Marketing Essentials: Product Life Cycle, Pricing & Strategies
Marketing Mix: Key Decisions
The marketing mix involves four key decisions that must be made for the effective marketing of a product.
Customer Relationship Marketing
Customer relationship marketing (CRM) uses marketing activities to establish successful customer relationships, maintaining existing customer loyalty.
Product Strategy
The product element includes consumer and industrial goods and services. New product development (NPD) is crucial for many businesses and is based on satisfying consumer needs.
Brand Management
A brand is a distinguishing name or symbol used to differentiate one manufacturer’s product from another. Brands can significantly influence marketing efforts.
Product Positioning
Product positioning involves analyzing how a new brand relates to other brands in the market, within the consumer’s mind. The first stage is to identify the product’s features that are important to consumers. This analysis can identify potential market gaps and niche market opportunities.
The Product Life Cycle
The product life cycle describes the stages a product goes through from its initial conception to its eventual removal from the market. It is an important concept in marketing.
Main Stages of the Product Life Cycle:
- Introduction: Researching, developing, and launching the product.
- Growth: Sales increase at their fastest rate.
- Maturity: Sales are near their highest, but the growth rate is slowing down.
- Decline: If no extension strategy is implemented, this is the final stage, where sales begin to fall.
Extension Strategies
Extension strategies extend the life of a product before it declines. Businesses use marketing techniques to improve sales.
- Advertising: Gain a new audience or remind the current audience.
- Price Reduction: Make the product more attractive to customers.
- Adding Value: Add new features to the current product.
- Explore New Markets: Try selling abroad.
Pricing Strategies
Price is the amount paid by consumers. The price level determines the degree of value added and influences revenue and profit.
Factors Determining Price Elasticity of Demand (PED)
Factors include how necessary the product is, the number of similar competing products, and the level of consumer loyalty.
Applications of PED
PED can be used for making more accurate sales forecasts and assisting in pricing decisions.
Limitations of PED
PED assumes nothing else changes, results can quickly become outdated, and it is not always easy or possible to calculate.
Main Determinants of Price
The main determinants of price are costs of production, competitive conditions, competitor’s prices, business and marketing objectives, and PED.
Pricing Methods:
- Cost-Plus Pricing: Setting a price by adding a fixed amount or percentage to the cost of making the product.
- Penetration Pricing: Setting a very low price to gain as many sales as possible.
- Price Skimming: Setting a high price before other competitors enter the market.
- Predatory Pricing: Setting a very low price to eliminate the competition.
- Competitor Pricing: Setting a price based on competitors’ prices.
- Price Discrimination: Setting different prices for the same good in different markets.
- Psychological Pricing: Setting a price just below a whole number to make it seem smaller (e.g., £9.99 instead of £10).