4.1Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004

Understanding Organisational Context 2e

Slides by Claire Capon

Chapter 4

MarketingMarketing mix

Product lifecycle

Customer growth options

Boston consulting group matrix

4.2Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004

The Marketing Mix

Product

Price

Promotion

Place

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Figure 4.3 The marketing mix

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Introduction to the 4Ps

• 4ps can be:

- manipulated to increase sales and profitability

- altered or improved as a product declines

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Product

• The manufacturer will aim to:

- make as much of the product for as long as possible without further investment being required

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Product

- manipulate product features at little cost to give a newer, fresher face if sales go into decline

- attract new customers and keep existing customers

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Product

• Product aspects which can be manipulated are:

- style, performance and quality

- branding, packaging and after-sales service

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Product

• Manipulation of the product:

- allows the manufacturer to claim continual innovation

and improvement

- requires co-operation between the marketing and

operations management departments

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Price

• Price can be:

- reduced during product decline or

introduction

- increased when sales start to become buoyant

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Price

• Price manipulation:

- can be done by use of special offers and finance deals

- requires co-operation between the marketing and finance departments

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Promotion

• Advertising and promotional activity are required to:

- create an awareness of and interest in the product and to ensure acceptance by the marketplace

- support a successful product

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Promotion

• Promotion and advertising support a product by:

- attracting new customers

- reminding consumers making repeat purchases to buy the same brand of product as before (crucial if customer loyalty low)

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Place

• Manipulation of place is to ensure the right amount of the product is in the right place at the right time

• Applies to all stages of the distribution process

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Place

Examples

• Manufacturer to wholesaler

• Wholesaler to retailer

• Retailer to customer

• Manufacturer to consumer

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Place

• careful positioning of goods in shops is to improve sales

• e.g. sweets by the supermarket checkout

• e.g. perfume next to the main doors in department stores

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Figure 4.4 The extended marketing mix

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People

• ‘People’ includes:

- staff inside the organisation

- customers and consumers outside the organisation

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People

• ‘Manipulation’ of people covers:

- effective use and management of staff

- sales staff building good relationships with customers

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Product lifecycle

Introduction

Growth

Maturity

Saturation

Decline

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Figure 4.5 The product lifecycle

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Introduction

• High costs, low sales - and no profit is made

• Aim to recover development costs

• Successful new product will move to growth phase

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Growth

• Steady costs, sales increase rapidly and high profits can be made by pioneering firms

• Aim to attract first-time customers and build market share

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Maturity

• Steady costs, sales increase more slowly and profits peak

• Aim to keep existing customers and persuade other consumers to switch from competing brands

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Saturation

• Steady costs, sales peak (no more growth) and reasonable profits

• Profit margins start to decline, owing to increased price competition

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Decline

• Low costs, falling sales and falling profits - maybe loss making

• Withdraw loss-making product

• Keep decline product if it makes a profit in a niche market

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Figure 4.6 Product lifecycle and extension strategies

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Extending the product lifecycle

• Extend lifecycle by:

- selling more product to existing customers

- market development, which is to seek new customers in home country or abroad

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Extending the product lifecycle

- product development which is minor product

modification or improvement

e.g. new model of a car -Vauxhall Corsa

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Extending the product lifecycle

• Aim to keep the product in the saturation phase of lifecycle as:

- profits are reasonable

- sales peak

- costs are steady

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Customer growth matrix

Customer loyalty

Customer extension

Customer acquisition

Customer diversification

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Figure 4.7 The customer growth matrixSource: Jenkins, M (1997), The Customer Centred Strategy, Prentice Hall. Reproduced with permission.

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Customer loyalty

• Loyal customers will bring greater profitability by:

- making frequent repeat purchases

- telling friends of the benefits of the company’s

products

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Customer extension

• Customer extension is:

- extending the range of products and services available to customers

- achieved via product development & diversification

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Customer extension

• Product development is used by companies:

- structured around product divisions

- with strong R & D and design functions

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Customer extension

- whose products have short lifecycles

e.g. consumer electronic companies like SONY

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Customer extension

• Product diversification occurs when a company moves away from current products

• Related diversification - remains in same industry

• Unrelated diversification - changes industry

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Customer acquisition

• Customer acquisition is:

- expanding the number of customers for existing products

- easiest in growing markets

- difficult in mature markets

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Customer acquisition

• If home markets are mature, then seek new customers in overseas markets

• Engage in IB activities, e.g. Exporting or locating production or marketing activities overseas

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Customer diversification

• Customer diversification:

- is achieved by selling a new product or service to new customers

- often involves innovative use of technology

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The BCG matrix

Question marks

Stars

Cash cows

Dogs

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Figure 4.8 The Boston Consulting Group matrixSource: Henderson, B (1970) The Product Portfolio, Boston Consulting Group. Used with permission of The Boston Consulting Group.

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Question marks

• High growth markets

• Low market share

• Another product is current market leader

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Question marks

• Unlikely to be profitable

• High investment is required if a question mark is to become a market leader

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Stars

• Successful question marks become stars

• Stars are market leaders in growth markets

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Stars

• Stars:

- require investment to maintain market

leadership in a high growth market

- are marginally profitable

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Cash cows

• Cash cows:

- are mature products

- occupy slower growth markets

- need less investment

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Cash cows

- are the most profitable products in a portfolio

- are used to fund products in other quadrants

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Dogs

• Dogs:

- Occupy no growth markets

- Have low market share

- May be previous cash cows

- May be marginally profitable

- Should be withdrawn before they become loss making

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A successful product

• A successful product moves around the BCG matrix

• A question mark to … a star to …

• … a cash cow to … a dog or back to a question mark

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A less successful product

• A less successful product remains in right-hand side of the BCG matrix, and is therefore a low cash generator

• A question mark may move to … a dog

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BCG matrix and product lifecycle links

• BCG ----------- plc• Q marks ------- introduction• Stars ----------- growth• Cash cow ----- maturity and

saturation• Dogs ---------- decline

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Balanced BCG matrix

• Tomorrow's products:

- question marks and stars

• Today's products:

- cash cows

• Yesterday’s products

- dogs