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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
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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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4.11Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004
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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4.12Capon: Understanding Organisational Context 2nd edition © Pearson Education 2004
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