A-Level Business Unit 3.4 - Product (Year 1/AS AQA Slides)

- Making marketing decision: using the marketing mix

- What you need to know:

• the elements of the marketing mix (7P's)
• the influences on and effects of the changes in the elements of the marketing mix
• product decisions

- Marketing mix: the elements of a firm's approach to marketing that enables it to satisfy and delight customers

• the marketing mix is commonly described as the 7P's
• the 7P's are manipulated by the firm to maximise sales and profit, create a brand, develop customer loyalty and to creast a unique selling point (USP)

- Unique selling point: a key feature of a product that differentiates it from its rivals

- A wide range of issues can influence the design of a firms's marketing mix:

• financial situation of a firm - for example, cash flow and levels of profit. This will influence the budget firmas are able to set for promotion and the types of promotion they use. it may also impact the prices they set, the levels of training they offer staff and its impact on customer service
• target market snf the firm's knowledge of the market through market research - what market segment does the business aim at? what level of income do they have? what are their interests, tastes and fashions? how price sensitive are they? what do they look for in a product?
• stage in life cycle - is it a start-up firm or one which has been operating for a long time?

• market forces - how much competition does the firm face? does the firm operate in a mass or niche market? does it sell to customers or other businesses? who holds the power, buyers or suppliers?
• consumer tastes and fashions
• the price elasticity of demand
• existing reputation and brand image of the firm
• the impact of technology - e-commerce and social media usage - does it sell its goods/services online; does it use social media? does it target ,arket prefer these methods? what is the rate of technological change in the market in marketing methods, production methods, components and types of products sold?

- The marketing mix will be most strongly influenced by the type of market the firm operates in

- Firms will make decisions on whether their target market is cinsumers or other businesses

- Therefore, they will operate in either industrial markets or the consumer market

- Different marketing approaches are needed to convince firms and consumers to purchase products

- There are some key issues which firms must deal with when they operate in industrial markets, which differ from selling directly to consumers. These may include:

• promotion - focuses on facts rather than persuasion
• larger quantities are purchased
• specialised purchasing staff who will be much more knowledgeable and harder to negotiate with and influence by marketing methods
• greater emphasis on quality
• price and mark-up is very important
• credit is often expected which can impact cash flow and liquidity
• time - often negotiation plays an important part and can take time
• delivery condition - firms often expect more specialist delivery unlike consumers who may seek out the retailers

- When a firm compete in a consumer markets, they will compete in different markets depending on what type of consumer product they sell

- Consumer products are purchased to satisfy a range of different consumer needs and wants

- There are 3 main catergories of consumer products:

• convenience - low-priced products which are frequently purchsed with minimum thought or planning
• shopping - high addedd-value so higher prices and consumers give some thought and planning to buy so not bought as often as convenience
• specialty - high price tags which consumers are very selective about and generally research in some detail

- Two other catergories of consumer products include:

• emergancy - bought due to sudden events to solve a problem
• unsought - unplanned impulse purchses as a result of a firm's marketing efforts and customer's exposure to them

- Product: the good/service provided by a business

- A product should possess key features that ensure it appeals to the needs of its target market, such as:

• functionality
• reliability
• durability
• appearance and aesthetics qualities
• value in relation to price charged
• safe and abiding by legislation
• convenient to use and ergonomic
• suitable packaging
• fashionable and in keeping with social media

- Other factors:

• market research - spotting new trends in the market, potential gaps or better understanding consumer tastes to identify potential new product. firms that launch new products purely based on consumers' tastes found from research are known as 'market-led'
• own personal experience
• solving your own personal needs and problem solving
• innovation and new ideas
• environmental awareness - new products designed to help solve envirnmental problems
• ideas from other countries

- At the decline stage of the product life cycle, a firm has a few options:

• withdraw the product
• let it decline in sales until it no longer generates profit or contributes towards paying fixed costs and breaking even
• improving the product sales by using an extension strategy

- Extension strategy: strategies taken to extend the life cycle of the product

- Possible extension strategies might include:

• reposition the brand into a niche market
• targeting new market segments with the same product
• updated design of the product and/or packaging
• modify ingredients
• change of sizes of products
• increase usage of the product
• new advertising campaigns
• move into foreign markets
• create a new brand image
• improve customer service or after-sales service

- A method of analysing the products in a firm's product portfolio, based on the market share they have in the market and the growth in the market in which they operate

- A product portfolio is the range of products a business may sel, for example, Proctor & Gamble owns brands such as Arial, Duracell, Wash & Go, Fairy, Gillette and Pampers

- This tool allows firms to analyse where their products are in realtion to their market and to make decisions about what needs to be done

- Income from cash cows can be used to promote star and question mark products in the portfolio whilst also being used to pay for research and development of the next new product

- Large share of a fat-growing market

- Highly successful products which may generate high incomes

- Usually expensive to market/promote

- Money needs to be spent to ensure it retains its position in the market; to stay ahead of the competition

- The aim is to develop it into a cash cow

- For example, the Apple iPad

- Small market share in a fast-growing market

- Products may be a success or they may fail

- They may generate little income

- Products have an uncertain future

- Need large investment in marketing to create awareness and brand image

- Mostly new products onto a market

- For example, Microsoft X-Box when it was launched in 2001

- High market share in in a slow-growing market

- Often mature products with well established producers

- They generate more income for the business than is invested

- Little room in the market for further growth

- Much of the promotion is already done

- Good product awareness in the market for the product

- May become dogs if not managed well

- Money generated fromcash cows is used ro fund a company's other star and question mark products to help them succeed

- For example, Heinz Baked Beans, Nescafe Original

- Low market share in low-growth markets

- These products may no longer generate profit but may contribute towards fixed costs

- Firms my want to withdraw products from the market or let them delcine until no longer making a positive contribution to the firm

- May be taking up resources that could be used for other products

- Could turn around these products with extension strategies

- May be held for strategic reasons

- Product development: when a firmcreates a new or improved good or service. This process has 5 stages:

• generate ideas - research and development will be completed, often at great cost. ideas will be discussed and market research will be completed to identify gaps in the market and consumer tastes
• analyse potential products ideas - firms will analyse how feasible the idea is and decide if it will fit in its product portfolio
• develop product - the product will be made, tested with prototypes and/or simulation using CAD/CAM
• test market - some firms will complete this stage, where the product is released in particular areas to test customer reactions
• launch product - once the firm feels the product is ready, it will be released and the firm will finally begin to recieve revenue to cover the costs already incurred

- Market researched gathered: spotting a gap in the market, rivals actions and consumer tastes

- Skills and expertise of staff and managers: what can the firm do? can they spot new opportunities and gaps in the market to gain first mover advantage?

- Management experience and knowledge

- Technology advancement: in product, components, marketing methods, and production methods

- Competitors actions and product launches

- Scientific developments and innovation

- Social trends

- Developing new products helps a firm to expand its product portfolio to help spread risk

- Over reliance on one product or one market segment can put the business at major risk if that area declines in sales

- Product development also helps a business to achieve a USP to ensure it has a sustainable competitive advantage against its rivals

- A firm must carefully analyse its product portfolio and ensure it does not have too many of one product type, at one stage of its life cycle or on the Boston Matrix

- Otherwise, they may have insufficient funding to pay for all the new products being launched, impacting their cash flow, liquidity and chance of survival