Product Flashcards
What is a product
A product is any good or service offered for sale to customers, A product can say about its consumer too.
What is a product portfolio
A product portfolio is the mix of products the business produces and sells.
What are the advantages of having a product portfolio
Spreads fixed costs
Allows for greater economies of scale
Allows the targeting of wider markets
Reduces risk
Definition of branding
It is a name, term, sign, symbol or design that identifies a seller’s products and differentiates them from competitors’ products. also a brand is a product which consumers can rely on for quality, value and service.
What is the objective of branding
The objective of a brand is to establish a product with a separate identity in consumers minds, making the product desirable, wanted and needed.
What are the pros and cons of branding
Creates increased consumer loyalty, Separate product from the herd, Increase price inelasticity this gives more control to pricing strategy.
High cost of advertising, Loss of brand value for one product can affect a whole range of similarly branded products, brands invite competition.
What is meant by unique selling point (USP)
Means that the product or service has a feature or features that can be used to separate it from the competition, this can be a technological advantage. USP can also result from some feature of the product and design.
Why is product differentiation important
This separates your brand from competitor brands
Helps create customer loyalty & gives the firm more control over prices
How can products be differentiated
Methods of promotion – creates personality for your product, packaging – eco packaging, Form – making your products look different from the competition and quality and reliability.
What are the impacts of having the right product to a business and stakeholders
If right
higher profits
reliable and affordable for customers
Increase in investment
record share prices
grants
Explain the product life cycle
A product life cycle represents the different stages in the life of a product and the sales that are achieved at each stage, some products have a short life cycles and some products have a long life cycle as they do not get replaced or never go out of fashion.
What are the stages of product life cycle
Development - During the development stage the product is being researched and designed, costs will be high.
Introduction – The product is new to the market and few potential customers know of its existence; sales are limited to early adopters.
Growth - The product is becoming more widely know n and consumed, advertising is used to strengthen the brand and develop the product image, profits may start to be earned.
Maturity – The product range maybe extended, competition will increase, sales are at there peak so profits should be high
Decline – Sales can now fall fast and the product range may be reduced, with the business focused on core products, advertising will be reduced, profits will fall so will prices.
What is an extension strategy
An extension strategy is used to extend the life cycle of the product they are necessary as there might not be a new product to replace the ageing product
What is the impact of extension strategies
On a good product - Jobs creation, Huge growth, bigger brand image
Bad product – Reduction in market share, Jobs lost around the business, reduction in output of product.
What is the changes in cash flow when in the product life cycle
The cash flow from a product as it moves through its life cycle will change. Initially high development costs and high promotional costs will mean a negative cash flow, but as the products moves through the growth phase and into maturity, the cash flow should start to become positive.
What are the advantages of using a product life cycle
Can help businesses to decide when new products are needed in its portfolio as it indicates when existing ones are in decline.
The profitability of a product at each stage of the life cycle can be indicated and compared to the profitability of other products in a portfolio
What are the disadvantages of using a product life cycle
It cannot be guaranteed to be correct, especially for products that are in new or developing markets
Does not fully indicate why they have performed in the way they
have.
External factors cannot be anticipated
What is the boston matrix
The Boston matrix allows the analysis of a businesses products by dividing the products into four categories, The categories the products are placed in depend on their market share and the level of growth that is occurring in the market, this can be used in portfolios to show a business’s performance overall products
What are cash cows
Cash Cow-
High market share and in a mature market Very profitable products and expenditure on such things as advertising is relatively low, customers know and understand the products.
What are question marks
Question Marks – In a fast-growing market but the product is not selling also has low market share, the product is getting beaten by competitors.
What are stars
Stars – Starts have high market share in a growing market, have high revenue and have high levels of cost, advertising costs are high
What are dogs
Dogs – have a low market share in a mature market, It is not worth spending money to redevelop but can be still profitable.
Why do business use the boston matrix
To judge how to manage individual products and the product range given market conditions.
To recognise the importance of using successful, profitable products to fund the development of the stars and cash cows of the future.
To see whether they have products in fast growing and potentially very profitable market sector.
Benefits of Boston Matrix
It is very simple to use and explain, as there are only two dimensions and four quadrants.
It is an important model for allocating resources to the right areas in order to achieve success in the future.
Help to manage wide ranging product portfolios
Drawbacks of Boston Matrix
Only a snapshot of the current position and has no predictable value
Too simplistic to measure firms competitive market strength as market share and growth is too little to measure competitive strength
It is based on a series of assumptions.
What is product differentiation
This separates your brand from competitor
brands. Products might be very similar in the way
that they are made or how they are used but may be
perceived quite differently by consumers.
