Chapter 9

Marketing Objectives and Strategy

Definitions
1. Boston Matrix – a 2x2 matrix model that analyses a product portfolio
according to the growth rate of the market and the relative market share of
products within the market.
2. Extension strategies – methods used to prolong the life of a product.
3. Marketing mix – the mix of marketing elements used by a company, which
are usually known as the 4Ps: product, price, place and promotion.
4. Marketing objectives – goals that a business attempts to achieve through its
marketing activities.
5. Marketing strategy – a set of plans that aim to achieve a specific marketing
objective.
6. Product lines – a group of products that are very similar.
7. Product portfolio – the collection of products a business is currently
marketing.
8. Unique selling point – the aspect or feature of the product that differentiates
it from those of rivals.
Marketing Objectives
The marketing activities of a business are likely to be more effective if there are
clear marketing objectives. These are goals that a business is trying to achieve
through its marketing.
Three key marketing objectives might include the following:
Increase market share: Businesses often want to gain a larger share in the market.
This is because having a larger market share is likely to give a business a
competitive edge. As market share grows, a business will have to produce more
output. As a result it may exploit economies of scale, which will help to lower
costs.
Increase revenue: Businesses often introduce specific marketing activities in order
to boost their revenues. If revenues are higher it is likely that profits will also be
higher. If a business sets out to increase revenue, there are a number of marketing
activities that could be used to achieve this objective.
Build a brand: Many businesses want to establish the name of their company or
their products. They can do this by giving products brand names. Strong brands
can generate huge returns for a business, so building a brand over a period of time
is important for many - particularly those in highly competitive markets. If a
business aims to build a brand it may exploit a unique selling point, invest heavily
in television advertising or use social media to achieve this specific marketing
objective.
THE PRODUCT LIFE CYCLE
Product is one part of the marketing mix. For marketing to be effective, a business
must be aware of its product life cycle. The product life cycle shows the different
stages that a product passes through over time and the sales that can be expected at
each stage. By considering product life cycles, businesses can plan for the future.

Development: During the development stage the product is being researched and
designed. Suitable ideas must be investigated, developed and tested. If an idea is
considered worth pursuing then a prototype or model of the product might be
produced. A decision will then be made about whether or not to launch the product.
A large number of new products never progress beyond this stage and will fail.
This is because businesses are often reluctant to take risks associated with new
products. During the development stage it is likely that the business will spend to
develop the product and costs will be high. As there will be no sales at this stage,
the business will initially be spending but receiving no revenue.
Introduction: At the start of this stage the product will be launched. As the product
is new to the market, initial sales are likely to be slow. Costs are incurred when the
product is launched. It may be necessary to build a new production line or plant,
and the firm will have to meet promotion and distribution costs. A business is also
likely to spend on promotion to make consumers aware of the new product.
Therefore, it is likely that the product will still not be profitable. Prices may be set
high to cover promotion costs. But they may also be set low in order to break into
the market. Few outlets may stock products at this stage. The length of this stage
will vary according to the product. With brand-new technical products, for
example, the introduction stage can be quite long. It takes time for consumers to
become confident that such products 'work'. At first the price of such products may
be quite high. Alternatively, a product can be an instant hit resulting in very rapid
sales growth. Fashion products and some fast-moving consumer goods may enjoy
this type of start to their life.
Growth: Once the product is established and consumers are aware of it, sales may
begin to grow rapidly, new customers buy the product and there are repeat
purchases. Unit costs may fall as production increases. The product then becomes
profitable. If it is a new product and there is a rapid growth in sales, competitors
may launch their own versions. This can lead to a slowdown of the rise in sales.
Maturity and saturation: At some stage the growth in sales will end. The product
has become established with a stable market share at this point. Sales will have
reached their highest point and competitors will have entered the market to take
advantage of profits. As more firms enter the market, it will become saturated.
Some businesses will be forced out of the market, as there are too many firms
competing for consumers. During the maturity and saturation stages of the product
life cycle, many businesses use extension strategies to extend the life of their
products.
Decline: For the majority of products, sales will eventually decline. This is usually
due to changing consumer tastes, new technology or the introduction of new
products. The product will lose its appeal to customers. At some stage it will be
withdrawn or sold to another business. It may still be possible to make a profit if a
high price can be charged and little is spent on promotion or other costs.
EXTENSION STRATEGIES
Extension strategies, ways to prolong the life of a product before it starts to
decline, are popular with businesses. This is because the costs of product
development are high and extension strategies help a product to generate more
cash. Two general approaches are often used. One is to make some adjustments to
the product; the second is to invest in promotion.
Product adjustments: Many companies try to prolong the life of the product by
'freshening' it up. This might involve making improvements, updating the product,
repackaging the product or extending the range.
Updating is quite a common approach for technical products and certain types of
consumer durables.
Some businesses add value to their products by making improvements.
Promotion: Some businesses prefer to leave the product unchanged but give a
boost to falling sales by investing in promotion campaigns.
 One approach is to find new uses for a product.
 Some businesses try to find new markets for their products.
 Investment in a advertising campaign can sometimes boost sales.
 Another approach is to encourage more frequent use of the product.
BOSTON MATRIX AND THE PRODUCT PORTFOLIO
Product life cycle analysis shows businesses that sales of products eventually
decline. A well-organised business with one or more products will attempt to phase
out old products and introduce new ones. This is known as managing the product
portfolio or product mix.
The product portfolio: The product portfolio will be made up of product lines. A
product line is a group of products which are similar.
The Boston matrix: One problem for firms when planning their product portfolios
is that it is very difficult in practice to tell what stage of the life cycle a product is
at.
A useful technique for allowing firms to analyse their product portfolios is the
Product Portfolio Matrix developed by the Boston Consulting Group. It is
sometimes called the Boston matrix or the Growth Share Matrix. Products are
categorised according to two criteria.
 Market growth. How fast is the market for the product growing? The market
may be declining or it may be expanding. Sales of a product in a fast
expanding market have a better chance of growing than a product in a
mature or declining market.
 Relative market share. How strong is the product within its market? Is it a
market leader that other products follow? Is it a product that is 12th in terms
of sales? To measure this the market share of a product is compared with the
strongest rival product.
Using these criteria the products of a business can be placed into one of four
categories on the Boston matrix.
Stars: A star is a product with a high market growth and a relatively high market
share. Stars are valuable to businesses. The product will be in a strong position in
its market as it has a high market share and the business can take advantage of a
fast-growing market. A star is already likely to be profitable as it has a relatively
high market share. But a business will need to invest in the product to cope with a
growing market and growing sales. This could mean investing in new production
facilities or promotion to protect the product from competition. Net cash flow may
be nearly zero. This is because although profits will be high, bringing money in,
investment spending will also be high, leading to outflows.
Cash cows: A cash cow is a product with a relatively high market share. It is
therefore well positioned in the market and likely to be profitable. But the market it
is in will have weak growth. So there will be little chance of increasing sales and
profits in future. There will be little need for investment. With slow growth in sales
there should be little need for new premises, for example. Cash cows have strong
positive net cash flow. Money coming into the business from profits will not be
taken out via investment.
Question marks: Question marks, sometimes known as problem children or
wildcats, are products with a relatively low market share in a fast-growing market.
This can be a problem for a business because it is unclear what should be done
with these products. If a product is performing weakly it is unlikely to be
profitable. But as it is in a fast-growing market, there is potential to turn it into a
star. Net cash flow is likely to be zero or negative. Weak relative market share
means that it will not be profitable. But investment will be needed to cope with
expanding sales in a fast-growing market.
Dogs: These are products with a relatively low market share in a market with low
growth. Dogs have poor prospects for future sales and profits. They may generate
some positive net cash flow because they will need little investment but may earn
some profit. But if they make little or no profit, net cash flow may be zero or even
negative.
Businesses can make use of the Boston matrix to manage their product portfolios.
Balancing product lines: Businesses must ensure that their product portfolios do
not contain too many items within each category. Naturally, they do not want lots
of dogs, but they should also avoid having too many stars and question marks.
Products on the top of the Boston matrix are in the early stages of the product life
cycle and are in growing markets. But the cost of developing and promoting them
will not yet have been recovered. This will use up resources. Balancing these with
cash cows will mean that the positive net cash flow from the cash cows can be
used to support products in a growing market. The development cost of cash cows
is likely to have already been recovered and promotional costs should be low
relative to sales. This does not mean though that a business would want lots of cash
cows and few question marks and stars. This is because many of the stars and
perhaps some question marks might become the cash cows of the future.
Taking appropriate decisions: Products in different categories in the matrix may
require different approaches.
Stars have great future potential. They are future cash cows. A business will need
to build the brand of these products so that sales increase and competition is fought
off successfully.
Cash cows might be milked for cash, which can then be used to develop other
products. Or the business may decide to spend just enough on promotion and
development to maintain sales and market share, known as holding.
For question marks a business has choices. It can build the brand, hoping to turn it
into a star, harvest the product by raising price and cutting promotion so that profits
are increased, or divest itself of the product, withdrawing it or selling it because it
is not making a profit.
Dogs may be divested if they are not making a profit or in some cases harvested.
THE CONCEPT OF 'MARKETING MIX'
In order to market its products effectively a business must consider its marketing
mix. The marketing mix refers to those elements of a firm's marketing strategy that
are designed to meet the needs of its customers. The marketing mix emphasises
four particular elements often referred to as the 4 Ps - product, price, promotion
and place. To meet customer needs and to create an effective marketing mix,
businesses must produce the right product, at the right price, make it available in
the right place and ensure that customers are aware of its existence through
effective promotion.
Product: It is important that products meet customer needs. This means that
businesses must address a number of features relating to the product.
 How consumers use the product.
 The appearance of a product. Businesses need to consider the different
colours, sizes, shapes and styles when designing products.
 Financial factors. Businesses need to develop products that customers can
afford to buy. There is no point in developing an attractive and highly
comfortable armchair if it costs US $ 20,000. Customers want value for
money and they may also take into account the quality of after-sales service
before they make a purchase.
 The product's life cycle. A business must decide whether to allow a product
to decline or try to refresh it in some way.
 A product's unique selling point (USP). This is the aspect or feature of the
product which distinguishes it from that of a rival. If a business can develop
a USP it may gain a competitive edge in the market.
Price: The pricing policy of a business is often a reflection of the market at which it
is aiming. Prices will not always be set at the level which will maximise sales or
short-term profits.
Promotion: Customers must be given information about products and encouraged
to buy them. Businesses can choose from a wide range of different promotional
methods. They can advertise on television, online or in newspapers and magazines,
for example. Alternatively, they may decide to use sponsorship, coupons, free gifts,
competitions or some other method that suits their product and customer target
group.
Place: Products must be made available at convenient locations at times when
customers want to buy them. This means that a business has to make decisions
about the way in which products will be physically distributed, i.e. by rail, road,
sea or air. It also means taking into account how the product is sold. Increasingly
businesses are selling their products online rather than from physical outlets such
as shops.
MARKETING STRATEGIES
A marketing strategy is a set of plans that aim to achieve a specific marketing
objective.
Strategies for mass markets: Some businesses sell products into mass markets.
Such markets are huge, often global, and can have millions of potential customers.
Mass markets are usually very competitive because the rewards for success can be
significant.
A wide range of different marketing strategies can be used in a mass market, but
some general similarities are as follows.
 Product. In a mass market there will be many products competing for
customer attention. Most of these products will be very close substitutes for
each other. The most successful businesses are likely to be those that can
differentiate their product in some way. Developing a USP will help a
business's product 'stand out from the pack'. If a business is unable to
differentiate its product it will have to rely on other elements in the
marketing mix to compensate.
 Price. The prices charged by businesses in a mass market are likely to be
very similar. All businesses in the market are likely to fear a price war
because they usually reduce revenue for every competitor. This helps to
explain why businesses are happy to charge the 'going rate' in the market.
Price leadership is common in mass markets where the dominant business,
 perhaps the one with the lowest unit costs, sets the price and everyone else
follows.
 Promotion. In the absence of price competition, firms look to non-price
competition to help gain an edge. This means they are prepared to invest
heavily in advertising and promotion because it is such an important part of
the marketing mix in mass markets. An overwhelming majority of television
adverts are placed by businesses selling into mass markets.
 Place. Businesses serving mass markets will often use multiple channels to
distribute their goods. Businesses selling fast-moving consumer goods will
target supermarkets, wholesalers, independents and any other outlet that is
suited to their particular product. Some manufacturers pay supermarkets to
display their goods in prominent places.
Strategies for niche markets: Customers in niche markets have very particular
needs, which are sometimes neglected by larger firms. Consequently, there is a gap
in the market for a business that is prepared to produce goods or services for this
small customer group. Businesses selling to niche markets will use different
marketing strategies from those selling into mass markets.
 Product. In a niche market the product is likely to have quite significant
differences from its rivals.
 Price. Businesses selling in niche markets have more flexibility in their
pricing. There is less competition in niche markets so higher prices can be
charged without losing significant market share to rivals. Also, customers
may be prepared to pay higher prices if their specific needs are being met
effectively.
 Promotion. In niche markets promotion and advertising will tend to be more
targeted. Since niche markets are smaller there is less need to use national
media when advertising. Businesses need to identify their customer profile
very accurately to ensure that advertising and promotion expenditure is not
wasted. Adverts are likely to be placed in specialised publications.
 Place. Businesses selling into niche markets are often more selective when
choosing distribution channels. They are more likely to use exclusive
distributors or to handle distribution privately. They will also use the Internet
if it is practical.
STRATEGIES FOR BUSINESS-TO-BUSINESS (B2B) AND BUSINESS-TO-
CONSUMER (B2C) MARKETS
Many businesses supply goods and services to other businesses. The marketing
strategies used by companies that sell to other businesses (B2B) are likely to be
different from those discussed above, that sell to consumers (B2C). In B2B
marketing, one approach is to distinguish between outbound and inbound
marketing strategies.
Outbound marketing strategies: This involves directing marketing material at
potential customers whether they are expecting it or not. This could include
sending direct mail, email, marketing by telephone, sponsorship, targeted adverts
in specialist publications or trade shows. However, there are some drawbacks using
this approach. People are increasingly ignoring adverts. Also, many people are
annoyed by being contacted by phone and other similar marketing methods.
Frequent or repeated use of these approaches could damage a brand's reputation.
Many of the potential customers obtained using these methods are poor quality and
waste resources when they do not lead to sales. It has also been reported that
potential customers found through outbound marketing cost significantly more to
acquire than leads found through inbound marketing.
Inbound marketing strategies: This involves attracting potential customers to
websites when they are looking for suppliers or solutions to problems. The use of
inbound methods also has challenges. Recruitment of experienced inbound
marketers can be difficult, and it can be tricky to keep the strategy up to date with
rapidly emerging trends.
Hybrid strategies: This involves a combination of both outbound and inbound
methods. It is reckoned that inbound strategies take at least 6 months to generate
results, so some outbound methods can be employed in the short term. Once
inbound methods start to generate meaningful leads some of the less effective
outbound methods can be dropped. This will help to reduce costs and create
sustainable growth in market share.
Communication: A business must keep customers informed. In a mass market this
might involve using national advertising campaigns to tell customers about new
products. Some businesses may use reassuring adverts. These help to convince
customers that they have made the right purchase. Some firms send out regular
newsletters, usually by email, to keep customers up to date with company events.
Regular communication helps to build a relationship between a business and a
customer. If a bond can be formed customers are more likely to return.
Customer service: Customers are more likely to return to a business if they receive
high-quality customer service. Employees who interact with customers must be
professional, reliable and conduct themselves honestly and sincerely. Customer
service can often be improved by dealing with matters more promptly, providing a
more effective after-sales service or making the 'purchasing experience' a pleasant
one. Some businesses provide customers with refreshments while they are
conducting a transaction.
Customer incentives: Many businesses reward their customers if they keep
returning. For example, cafe chains and supermarkets use loyalty or reward cards.
These give customers discounts, cash vouchers or free goods as rewards for
loyalty. The value of the rewards are usually linked directly to the amount spent by
customers. In some countries these are in decline.
Preferential treatment: Many people like the idea of receiving preferential
treatment from a business. For example, many airlines have VIP lounges at airports
where first class, business class or other select passengers can relax away from the
loud and busy environment of normal airport business.