Products and

Markets
Dipjoy Das
(MBA 4th Semester)

Centre for Management Studies

Dibrugarh University
 Learning Objectives
 Explain the term “market” and be able to describe 3
ways markets can be defined
 Describe market segmentation and ways to segment
 Describe 3 approaches to market segmentation
 Explain the term “product” and describe Kotler’s 5
levels of product benefit
 Describe and criticize Copeland’s product typology
 Understand the product life cycle
 Understand the concept of portfolio
 BCG Matrix; GEC Matrix
 Key Definitions
 Market (demand and supply sides)
 Market share (by volume or by value)
 Need
 Want
 Utility
 Served market
 Market segmentation
 Product
 Portfolio
Market (A Strategy View)
 Demand side – a group of actual or
potential customers with similar
needs or wants
 Supply side - industry
 Market Share
 Market share – measure of an
organization’s performance with
regard to its ability to win and retain
customers
 Measurement of market share
- by volume (units sold)
- by value (sales turnover)
 3 Ways to define
markets
 Definition based on product
 Definition based on need satisfaction
or function performed
 Definition based on customer identity
 Product Market
 Product produced or sold
 Disadvantage – doesn’t identify the fact that
different products may satisfy the same need or
want, leading to a failure by organizations to
recognize threats from different industries
 Advantage – economies of scale can be gained
by sharing a production process
 Example: electronic organizer
 Need Satisfaction of
Function Performed
 Relies on the concept of utility
 Disadvantage – very broad, can lead to a
view of markets that does not allow a
practical approach to decision-making
 Remember: Opportunities only arise from
activities that the company’s competences
allow it to enter, and threats come from
activities that would likely be to substitute
customers’ business
 Example: products that satisfy thirst
(water, soft drinks, juice, etc.)
 Customer Identity
 Based on common requirements of
customers
 Advantage – allows for the targeting of
customers, and may provide for marketing
economies of scale
 Disadvantage – different technologies may
need to be employed, and thus not
economical to produce all things for the
market
 Example: people who play golf
 Examples
 Starbucks
 McDonalds
 NBA
 Cinema
 7-11
 HBO
 Golf Club
 Market Segmentation: 3
Approaches
 Undifferentiated marketing
 Differentiated marketing
 Concentrated marketing
Undifferentiated marketing
strategy
 Denial of any market segmentation,
and the assumption that demand is
homogeneous
 Approach is appropriate when the
market is truly homogeneous
 Examples: Coca-Cola uses this
approach, Subway uses this
approach
Differentiated marketing
strategy
 Recognition of separate segments of
the total market and treatment of
each segment differently
Concentrated marketing
strategy
 Organization focuses on one market
segment
 Gives up all other parts of the market to
specialize in one niche
 Advantage – allows the company to
specialize and make a better match
between their product and the segment
 Disadvantage – “putting all your eggs in
one basket”
 Product Positioning
 Product positioning is the way in
which a product or brand is perceived
in relation to the preferences of
segments of the market, and in
relation to competitive products
 On the product positioning chart, an
“x” represents customer preferences
and perceptions of existing products
 Product Positioning
ChartBitter
(Beer)
xx
xxxx xx
xx

x
xxxx

Weak Strong

x x
xxx

xxxx
x
Market Gap

Sweet
 Bases for Segmentation
 Way of distinguishing one customer type
from another
 Common criteria before segmentation can
occur:
 Market size
 Identifiability of the segment
 Measurability of the segment
 Accessability to the segment
 Buying behavioral characteristics of the
segment
 Typical Bases for
Segmentation
 Demographic variables (age, stage of
family life cycle, gender, income,
occupation, education, race, religion)
 Geographic variables (country, region, type
of housing/neighborhood)
 Psychographic variables (lifestyle,
personality, intelligence)
 Behavioral variables (brand loyalty,
frequency of use, consumption occasion)
 Examples of
Segmentation
 McDonalds – products target to children (age
segmentation), health conscious (psychographic
segmentation based on lifestyle)
 FHM magazine – targeted to men (demographic
segmentation based on gender) who are ages @ 20
-30 (demographic segmentation based on age)
 Ferrari – products targeted to rich (demographic
segmentation based on income), risk-taking types
(psychographic segmentation based on lifestyle)
 Products: Definition
 Anything offered for sale
How Value Might Be Added:
Kotler’s 5 Levels of Product
Benefit
 Core benefits
 Basic benefits
 Expected benefits
 Augmented benefits
 Potential benefits
Competition of Augmented
Benefits
 In mature markets, competition
normally occurs at the augmented
product level or above (over time,
the augmented product may become
the expected one)
 Example: Kotler’s 5 levels
of product benefit
 Mobile phones
 Core benefit – wireless phone calls
 Basic benefit – touch pad, mouthpiece, earpiece,
screen
 Expected product – customers expect phones to have
hands-free ability, a place to store contacts, SMS ability
 Augmented product – games, download capability, MP3
capability
 Potential product – social status from owning a certain
phone
 Copeland’s Product
Classification
 Common view – different types of
products need to be managed and
brought to market in different ways
 By classifying types of products,
organizations can easily identify how to
market a product
 Copeland’s classification:
 Convenience goods
 Shopping goods
 Specialty goods
 Copeland’s Classification:
Convenience Goods
 Convenience goods – products purchased
frequently, at low prices, and the customer
sees little interest or risk in the purchase
 Businesses selling convenience goods
should make the product available
everywhere, because customers buy at the
most convenient place
 Examples: bottled water, soft drinks, pens,
notebooks, chips
 Copeland’s Classification:
Shopping Goods
 Shopping goods are generally more expensive,
of more interest to the customer, and some risk
is seen in the purchase
 Customers will shop around for this good
 Goods don’t have to be available in all outlets
 Promotional material should have high
information content
 Examples: computers, mobile phones, TVs,
common clothes
 Copeland’s Classification:
Specialty Goods
 Specialty goods are products that are very
differentiated and often carry high levels of
prestige
 Customers may insist on only one brand
 For businesses, high levels of service, high
prices and restricted distribution is
appropriate
 Specialized computers, cameras, watches
 Limitations of Copeland’s
Classifications
 Circular logic – the classification is
based on how a product is marketed,
and businesses, in turn, will use the
classification as a basis for marketing
the product
 Companies that only adopt this
classification system will never lead
with new product strategies
 Product Life Cycle
 Introduction stage
 Growth stage
 Maturity stage
 Decline stage
 Introduction Stage:
Characteristics
 Low production volume, high per unit cost
 Price elasticity of demand will determine pricing strategy
(skimming or penetration pricing strategies)
 Skimming – price is high, is appropriate for products that are
price inelastic
 Penetration – price is low, is appropriate for products that are
price elastic and when gaining market share is more important
than recovering development costs
 High risk for entrants, because cash flows will likely be
negative for awhile, and imitators will enter the market
 Growth Stage:
Characteristics
 Sales for the market as a whole
increase
 New competitors typically enter the
market
 Market becomes profitable
 Strategies: enter the market and win
market share; develop new segments
of the market
 Maturity Stage:
Characteristics
 High proportion of people who will
purchase the product have already
purchased it once
 May be expensive or risky to enter the
market now or challenge for more
market share
 Strategies: hold existing customers,
compete hard for new customers,
develop niches
 Decline Stage:
Characteristics
 Market is shrinking
 Strategies: develop new uses for the
product, find new users, reposition
the product for parts of the market
that will remain
 “Milking” strategy – low investment
and take market share left by
departing competitors
Product Portfolio Theory
 Product portfolio – the array of products a
company provides
 Assembling a portfolio is based on the idea of
minimizing risk
 Broad portfolio – company has a presence in a
wide range of product and market sectors
 Narrow portfolio – company operates in only a
few or even one product market or sector
 BCG Matrix: A way to view
the entire product range
 The BCG matrix is a way of identifying where a
company’s products are in the market and how
they should be treated in internal analysis
 Helps identify which product to push or drop,
and when
 The horizontal axis measures market share in a
particular way (market share measure)
 The vertical axis measures the rate of market
growth (market growth measure)
 Relative Market Share
High Low
10x 1x
High

Stars Question Marks

Rate of Market Growth Low

Cash Cows Dogs

 Understanding the BCG
Matrix
 Cash cow – a product with high market
share in a low growth market normally is
profitable and a generator of cash
 Standard strategy for a cash cow – manage
conservatively and defend strongly
 Understanding the BCG
Matrix
 Dog – a product that has a low
market share in a low growth
market, and is typically not profitable
 Standard strategy – get rid of it, or
differentiate it to try to get a strong
position for it in a niche market
 Understanding the BCG
Matrix
 Stars – products that have high
market share in a high growth
market
 One important characteristic – likely
to use lots of company cash in
advertising and product
improvements
 Understanding the BCG
Matrix
 Question marks – products that have
low market share in high growth
markets
 If they cannot improve, they will
become dogs
 Strategy – management must make a
decision: either invest more resources
in winning market share, or dump it
 Another way to analyze:
GEC Matrix
 Based on a comparison of market
attractiveness and competitive strength
 Market attractiveness criteria is set by the user
of the matrix (factors such as market growth,
profitability, strength of competition, entry/exit
barriers, etc. are common)
 Competitive strength might include
technological capability, brand image,
distribution channel links, production capability
and financial strength
 High

A B C
Market Attractiveness

Medium
D E F

Low
G H I

High Medium Low

Competitive Strength
 Understanding the GEC
Matrix
 Cell A Strategy – invest strongly
 Cell B Strategy – either build strength to
challenge, or build selectively
 Cell C Strategy – here is a dilemma, either
sell or differentiate
 Cell D Strategy – investment and
maintenance of competitive position
 Cells E & F Strategy – minimize risk and
expand carefully
 Cells G & H Strategy – management for
earnings
 Cell I strategy – sell or minimize investment