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Market and Marketing Analysis (part 2)

Nur Aini Masruroh

http://aini.staff.ugm.ac.id/ ; Email: aini@ugm.ac.id; n_masruroh@yahoo.com

Outline
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Product life cycle The Boston matrix Marketing strategy

Product Life Cycles


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Product Life Cycle shows the stages that products go through from development to withdrawal from the market Product Portfolio the range of products a company has in development or available for consumers at any one time
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Managing product portfolio is important for cash flow

Product life cycle

Product life cycle (PLC)


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Each product may have a different life cycle PLC determines revenue earned Contributes to strategic marketing planning May help the firm to identify when a product needs support, redesign, reinvigorating, withdrawal, etc. May help in new product development planning May help in forecasting and managing cash flow

PLC: development stage


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May come from any of the following


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Market research identifies gaps in the market Monitoring competitors Planned research and development (R&D) Luck or intuition stumble across ideas? Creative thinking inventions, hunches? Futures thinking what will people be using/wanting/needing 5,10,20 years hence?

Product development: stages


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New ideas/possible inventions Market analysis is it wanted? Can it be produced at a profit? Who is it likely to be aimed at? Product Development and refinement Test Marketing possibly local/regional Analysis of test marketing results and amendment of product/production process Preparations for launch publicity, marketing campaign

PLC: introduction/launch
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Advertising and promotion campaigns Target campaign at specific audience? Monitor initial sales Maximise publicity High cost/low sales Length of time type of product

PLC: Growth
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Increased consumer awareness Sales rise Revenues increase Costs - fixed costs/variable costs, profits may be made Monitor market competitors reaction?

PLC: maturity
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Sales reach peak Cost of supporting the product declines Ratio of revenue to cost high Sales growth likely to be low Market share may be high Competition likely to be greater Price elasticity of demand? Monitor market changes/amendments/new strategies?

PLC: Saturation
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New entrants likely to mean market is flooded Necessity to develop new strategies becomes more pressing: ` Searching out new markets:
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Linking to changing fashions Seeking new or exploiting market segments Linking to joint ventures media/music, etc.

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Developing new uses Focus on adapting the product Re-packaging or format Improving the standard or quality Developing the product range

Decline and withdrawal


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Product outlives/outgrows its usefulness/value Fashions change Technology changes Sales decline Cost of supporting starts to rise too far Decision to withdraw may be dependent on availability of new products and whether fashions/trends will come around again?

Product Life Cycle


Sales

Effects of Extension Strategies

Time

Product Life Cycle


Sales/Profits PLC and Profits

PLC

Profits

Losses Break Even

Time

The Boston Matrix


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the Boston Matrix is a well known tool for the marketing manager A means of analysing the product portfolio and informing decision making about possible marketing strategies Developed by the Boston Consulting Group a business strategy and
marketing consultancy in 1968

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Links growth rate, market share and cash flow You would look at each individual product in your range (or portfolio) and place it onto the matrix. You would do this for every product in the range. You can then plot the products of your rivals to give relative market share.

The Boston Matrix


Market Growth Problem Children

High

Stars

Dogs

Cash Cows

Low

Market Share

High

The Boston Matrix


Classifies Products into four simple categories: ` Stars products in markets experiencing high growth rates with a high or increasing share of the market - Potential for high revenue growth
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The Boston Matrix


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Cash Cows:
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High market share Low growth markets maturity stage of PLC Low cost support High cash revenue positive cash flows

The Boston Matrix


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Dogs:
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Products in a low growth market Have low or declining market share (decline stage of PLC) Associated with negative cash flow May require large sums of money to support Is your product starting to embarrass your company?

The Boston Matrix


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Problem Child: Products having a low market share in a high growth market Need money spent to develop them May produce negative cash flow Potential for the future? Problem children worth spending
good money on?

The Boston Matrix


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Implications: Dogs:
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Are they worth persevering with? How much are they costing? Could they be revived in some way? How much would it cost to continue to support such products? How much would it cost to remove from the market?

The Boston Matrix


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Implications: Problem Children:


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What are the chances of these products securing a hold in the market? How much will it cost to promote them to a stronger position? Is it worth it?

The Boston Matrix


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Implications: Stars:
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Huge potential May have been expensive to develop Worth spending money to promote Consider the extent of their product life cycle in decision making

The Boston Matrix


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Implications: Cash Cows:


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Cheap to promote Generate large amounts of cash use for further R&D? Costs of developing and promoting have largely gone Need to monitor their performance the long term? At the maturity stage of the PLC?

The Product Life Cycle and the Boston Matrix


Importance of (3) A is at maturity (2) Cash from C maintaining a (1) Cash from B The product used tocash cow. balance of products used to support stage support portfolio D and four growth of funds for in the portfolio at Generates C through growth productsto finance possibly stages of different in the the development of stage and to portfolio Boston the PLC D.strategy extension A now D launch Matrix helps with the for B? a dog? possibly analysis

Sales (1) (2) (3)

D A B C Time

Marketing strategies
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Market penetration Market expansion Product development Diversification Marketing mix

Marketing Mix

People Physical evidence process

Product
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Marketing tools to evaluate product


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Three levels of a product Product life cycle Customer life cycle

Place, distribution, channel, or intermediary


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Six basic channel consideration: ` Do we use direct or indirect channels? (e.g. 'direct' to a consumer, 'indirect' via a wholesaler). ` Single or multiple channels. ` Cumulative length of the multiple channels. ` Types of intermediary (see later). ` Number of intermediaries at each level (e.g. how many retailers in Southern Spain). ` Which companies as intermediaries to avoid 'intrachannel conflict' (i.e. infighting between local distributors)

Types of Channel Intermediaries


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Wholesalers
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break down 'bulk' into smaller packages for resale by a retailer buy from producers and resell to retailers Agents are mainly used in international markets An agent will typically secure an order for a producer and will take a commission Agents can be very expensive to train. They are difficult to keep control of due to the physical distances involved. They are difficult to motivate

Agents
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Retailers ` Retailers will have a much stronger personal relationship with the consumer. ` The retailer will hold several other brands and products. A consumer will expect to be exposed to many products Internet

Pricing strategies

Other pricing strategies


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Psychological Pricing.
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This approach is used when the marketer wants the consumer to respond on an emotional, rather than rational basis. For example 'price point perspective' 99 cents not one dollar. Where there is a range of product or services the pricing reflect the benefits of parts of the range. For example car washes. Basic wash could be $2, wash and wax $4, and the whole package $6. Companies will attempt to increase the amount customer spend once they start to buy. Optional 'extras' increase the overall price of the product or service. For example airlines will charge for optional extras such as guaranteeing a window seat or reserving a row of seats next to each other. This approach is used where external factors such as recession or increased competition force companies to provide 'value' products and services to retain sales e.g. value meals at McDonalds.

Product Line Pricing.


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Optional Product Pricing.


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Value Pricing.
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Other pricing strategies


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Captive Product Pricing


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Where products have complements, companies will charge a premium price where the consumer is captured. For example a razor manufacturer will charge a low price and recoup its margin (and more) from the sale of the only design of blades which fit the razor Here sellers combine several products in the same package. This also serves to move old stock.Videos and CDs are often sold using the bundle approach. Pricing to promote a product is a very common application. There are many examples of promotional pricing including approaches such as BOGOF (Buy One Get One Free). Geographical pricing is evident where there are variations in price in different parts of the world. For example rarity value, or where shipping costs increase price.

Product Bundle Pricing.


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Promotional Pricing.
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Geographical Pricing.
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Promotion mix
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Personal Selling. Sales Promotion. Public Relations. Direct Mail. Trade Fairs and Exhibitions. Advertising. Sponsorship

Physical evidence
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Packaging. Internet/web pages. Paperwork (such as invoices, tickets and dispatch notes). Brochures. Furnishings. Signage (such as those on aircraft and vehicles). Uniforms. Business cards. The building itself (such as prestigious offices or scenic headquarters). Mailboxes and many others . . . . . .