4.5 - The 4 P's

Question 1

Describe product

Answer 1

The end result of the production process sold on the market to satisfy a customer need

Question 2

Describe consumer durables

Answer 2

Manufactured products that can be reused and are expected to have a reasonably long life, such as cars

Question 3

What is the product life cycle?

Answer 3

The pattern of sales recorded by a product from launch to withdrawal from the market

Question 4

What are the 5 stages of the product life cycle?

Answer 4

development

introduction

• When the product has just been launched after development and testing
• Sales are quite low at the beginning (there are exceptions to this depending on fame)

growth
 - Effective promotion + well received → sales should grow significantly 
 - Does not last forever
Reasons for declining growth:
     - Increased competition
     - Technological changes
     - Changes in consumer tastes
     - Market saturation 

maturity / saturation

• Sales fail to grow
• However, they do not decline significantly either
• Stage can last for years (eg coca cola)
• Recent example: mobile phones
  
  • Saturation of consumer durables markets caused by consumers who have a product wanting a new one

decline
- Extension strategies used to stop sales from falling so steadily

Question 5

What are extension strategies?

Answer 5

marketing plans that extend the maturity stage of the product before a brand new one is needed

Question 6

Name the 5 main extension strategies

Answer 6

adding features to the product
repackage a product
discount the price
rebrand
sell into new markets

Question 7

What are the benefits and limitations of adding features?

Answer 7

• can be developed or marketed quickly and at lower cost than a new feature
• the original product is still ageing so consumers still might not want a slightly different product

Question 8

What are the benefits and limitations of repackaging?

Answer 8

• relatively cheap and quick method

- consumers might feel misled once they realise it is the same product

Question 9

What are the benefits and limitations of discounting the price?

Answer 9

• low income consumers can now get the product

- impact on long term image of the company (can be seen as cheap)

Question 10

What are the benefits and limitations of rebranding?

Answer 10

• opens up new market segments, can be presented as a substantially ‘new product’
• expensive - is it worthwhile if this product will eventually be replaced anyway?

Question 11

What are the benefits and limitations of selling into new markets?

Answer 11

• can increase sales, especially since a product is not perceived as old or matured in these markets
• product and promotion may need to be redesigned based on culture and local laws

Question 12

Describe the marketing mix during the introduction phase

Answer 12

price: depends on pricing strategy
promotion: high levels of informative advertising
place: restricted outlets
product: new model launched

Question 13

Describe the marketing mix during the growth phase

Answer 13

price: if successful: can raise prices
promotion: brand identification to help establish consumer loyalty
place: growing number of outlets
product: planning of product improvements / developments to maintain appeal

Question 14

Describe the marketing mix during the maturity phase

Answer 14

price: need to keep price at competitive levels as competitors enter the market
promotion: brand imaging continues - differentiate from competitors
place: highest amount of geographical outlets possible
product: extension strategies utilised

Question 15

Describe the marketing mix during the decline phase

Answer 15

price: lower prices to sell off stock
promotion: limited advertising
place: eliminate unprofitable outlets
product: prepare to replace with other products

Question 16

describe the relationship between the product life cycle investment, profit and cash flow

Answer 16

check google document.

Question 17

What is the BCG Matrix?

Answer 17

A method of analysing the product portfolio of a business in terms of market share and market growth

Question 18

Describe a cash cow

Answer 18

high market share / low market growth

Creates high positive cash flow
Is profitable
Sales are high (relative to the market)
Promotional costs are probably low (due to high consumer awareness)
Cash can be ‘milked’ and invested into other products (hence the name)
Business wants to maintain cash cow as long as possible
Particularly if high market share can be maintained with little additional promotional costs

Question 19

Describe a star

Answer 19

High market share / high market growth

Company keen to maintain position of this product
Successful product
Promotional costs are high → differentiate product and reinforce its brand image
A star will generate high amounts of income
If status and market share can be maintained → become cash cows in the future
Market matures, market growth slows

Question 20

Describe a question mark

Answer 20

low market share / High market growth

Consumes resources but generates little in return (at least in short term)
If a newly launched product → heavy promotional costs needed to help it get established (finance could come from cash cow)
Future of the product is uncertain
Quick decisions made if sales fo no improve (relaunch, redesign, or withdrawal from market)
Has potential → selling in a growing market sector
Businesses must analyse which problem children are worth developing and investing in and which ones to drop

Question 21

Describe a dog

Answer 21

low market share / low market share

Offer little to the business in terms of existing sales + cash flow and future prospects
May need to be replaced shortly
Firm could decide to withdraw from this market sector altogether
Position itself into faster growing sectors

Question 22

What 4 actions can be done to maximise the effects of the BCG matrix?

Answer 22

Building → supporting question marks with additional advertising or other distribution outlets
Finance obtained from established cash cow products

Holding → continuing support for stars so they maintain their market position
Can work to freshen a product in eyes of consumers to sustain high sales growth

Milking → taking positive cash flow from established products and investing in other products

Divesting → identifying worst performing dogs and stopping production/supply of these
Not a decision to be taken lightly → other issues such as impact on workforce and whether new capacity from stopped production can be used profitably for another product

Question 23

Define brand

Answer 23

an identifying symbol, name, image or trademark that distinguishes a product from its competitors

Question 24

Define brand awareness

Answer 24

extent to which a brand is recognised by potential customers and is correctly associated with a particular product – can be expressed as a percentage of the target market

Question 25

Define brand loyalty

Answer 25

the faithfulness of consumers to a particular brand as shown by their repeat purchases irrespective of the marketing pressure from competing brands

Question 26

Define brand development

Answer 26

measures the infiltration of a product’s sales, usually per thousand population; if 100 people in 1000 buy a product, it has a brand development of 10

Question 27

Define brand value

Answer 27

the premium that a brand has because customers are willing to pay more for it than they would for a non-branded generic product

Question 28

What is the importance of branding?

Answer 28

Promotes instant recognition of the company and product (especially through logos and images)

Helps differentiate the company and its products form rivals → important when products themselves might be difficult to differentiate (eg. petrol)

Aids in employee motivation → commitment to the brand
Generates referrals from customers (through social media especially)

Customers know what to expect from the company and products

Emotional attachment can develop between a brand and customers → increased customer loyalty

Increases the value of the business above the value of its physical assets (brand equity)

Question 29

What is family branding?

Answer 29

a marketing strategy that involves selling several related products under one brand name (also known as umbrella branding)

Question 30

What is product branding?

Answer 30

each individual product in a portfolio is given its own unique identity and brand image (also known as individual branding)

Question 31

What is company branding?

Answer 31

the company name is applied to products and this becomes the brand name

Question 32

What is own label branding?

Answer 32

retailers create their own brand name and identity for a range of products

Question 33

What are manufacturers’ brands?

Answer 33

producers establish the brand image of a product or a family of products, often under the company’s name

Question 34

What factors influence pricing?

Answer 34

Cost of production
Competitiveness of market
Competitor prices
Marketing objectives 
Price elasticity 
New product

Question 35

What is cost plus pricing?

Answer 35

a

Question 36

What is penetration pricing?

Answer 36

Setting a relatively low price often supported by strong promotion in order to achieve a high volume of sales

Question 37

What is market skimming?

Answer 37

a

Question 38

What is psychological pricing?

Answer 38

a

Question 39

What is loss leaders?

Answer 39

a

Question 40

What is price discrimination?

Answer 40

a

Question 41

What is promotional pricing?

Answer 41

a

Question 42

What is price leadership?

Answer 42

a

Question 43

What is predatory / destroyer pricing?

Answer 43

a