FURTHER ASPECTS OF MARKETING & VALUE

The product life cycle

The product life cycle is an attempt to recognize distinct stages in a product's sales, history,
from introduction to the market, through periods of growth and maturity to eventual decline.

It is important to understand what we mean by “Product”

Product class

This is a broad category of product, such as cars, televisions telephones, newspapers and so
on.

Product form

Within a product class, products take different forms. For example, there are many different
forms of car, such as four door saloon car, hatchback, two-seater sports car, 4x4 and so on.

Product forms may change over time even though the product class remains. And at any time
there may be many different forms of the same product class Product forms have a shorter
life cycle than a product class

Brand or specific model

Within each product form there are many specific models and brands of the product, made by
different manufacturers. For example, mobile phones and smartphones have been produced,
in different models, by manufacturers such as Apple, Samsung, Blackberry, Nike and others.
Individual models may have a much shorter life cycle than the product form to which they
belong.

Typical Product Life cycle of a product form

Introduction stage of the life cycle

A new product takes time to be accepted, slow growth in sales, Unit costs are high, Costly
sales promotions, Marketing costs are high, the product range is limited, The product for the
time being is a loss maker, negative cash flows high risk, few, if any, competitors, opportunity
for a company to establish a name

Product

Developing a product that meets the needs of customers in a target market. If the product is
very new, this may be difficult and the first producers may not get the product features 'right'
first time. At this stage, there may be significant changes to the product features to make the
product more attractive

Price

The pricing strategy for a new product may be a price skimming strategy - charging a high
price in the belief that a sufficient number of customers will be willing to pay this price-or a
market penetration pricing strategy-charging a low price in order to build up demand for the
new product quickly.

Place

There will probably be limited distribution channels for a new product, and the challenge for
the manufacturer is to find ways of making the product available to customers to buy

Promotion

Spending on advertising and promotions may need to be high, initially to make potential
customers aware of the existence of the product; then to create interest, then to persuade
customers
Growth stage of the life cycle

Sales will eventually rise, The market will grow, product will start to be profitable, Capital
investment may be needed to meet the rising demand, Competitors are attracted to the
market, Manufacturers introduce additional features to their product ( company may attempt
to be the least-cost producer), continued marketing expenditure is required, companies may
identify new market segments

Product

Products are differentiated as the market grows in size. With market segmentation, products
are developed for different segments of the market.

Price

If the early manufacturers charged skimming prices, prices in the market will fall. The rate of
growth in the market will depend to a large extent on prices charged.

Place

There will be more distribution channels for the product, and the challenge for the
manufacturer is to find ways of improving the distribution of its products to customers. New
methods of distribution may be used.

Promotion

Spending on advertising and promotions may continue at a high level, due to the increase in
competition in the market. However as customers become more aware of the product, the
advertising message may change from trying to create awareness to trying to persuade
customers to buy.

Maturity stage of the life cycle

Market will stop growing, Purchases are now based on repeat or replacement purchases,
longest period in the life cycle of a successful product's life, generates positive cash flows,
Prices may fall sell new products under the same brand name, The number of companies in
industry falls.

Product

Extending the maturity phase of the life cycle by introducing new features to the product and
developing new and improved models. Some producers may look for different ways of
segmenting the market and identifying target markets, in order to improve competitiveness.
Protecting and exploiting the brand name may be important.

Price

Price competition in the market may increase.

Place

Distribution channels in the market should be well-established. Efficient channel

management is important for producers.

Promotion

Spending on advertising and promotions is managed as part of the overall marketing mix.

Decline stage of the life cycle

Sales of a product form will begin to decline, severe competition between manufacturers,
Profits fall as sales volume and prices fall, producers leave the market, Producers may be
reluctant to leave the market

Product

Making improvements to the product and try to maintain sales demand and extend the life of
the product.

Price

Price competition in the market may continue, but as unit costs rise with falling sales,
volumes price reductions may be difficult because the profit needs to remain profitable if it is
to continue

Place

There may be fewer distribution channels. Producers may need to consider how to retain
sufficient distribution channels in order to reach remaining customers.
Promotion

Spending on advertising and promotions will fall, because high spending is no longer
justified.

Problems with the product life cycle concept

• With the speed of technological change, some products may have a very short life cycle

& it makes no time to change marketing strategies for each stage.

• Recognition of stage of the product has reached.

• Not always true (theoretical curved of a product life cycle). E.G. Radio

• Changeable (change or extend of PLC)

Product life cycle and portfolio planning

Portfolio planning is planning which products to make and sell, so as to have a balance of
products that are currently successful and newer products that are expected to be successful in
the future. Main objective is to create a balance portfolio of products.

The Boston classification (BCG matrix)

The product portfolio should be balanced, with cash cows providing finance for stars and
question marks. There should be a minimum number of dogs in a company's product range,
and the aim should be to withdraw these from the market.

 Stars. In the short term, these require capital expenditure in excess of the cash they
generate, in order to maintain their market position, and to defend their position
against competitors' attack strategies, but they promise high returns in the future.

 Cash cows. In time, stars will become cash cows as the market matures. Cash cows
need very little capital expenditure (because opportunities for further growth in a
mature market are low), and they generate high levels of cash income. Cash cows can
be used to finance the stars or question marks that are in their development stage.

 Question marks. The question with these products is whether they justify considerable
capital expenditure in the hope of increasing their market share and improve their
market share. Or will they be squeezed out of the expanding market by rival products?
Question marks have the potential to become stars if they are successfully developed.
However, if their development is not successful, they may end up as 'dogs'
 Dogs, these may be former cash cows that have fallen on hard times, or question
marks that did not succeed. They may have a useful strategic role, either to complete a
product range or to keep competitors out. However remaining life of dogs is unlikely
to be long.

Although developed for use with a product portfolio, the BCG matrix is also in in
diversified conglomerates to assess the strategic position of subsidiary strategic business
units (SBUS). This is an important point to note: the BCG matrix can be applied either to
a product portfolio or a business portfolio.

Services marketing mix

The extended marketing mix (7Ps) for services consists of product, price, place, promotion,
people, physical evidence and process.

• People - employees
When employees deal directly with customers in providing a service they should understand
that what they do has a direct impact on the satisfaction and the value customer receives.
'People' issues in marketing may include;

• Appearance
• Attitude in dealing with the customer
• Behaviour Competence, or perceived competence
• Commitment to providing good service
• Discretion/confidentiality
• Integrity/ethics ethics
• Professionalism

Front line service staffs are also important for CRM which is described later.

• Physical evidence- Physical evidence refers to intangible aspects such as the look and feel
of the organization and its brand, through physical evidence such as the buildings they
operate in, and the use of company livery, uniforms, letterhead and so on.

Physical evidence of a service can be provided in different ways that are intended to make the
customer more willing to buy the service or more satisfied with the service that is received-
even though the service is essentially intangible in nature

1. Environment (and atmosphere) of service delivery

• Colours • Layout • Staff uniforms • Noise levels • Smells • Ambience •
Website design
2. Facilities • Vehicles • Equipment/tools
3. Tangible evidence of purchase
• Labels and other printed information • Tickets, vouchers and purchase
confirmations • Logos and other visible evidence of brand identity Packaging

• Process-the way that services are delivered (smoothness of company systems and
procedures in a way that is trouble free and meets the customer’s expectation)

Customer relationship marketing (CRM)

Customer relationship marketing: using marketing resources to retain, rather than simply

attract, customers. It focuses on establishing loyalty among the existing customers.

Customer relationship management (CRM) (June 2016) is the establishment, development

maintenance and optimization of long term mutually valuable, relationships between

consumers and organizations. Many companies provide customized services by using CRM
based computer software & customer databases

Transactional marketing

Importance of single sale

Importance of product features

Short timescale

Less emphasis on service

Quality is the concern of production

Competitive commitment

Persuasive communication

Relationship marketing

Importance of customer relationship

Importance of customer benefits

Longer timescale

Strong emphasis on customer service

Quality is the concern of everyone

High customer commitment

Regular communication

The need for CRM

• Loyalty
• Cost
• Revenue and profit
• Extending the product range
CRM is concerned with more than the quality of the product or the service, and the level of

customer satisfaction. Important aspects of CRM are therefore (Key requirements of

successful CRM)

• Getting to know the customer better (Improve and add this over the time)

• Getting the customer to understand that the company knows about them and appreciates
their business

• Developing the customer's interest in and loyalty to the company

(By using the knowledge about the customers)

The difference between customer and consumer (user)

Customers are the people who buy an organization's products and services. The consumer is
the person who uses it or consumes it.

The person or persons who make a buying decision may be referred to as the decision-
making unit or DMU

Collecting and using information about customer needs and buying habits

A key requirement with CRM is to gather information about the customer, their needs and
how they make their buying decisions.

CRM and the information collection methods will be differ according to the target market

1. For industrial products and high value products – possible to devote more time and
even build a personal relationship.
2. For Goods where the number of customers is large (retailers, loyalty cards, etc)

Different ways from which companies can collect informations

• Direct questioning

• Conversation

• Questionnaires

• Complaints

• Loyalty cards

• Social networking

Using information to build the relationship

1 Dealing with industrial customers

Companies may communicate with industrial customers regularly. They can use information
obtained about the customer's future intentions and buying preferences to make selling
propositions.

2 Dealing with repeat customers for consumer goods or services

For example, many hotels record guests' details and preferences so that they do not have to be
re-entered each time a guest checks in.

3 Using knowledge about the customer to improve the product or service

If a retail store has a loyalty card system, and uses the cards to build up a database of the
customer's buying history, its knowledge of customer buying habits will enable it to offer
money-off vouchers or other sale promotions, This will strengthen the relationship.

4 Using knowledge of the customer to send personalized sales promotions

A company may use its knowledge of a customer to send personalized communications to

customers, by email or sales letter, providing information about new products or containing a
sales promotion offer.

CRM and customer databases

Databases improve the process of obtaining information about a customer because they can
be used to:
• Accumulate more data about customers than could be held in manual records

• Analyze the information to understand more about the customer

• Use the information to make personalized marketing communications with the customer

• Improve customer loyalty by showing that the company knows about the customer
personally

CRM applications and CRM databases

The use of a database makes marketing with CRM much easier.

• Electronic marketing

A high volume of all communication takes place via email. A basic application for any CRM
system is to send an email to any customer who has previously purchased certain items,
which should lead the company to think that the customer may be interested in related items.
CRM systems allow this list to be created in minutes and campaigns put into action instantly.

• Targeted mailing

A simple example of this is to send this season's catalogue to customers who purchased from
the last catalogue. To achieve this, the mailing lists need to be linked to sales history

.• Sales analysis

For example, it should be easy to generate a list of customers who have not purchased a
product for over a year. These could then be targeted by email, direct mail or telephone by
asking them if they want to receive the next catalogue, or offering them a discount to become
a customer again

• Order building

Regular customers placing orders online can be reminded of their usual order requirements,
any related products on offer and further product information. As well as increasing sales, this
also helps to build the customer relationship.

• Front office solutions

These involve using a customer database when dealing directly with the customer. Many call
centers use CRM software to store all of their customers' details. When a customer calls, the
system can be used to retrieve and display information relevant to the customer. By serving
the customer quickly and efficiently, and also keeping all information on a customer in one
place, a company aims to make cost savings, and also encourage new customers.