5.4b The Marketing Mix: Product

Market-Driven

A business must produce products which customers want or need.

Firms will research the market to find out what this is, and hope to create a product which satisfies customers.

This is called a market-driven product.

Product-Driven

This is the opposite of market-driven.

A business will come up with an idea, manufacture it, then try to find a market for it.

Why do you think market-driven products often fail?

Answer

Product Lifecycle

All products have a lifecycle. Some types of product have a very long lifecycle, some are much shorter. The marketing mix will need to change as a product progresses.

Development: the product is designed, tested, and refined until ready for production. Development is expensive, but there is not yet anything to sell, so the company will make a loss at this stage
Introduction: the product is launched. There will be lots of promotion to make customers aware and generate interest. Sales begin and increase slowly.
Growth: More customers become aware of the product and sales increase rapidly. The business may introduce variants of the product to maintain interest.
Maturity: the product is well-established, the market becomes saturated and sales peak. Promotion is reduced and the business should be making a good profit.
Decline: Demand falls as newer, rival products overtake it. The product becomes less profitable. It will eventually begin to make a loss, so the company will discontinue it.

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Surviving the Decline

The decline phase of a product's lifecycle is a critical time for a business – sales and profits are falling, it will soon make a loss.

A business must ensure it survives.

Two strategies:

Extending the product’s life (extension strategies>
Having a range of different products which it can continue to sell (having a product portfolio)

Extension Strategies

A business may do one or more of the following:

Improve the product to make it more appealing
Reduce the price, or use special offers
Re-promote it to remind customers of its benefits, or attract new customers
Change the place of sale, introduce to new counties or a different market
Change the name or packaging, giving the impression of a new product

Product lifecycle with extension strategy

Product Portfolio

A business should have a range of products
Products should be at different stages of the lifecycle
As one product is in decline and losing sales, others should be at earlier stages and generating income

The Boston Matrix

Helps a business analyse their portfolio.

They can plot their products on a graph according to market share and market growth

Question Mark

High-growth, low market share
Not yet profitable and need a lot of marketing
Success is questionable
Usually in the introduction section of the lifecycle

Stars

High-growth, high market share
Like a rising star!
Usually in the growth section of the lifecycle
They should become cash cows

Dog

Low-growth, low market share
Like a lazy dog – consuming resources but doing nothing in return!
Usually in the decline section of the lifecycle

Cash Cow

Low-growth, high market share
Costs are low and they generate lots of cash
Businesses milk them for all they can get!
Usually in the maturity phase of the lifecycle