Marketing Strategy (Edexcel A Level Business)

• The product life cycle describes the different stages a product goes through from its conception to its eventual decline in sales
• There are typically five stages in the product life cycle: development, introduction, growth, maturity, and decline
    

The five stages a product goes through over its life span - from development to decline (and ultimately withdrawal from a market)

 

•  The implications for cash flow and marketing vary at each stage of the product life cycle
• Companies should tailor their marketing strategies and manage their cash flow to ensure long-term profitability and success
   

The Implications of the Product Life Cycle for the Business cash flow and Marketing Strategy

Stage	Explanation	Implication
Development	The focus is on designing and developing the product The business usually incurs high costs for research and development, market research, and product testing	Cash flow is usually negative during this stage, as the company is investing heavily in the product without generating any revenue The marketing strategy during this stage is focused on creating awareness and generating interest in the product
Introduction	The stage begins when the product is launched Characterised by slow sales growth as the product is still new and unknown to most consumers	Cash flow is usually negative as the business usually incurs high costs for promotion, advertising and distribution Marketing efforts are focused on creating awareness and generating interest in the product
Growth	The product enters this stage when sales begin to increase rapidly The business focus shifts to building market share and increasing production to meet the growing demand	Cash flow usually turns positive during this stage as sales revenue increases and costs are spread out over a larger volume of production The marketing strategy is to differentiate the product from its competitors and build brand loyalty
Maturity	Characterised by slowing sales growth as the product reaches its peak in terms of market penetration	Cash flow is usually positive during this stage as sales revenue continues to come in and costs are reduced through economies of scale and efficient production processes The marketing strategy aims to maintain market share and increase profitability by cutting costs and finding new markets
Decline	Starts when sales begin to decline as the product becomes obsolete or is replaced by newer products The business focus shifts to managing the product's decline and reducing costs	Cash flow usually turns negative as sales revenue declines and costs associated with the product's decline increase The marketing strategy may involve discontinuing the product, reducing its price to clear inventory, or finding new uses for the product

• Extension strategies refer to the techniques used by businesses to extend the life of a product beyond its natural life cycle
• These strategies are designed to boost sales and maintain profitability for a product that has reached the decline stage of its life cycle
• There are two types of extension strategies:
  • Product-related extension strategies
  • Promotion-related extension strategies
• By making product and promotion-related changes businesses can continue to appeal to customers and extend the life of their products
  
  

Product-related extension strategies

• Involves changing or modifying the product to make it more appealing to customers and extend its life cycle and can be achieved in one of three ways:
  • Product improvements e.g. Samsung releases new versions of its Galaxy Smartphone every year with upgraded features and improvements to the previous model
  • Line extensions e.g. Coca-Cola introduced Diet Coke and Coke Zero as line extensions of its original Coca-Cola
  • Repositioning e.g. when IBM's personal computer division started losing market share to other brands, it repositioned its products as high-end business machines and focused on the enterprise market
    

Promotion-related extension strategies

• Involves changing the marketing and promotion of the product to extend its life cycle and could include one or more of the following changes:
  • Changes to advertising e.g Kellogg's continues to recreate adverts for its Corn Flakes cereal which has been around since 1906
  • Price promotions e.g. Cyber Monday occurs on the first Monday after Thanksgiving in the USA and electronic firms discount prices significantly to boost sales of their products
  • Sales promotions e.g. many coffee shops offer a loyalty program where customers can earn a free drink for every six consumed

• The Boston Matrix is a tool used by businesses to analyse their product portfolio and make strategic decisions about each product
• The matrix classifies products into four categories based on their market share and the market growth rate
  • Cash Cow
  • Problem Child/Question Mark
  • Star
  • Dog
     

The classification of products in the Boston Matrix according to their market share and the growth rate in the market as a whole
 

• By categorising products into these categories, businesses can allocate resources more effectively, optimising their cash flow and developing marketing strategies that align with the product's potential
   

The Implications of Product Classification in the Boston Matrix for the cash flow and Marketing Strategy

Product Type	Explanation	Implications
Cash Cow	Cash cows are products with a high market share in a mature market (the entire market is no longer growing)	They generate significant positive cash flow but have low growth potential The business invests minimal resources in cash cows as they are seen as stable sources of income Marketing efforts focus on maintaining their market share and profitability Cash cows are valuable assets and can be used to fund the development of new products
Problem Child/Question Mark	Problem child or question mark products have a low market share in a high-growth market These products have the potential to become stars if the company invests in their development	There is often a negative cash flow as businesses usually invest in problem child products to increase their market share and turn them into stars If the investment does not result in growing the business may discontinue the product Marketing efforts focus on increasing their market share and brand recognition
Star	Star products have a high market share in a high-growth market The company typically invests in stars to maintain or increase their market share	They generate significant positive cash flow and have the potential for continued growth Marketing efforts focus on building brand recognition, increasing market share, and maintaining profitability Stars are valuable assets and the business should focus on maximising their potential
Dog	Dog products have a low market share in a low-growth market	They generate little revenue for the company and have no growth potential Businesses often move away (divest) from these to focus on more profitable products Marketing efforts for dog products are minimal or zero

• Marketing strategies vary depending on the type of market being targeted
  • Mass markets, niche markets, business-to-business markets (B2B), and business-to-consumer (B2C) markets
     

Mass Markets

• Mass markets are characterised by large numbers of customers who have similar needs and wants e.g. retail clothing
• Mass markets focus on building brand awareness and appealing to a broad audience
  • Advertising campaigns are usually designed to reach as many people as possible and use mass media such as TV, radio, and print ads
  • The messages are often simple and the goal is to create a strong brand identity that resonates with a large segment of the population

  

Niche Markets

• Niche markets are characterised by smaller groups of customers with specific needs and want. e.g organic food stores, luxury car dealerships
• Marketing strategies focus on targeting a specific segment of the population and building relationships with them
  • Advertising campaigns are usually more targeted and may use social media to reach potential customers
  • The messages are often more detailed and often include technical information that is relevant to the specific needs of the target market

 

Business to Business (B2B)

• B2B marketing focuses on selling products to other businesses e.g. software companies selling to other businesses; manufacturers selling parts to other manufacturers
• In B2B marketing, the emphasis is on building relationships with other businesses and demonstrating how your product can help them be more successful
  • Advertising campaigns may include case studies that demonstrate the value of your product/service
  • The messages are often more technical and may focus on features and benefits that are relevant to other businesses

 

Business to Consumer (B2C)

• B2C marketing focuses on selling products/services directly to consumers e.g clothing retailers
• In B2C marketing the emphasis is on building brand loyalty and creating a positive customer experience
  • Advertising campaigns may include social media ads or influencer marketing campaigns that appeal to the emotions of consumers
  • The messages are often more emotional and may focus on the lifestyle benefits of using the product/service

• Developing customer loyalty helps businesses to grow and be successful in the long term
• Customer loyalty drives repeat purchases which helps the firm to reduce marketing costs when launching new products
• Three commonly used methods of building customer loyalty include providing excellent customer service, offering loyalty cards, and offering saver schemes

 

Examples of how Businesses Develop Customer Loyalty

Method	Explanation	Example
Customer service	When customers have a positive customer service experience, they are more likely to return and recommend the business to others	Zappos is an online retailer that is well known for its exceptional customer service They offer free shipping and returns Their customer service representatives are available 24/7
Loyalty cards	A popular way for businesses to encourage repeat customers These cards typically offer rewards or discounts for frequent purchases	Sephora has a loyalty program called "Beauty Insider." Members earn points for every purchase they make They can redeem those points for beauty products or experiences
Saver schemes	These schemes typically offer discounts or special pricing for customers who save money with them This helps customers gradually save up some money that can be used at periods when food bills are usually higher e.g Christmas	Sainsbury's offers a Christmas saving scheme Their discounts are then usually between 2% and 6%