Marketing Mix and Product Lifecycle

The Marketing
Mix & Product
LifeCycle – Part 1

Unit 2 Business & Communication
Systems

Intended Learning Outcomes

Students should be able to:-
1. List the four elements of the Marketing Mix and be able to describe each

of them
2. Product: demonstrate knowledge and understanding of the Product Life

Cycle (PLC) and strategies used to extend the PLC
3. Price: demonstrate knowledge and understanding of the 4 aspects of

pricing:
• Cost-based; competitor-based; penetration and skimming

Recap - Marketing

• Marketing refers to activities a company
undertakes to promote the buying or
selling of a product, service, or goods.

• “What the customer wants”
• Identifying the need and satisfying it!
• selling of a product, service, or good

The Marketing Mix

• All businesses have choices to make when it comes to
marketing their products:
• What shall the price be?
• What is the best design for the product?
• Where should it be sold?
• How should it be promoted?

• These decisions and how they relate to each other are
known as the marketing mix:

• Product, Price Promotion and Place (4P’s)

Marketing Mix

• The marketing mix is made up the
four P’s:-
• Product
• Price
• Promotion
• Place

https://www.bbc.com/bitesize/guides/zw987ty/revision/1

Marketing Mix

• No one element of the marketing mix
is more important than another

• Each element ideally supports the
others.

• Firms modify each element in the
marketing mix to establish an overall
brand image and unique selling point
that makes their products stand out
from the competition.

Recap ILO 1

• Marketing refers to activities a company
undertakes to promote the buying or selling of a
product, service, or goods.

• All businesses have choices to make when it comes to
marketing their products

• These decisions and how they relate to each other are
known as the marketing mix

• 4 P’s –product, price, place and promotion

ILO 2

• The first P:
1. Product: demonstrate knowledge and

understanding of the Product Life Cycle
(PLC) and strategies used to extend the PLC

Product

• Appearance
• Features
• Function
• Cost
• Packaging
• USP (what makes your product different/better from

the competition?)

Product Licecycle

• Every product was new, once, and most of them follow a
fairly predictable path of acceptance, demand and
eventual disinterest from consumers.

• That doesn't mean everything stops selling eventually but
it's applicable to most products

• That rise and fall is usually referred to as the product
lifecycle, and knowing where your product fits into that
cycle can help you make intelligent decisions about your
business's future

What is the Product Life Cycle?

“The product life cycle (PLC) is the cycle through
which every product goes through from
introduction to withdrawal or eventual demise.”

(Economic Times)

Stages of the Product Lifecycle (PLC)

1. Research and Development
2. Introduction
3. Growth
4. Maturity
5. Saturation
6. Decline

1. Research & Development

• Market research is carried out
• The product is tested
• Expensive stage – large costs
• No income for the business during this stage

2. Introduction

• This is the stage when the product is launched onto the
market

• At this stage, there is heavy marketing and product
promotion

• Sales are slow as customers are made aware of the
product

• Expenditure by the business is high
• Profits low

3. Growth

• Sales increase rapidly as
customers are now aware of the
product

• Customer loyalty
• Competition can be high from

other businesses with similar
products
• Profits should begin to increase

4. Maturity

• Sales are maintained as the product is well
established in the market

• Competition becomes very intense
• Difficult to increase the volume of product

sales any further
• Business starts to think of ways of extending

the PLC

5. Decline

This is the final stage of the PLC
• Sales have fallen and product becomes

unprofitable
• Price wars continue
• Profits are lower
• Further advertising or price reductions

will not be successful
• Product will be withdrawn from the

market
• Some products can go through a

regrowth also to avoid decline

Strategies to extend the PLC

• Businesses can try and extend the
Product Life Cycle of a product so that
it does not go into the decline stage too
early

• There are a number of strategies that
they can use to help them do this

Strategies to Extend PLC of
a product

1. Modify the product - new and improved
versions of the product can be released…
version 2.0 and then version 3.0.

2. Change the packaging - the style of the
packaging may be changed to give the
appearance of a new and improved product.

3. Reduce the price - price can be lowered to
allow new customers to buy it.

Strategies to Extend PLC
of a product

• Find new market/change Place -products can be sold in
different countries/online to gain more sales

• Encourage increased use of product - existing customers
can be encouraged to buy more of the product or to use
it in a different way. For example, breakfast cereals used
advertising to show consumers eating cereal at different
times of the day; distilleries manufacturing hand
sanitizer

• Change name - If a product has suffered from bad
publicity and sales are falling, a tried and tested
technique is to simply change the name of the product.

Recap ILO 2

• The product life cycle (PLC) is the cycle through which
every product goes through from introduction to withdrawal or
eventual demise

• Research & Development – research is carried out; expensive
stage; no sales/income

• Introduction – product comes on the market; expensive stage
as heavy marketing and promotion costs; slow sales; low profits

• Growth – increased sales; customer loyalty; competition
increases; higher profits

• Maturity – product well-established; maintained sales; hard to
increase volume of sales; intense competition

• Decline – fallen sales; lower profits; price wars; product may be
withdrawn

• Strategies to extend PLC – modify product; drop price; change
packaging; extend use of product; find a new market/place;
change name

ILO 3

1. Price: demonstrate knowledge and
understanding of the 4 aspects of
pricing:
• Cost-based; competitor-based;
penetration and skimming

Price • Price is one of the elements of the marketing mix.
• It can have an immediate impact on sales.
• How much will we charge for our product/service?
• How do we decide on a price?

Pricing • This describes how a company will decide on what price to charge for their
Strategies products

• Price is always linked to value. Customers will look at a product and think “Is
it worth that?”

• Costs – are the expenses of a firm

• Price – the amount customers are charged for an item

• Firms think very carefully about the price to charge for their products.

Pricing Strategies

• There are a number of factors to take into account when
reaching a pricing decision such as:
• Competitors - should a business follow the lead of its
competitors when it comes to pricing or adopt its own
pricing strategy?
• Customer – who/what is the customer base?
• Production costs – how much will it cost to make?
• Quality & image – low-end or high-end; budget or
designer?

Pricing
Policy/Strategies

1. Cost-Plus Pricing
2. Competitor Based Pricing
3. Penetration
4. Skimming

Cost-based pricing

A method of pricing in which a mark-up is added to the total
product/service cost and this makes the selling price

This involves:-
• How much will it cost to make the product? (cost price)
• Decide the percentage profit you want. (profit margin)
• Add the two together to get the selling price
• Cost + percentage profit = Selling Price
Advantage: the business is guaranteed a profit
Disadvantage: if a competitor sells at a lower price, no sales will be
made to get a profit!

Example of Cost-
based Pricing

• A product costs £10 to make
• Using cost-based pricing, the company wants to

make 25% profit
• How much will the selling price be?
• Answer: cost + mark-up = selling price
• =£10+(£10*25%)
• =£10+£2.50 = £12.50

Competitor-based
Pricing

• A method of pricing which involves setting prices based on
what your competitors are charging.

• If there is strong competition in the market, customers are
faced with a wide choice leading to better value for money.

• You have to decide if you want to set a price lower than your
competitors – this may increase sales but could reduce the
‘image’ of your product and make it look ‘budget’ or lower
quality

• If you set a higher price, it may make your product look more
‘high-end’ which would appeal to certain customers

Price • When a business sets a low price at the beginning to boost sales and in order to gain
Penetration
entry into an existing market.
• This is used for new business trying to enter an existing market which is well

established
• They need to offer low prices to attract customers
• The idea is that they gain the customers and then can increase the price when they

gain regular customers.
• Risk is that the prices can be set very low which makes profit minimal.
• The price increases once the product’s place in the market has been established

Price • Price skimming means setting a relatively high price to boost profits. It
Skimming is often used by well-known businesses launching new, high quality,
premium products. Can you think of any examples??!

• Skimming is when a business set a high price initially to ‘skim’ the
market and gain as high a profit as possible.

• This policy is used for new products which have little competition at
the start e.g. smart phone/ Playstation/ TVs. People are willing to pay
high prices to be the first to have the new/unique product.

• Later on, other businesses come into the market and the prices have
to fall to maintain sales, this policy can mean high profits can be short
lived.

Recap ILO 3

• Price is one of the elements of the marketing mix

• There are strategies that companies can use to help determine what
price to charge

• Cost-base pricing - a mark-up is added to the total product/service cost
and this makes the selling price

• Competitor-based pricing - setting prices based on what your
competitors are charging.

• Penetration – a business sets a low price at the beginning to boost sales
and in order to gain entry into an existing market. Once established,
price goes up., e.g. foodstuffs – yoghurts, biscuits, juices

• Skimming - when a business sets a high price initially to ‘skim’ the
market and gain as high a profit as possible; later on prices have to fall
to maintain sales as more competitors enter the market, e.g. smart
phones