4.5 - The 7 Ps Of The Marketing Mix Flashcards
What are the 7 Ps
Products
Price
Promotion
Places
People
Processes
Physical evidence
What is marketing mix
The marketing mix is a term introduced by Jerome McCarthy (1964), originally used to describe the four key components of marketing physical goods, also known as the 4 P’s : Product, Price, Promotion and Place.
What is a product
Recall that a product is any good (tangible) or service (intangible) that is offered to the market with the aim to satisfy customer needs and wants.
What is a product cycle
A product cycle, however, describes the stages a product goes through from when it was first thought of until it is finally removed from the market. Not all products reach this final stage. Some continue to grow, and others rise and fall.
What are the 6 stages of the product cycle
- Development
- Introduction
- Growth
- Maturity
- Saturation
- Decline
What is the stage of development
at this stage the product is designed. Generating and screening ideas, creating prototypes, carrying out market tests and commercializing the product for a successful launch. R&D has high costs and since the product is still not in the market there are no profits at this stage. Hence, cash flow is negative.
What is the stage of introduction
This is the stage where the product is launched and could be the most expensive for a company. The size of the market for the product is small, which means sales are low, although they will be increasing. Cash flow is still negative.
What is the stage of growth
this stage is typically characterized by a strong growth in sales and profits, and because the company can start to benefit from economies of scale in production, the profit margins, as well as the overall amount of profit, will increase. This makes it possible for businesses to invest more money in the promotional activity to maximize the potential of this growth stage.
What is the stage of maturity
the product is established and the aim for the manufacturer is now to maintain the market share they have built up. This is probably the most competitive time for most products and businesses need to invest wisely in any marketing they undertake. They also need to consider any product modifications or improvements to the production process which might give them a competitive advantage.
What happens in the stage of saturation
at this stage many competitors have entered the market and saturated it. Sales are at their highest point but begin to fall. Cash flow is positive, but prices might have reduced. However, profits are stable.
What happens in the stage of decline
due to the market saturation or because the consumers are switching to a different type of product there will be a significant drop in sales. While this decline may be inevitable, it may still be possible for companies to make some profit by switching to less-expensive production methods and cheaper markets.
What are extension strategies
are marketing plans that extend the maturity stage of a product before a brand-new product is needed. These are techniques aimed to try to delay the decline stage of the product life cycle.
This is done at the maturity or saturation stage since the costs of developing the product and establishing it in the market are paid and the product tends to be at a profitable stage. The longer the company can extend this stage the better it will be for them.
What are 5 extension strategies
➢Selling their products into new markets
➢Find new uses for the product
➢Change the products packing
➢Target different market segments
➢Develop new promotional strategies
What is the relationship between product and introduction
The basic product is marketed
What is the relationship between growth and product
Product improvements of new product development plans start
What is the relationship between maturity and product
New product development is at an advanced stage. Extension strategies are introduced in some cases
What is the relationship between saturation and product
Extension strategies are critical to maintain sales
What is the relationship between saturation and product
Extension strategies are critical to maintain sales
What is the relation ship between decline and product
Weak products are withdrawn from the market
What is the relationship between introduction and price
Cost plus skimming or penetration pricing is used
What is the relationship between growth and price
Penetration prices slightly increase
The relationship between maturity and price
Competitive or promotional pricing is used
What’s the relationship between saturation and price
Competitive pricing is used
What is the relationship between decline and pricing
Pricing cuts are made
What the relationship between promotion and introduction
Informative advertising is used
What is the relationship between promotion and growth
Persuasive advertising used
What is the relationship between promotion and maturity
There is extensive advertising to remind customers of the product
What is the relationship between promotion and saturation
Aggressive advertising is carried out to emphasise the brands benefits and differences
What is the relationship between promotion and decline
Advertising is reduced to a minimum
What is the relationship between introduction and place
Selective or restrictive distribution takes place
What’s the relationship between place and growth
Intensive distribution or more distribution outlets are used
What is the relationship between place and maturity
There is more intensive distribution or a wide range of distribution outles
What’s the relationship between place and saturation
The widest range of geographical distabution outlets is used
What is the relationship between place and decline
There is selective distraction and unprofitable outlets are eliminated
What is the relationship between investment level and development
High research and development costs
What is the relationship between introduction and investment level
High costs on promotion
What is the relationship between investment level and growth
Average to high costs on promotion
What is the relationship between investment level and maturity
Lower costs on promotion
What’s the relationship between investment level and saturation
Cost focus is on extension strategies
What’s the relationship between investment level and decline
Very low costs on promotion
What the relationship between development and profit
None
What’s the relationship between profit and introduction
None
What’s the relationship between profit and growth
Some profit and rising
What’s the relationship between profit and growth
Some profit and rising
What’s the relationship between profit and maturity
High profit;reaches it peak
What’s the relationship between profit and saturation
High and mostly stable profit
What’s the relationship between profit and decline
Decreasing profit
What’s the relationship between cash flow and development
Negative
What’s the relationship between introduction and cash flow
Negative but with improved sales
What’s the relationship between cash flow and growth
Positive
What’s the relationship between cash flow and maturity
Positive
What’s the relationship between saturation and cash flow
Positive
What’s the relationship between cash flow and decline
Positive but decreasing cash flow
What’s are the Boston matrix
a method of analysing the product portfolio of a business in terms of market share and market growth. It was developed by the Boston Consulting Group, so it is also be called the BCG Matrix.
It is one of the most powerful tools a firm can use to assist strategic decision-making. It allows not only for an analysis of the existing product portfolio but also what future strategies the firm could take.
What are the 4 things the Boston matrix is categorised into
Stars, cash cows, question marks, dogs
What’s does the star in the Boston matrix represent
Star (high market growth/high market share) – A successful product in an expanding market. The firm will be keen to maintain the market position for this product in a fast-changing market. Promotion costs will be high to help differentiate the product and reinforce its brand image.
Despite the promotion costs, a star will generate a lot of income. If their status and market share can be maintained, they should become the cash cows of the future.
What does the cash cow represent in the Boston matrix
Cash Cow [low market growth/high market share]-
This is a well-established product in a mature market. Typically this type of product creates a high positive cash flow (as per its name!).
Sales are high and promotion costs are low as a result of high consumer awareness. The cash from this product can be “milked” and put into some other products in the portfolio. The business will want to maintain cash cows for as long as possible.
What does the problem child/question mark represent in the Boston matrix
Problem Child/Question Mark [high market growth/low market share] - The problem child consumes resources, but it generates little return. If it is a newly launched product it is going to need heavy promotional costs to become established (money from cash cow)
The future is uncertain, so quick decisions need to be made if sales do not improve such as revised design, relaunch or even a withdraw from the market. It should have potential as it is a growing market sector.
Businesses need to look carefully at which problem children are worth developing and investing in and which need to be dropped and stop selling.
What does the dog represent in the Boston matrix
Dogs [low market growth/low market share] -
Dog products offer little to a business either in terms of existing sales and cash flow or future prospects because the market is not growing.
They may need to be replaced shortly or the firm could decide to withdraw from the market sector altogether and position itself into faster growing sectors.
What does the Boston matrix strategies do
Boston Matrix Strategies - by identifying the position of all of the firm’s products a full analysis of the portfolio is possible. This should help focus on which products need support or which need corrective action.
What are the actions included in the Boston matrix stratagies
- holding strategy
- building strategy
- harvesting strategy
- divesting
What is the holding strategy
continuing support for star products so that they can maintain their good market position. Work may be needed to “freshen” the product in the eyes of the consumers so that high sales growth can be sustained.
What is the building strategy
supporting problem child products with additional advertising or further distribution outlets. The finance for this could be obtained from established cash cow products.
What is the harvesting strategy
taking the positive cash flow from established products and investing in other products in the portfolio.
What is the divesting strategy
identifying the worst performing dogs and stopping the production and supply of these. This strategic decision should not be taken lightly as it will involve other issues such as the impact on the workforce and whether the spare capacity freed up by stopping production can be used profitably for another product.
What is the summary of the Boston consulting group
n summary, a product that has a good number of stars and cash cows (finance generators) will effectively be able to invest in the other high market growth products (i.e. problem children).
Nevertheless, a relatively large number of dogs and problem children can seriously drain any positive cash flow from the business if it’s not well checked. Therefore, the BCG matrix shows that the ideal product portfolio of a business is to have a balanced portfolio which might include some stars, a few problem children and several cash cows.
What are some limitations of the Boston consulting group
Some limitations of the BCG are:
•It focusses on the current market position
•It can be time-consuming and complex
•High market share does not necessarily equal profits
The next graph, is useful to relate the BCG matrix and the product cycle
What is branding
brand is a name, symbol, sign or design that differentiates a firm’s products from its competitors. Branding is the process of distinguishing one firm’s product from another and can add great value to a product.
What are the three p[arts of branding
A)Aspects of branding
b)The importance of branding
c)The importance of packaging
What are the aspects of branding
Brand awareness
Brand development
Brand loyalty
Brand value
What is brand awareness
the extent to which a brand is recognized by potential customers and is correctly associated with a particular product (i.e. McDonalds “big M”)
What is brand development
any plan to improve or strengthen the image of a product in the market. It is a way of enhancing brand awareness of a product by increasing the power of its name, symbol or sign leading to higher sales and market share (i.e. Pepsi changed the background of his logo from white to blue)
What is brand loyalty
the faithfulness and commitment of consumers to a particular brand as shown by their repeat purchases irrespective of the marketing pressure from competing brands (Kellogg’s vs other cereals)