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  1. Product IB Business and Management

  2. Every company needs to decide what product and/or services it will offer to its’ customers. Must link back to the corporate aims and objectives It is the “P” the marketing department looks at first Products & Services Intangible Tangible

  3. Successful products must add value: Functional value Emotional value Each consumer determines the value Essential the product/brand is developed with the target customer in mind Product Value

  4. Consumer Fast Moving Perishables Durables Specialty Producer (Industrial) Product Classification

  5. Product Product Line Product Mix/Range 46” 42” 37” 32” 26” 22” Classification Kitchen Appliances Personal Care Headphones DVD Players Audio Televisions Televisions Product Mix/Range Product Line

  6. Select any company, which sells its’ products/services in China Identify all the product/service lines offered by the company, the product range. For 1 product/service line, identify all products on offer Present your findings to the class Activity – Product Range

  7. Market Research Research & Development Extension Compliments Competitors Product Ideas Where does Starbucks get new ideas for it’s products?

  8. Market Research Develop & Test Prototypes Test Marketing Feasibility Study Launch Product Development Stages

  9. Product Design • The design of the product must be aligned with the needs of the market • Factors • Aesthetics • Function • Economic Manufacture Aesthetics Economic Manufacture Function

  10. For the company you previously selected For product/service line where you identified all products on offer, determine which products have been launched within the past 2 years. For the new products, identify the catalyst for the new product Market research Extension Research & Development Etc. Activity – New Products

  11. Research & Development Companies invest a lot of money developing the product before introduction No sales revenue at this stage Prototypes and test markets are used Product Life Cycle R & D Decline Growth Maturity Introduction Sales Revenue Time

  12. Launch (Birth/Introduction) Extensive promotion Not profitable at this stage (low sales and high expenses) Objective is to move to growth stage as quickly as possible and become market leader R & D Launch Growth Decline Maturity Sales Revenue Time Product Life Cycle

  13. Growth More consumer awareness increases sales Increase the distribution (place) Strong profits More competitors Product differentiation R & D Launch Growth Decline Maturity Sales Revenue Time Product Life Cycle

  14. Maturity Sales increasing (but at slower rate) Economies of scale Heavy promotion to differentiate brands Product lines extended (more product versions and variations) Unsuccessful competitors drop from market R & D Launch Growth Decline Maturity Sales Revenue Time Product Life Cycle

  15. Decline Sales start to fall Prices are reduced Profit decreases Companies stop production R & D Launch Growth Decline Maturity Sales Revenue Time Product Life Cycle

  16. Every product will have a different slope and duration at each stage Companies will try to extend the length of the maturity stage Price reductions New promotions New markets New uses New versions R & D Launch Growth Decline Maturity Sales Revenue Time Product Life Cycle

  17. Draw and label the product life cycle diagram Identify a product from “your” company in each of the stages of the product life cycle. Identify and describe extension strategies used by “your” company. R & D Launch Growth Decline Maturity Sales Revenue Time Activity

  18. R&D Basic Research Applied Research Launch Promotion Capital Investment Growth Promotion Product Improvement Capacity/Expansion Maturity Extension Decline Divestment PLC & Investment R & D Launch Growth Decline Maturity Sales Revenue Time Investment

  19. R&D No revenue Launch Very little revenue Start up and Promotions costs Growth Profit, once R&D and launch costs recovered Maturity Maximum profit Depends on costs to defend market share Decline Profit disappears as prices are reduced and sales decrease Product termination costs PLC & Profit R & D Launch Growth Decline Maturity Sales Revenue Profit Time Investment

  20. R&D Negative Launch Negative Growth Turns Positive Maturity Positive Decline Turns Negative PLC & Cash Flow R & D Launch Growth Decline Maturity Sales Revenue Profit Time Investment

  21. Paying for the R&D Financing Retained profit Mature products Maximizing launch resources Minimizing launch time frame Accelerating sales Promotion New markets Getting to Profit What are the risks of sales growing too fast?

  22. In order to compete, companies need to make their products different from their competitors Appearance Packaging Design (function) Quality Availability Loyalty Program After sales service Product Differentiation

  23. Benefits Price Advantages Consumer Recognition & Loyalty Distribution Advantages Product Differentiation

  24. For the company you previously selected For product/service line where you identified all products on offer, identify all the aspects that differentiates the products Evaluate if the differentiating aspects provide any advantage to your company. Activity – Differentiation

  25. Developed by the Boston Consulting Group in the 1960’s Links Growth, Market Share and Cash Flow Products are placed into categories Stars Cash Cows Question Mark (problem child) Dogs Boston Matrix

  26. Stars High Growth High Market Share Generate large revenue, but require large investment to keep market share and growth As market growth slows these become Cash Cows Boston Matrix

  27. Cash Cows Low Growth High Market Share Mature products Strong revenue, and minimal investment Revenue used to maintain Stars or grow Question Marks Boston Matrix

  28. Question Marks High Growth Low Market Share High potential but require substantial investment to develop into Stars Low revenue and high investment expense Management must decide which products to grow or drop Boston Matrix

  29. Dogs Low Growth Low Market Share Generate little revenue but still require company resources Product should be dropped Boston Matrix

  30. Tool used to identify the need to rebalance portfolio Can be applied at all levels Product Product line Product Range (Brand/SBU) Limitations Market share does not always translate to profit Does not identify root cause of low market share Simplifies complex issue of portfolio management Boston Matrix ? Star CashCow Dog This placement of the brands/SBU of HWL in the Boston Matrix has been based on limited information and should not be considered accurate

  31. Boston Matrix & PLC (1) ‘A’ is at maturity stage – cash cow. Generates funds for the development of ‘D’ (2) Cash from ‘B’ used to support ‘C’ through growth stage and to launch ‘D’. ‘A’ now possibly a dog? (3) Cash from ‘C’ used to support growth of ‘D’ and possibly to finance extension strategy for ‘B’? Sales (1) (2) (3) D B C A Time

  32. For the company you previously selected Construct a Boston Matrix for all the products in the product portfolio (product range) For the problem child products, identify reasons for their lack of market share, and suggest strategies to migrate to a star Activity – Boston Matrix

  33. A key product differentiator Refers to a name (or symbol) identifiable with a product or business Trademarks are legal protection for the brand Intangible asset Branding

  34. Differentiation Recognition Reduce risk New products Expand product range Premium price Reduce price elasticity Distribution advantage Extension Barriers to new competitors Why develop the brand?

  35. Build and strengthen the awareness and image of the brand Long term marketing strategy Expensive Marathon vs. sprint Brand Development

  36. Objective of every marketing department Consumer purchase based on the brand, not the product Brand Loyalty

  37. Started as below the line promotions to increase brand loyalty Loyalty programs have become part of the product Or even their own product Loyalty Programs

  38. Types of Branding Product Family Company Manufacturer Own Label

  39. Types of Branding Product Family Company Manufacturer Own Label

  40. Economies of scale New products “Guilty by association” Brand dilution Branding Impacts

  41. Read the article “Virgin –spreads” by Jackson Mahr, and answer the following questions. What type(s) of branding does Virgin use? Analyze the risks and opportunities of the Virgin brand. Exercise

  42. Global brands Global marketing economies of scale Brand loyalty Glocalized Language Culture Branding in a Global Market

  43. For the company you previously selected List all the brands within your company, showing ownership where possible For each of the brands, identify the type(s) of brand Select one of the brands and comment on the effectiveness of the brand Activity – Branding

  44. Learning Outcomes • Classification of products • Classify products by line range and mix. • New product design and development • Describe the importance of innovation in an era of rapid technological change and discuss the problems of financing research and development. • Product life cycle • Extension strategies • Relationship with investment, profit and cash flow • Analyze the relationship between the product life cycle and the marketing mix, and determine appropriate extension strategies. • Analyze the relationship between the product life cycle, investment, profit and cash flow. • Product portfolio analysis • Boston consulting group (BCG) matrix • Apply the BCG matrix to a given situation. • Use the BCG matrix to help in developing future strategic direction.

  45. Learning Outcomes • Branding • Brand awareness • Brand development • Brand loyalty • Discuss the importance and role of branding • Types of branding • Family branding • Product branding • Company branding • Own label branding • Manufacturer’s brand • Distinguish between different types of branding • Analyze the role of branding in a global market