1. Topic 2: Product

2. Product Trial
 This is when a business gets customers to
buy a product for the first time. This may
be because the product is new on the
market.
 Hopefully this will instil some brand loyalty
and ensure repeat purchases.
 Getting a customer to trial a product for the
first time means using certain aspects of
the 4Ps of marketing.

3. Product Trial
 Price:
 Penetration pricing can be used when the product is
new. This means initially selling it at a much reduced
price and then raising the price once it has established
some brand loyalty.
 Money off coupons can be used in newspapers,
magazines and/or through direct mailing.
 Promotional pricing can be used if the product is not
new. This means lowering the price for a limited time
to try and encourage new people to try it out. BOGOF
or 2 for 1 could also be used as part of this.

4. Product Trial
 Product:
 Free samples using magazines, direct mailing
or a stand in the supermarket
 Test trials e.g. test drive a car
 Trying out a product in the shop e.g. new
video game

5. Product Trial
 Promotion:
 Advertising – TV, radio, newspapers, magazines etc.
Companies will try to make sure they can reach their target
audience by using specific magazines or TV programmes.
 Sponsorship – Sponsoring a TV programme is a good way
of getting people to notice your product and trial it.
 Billboards and/or any flat space e.g. buses
 Publicity – have a launch party and invite journalists to
come. Give them a brochure and ask them to write about
the product in their publications.
 Celebrity endorsement – get a celebrity to champion the
product.
 Viral marketing – use Twitter, FaceBook, YouTube,
MySpace to get people talking about it and recommending
it to friends.

6. Product Trial
 Place:
 Manufacturers often need to persuade retailers to
devote shelf space to the product. Often this means
that they will have to pay for the privilege.
 Also manufacturers may have to pay for any
promotional deals that the retailer has such as
BOGOF and 2 for 1

7. Repeat Purchase
 Repeat purchase is when a customer buys
a product more than once.
 Customer loyalty is the willingness of
customers to make many repeat
purchases from one company or of one
product.
 Repeat purchases is the key to success of
most business. It is less expensive to
achieve than launching new successful
products.

8. Repeat Purchase
 Promotion:
 Advertising is very important for keeping the
brand in the consciousness of customers. All
forms of advertising are suitable to achieve
this.
 Many other forms of promotion are also useful
for this e.g. money off coupons, competitions,
special offers etc.

9. Repeat Purchase
 Price:
 Showing that the product gives value for
money is a good way of considering the price.
 Sometimes firms can maintain a high price –
known as prestige pricing – because they are
attracting people with relatively high incomes
who want to purchase something exclusive or
of high quality.
 Promotional pricing can be very useful
occasionally.
 BOGOF and 2 for 1 can be good.

10. Repeat Purchase
 Product:
 Must meet or exceed customer expectations
 The brand should match the image of the customer
 The product should be made to feel as if the customer
cannot live without it
 The product needs to be able to satisfy a customer’s
need or want
 The product could satisfy more than one need or want
(dual purpose)
 New varieties to keep consumer’s interested.
 New technology to keep consumers interested.

11. Repeat Purchases
 Place:
 Manufacturers often need to persuade retailers to
devote shelf space to the product. Often this means
that they will have to pay for the privilege.
 Also manufacturers may have to pay for any
promotional deals that the retailer has such as
BOGOF and 2 for 1

12. Questions
 1. Answers B and D
 Comments
 Aincorrect – low or high production costs will not persuade or dissuade a
customer from buying the product.
 B correct – a relevant free gift acts as an incentive to the purchaser.
 C incorrect – this is a human resources matter and has no bearing on a
customer’s decision to purchase.
 D correct – a reduced price may persuade a customer to buy a product
without having to spend too much money on it.
 E incorrect – many of the other magazines may have different target markets.
 2. Answer A
 Comments
 A correct – a lack of loyalty means that customers will not return to purchase
the same brand again and again.
 B incorrect – a lack of loyalty often reduces sales levels.
 C incorrect – good value often results in customer loyalty.
 D incorrect – large price cuts are not a guarantee of customer loyalty as it is
often based on many different factors

13. Questions
 3. Answer C
 Comments
 A incorrect – the amount of profit is based on several different
factors and not just sales levels.
 B incorrect – repeat purchases maintain sales levels for a
company.
 C correct – advertising encourages people to make repeat
purchases.
 D incorrect – little brand loyalty would not generate repeat
purchases. Also, in the pizza market people do tend to have
brand loyalty.

14. Repeat Purchases
 Other key factors:
 Be sure everyone in your company provides
outstanding service to your customers.
 Stay in touch with customers and ask for feedback.
 Tell someone by in person, on the phone, or by mail,
"Thank you for your business.

15. Product Life Cycle
 Product Life Cycle (PLC):
 Every product goes through a life cycle
from development to decline
 Each life cycle is different
 Some products have longer lifecycles than
others
 Some companies are very successful in
extending lifecycles

16. Product Life Cycle
 The Stages of the Product Life Cycle:
 Development
 Introduction/Launch
 Growth
 Maturity
 Saturation
 Decline
 Withdrawal

17. Sales
Time
Development Introduction Growth Maturity Saturation Decline
Product Life Cycle

18.  The Development Stage:
 Initial Ideas – possibly large number
 May come from any of the following –
 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?
 At this stage there are high costs and no revenue –
therefore the company is making a large loss
Product Life Cycle

19.  Introduction/Launch:
 Advertising and promotion campaigns
 Target campaign at specific audience?
 Monitor initial sales
 Maximise publicity
 High cost
 Low sales
 Firm still making losses
 Length of time – type of product
Product Life Cycle

20.  Growth:
 Increased consumer awareness
 Sales rise
 Revenues increase
 Costs - fixed costs/variable costs, profits
may be made
 Monitor market – competitors reaction?
Product Life Cycle

21.  Maturity:
 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?
Product Life Cycle

22.  Saturation:
 New entrants likely to mean market is ‘flooded’
 Necessity to develop new strategies.
 Sales and profits falling.
 Decline and Withdrawal:
 Product outlives/outgrows its usefulness/value
 Fashions change
 Better products appear
 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

23.  Extending the life cycle
 Diversification – have core product but
introduce new flavours/styles etc.
 Innovate – use new technology to enhance the
product
 Change flavour
 Repackage
 Advertise to appeal different audience
 Re-launch – product that have been withdrawn
can make comebacks if sold right e.g
skateboards, yoyos
Product Life Cycle

24. Sales
Time
Effects of Extension
Strategies
Product Life Cycle

25.  Cash Flow and the Product Life Cycle
 During the development stage cash flow is
going to be NEGATIVE. Money has to be paid
out for equipment, wages etc but no money is
coming in.
 During the launch stage cash flow is still
NEGATIVE. More money is being paid out
than is coming in (as sales are very low at the
moment).
Product Life Cycle

26.  Cash Flow and the Product Life Cycle
 During the growth stage cash flow may turn from
NEGATIVE to POSITIVE. Lots of money is coming in
but there are many outgoings because the firm has to
continue to promote the product and may need to
expand production and its workforce.
 During maturity/saturation and decline the cash flow
will be POSITIVE. The company spends little money
on promoting it. It doesn’t need to expand production
but sales are still coming in. Only during the decline
stage will sales be so low that cash flow might be
NEGATIVE.
Product Life Cycle

27. Sales/Cash Flow
Time
PLC and Cash Flow
PLC
Negative Cash Flow
Positive Cash Flow
Product Life Cycle

28. Product Portfolio Analysis
 Product Portfolio is the range
of products a company has in
development or available for consumers at
any one time.
 The Boston Matrix is a means of analysing
the product portfolio and informing
decision making about possible marketing
strategies. It was developed by the Boston
Consulting Group – a business strategy
and marketing consultancy in 1968

29. The Boston Matrix
Market Growth
Market Share
High
Low High
Problem Children Stars
Dogs Cash Cows

30. The Boston Matrix
 Stars
 Products in markets experiencing high
growth rates with a high or increasing
share of the market.
 Likely to be in the growth stage of product
lifecycle so costs of advertising and
machinery could still be high.
 Potential for high revenue and profit in the
future but not in the present.

31. The Boston Matrix
 Cash Cows:
 High market share
 Low growth markets
– maturity stage of
PLC
 Low cost support –
little spent on
advertising.
 High customer
loyalty.
 High cash revenue –
positive cash flows

32. The Boston Matrix
 Dogs:
 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
 Company may drop
them soon

33. The Boston Matrix
 Problem Child:
 Products having a
low market share in
a high growth market
 May have potential
but needs money
spent to develop
them
 May produce
negative cash flow
 Potential for the
future or ditch the
product?

34. Product Portfolio
Analysis/Boston Matrix
 Advantages:
 The company knows at what stage of the
product life cycle its products are
 It will know whether the products are dogs,
stars, cash cows or problem children
 It will be able to understand the levels of
revenue the products should be generating
 Cost to the business may be determined.

35. Product Portfolio
Analysis/Boston Matrix
 Advantages:
 The likely level of advertising for the products
will be understood
 The company will be able to see if it needs to
develop any new ideas
 Likewise the company will be able to know if it
needs to get rid of any products

36. Questions
 1. Answer A
 Comments
 A correct – the costs of development are high and there are no sales as
the product has not been launched.
 B incorrect – a positive cash flow may be evident as sales are increasing
and may outweigh any other supporting costs such as marketing.
 C incorrect – sales are likely to outweigh any supporting costs.
 D incorrect – support may be minimal so costs are low despite a falling
sales trend.
 2. Answer B
 Comments
 A incorrect – this is an activity used to support an extension strategy.
 B correct – this is an activity designed to adapt the product itself.
 C incorrect – this would be the development of a completely new product.
 D incorrect – this would not necessarily extend the sales or life of the
product.

37. Questions
 3. Answer D
 Comments
 A incorrect – they may be cash cows, problem children or, indeed, dogs.
 B incorrect – the 25 products may not all be in the same market or in
markets with fast growth.
 C incorrect – despite being a star it may have lower sales levels than, say,
a cash cow product.
 D correct – this is one feature of a star product.
 4.
 Diversification
 Innovate
 Change flavour
 Repackage
 Advertise to appeal different audience
 Re-launch

38. Questions
 5.
 To stay ahead of the competition in order to maintain market
share.
 To re-launch the brand to remind consumers of the brand’s
existence.
 To develop the range in order to meet changing market needs and
fashions.
 To introduce the product to a new segment of the market or a
younger audience.
 To prevent the product from being withdrawn due to a lack of
sales.

39. Branding and Differentiation
 A brand is a named product which customers
can identify with and which is seen as different
from other similar products. E.g. I-pod.
 A generic product is a product made by a
number of different businesses, which
customers fail to recognise any differences
between. E.g. Other MP3 players.
 An own brand is one which is sold under the
brand name of a supermarket, rather than the
name of the company that manufactured it.

40. Branding and Differentiation
 Product differentiation occurs when a
company produces a range of brands each
with different features e.g. quality, design,
packaging etc.

41. Branding and Differentiation
 Achieving branding/differentiation:
 Design – make each product have different features,
quality, build to others in the range. Make your product
features different to those of competitors.
 Name – make each name unique. Either make the name
reflect the product e.g. Gold Blend Coffee or make the
name obscure to imply that it is highly technical e.g. Intel
Pentium Processor. Some firms market themselves
under the company name brand e.g. Cadbury, whereas
others prefer to do it through individualised branding e.g.
Nestle with Kit Kat and Yorkie.
 Efficiency – so the product doesn’t break down
 Quality – value for money

42. Branding and Differentiation
 Achieving branding/differentiation:
 Packaging – used to give the product an
attractive appeal. Used to protect the product.
Used to give instructions on how to use the
product.
 Range – appeal to different market segments
 Design – to attract the consumer
 After sales service – so the customer gets help
when they need it
 Unique Selling Point (USP) – what makes it
different from everything else on the market

43. Branding and Differentiation
 Advantages of branding/differentiation:
 Premium prices: A strong brand may allow
firms to charge a higher price than rivals. This
allows a firm to add value.
 Greater consumer awareness: This may make
consumers more likely to buy a high profile
brand rather than a rival’s less well known
brand.
 Increased sales and market share: Bothe of
the factors listed previously can result in an
increase in sales revenue and market share.

44. Branding and Differentiation
 Advantages of branding:
 It is more likely that retailers will devote shelf
space to well known brands.
 Allows the company to launch new products
 Possibility of successful product trial
 Encouragement of word or mouth advertising
 Possibility of repeat sales
 Discourages competition

45. Branding and Differentiation
 Disadvantages of branding:
 High costs associated with the massive promotion that
is needed to establish and maintain the brand.
 Launching a new version of the brand may lead to a
risk of failure and damage to the brand.
 A single bad event will affect all the brand’s products
e.g. Cadbury Salmonella scare in 2006 wiped 14% off
Cadbury sales.
 Brand names may be difficult to protect in a global
market – leading to ‘fake’ products.
 It may be more important for a firm to use other
aspects of the marketing mix e.g. price, place or
promotion.

46. Branding and Market maps

47. Questions
 1. Answer B
 Comments
 A incorrect – increasing levels of production does not differentiate
one product from another.
 B correct – a change in packaging could make one product stand
out from another on the shelf.
 C incorrect – increasing sales does not change a product in its
look, taste or smell.
 D incorrect – a change in suppliers may change the raw materials
or reduce costs but does not differentiate.

48. Questions
 2. Answer D
 Comments
 A incorrect – cutting costs of production can apply to both branded
and non-branded products.
 B incorrect – this is a product which is sold under the brand name
of a supermarket chain or other retailer rather than under the
name of the business which manufactures the product.
 C incorrect – these are products made by a number of different
businesses in which customers see no difference between the
products of one business compared to the products of another
business.
 D correct – branded products, through quality or advertising, can
charge a higher selling price.

49. Questions
 3. Answer C
 Comments
 A incorrect – high pricing will not entice customers to
buy for the first time.
 B incorrect – the customer will not be aware of the new
production method and this will not persuade them to
try the product.
 C correct – heavy advertising will inform the customer
of the product’s existence.
 D incorrect – the launch is important to get the
customer to know about the product. Cutting the trial
launch costs would reduce this effect.

50. Questions
 4.
 Definition: A branded product is a product which, in the
eyes of customers, is seen to be different from other,
often similar, products. A brand provides an identity
which allows consumers to associate with the product
or service and to recognise it. This may help to
persuade them to buy that product rather than its rivals.
 Apple Corporation has very distinct brands. The
company brand itself ‘Apple’ is worldwide and the
individual product brands, such as iPhone, iPod and
iMac are all strong brands in their own right. People
recognise the brand and associate it with style and
quality.

51. Questions
 5.
 Branding helps Apple to get trials by:
 its reputation for worldwide quality.
 the wish for consumers to buy a reliable product.
 consumers wanting to be ‘part of the cult’.
 branding brings ‘word of mouth’ advertising with current
owners persuading new ones to buy the product.
 Branding helps with repeat purchase by:
 retaining current Apple product users.
 customers desire to own a ‘suite’ of Apple products.
 constant advertising reminding the customer of the brand’s
features and advantages.
 reputation for updating their product portfolio to meet market
needs.