Product Portfolio Flashcards
Define product portfolio
Range of products are firm has
(firms have more than one product so they want to analyse the overall position of the portfolio products)
How can a product portfolio be analysed?
Using the Boston matrix this is based on market share – does the product sold Have a low high market share compared to others in the market?
and it’s also based off market growth – our numbers of potential customers in the market growing or not
What is the description of a ? In the product life-cycle.
Low market share in a high growth market
likely to be in the introduction stage of the product life-cycle. It could provide high profits in the future
may and prosper but equally may fail.
What is the strategy for? Marks in the product life-cycle.
High levels, investments protect and grow these products so they are cash absorbing
Could choose to drop the product – this is why it’s called a? – Managers aren’t sure what to do with them.
They have to choose which ones to invest in in which ones they should allow a fail
they are supported through Cashcow
Describe the star in the product life-cycle
High market share in a high growth/fast growing market
Likely to be in the growth stage of the product life-cycle
Likely to be cash neutral
Will usually become cash cows when the market mature is I.E low market growth
What is the strategy for stars in the product life-cycle?
Need protecting from competitors products – build barriers to entry E.G branding customer loyalty quality
Keep promoting and gaining more distributions to ensure they remain stars
Profit from cash cows keep them in this position
Describe the cash cow in the product life-cycle
High share of a slow growing market
Likely to be in the maturity stage of the product life-cycle
Provide high profits in cash for company (milk them)
Cash generating
What should managers do with the cash cow?
Promotional cost relatively low as cash cows are well known
Describe the dog in the product life-cycle
Low share of a stable or declining market
Likely to be in the declined stage of the product life-cycle
little appeal
What are the strategies for the dog in the pro life cycle?
Either invest to revitalise these products or let them decline and eventually remove them/sell them
May remove if profitable due to opportunity cost
Products will be killed off if sales fall to meet the breakeven point
Keep dog if it’s profitable taking sales from competition or if it introduces the customers to the brand or if it’s complimentary product so one that goes with another one of your products
What does the size of the circle on the Boston matrix mean ?
The size of the circle drawn t o illustrate each product highlights t h e size o f its revenue
What are the criticisms of the Boston matrix model?
Criticisms / limitations of the model
* It is only a snapshot of the current position, it does not predict the future.
It assumes that market share can be gained by investing in marketing.
It assumes that cash surpluses will be generated when the product is in the maturity stage of the product life cycle.
Market share may not be a good measure of a product’s ability to generate cash.
Relative market share and market growth are not the only factors that determine whether a firm has competitive strength
Case study examples of the Boston matrix
Case studies:
Nokia: Nokia smartphone are doing well - ony a small market share in a fast-growing market - Nokias smart phone considered to be queston marks. novas feature phones-falling marnet share in low growth market - “dog” product
Shell ; says it needs the positive cash flows from oil production (cash cow) to finance investment in future stars the company plans for greener energy can only be funded by oil and gas
Why might new products need development ?
New Product Development
Investment to modify existing products or develop new ones.
- products at the end of the life cycle
- to ensure a balanced product portfolio
- to tave advantage of new opportunites that are occunng eg newtech or changing taste
- bulld the brand
- to keep up with competitions
- to spread risk across products
How does the product life cycle link to the Boston matrix ?
The products life cycle is concerned with individual products and focuses on sales.
The Boston matrix is concerned about a portfolio products. There’s a greater focus on cash flow and the need for cash cows to provide the finance to support the question marks .
It isn’t trying to predict sales is simply trying to assess where the product sitting in relation to each other
however there is a link between the two for example cash cows likely to be in the maturity stage of the product life-cycle.
Define promotion
Promotion: The ways in which the business communicates about the product
What are the main types of promotion ?
The main types of promotion are:
Advertising
Personal (direct) selling
Sales promotions
Social Media & Viral Marketing
Public Relations
Direct Marketing
Sponsorship (part of PR) Branding
What are the aims of promotions ?
The main aim of promotion is to ensure that customers are aware of the existence and positioning of products.
Promotion is also used to persuade customers that the product is better than competing products and to remind customers about why they may want to buy.
Define the promotional mix
Businesses utilise a combination of promotional methods. This is known as the ‘promotional mix’.
Define advertising
Paid for communication in the media eg TV & radio, newspapers & magazines, online, social media, cinema, billboards. Its aim is to inform and persuade.
Define sales promotion
Sales Promotions:
Providing incentives to stimulate demand eg BOGOF, loyalty cards, free gift, mone
Pros and cons of advertising
Pros
Reaches wide audience
build awareness and brand image
can be targeted to viewing groups
business can control the message
Cons
Consumers switch off from adverts
Mass marketing advertising is expensive
May not reach target customer
Can’t answer customer questions
Pros and cons of sales promotion
Pros
Increase the sales immediately and possibly dramatically encourages customers to try product or switch brands
Cons
can damage brand image
customers may have bought anyway
if used long-term customers get used to it
Pros and cons PR
Pros
Can be seen as more credible if coming via a third-party
cheap way of reaching customers
Cons
Hard to measure effectiveness
risk of losing control if it’s via a third-party
Pros and cons of sponsorship
Pros
Possible wide coverage of brand name
Can target audience a little
Cons
Costly
not informing about product
Pros and cons of personal selling
Pros
With good reason research the firm can target customers
can explain questions and thus close the sale
potential to develop a relationship with the customer
Cons
Costly to employee sales force
can get reputation of being a nuisance
difficult to target unless research properly conducted (costly) limited number of customers can be met
Pros and cons of personal selling
Pros
Low costs and ability to target customers
Cons
Time consuming -managing multiple social media accounts and creating engaging content can be also very time-consuming
negative feedback or comments from customers can harm brand reputation and require careful handling
Pros and cons of direct marketing
Pros
Can reestablished lapse customer relationship
builds customer loyalty
generates new business
can personalise the message
Cons
Response rates may vary
Negative image of junk mail
Can be expensive to keep an accurate customer database
Pros and cons of branding
Pros
Once established the business can reduce it spending on other promotions With a recognise brand it’s more likely consumers will buy the product for the first time
Can create loyalty repeat purchase and word-of-mouth advertising
Easier to persuade retailers to stock the products PED will become more inelastic for established brands allowing price rise
Makes launch of future products easier
Cons
Takes time to establish
Costly
What are the factors affecting promotional mix?
The target audience – what is the best method to reach them?
Finance available – some methods are more expensive
The message the firm wants to convey/positioning – it must fit with the promotion chosen for example sales promotion may not be suitable for luxury goods
Technology available – is social media appropriate?
Stage in the product life-cycle – different stages will require different promotional methods
Competitors – how are they promoting?
Define above the line promotion
Paid – for communication in the independent media for example advertising on TV or in the newspapers. It can be targeted it could be seen by anyone outside the target audience. Advertising is the main methods of above the line promotions.
Define below the line promotion
Promotional activities where the business has direct control, for example direct mailing a money of coupons. It is aimed directly at the target audience.
