PLC (product’s life cycle)

Shows the different stages that a product is likely to go through from its initial design and launch
to its decline and eventual withdrawal from the market.
Measured in terms of sales revenue
PLC allows managers to identify necessary changes and to take appropriate action as a part of
an improved marketing strategy.

Research and development:

- Involves the R&D department
- Activities include idea generation, market research, market analyses, product
development, testing prototypes, and test marketing.

Launch (Introduction):
- At this stage, the product is introduced to the market.
- Requires a significant amount of promotion to raise awareness and to encourage sales
- The price may be high if the product has a first mover advantage or a unique
sellingpoint.

Growth:
- At this stage, the product enjoys sales growth and brand recognition
 - Establish brand loyalty
- Marketing activities are focused on gaining higher market share

Maturity:
- The rate of growth in sales slows down, although the firm has a significant market share.
- The combination of high sales and low unit costs leads to higher profits which can be
used to support the development of other products in the firm’s portfolio.
- Due to competition in the market, the pricing of the product is likely to change.

Decline:
- The final stage of the PLC
- Sales revenue and profits fall
- Cost cuttings
- Extension strategies are used

Product portfolio
The collection of all the products owned by a business at a point in time. Product portfolio
management enables a firm to have better control over its sales revenues, costs, profits, and
operational risks.

The BCG matrix is the most popular marketing planning tool that helps managers to plan for a
balanced product portfolio.

Extension strategies:
Aims to extend PLC

- Price reductions
- Advertising
- Redesigning
- Repackaging
- New markets
- Respotioning the product
- Changing brand name
- Brand extension
- Product differentiation
PLC, investment, profit, and cashflow:

Aspects of branding:
A brand refers to a name that is identifiable with a product of a particular business.
A trademark gives legal protection to the owner to have exclusive use of the brand name.

Brand awareness:
The extent to which people recognize a particular brand. Often expressed in percentage.
Brand awareness plays a major part in the buying decision of consumers.

Brand development:
Refers to the ongoing and long-term marketing process of improving and enlarging the brand
name in order to boost sales revenue and market share.

Brand loyalty:
When customers buy the same brand of a product repeatedly over time.
- Helps businesses to maintain and improve their market share
- Enables businesses to charge premium pricing for their products, which improves their
profit margins
- Acts as a barrier to entry in highly competitive markets
- Plays a major role in the future success of a business, helping to prolong PLC

The opposite of brand loyalty is brand switching.

Brand value:
The premium that customers are willing to pay for a brand name over and above the value of
the actual product.

Advantages:
- Higher market share
 - Premium prices
- Higher barriers of entry

Branding strategy is used to reinforce the four aspects of branding. This often includes the use
of slogans and logos to emphasize the brand and what it stands for.

Importance of branding:
- Legal instrument
- Revenue earner
- Image enhancer
- Risk reducer

Certain reasons why the brand is superior to the product:

- Intangible
- Uniqueness
- Timeless

Price refers to the amount paid by a customer to purchase a good or service.

Pricing methods:

Cost plus (markup) pricing

This method involves adding a percentage or predetermined amount of contribution to the cost
per unit of output to determine the selling price. The percentage or specific amount is known as
the markup or profit margin.
1. Direct labour + direct materials + overheads + cost price
2. Cost price + profit margin = MRP

The main advantage of cost-plus pricing is its simplicity and ease of calculation.
The disadvantage is that cost-plus pricing often relies too much on intuitive decision-making
rather than on any actual market research about the needs of the customer.

Penetration pricing:
A pricing method that involves setting a low price in order to enter the industry. It takes the form
of a heavily advertised discounted price offer in order to attract a large number of customers in a
short space of time.
Suitable for mass-market products that sell in large enough volumes to sustain low-profit
margins.

Loss leader pricing:

- Involves selling a good or service below its cost value.
- Loss leader products can also be used to encourage brand switching
 - Used to attract new customers to a good or service to establish a customer base and
secure future and recruiting sales revenues.

Predatory pricing:
- Price war
- Involves temporarily reducing prices in an attempt to force competitors out of the
industry as they cannot compete in a profitable way

Premium pricing:
When the price of a good or service is set significantly higher than similar competing products,
usually because the product is of higher quality or is sufficiently unique enough to justify the
premium price

Advantages:
- Generating higher profits margins
- Create high barriers of entry for competitors if it can establish a loyal customer base
Disadvantage:
- Can limit the number of customers, due to the relatively high price.
- Premium brands may lose their status if they appeal to the mass market

Dynamic pricing:
- Varying the price of a good or service to reflect changing market demand, often with
price changes throughout the day
- Are flexible and adaptive
- Is about selling the same product at different prices based on changing dynamics of the
market for a particular product.
Advantages:
- Greater control over pricing method
- Real-time data, enabling firms to set the right or optimal price for different products
- Can help maximize profits
Disadvantages:
- Customers are often unhappy about not knowing just how high a price they have to pay
for the good or service
- Price wars are not sustainable in the long term and can even lead to bankruptcies
Competitive pricing:
Setting the price of a good or service at the same or similar level to that of its competitors.
Options:
- Pricing above the competition
- Pricing on the same level as the competition
- Pricing below the competition

Advantage:
- Simple
- Minimal effort
Disadvantage:
- Needs nonprice methods to differentiate itself in a highly competitive market

Contribution pricing:
Setting a price based on the direct costs of producing a product. The aim is to ensure the selling
price generates an acceptable contribution towards covering the fixed costs of the business

Contribution refers to the amount of leftover from the selling price after deducting all direct costs
of production.

Advantage:
- Selling price high enough to cover both direct costs and contributes to the payment of
indirect costs
Disadvantage:
- Allocating indirect costs between products can be subjective, which is deemed to be
unfair or inequitable
- The business still needs to double-check the resulting contribution price to ensure that it
remains competitive.

Price elasticity of demand (PED)

The degree of responsiveness of demand for a product due to a change in the price of that
product

Relatively small change = price inelastic

Relatively large change = price elastic

Percentage change in quantity demanded / percentage change in price

PED less than 1: price inelastic

PED equal to 1: unit elastic
PED greater than 1: price elastic

Why is PED used:

- Help firms decide on their pricing policy
- Determining which products are most affected by a downturn in the economy
- Predicting the effects of exchange rate fluctuations
- Helping governments to determines the optimum level of tax to impose on certain
products

Promotion:
The methods of communicating marketing messages to existing and potential customers,
usually with the intention of selling a firm’s products.
They have 5 key objectives:
- To inform
- Persuade
- Remind
- Develop
- Attract

Above-the-line promotion:
Any form of paid-for promotional method through independent mass media sources to promote
a business, its product, or its brand.
Methods:
1. Television advertising
- Has the power to bring about extremely powerful messages to audiences
- Designed to meet specific needs
- Huge costs (drawback)
2. Radio advertising:
- Reach larger audiences
- Cheaper than TV advertising
- It can only communicate audio messages (drawback)
3. Cinema:
- Audiences can be specifically targeted
- Tailored to specific market segments
- Limited audience (drawback)
4. Newspaper advertising
- Reaching wide audiences
- Cost-effective
- Target different markets
- This could be considered a high cost for small businesses (drawback)
5. Magazines:
- High-definition, photo-quality color images to capture the audience’s attention
- Specialist magazines target the right market segment
 - Static (drawback)
- Advertising clutter (drawback)
- The lag time between submitting an advert and publishing (drawback)
6. Outdoor advertising:
- Use of commercial billboards
- High rate of exposure
- Difficulty in monitoring and measuring effectiveness (drawback)
- Difficulty in targeting market segments (drawback)
Below-the-line promotion
The use of non-mass media promotional activities, allows the business to have direct control.

Methods:
1. Direct marketing
- Do not use an intermediary
- The business keeps a large share of financial returns
- Does not reach the right audience (drawback)
- The cost of producing and distributing promotional materials is high (drawback)
2. Personal selling
- Rely on sales representatives directly helping and persuading customers to buy
- Can be tailored to the individual’s needs and preferences of the customer
- Personal selling agents can be expensive to hire (drawback)
3. Sales promotion:
- Temporary method
- Used to boost sales and attract new buyers
- Used to sway customers away from rivals
- Encourages action rather than just information and reminder
- High cost (drawback)
4. Point of sales promotion:
- Promotion of a product at the place or location where the customer buys the
product
5. Publicity and public relations
- The process of promoting a business and its products by getting media coverage
without directly paying for it
- Public relations refers to the marketing activities aimed at establishing and
protecting the desired image of an organization
6. Trade shows:
- Enable exhibitors to conduct live demonstrations to showcase and promote their
products
- Attract large audiences of targeted customers
- Potential rivals could make an appearance (drawback)
7. Sponsorships:
- Businesses provide financial funds and resources to support an event or another
organization in return for publicity and advertising space and prominent publicity
8. Word-of-mouth (WOM)
 - Most effective
- No direct costs
- Potentially very damaging if the word spread is sub-standard
9. Guerrilla marketing/ Stealth marketing
- Low budget
- Designed to make the audience unaware that they are being targeted
- Catches the attention of targeted customers through unusual and shocking
methods
10. Packaging:
- Promotes brand name
- Encourages impulse buying
- Cost (drawback)

Through the line promotion:

The promotional strategies that involve both above and below the line methods

Considering factors:
- Cost
- The product
- The PLC
- Legislation

Methods:
- TV
- Radio
- Outdoor advertising
- Newspapers
- Internet
- Cinema

Social media marketing

- Greater and faster than WOM
- Highly cost-effective
- Easy access to promotional exposure
- No control over comments made about the brand (drawback)

Channels of distribution:
The means used to get a product to the consumer.

Intermediation is the process used to facilitate this. Intermediates are the agents or businesses
that act as middle persons in the channel of distribution between the manufacturers and
consumers of a product.
A long channel of distribution tends to raise prices for consumers as each intermediary will add
a profit margin to the price. A longer channel of distribution is not appropriate for perishable
products.

Distribution channels:

1. Wholesalers:
- Purchases large quantities of products from teh manufacturer and then separates
or breaks the bulk purchases into smaller units for resale
- They bear the costs of storage
- They sell smaller batches of products to retailers and intermediaries
- Frees up time for manufacturers to focus on production
- The producers take a risk in passing on the responsibility of marketing their
products. (drawback)

2. Distributors and agents (brokers)

- Independent and specialist businesses that trade in the products of only a few
manufacturers
- They are representatives and negotiators who act on behalf of buyers and
vendors of a product
- They rely on personal selling techniques such as door-to-door and exhibitions.

3. Retailers
- Sellers of the product to the final consumer.
- They have the ability the reach large numbers of consumers