IB Business

1. 4.5 – The Four P’s
IB Business

2. Product Life Cycle
 Research and Development
 Generating Ideas; Screening Ideas; Creating a Prototype; Test Marketing;
Commercialization
 Launch (Introduction)
 Growth
 Maturity
 Saturation
 Decline

3. Product life Cycle

4. Extension Strategies
Done at the maturity or saturation stages
 New Markets
 New uses for a product
 Repackaging/Redesigning
 Target different market segments (or export markets)
 Promotion
 These strategies are essential to long-term business success
 Extension strategies: marketing plans that extend the maturity stage of the
product before a brand new one is needed

5. Product Life cycle & marketing mix
Strategie
s
Introduction Growth Maturity Saturation Decline
Product Basic product
marketed
Product
improvements
or new product
development
New product
development;
extension
strategies
Extension
strategies
critical to
maintain sales
Weak products
withdrawn
from market
Price Cost-plus,
skimming or
penetration
pricing used
Penetration
prices slightly
increase
Competitive or
promotional
pricing used
Competitive
pricing used
Price cuts are
made.
Promotion Informative
advertising used
Persuasive
advertising used
Extensive
advertising to
remind
customers of
product
Aggressive
advertising
carried out to
emphasize
benefits
Advertising
reduced to a
minimum
Place Selective or
restricted
distribution takes
place
Intensive
distribution or
more
distribution
outlets are used
More intensive
distribution or a
wide range of
distribution
outlets
Widest range of
geographical
distribution
outlets used
Selective
distribution
and
unprofitable
outlets are

6. Product life cycle, investment, profit
and cash flow
High profit
margins
are most
likely
during the
growth
and
maturity
phase.
IF the machinery and cost of
developing the product is paid
off there might still be net
profit.

7. Relationship between product lifecycle,
investments, profit & cash flow
Product
Life Cycle
Stage
Developm
ent
Introduct
ion
Growth Maturity Saturatio
n
Decline
Investmen
t Level
High R & D
costs
High
costs on
promotio
n
Average
to high
costs on
promotio
n
Lower
costs on
promotion
Cost focus
is on
extension
strategies
Very low
costs on
promotion
Profit None None or
negative
Some
profit and
rising
High
profit;
reaches
its peak
High and
mostly
stable
profit
Decreasin
g profit
Cash flow Negative Negative
but
improves
with sales
Positive Positive Positive Positive
but
decreasin
g cash
Cash flow is
vital! Lack of
cash flow could
lead to a lack of
liquidity for the
business!!

8. Product Portfolio Analysis – BCG matrix
MarketGrowth
Market Share
High LowHigh
(Growing)
Stars
Problem Children or
Question Marks
??????
Low(Mature)
Cash Cows Dogs

9. BCG Matrix strategies
 Holding strategy –
 focus here is on products with a high market share, to ensure they maintain
current position
 Building strategy –
 turning problem children into stars
 Harvesting strategy –
 milking the benefits of products with a positive cash flow
 Divesting strategy –
 poor-performing dogs are phased out or sold off.

10. Limitations of Boston matrix
 Focuses on current market position
 May be a time consuming and complex exercises for businesses
 High market share doesn’t necessarily equate to high profits.

11. Branding
 Branding a name, symbol, sign or design that differentiates a firm’s product
from its competitors
 Can add value to a product, and can have a strong influence on how
consumers view a product. Read page 407 for the benefits and limitations
e.g Mars ice cream

12. Aspects of Branding
 Brand Awareness
 Ability of consumers to recognize a firm’s goods or services
 Major step; very important when promoting a product.
 Brand Development
 Any plan to strengthen or improve the product image
 Brand Loyalty
 When consumers are committed to a firm’s brand; willing to make repeat purchases
 A result of brand preference
 Brand Ambassadors – consumers who are positive about a particular brand
 Brand Value
 How much a brand is worth – reputation, potential income, market value

13. Importance of branding
 One of the most important tasks of marketers
 Branding gives customers a clear image with which they can associate the business
 A well-known brand can command a higher price
 Customers make judgments about certain product and services based on the way
they are presented
 A firm’s brand can provide legal protection
 Effective branding results in a sense of personal identification & emotional
connection among coHigher Market share, Premium Prices and Higher Barriers to
Entry
 nsumers
 Therefore=>

14. Importance of packaging
 Provides physical protection
 Offers convenience
 Provides information
 Can help reduce security risks
 Aids promotion
 Should be eye-catching and appeal to the customer
 Color and shape is key to reinforce and project a brand image

15. price
 Plays a significant role in the marketing mix – only “P” that generates revenue for a business;
businesses need to set an appropriate pricing strategy
 Cost-plus pricing (Mark-up pricing)
 Adding a mark-up to the average cost of producing a product – p. 409
 Penetration pricing
 Setting a low initial price to attract a large number of customers quickly
 Price Skimming
 Setting a high price when introducing a new product – usually for a limited period
 Psychological Pricing
 When firms consider how pricing affects consumers’ perception of their product’s value
 Consumers may associate a higher price with high quality
 Also reducing prices to make us believe we’re getting a deal – 9.95 instead of 10.00

16. Price - continued
 Loss Leader
 Charging a low price for a product, below average cost
 Aim is to attract customers; usually associated with supermarkets p. 305
 Price Discrimination
 Charging different prices to different groups of consumers
 Business has to have price-setting ability
 Elastic v. inelastic demand
 Example – concert tickets – different price points
 Competitive Pricing
 Takes into account what competitors are charging
 Predatory pricing; Destroyer pricing – driving competitors out of the market – p. 306

17. Promotion
 Communicating about your product to consumers
 Objectives of Promotion
 Informing consumers of a new or improved product
 Persuading consumers to purchase a product
 Reminding consumers that your product exists
 Enhancing the brand image of the product as well as the image of the business
 Promotion categorized into two forms: above-the-line and below-the-line

18. Above the line and Below the line

19. Above the line
 Paid form of communication – uses independent mass media to promote a
product or business
 Advertising – central global role – categories of advertising
 Informative Advertising – providing information on features, price or other
specifications
 Persuasive Adverting – convincing customers to buy one product over another
 Reassuring Advertising – Focus on existing customers; remind them they made the
right decision
 Television Radio Cinema Newspaper Magazines Outdoor Advertising

20. Below the Line promotion
 Focuses on promotional activities aimed at consumers or people interested in product
 Direct Marketing – examples – direct mail sent to consumers
 Has limitations – many consider it “junk mail”
 Personal Selling – sale of a product through personal contact
 Face to face or over the telephone – car sales as an example; personalized attention; salesperson =
commission
 Public Relations – promotional activities aimed to enhance the product image
 Sales Promotions
 Money off coupons
 Point of sale displays
 Free offers or free gifts
 Competitions
 BOGOF – Buy one get one free

21. Possible impact of sales promotions
Method explained Possible limitations
Price promotions Increased sales gained from price
reductions will affect gross profit on
each item sold. There might be a
negative impact on the brand’
reputation
Money off coupons encourage what they would have
bought anyway, retailers may be
surprised in the increased in demand
and not hold enough stocks=>consumer
disappointment
Customer loyalty schemes The discount offered cuts the gross
profit on each purchase .
Administration costs and many
customers have many loyalty cards
(how loyal are they?)

22. Possible impact of sales promotions
Method explained Possible limitations
Buy one get one free –BOGOF –it
encourages multiple purchases, which
reduces demand for competitors
products too
There could be substantial reduction in
gross profit margin, what about the
normal price….is it too high? Sell off
stock that can not be bought? Current
sales might increase but future sales
could fall as consumers have stocked up
on the product
Point of sales displays The best displays are usually offered to
the market leaders –new products may
struggle for best positions
Public relations and sponsorships Not easily controllable

23. Promotional mix
 The combination of promotional techniques that a firm uses to communicate
the benefits of its products to customers
 Involves a good balance of both above-the-line and below-the-line methods
 Certain factors must be considered when putting together an appropriate
mix:
 Cost – does the marketing budget support the method you want to use?
 Legal framework – must take into account any applicable laws
 Target Market – what specific segment of the market is the product aimed at?
 Stage in the Product Life Cycle
 Type of Product

24. Promotional Mix
 Eight stages in deciding:
1. Decide on the image of the product
2. Develop a profile of the target market
3. Decide on the messages to communicate
4. Set an appropriate budget
5. Decide how the messages should be communicated
6. Establish how the success of the promotional mix is to be assessed
7. Undertake the promotional plan and the mix elements of it
8. Measure its success

25. Impact of new technology on
promotional strategies
 Over the last decade technology has changed rapidly, forcing marketers to
incorporate the new technology into their marketing strategy.
 Social Media Marketing – the way technology is used to build relationships,
drive repeat business, and attract new customers through the sharing of
information.
 Promotion through word of mouth powered by technology
 Viral Marketing – the use of social media sites or text messages to increase
brand awarenesss or sell products
 Use of banners, pop-ups, social media, YouTube videos.
 Main goal to increase brand awareness through replicating a viral-like process
 Story of influencer being sued (not in the lesson)
https://sabguthrie.info/influencer-sued-breach-of-contract/

26. Benefits/limitations of technology
Benefits of Technology on Promotional
Strategies
Limitations of New Technology
Wide Reach – large % of internet usage
is Social Media
Accessibility problems – if a region has
no computer of internet, opportunities
may be missed
Engagement – most customers are
participants
Distraction – use of pop-ups can be
viewed as a waste of time
Market Information – provide useful
feedback on trends, public opinion,
brand activity, etc.
Lurkers – people who sit and absorb
information.
Cost Savings – Less expensive than
traditional methods
Brand Recognition – Repeat exposure
can increase awareness of brands,
leading to loyalty

27. Guerrilla marketing
 Marketing form using “untraditional” activities to help companies
stay successful but with a low budget, tends to be reserve for edgy
youth products=> might not be well received though
 Phrase coined from military and warfare-related terminology by
Jay Conrad Levinson
 Principles of Guerilla Marketing – remember with acronym of
APENS
 A = Activity
 P = Presence
 E = Energy
 N = Networks
 S = Smart

28. Methods used in guerrilla marketing
 Peer Marketing; Product Give-aways; text- & video-messaging; “Roach
Baiting” and Buzz Marketing; Intrigue; Liver commercials; Bill Stickers
 Benefits:
 Low Cost Flexibility Simplicity Identified target market
 Communication Tool Interaction opportunity Accessibility
 Negative Effects of Guerilla Marketing
 Denting the brand image high negative attitudes
 Negative impact on social life Ethical issues

29. Place – how does product get to
consumer?
 Refers to the location of the business and the customers
 Helps businesses develop the best way to distribute their produce
 Using intermediaries and wholesalers helps businesses store and market
products
 Growing use of internet makes reaching a wide range of customers possible

30. Channels of distribution
 Path taken by a product from producer to consumer
 Zero Intermediary – directly sold from producer to consumer
 Example – vegetables at a Farmer’s Market
 One Intermediary –
 One person between producer & consumer
 Two Intermediaries
 Producer, Wholesaler, Retailer, Consumer
 Look at illustrations and table, page 425

31. Distributors
independent businesses that act as
intermediaries that specialize in the
trade of products made by certain
manufacturers.
Distributors
Many distributors maintain exclusive
buying agreements that limit the
number of participants or enable
distributors to cover a certain territory.
The distributor is the manufacture’s
direct point of contact for prospective
buyers of certain products. However,
distributors rarely sell a manufacturer’s
goods directly to consumers.

32. Wholesalers
Are businesses that purchase large
quantities of products from a
manufacturer and then separate or
'break' the bulk purchase
into smaller units for resale to
retailers.
Agents
Agents or brokers are negotiators
who help to sell the vendor's
products. Mortgage and insurance
agent/brokers will negotiate the
best deals on behalf of their
clients and take a commission
payment (and bonuses if they
reach specific targets).

33. Revision checklist
 Have information understood
 Read!!!!