and finding new markets
What is the implication of decline for the businesses cash flow & marketing strategies in the Product lifecycle?
- Cash flow usually turns negative as sales revenue declines and costs associated with the product’s decline increase
- The marketing strategy may involve discontinuing the product, reducing its price to clear inventory, or finding new uses for the product
Define ‘extension strategies’ within the product lifecycle.
- Extension strategies refer to techniques used by businesses to extend the life of a product beyond its natural life cycle
What are extension strategies designed to do?
- Boost sales &
- Maintain profitability
for a product that has reached the decline stage of its life cycle
What are the two types of extension strategies?
- Product related extension strategies
- Promotion related extension strategies
What is a product- related extension strategy?
Involves changing/modifying the product to make it more appealing to its customers & extend the lifecycle
This can be done in 1/3 ways:
- Product improvement e.g. Samsung releases new versions of its Galaxy Smartphone every year with upgraded features and improvements to the previous model
- Line extensions Coca-Cola introduced Diet Coke and Coke Zero as line extensions of its original Coca-Cola
- Repositioning
What are promotion related extension strategies?
Involves changing the marketing & promotion of the product to extend its life cycle
& could include one or more of the following changes:
* Changes to advertising e.g Kellogg’s continues to recreate adverts for its Corn Flakes cereal which has been around since 1906
- Price promotions e.g. Cyber Monday occurs on the first Monday after Thanksgiving in the USA & electronic firms discount prices significantly to boost sales of their products
What is the boston matrix?
- A tool used by businesses to analyse their product portfolio & make strategic decisions about each product
What does the matrix classify products into depending on & what are these classifications?
Classifies products into 4 categories based on their market share & the market growth rate:
- Cash Cow
- Problem Child/ Question mark
- Star
- Dog
What are cash cows?
- Products with a high market share in a mature market
(The market is no longer growing)
What is the problem child/question mark?
- Products have a low market share in a high growth market
- These products have the potential to become stars if the company invests in their development
What are star products?
- Have a high market share in a high growth market
- The company typically invests in stars to maintain or increase their market share
What are dog products?
- Have a low market share in a low- growth market
What are the implications of cash cows?
- Generate significant positive cash flow but have low growth potential
- Business invests minimal resources in CC’S as seen as stable sources of income
- CC’S are valuable assests & can be used to fund the development of new products
What are the implications of the problem child/question mark?
- Often a negative cash flow as businesses usually invest in problem child products to increase their market share and turn them into stars
- If investment does not result in growing- business may discontinue the product
- Marketing efforts focus on increasing their market share and brand recognition
What are the implications of star products?
- Generate significant positive cash flow & have potential for continued growth
- Stars are valuable assets and the business should focus on maximising their potential
- Marketing efforts focus on building brand recognition, increasing market share, and maintaining profitability
What are the implications of dog products?
- Generate little revenue for the company & have no growth potential
- Businesses often move away (divest) from these to focus on more profitable products
- Marketing efforts for dog products are minimal or zero
What marketing strategies are used for mass markets?
- Focus on building brand awareness & appealing to broad audience
- Advertising campaigns are usually designed to reach as many people as possible & use mass media such as TV, radio etc.
- Messages are often simple & the goal is to create a strong brand identity that resonates with a large segment of the population
What marketing strategies are used for niche markets?
- Targeting a specific segment of the population & building relationships with them
- Advertising campaigns- usually more targeted & may use social media to reach potential customers
- Messages often more detailed & include technical information that’s relevant to the specific needs of target market
