4.5 The seven Ps of the marketing mix Flashcards
Marketing mix
the key elements of a marketing strategy that ensure the successful marketing of a product
Product
any good or service that is offered to the market with the aim of satisfying consumer needs or wants
Product life cycle
the course a product passes through from its development to its decline in the market
Product stage 1: Development
- generating ideas (brainstorming)
- screening ideas (which ideas leave)
- creating a prototype (1st trial form)
- carrying out test marketing
- commercialization (full launch after success)
Product stage 2: Introduction
launch stage of the product into the market, sales are low because most consumers are not yet aware of the product’s existence. to increase awareness of the product, informative advertising can be used, as well as price skimming or penetration
Product stage 3: Growth
once the product has been well received by the market, sales volumes start to increase significantly. initially low prices can be increased, products that started with high prices can also be reduced
Product stage 4: Maturity
sales continue to rise, but slowly. product is well established, stable significant market share and positive cash flow. sales revenue its at its peak, profit is high, but little growh. promotional pricing strategy used to keep competitors at a bay
Product stage 5: Saturation
many competitors have entered the market and saturated it, sales are at their highest point and begin to fall, cash flow is still positive, some businesses forced out of the market as a result of the stiff competition, prices will have to be reduced by promotion
Product stage 6: Decline
steady drop in sales and decreased profits, cash flow begins to fall but is still positive, product lost its appeal to consumers because of new models, if sales fall too low the product is slowly withdrawn from the market, promotional activities are kept at minimum, prices reduced to sell off all stock
Extension strategies
plans by firms to stop sales from falling by lenghening the products life cycle
Extension strategies methods
- selling existing products in new markets
- finding new uses for the product
- changing the products design/appearance
- targeting different market segments
- developing new promotional strategies
Product portfolio
all products or services provided by an organization
Product portfolio analysis (Boston Consulting Group/Boston Matrix)
process of evaluating these products, growth-share matrix: stars, question marks, cash cows and dogs
Stars
high market growth, high market share
- need high levels of investment to sustain rapid growth
- eventually turn into cash cows
Cash cows
low market growth, high market share
-well-established products in a mature market and businesses will invest less to hold on to their market share
- generare reasonable cash
- strong precense
- can charge slightly higher prices
Question marks
high market growth, low market share
- concern for the large amount of money needed to increase their share in the market
- high market growth means that the product is in a competitive maret
- needs a strong marketing strategy
- need to think which of these they want to develop into stars
Dogs
low market hsare, low market growth
- operate in markets that are declining
- little income
- poor future prospects
- may need to be replaced
BCG matrix strategies
- Holding strategy
- Building strategy
- Harvesting strategy
- Divesting strategy
Holding strategy
focused on products with high market shar to ensure they maintain their position, some investment will be needed
Building strategy
turning question marks into stars, investing money from cash cows
Harvesting strategy
milking the benefits of products with a positive cash flow, these products provide the necessary finance for other products
Divesting strategy
poor performing dogs are sold off, resources are freed up from this will need to be used effectively to boost the performance of the other products
Limitations of the BCG matrix
- focuses on the current market position of the firms product, no information from the future planning
- time consuming and complex to classify products
- high market shares doesnt necessarily equate to high profits (promotion)
Brand
A name, symbol, sign or design that differentiates a firms product from those of its competitors
Branding
the process of disinguishing one firms product from another
Aspects of branding
- brand awareness (ability of consumers to recognize it)
- brand development (improve and strenghten its image)
- brand loyalty (consumers become committed, willing to make repeated buys)
- brand value (worth in reputation, income and market value)
Price
what consumers pay to acquire a product
Cost-plus pricing (mark-up pricing)
adding a mark-up (% of profit a firm wishes to gain for every product that it sells) to the average cost of producing a product
Advantages of cost plus pricing
- simple and quick method to calculate the selling price of a product
- good way to ensure that a business covers its cost and makes profit
Disadvantages of cost plus pricing
- fails to consider market needs or customer value when setting prices
- competitors prices are not considered
- could lose sales if it sets a selling price higher than competitors
Penetration pricing
setting a low initial price for a product with the aim of attracting a large number of customers quickly and gaining high market share