Section outline

  • Kia Ora Team


    Well done on excellent participation on the USP task last Wednesday. This week we will at other concepts linked to the product that may be useful when looking at the marketing mix. Please also take time to read the weekly course page notes as we may not have time to cover all content in class. Remember though that we will cover the main points in class in detail.


    • Product

      A product is a good (tangible) or a service (intangible) produced by an organisation. Companies can grow using existing or new products:

      Value Analysis


    • Value analysis is the process of deciding which product features most attract or satisfy a target customer's needs. 

      For example, 
      • Function will be most important when buying a parachute!
      • Fashion clothes or bought mostly on the basis of aesthetics (how they look).
      • Economic manufacture is important for customers who have low income.


      Product Life Cycle

      Sales, costs and profit of a product follow a series of stages over its life. 

      When being developed, there are no sales, high costs and no profit - just losses.

      A newly introduced product has slowly growing sales, high costs & no profit. 

      Sales increase rapidly during the Growth stage, unit costs start to fall and some profit may be made. 

      As competitors enter the market during Maturity, sales stop growing, costs reduce and profits are high. 

      When the market becomes saturated with too many businesses competing for customers, a price war can start and some businesses drop out. Costs remain constant, but sales and profits decrease.

      The market declines and the product eventually becomes unprofitable.  




      The life cycle is important because:

      1. each stage needs a different marketing mix
      2. a business needs products at different life stages to survive long term. 


      Businesses try to extend products' lives beyond the saturation stage and so might repackage or slightly change it. Lux soap is more than 100 years old and its shape, perfume, colour, size and packaging have all changed to maintain consumer interest in it. Other extension strategies are finding new uses or accessories for the product. Examples of long lived products are Dettol, Bisto, Persil, Marmite, Coleman's mustard, Tetley tea.

      Life cycles are getting shorter as technological change accelerates. Products can become obsolete within months as more advanced versions are released. 

        

      Product portfolio

      It helps to sustain your business to have a range of products at different stages of their life cycles, so that as sales of one decline, sales of others are growing. 

      In the product portfolio, some products may be cash cows, which are established brands in mature markets. The main work has been done. They sell well, bring money in, but are unlikely to increase sales. Every business wants these!

      Stars are also great to have because, not only are they strong brands in the market, but also the market is growing and so income and profits will probably increase.

      Dogs are products that are sold to the last, loyal, 'die hard' customers. They are not attracting new consumers and will probably be phased out. 

      Question marks are in a growing market and may become established, popular brands, but this is uncertain. Work is needed here to make them stars.



      Obsolescence

      Obsolescence is the process by which products become divided, discarded or 'overtaken' by more up-to-date versions or products (eg vinyl records, magnetic cassette-tapes, CDs, MP3 players). 

      Built-in obsolescence       results from the product's design or durability (ie how long before it wears out).

      Planned obsolescence       is making a product out of date by deliberately introducing a new version or product. 


      Activities:

    • Product Life cycle doc (Complete the Doc on google classroom)

    • Class activities from the slideshow

    • Obsolescence 

    Discuss examples of products that became obsolete without their manufacturer's intention.
    Discuss examples of products that are obsolete because their manufacturer deliberately released a new product.

    Discuss why obsolescence might benefit a company (eg Apple iPhones).