30: Using the marketing mix: Product

Question 1

Product development

Answer 1

Changing aspects of goods and service to meet the changing needs of existing customers or to target a different market.

Question 2

Product line:

Answer 2

A set of related goods or services.

Question 3

Product mix:

Answer 3

The full range of products offered by a business, also known as product portfolio.

Question 4

The product development process:

Answer 4

1. Creativity.
2. Defining the concept.
3. Developing the concept.
4. Testing and finalising the concept.
5. Full product launch.
6. Managing the product life cycle.

Question 5

USP

Answer 5

A feature or function of a product that makes it different to any other on the market.

Question 6

Product differentiation

Answer 6

Creating a perceived difference for a product in a competitive market.

Question 7

What factors influence product development?

Answer 7

• Advances in technology. Robotics and automated stock control. Communication technology has created opportunities to enter new markers. Small businesses can now trade in the global market place via the internet.
• The actions of competitors. Competitors may threaten market share, and lead to the necessity of new product development. A large company, with a reputation for high quality products at low prices, may decide to move into a new market. Exisiting firms in that market, may not be able to compete on price so may opt to event their product mix to meet the needs of a wider range of people or develop their existing product lines to provide a greater rage of options.
• The entrepreneurial skills of managers and owners. Its the ability to see an opportunity and develop the product to exploit it that can make the difference between a successful small business, that survives in a competitive market and increases its share of the market, and a firm that joins the large percentage of new businesses that fail within the first three years.

Question 8

Product portfolio analysis:

Answer 8

Analysing the existing product mix to help develop a balanced range of goods and services.

Question 9

Boston Matrix:

Answer 9

A method of analysing the products in a firms portfolio based on relative market share and market growth.

Question 10

The QuestionMark/Problem Child.

Answer 10

A new product with a small share of a growing market, high maintenance: needing relatively high levels of investment to become well established in the market; high failure rate but potential for future success.

Question 11

The rising star.

Answer 11

High share of a growing market; high maintenance: marketing resources and effort should be concentrated on this type of product so that market share is maintained; fierce competition is likely.

Question 12

The cash cow.

Answer 12

High share in a low growth market; any increase in sales will be at the expense of a competitor; low maintenance; little marketing expenditure needed; relatively high profits.

Question 13

The Dog.

Answer 13

Low share of a declining market, may be kept going because they complete a product line; can possibly be revived, but likely to be withdrawn.

Question 14

Product life cycle:

Answer 14

The sales path of a product from its introduction onto the market, to its eventual disappearance form that market.

The timescale will vary - some products only last a few months (think world cup t-shirts) while others seem to go on forever (think chic biscuits).
During the introduction or launch stage, sales will often grow slowly. This may be followed by a sharp rise in sales as the product becomes better known. At some point, sales stabilise into the maturity phase, before being overtaken b new product developments or changes in consumer needs, causing a decline in sales.

Question 15

Drawbacks to using the Boston Matrix:

Answer 15

It is based on two assumptions which are flawed:
1) Market share is the best way to measure the success of a product: a great deal will depend on the type of market and the overall market size. If a firm is trading in a very competitive market, with many other businesses, then a relatively small market share is perfectly acceptable. If the product is competing in a very large, global market, however, a small market share could be seen as successful.

2) A fast growing market is the most important quadrant to be in. This may be true for an entrepreneurial business that thrives in risk taking and cutting-edge innovation, but there is plenty of scope for success for businesses involved in a slow moving market as well.

Question 16

How useful is the product life cycle?

Answer 16

Should be treated with caution. It is useful for analysing past sales figures, but it is very difficult to say with any certainty where exactly a product is on the graph at any particular time.
There is also a danger that firms may anticipate stages in the product life cycle and react too quickly to variations in sales: reducing marketing activities because they believe the product has gone into decline, rather than looking for any other explanation for a dip in sales. There are a range of factors that affect sales, such as activities of competitors and changes in tastes and fashion, and a products declining sales may be due to an inappropriate marketing mix rather than any intrinsic problem with the product.
There are goods and services that have been on the market for a very long time, such as Monopoly, which prove that with product development, new packaging, new designs and new distribution channels, the maturity stage might never end.

Question 17

Extension strategies: whether an extension strategy should be implemented for a mature product?

Answer 17

In terms of product development, the maturity stage omit the product life cycle is particularly significant.
Extention strategies are when modifications can be introduced the extend the life of the product.
E.g IPhone updates.
Businesses must prepare for this stage, and make sure that the revised version is ready when needed and (as ever) meets the needs of the customers. It is important to note that any element of the marketing mix can be changed to maintain or increase sales.