marketing strategy

Question 1

The product life cycle shows:

Answer 1

The sales of a product over time

Question 2

Product life cycles are valuable for:

Answer 2

Planning marketing strategies and has implications for cash flow

Question 3

Marketing decisions wil be based on:

Answer 3

Where a product is in the life cycle

Question 4

The five stages of the product life cycle:

Answer 4

1) development
2) introduction
3) growth
4) maturity
5) decline

Question 5

Development:

Answer 5

• The research and development (R&D) department develop the product
• The marketing department does market research
• The costs are high, and there aren’t any sales yet to cover the costs
• Development has a high failure rate. This is because there’s often not enough demand, or because the business can’t make the product cheaply enough to make a profit

Question 6

Introduction:

Answer 6

• The product is launched, either in one market or in several markets. It’s sometimes launched with complementary products - e.g. the PlayStation was launched with games
• The business often promotes the product heavily to build sales - but businesses need to make sure they’ve got enough resources and capacity to meet the demand that promotions create
• The initial price of the product may be high to cover promotional costs. This is price skimming
• Alternatively, the price can start off low to encourage sales. This is penetration pricing
• Sales go up, but the sales revenue has to pay for the fixed cost of development before the product can make a profit. The business usually ditches products with disappointing sales after this stage
• There may not be many outlets for the new product - businesses will have to work hard to persuade retailers to sell it
• Competition may be limited (if it’s an innovative product)

Question 7

Growth:

Answer 7

• Sales grow fast. There are new customers and repeat customers
• Competitors may be attracted to the market. Promotion shows differences from competitors’ products
• The product is often improved or developed, and it may be targeted at a different market segment
• Rising sales encourage more outlets to stock the product

Question 8

Maturity:

Answer 8

• Sales reach a peak and profitability increases because fixed costs of development have been paid for
• At saturation (when the market is fu;; and has reached its maximum growth) sales begin to drop, depending on the product. Sales are more likely to drop for long-lasting products that customers do not need to replace regularly. The price is often reduced to stimulate demand, which reduces profits
• There aren’t many new customers. Competition within the industry becomes fierce so sales might fall

Question 9

Decline:

Answer 9

• The product doesn’t appeal to customers any more. Sales fall rapidly and profits decrease
• On the other hand, the product may stay profitable if promotional costs are reduced enough
• If sales carry on falling, the product is withdrawn or sold to another business (divestment). Sometimes, sales might pick up again if competitors leave the market first
• Decline isn’t inevitable. It’s usually caused by products becoming obsolete, changing consumer tastes or poor marketing. Quality products with great design (e.g. Cadbury Dairy Milk) can sell for decades

Question 10

Extension strategies, like:

Answer 10

Product development and promotion, are used to improve the sales of products that are starting to decline

Question 11

Product development involves:

Answer 11

Businesses improving, reformulating or redesigning a product. They can change the design of packaging to make it look more up to date, or make special editions of the product. This can also give a new focus to existing marketing campaigns.

Question 12

A business can change the way it:

Answer 12

Promotes the product - for example, by running a new ad campaign, or by using special offers or competitions.

Question 13

A product line consists of:

Answer 13

Related products (including different sizes of the same product) with similar characteristics, uses or target customers

Question 14

The product portfolio is the:

Answer 14

Combination of all the product lines that a business produces.

Question 15

An example of a product line and product portfolio:

Answer 15

The Nestlé KitKat product line includes 2 Finger KitKat, 4 Finger KitKat, KitKat Chunky, etc. Nestlés product portfolio includes all product lines they make - KitKat, Nescafé, Maggi, Shredded Wheat, etc.

Question 16

Businesses aim to have a:

Answer 16

Product portfolio that contains a variety of different products, all at different stages of the product life cycle. That way, if one product fails, the business should still be able to depend on others

Question 17

The Boston Matrix includes:

Answer 17

Question marks
Cash cows
Stars
Dogs

Question 18

The Boston Matrix compares:

Answer 18

The market growth with market share. Each circle in the matrix represents one product. The size of each circle represents the sales revenue of the product

Question 19

All new products are:

Answer 19

Question marks (sometimes called problem children) and they have small market share and high market growth. These aren’t profitable yet and could succeed or fail. They need heavy marketing to give them a chance. A business can do various things with question marks - brand building, harvesting (maximising sales or profit in the short term) or divestment (selling off the product).

Question 20

A business can do various things with question marks:

Answer 20

Brand building, harvesting (maximising sales or profit in the short term) or divestment (selling off the product).

Question 21

Cash cows:

Answer 21

Have high market share but low market growth. They’re in their maturity phase. They’ve already been promoted and they’re produced in high volumes, so costs are low. Cash cows bring in plenty of money

Question 22

Stars:

Answer 22

Have high market growth and high market share. They’re in their profitable growth phase and have the most potential. They’re future cash cows.

Question 23

But, with stars:

Answer 23

Competitors are likely to try to take advantage of this growth market too, so a firm will need to spend a lot on promoting their product to keep their market share. Also, money might need to be spent to increase capacity to keep up with demand

Question 24

Dogs:

Answer 24

Have low market share and low market growth. They’re usually pretty much a lost cause. If they’re still profitable, e.g. a chocolate bar that is still popular, but no longer growing, the business will harvest profit in the short term. If the product is no longer making a profit it can be sold off