Top marketing models of all time

Complied by: Dr Dennis Mark Laxton

Just like human every brand and product has also its life time in this world. Some
brands are born for very short time period and people may be customers or
competitors rejected them and compelled them to die. For instance a social
community website ORKUT that almost quit from the market due to its weak
strategies and strong competitors like Face book and Twitter. But some brands
live long lasting life that never end like Pepsi and Coke.

Product life cycle consist of different stages that a product or brand must
occupies in its life. There is a chance of missing one or more stage in product life
cycle i.e. one product can be directly shift from introduction stage to decline.
Market rejects these products and compels to die.
There are five stages in Product Life Cycle:
1.

Product Development or Research and Development Stage

2.

Introduction Stage

3.

Growth Stage

4.

Maturity Stage

5.

Decline Stage

All the stages are explained below:

Product Development or Research and Development Stage

This is the pre-lunched and very beginning stage of any product or brand. In this
stage product is on the table of experiment and research. Manufacturers, in this
stage try to make product according to customers need. Initial work done on this
stage and research and development, that may any product need also done in
this stage. Very heavy cost occurs in this stage and manufacturer bear only loss
in this stage. This is not actual loss but this is pre-lunched expenditure. But if
product fails in this stage then all the expenditure turned in to loss.

On graph Red line is showing sales made by that particular product or brand and
in this stage sales line is on the X-axis and also parallel to X-axis it means in this
stage product never make any sale as this is pre-lunched stage of product life
cycle. Blue line which is representing profit is below the X-axis which means
product in not earning profit it is in the loss.

In this stage company try to hide all the information regarding product from the
market and its competitors because it is too dangerous for one company to
spread products information before it launching. No marketing and advertising
expense made on this stage because of secrecy. All the cost spend on this stage
is development and research cost.

Introduction Stage

This is the second stage of product life cycle. After pre launched step, product
development, this is the after launching step. In this step company launch its
product in the market and start selling it. Now product is available in the market
to all customers.

In this stage company try to invest heavy budget on marketing and advertising
on product because this is the first step of product in the market and product
needs advertisement and promotions.
In this stage company also bears more cost because of advertisement and
marketing activities regarding product. Although product available in market and
also starts selling but revenue is not enough to cover all the expenditure so we
can say that product starts covering its all expenditures and cost.

In the graph, red line is just above the X-axis which means it just starts it selling
and with the passage of time it will make more and more sale. And the blue line
representing profit is below the X-axis which means no profits earns in this stage
and all the sales are now covering previous cost.

Growth Stage

After the introduction of product in the market, company knows the response of
customer toward its product. If company found customers are appreciating its
product and purchasing more units then product is shifting itself in to next stage
Growth stage.

Growth is the third stage of product life cycle. In this stage company also make
heavy investment on advertising and marketing of product because competition
is high and product needs some support from company in term of advertising.
For becoming no 1 product in the market, manufacturer try to invest more
money on the product but product also return to the company. Now product is
filmier with market and everyone knows about it. So product is now earning profit
for its owner.

In the graph, red line is now vertically going upward which means product is now
on the road. Product is generating more revenue and covering its all cast. Blue
line representing profit ratio earned by the brand, is now getting above the Xaxis and representing huge profit. Now product is in the profit. All the
expenditure is covered and product is now bearing cost by itself.

With comparison to introducing stage, growth time period is little bit short. If
market accepts it then product will quickly pass into growth stage. With proper
backup and support in terms of advertisement, promotions and marketing
related activities, product will quickly reach in next era.

Maturity Stage

After growth stage, next stage is maturity stage. Product is mature and very
much familiar with market conditions and on top position. In the maturity stage,
product enjoys it high market share and cashing brand name.

In this stage low investment required for advertisement and promotions because
everyone knows about product and ad displays just for exposure and support.
Advertisement made for sustaining positions not for make more sales.

Now product is earning high profit and on its peak time. Market conditions are
mature. Competitors also know about product market share.

Graph showing red line parallel to X-axis but distance from X-axis is very high. In
this stage red line remains constant and no variations occur in the graph. Blue
line which is representing profit is same with sales line but distance with X-axis is
low because profit cannot increase from sales. Profit line is on the peak and
horizontal.

This is the last stage of gaining more market share. Product now cannot gain
more market share each and every activity done just for sustaining market share.

Decline Stage

Everything in this world has to die. Here die means quitting from the market.
Product, after long time enjoying profit and sales, goes down in the market.
There may be many reasons of it i.e. technology can be changed and new
technology can make good product as compare to previous so in this stage
customers change their preferences and shift to other product. Sales go down
and profit also.

No need to invest more money on product in this stage. You will definitely not
waste your 10 dollars to save your one dollar. Yes, manufacturers try to make
other product more efficient and more attached with customers needs.

Ansoff Matrix
The Ansoff Growth matrix is another marketing planning tool that helps a business
determine its product and market growth strategy.
Ansoffs product/market growth matrix suggests that a business attempts to grow
depend on whether it markets new or existing products in new or existing markets.
The output from the Ansoff product/market matrix is a series of suggested growth
strategies which set the direction for the business strategy. These are described
below:

Market penetration
Market penetration is the name given to a growth strategy where the business
focuses on selling existing products into existing markets.
Market penetration seeks to achieve four main objectives:

Maintain or increase the market share of current products this can be

achieved by a combination of competitive pricing strategies, advertising, sales
promotion and perhaps more resources dedicated to personal selling

Secure dominance of growth markets

Restructure a mature market by driving out competitors; this would require a

much more aggressive promotional campaign, supported by a pricing strategy
designed to make the market unattractive for competitors

Increase usage by existing customers for example by introducing loyalty

schemes

A market penetration marketing strategy is very much about business as usual.

The business is focusing on markets and products it knows well. It is likely to have
good information on competitors and on customer needs. It is unlikely, therefore,
that this strategy will require much investment in new market research.
Market development
Market development is the name given to a growth strategy where the business
seeks to sell its existing products into new markets.
There are many possible ways of approaching this strategy, including:

New geographical markets; for example exporting the product to a new

country

New product dimensions or packaging: for example

New distribution channels (e.g. moving from selling via retail to selling using
e-commerce and mail order)

Different pricing policies to attract different customers or create new market

segments

Market development is a more risky strategy than market penetration because of the
targeting of new markets.
Product development
Product development is the name given to a growth strategy where a business aims
to introduce new products into existing markets. This strategy may require the
development of new competencies and requires the business to develop modified
products which can appeal to existing markets.
A strategy of product development is particularly suitable for a business where the
product needs to be differentiated in order to remain competitive. A successful
product development strategy places the marketing emphasis on:

Research & development and innovation

Detailed insights into customer needs (and how they change)

Being first to market

Diversification
Diversification is the name given to the growth strategy where a business markets
new products in new markets.
This is an inherently more risk strategy because the business is moving into markets
in which it has little or no experience.
For a business to adopt a diversification strategy, therefore, it must have a clear idea
about what it expects to gain from the strategy and an honest assessment of the
risks. However, for the right balance between risk and reward, a marketing strategy
of diversification can be highly rewarding.

The BCG matrix method is based on the product life cycle theory that can be used to determine what
priorities should be given in the product portfolio of a business unit. To ensure long-term value
creation, a company should have a portfolio of products that contains both high-growth products in need
of cash inputs and low-growth products that generate a lot of cash. It has 2 dimensions: market share
and market growth. The basic idea behind it is that the bigger the market share a product has or the
faster the product's market grows, the better it is for the company.

Placing products in the BCG matrix results in 4 categories in a portfolio of a company:

Cash Cow - a business unit that has a large market share in a mature, slow growing
industry. Cash cows require little investment and generate cash that can be used to
invest in other business units.

Star - a business unit that has a large market share in a fast growing industry. Stars
may generate cash, but because the market is growing rapidly they require investment
to maintain their lead. If successful, a star will become a cash cow when its industry
matures.

Question Mark (or Problem Child) - a business unit that has a small market share in
a high growth market. These business units require resources to grow market share,
but whether they will succeed and become stars is unknown.

Dog - a business unit that has a small market share in a mature industry. A dog may
not require substantial cash, but it ties up capital that could better be deployed
elsewhere. Unless a dog has some other strategic purpose, it should be liquidated if
there is little prospect for it to gain market share.

So
me limitations of the Boston Consulting Group Matrix include:

High market share is not the only success factor

Market growth is not the only indicator for attractiveness of a market
Sometimes Dogs can earn even more cash as Cash Cows

The BCG Matrix method can help understand a frequently made strategy mistake: having a
one-size-fits-all-approach to strategy, such as a generic growth target (9 percent per year) or a
generic return on capital of say 9.5% for an entire corporation.
In such a scenario:
A. Cash Cows Business Units will beat their profit target easily; their management have an
easy job and are often praised anyhow. Even worse, they are often allowed to reinvest
substantial cash amounts in their businesses which are mature and not growing anymore.
B. Dogs Business Units fight an impossible battle and, even worse, investments are made
now and then in hopeless attempts to 'turn the business around'.
C. As a result (all) Question Marks and Stars Business Units get mediocre size investment
funds. In this way they are unable to ever become cash cows. These inadequate invested sums
of money are a waste of money. Either these SBUs should receive enough investment funds
to enable them to achieve a real market dominance and become a cash cow (or star), or

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otherwise companies are advised to disinvest and try to get whatever possible cash out of the
question marks that were not selected.

McKinsey / GE Matrix

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The business portfolio is the collection of businesses and products that make up
the company. The best business portfolio is one that fits the company's strengths
and helps exploit the most attractive opportunities.
The company must:
(1) Analyse its current business portfolio and decide which businesses should receive
more or less investment, and
(2) Develop growth strategies for adding new products and businesses to the
portfolio, whilst at the same time deciding when products and businesses should no
longer be retained.
The two best-known portfolio planning methods are the Boston Consulting Group
Portfolio Matrix and the McKinsey / General Electric Matrix (discussed in this revision
note). In both methods, the first step is to identify the various Strategic Business
Units ("SBU's") in a company portfolio. An SBU is a unit of the company that has a
separate mission and objectives and that can be planned independently from the
other businesses. An SBU can be a company division, a product line or even
individual brands - it all depends on how the company is organised.

The McKinsey / General Electric Matrix

The McKinsey/GE Matrix overcomes a number of the disadvantages of the BCG Box.
Firstly, market attractiveness replaces market growth as the dimension of
industry attractiveness, and includes a broader range of factors other than just the
market growth rate. Secondly, competitive strength replaces market share as
the dimension by which the competitive position of each SBU is assessed.
The diagram below illustrates some of the possible elements that determine market
attractiveness and competitive strength by applying the McKinsey/GE Matrix to the
UK retailing market:

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Factors that Affect Market Attractiveness

Whilst any assessment of market attractiveness is necessarily subjective, there are
several factors which can help determine attractiveness. These are listed below:
-

Market Size
Market growth
Market profitability
Pricing trends
Competitive intensity / rivalry
Overall risk of returns in the industry
Opportunity to differentiate products and services
Segmentation
Distribution structure (e.g. retail, direct, wholesale

Factors that Affect Competitive Strength

Factors to consider include:
-

Strength of assets and competencies

Relative brand strength
Market share
Customer loyalty
Relative cost position (cost structure compared with competitors)
Distribution strength

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- Record of technological or other innovation

- Access to financial and other investment resources

7 Ps marketing mix
Product, Price, Place, Promotion, People, Process and Physical evidence these elements of
the marketing mix form core tactical components of a marketing plan.

USP
Unique Selling Proposition is the concept that brands should make it clear to potential buyers
why they are different and better than the competition.

Boston Consulting Group Matrix

This model categorises products in a portfolio as Stars, Cash Cows, Dogs and Question
Marks, by looking at market growth and market share.

Brand positioning map

This model allows marketers to visualise a brands relative position in the market place by
plotting consumer perceptions of the brand and competitor brands against the attributes that
drive purchase.

Customer Lifetime Value

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Customer Lifetime Value is the concept used to assess what a customer is worth, based on the
present value of future revenue attributed to a customers relationship with a product.

Growth strategy matrix

Ansoffs matrix identifies alternative growth strategies by looking at present and potential
products in current and future markets. The four growth strategies are market penetration,
market development, product development and diversification.

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Loyalty ladder
This model shows the steps a person takes before becoming loyal to a brand as they move
through the stages of prospect, customer, client, supporter and advocate.

PESTLE
As an extension of the traditional PEST model, this analysis framework is used to assess the
impact of macro-environmental factors on a product or brand political, economical, social,
technological, legal and economic.

Porters Five Forces

The five forces are Rivalry, Supplier power, Threat of substitutes, Buyer power and Barriers
to entry and are used to analyse the industry context in which the organisation operates.

Product Life Cycle

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This model plots the natural path of a product as it moves through the stages of Introduction,
Growth, Maturity, Saturation and Decline.

Segmentation, Targeting and Positioning

This three stage process involves analysing which distinct customer groups exist and which
segment the product best suits before implementing the communications strategy tailored for
the chosen target group.

SOSTAC
This acronym stands for Situation, Objectives, Strategy, Tactics, Actions, Control and is a
framework used when creating marketing plans.

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McKinsey Growth Pyramid - Growth Strategy

Introduction

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This model is similar in some respects to the well-established Ansoff Model. However, it looks at
growth strategy from a slightly different perspective.
The McKinsey model argues that businesses should develop their growth strategies based on:
Operational skills
Privileged assets
Growth skills
Special relationships
Growth can be achieved by looking at business opportunities along several dimensions, summarised
in the diagram below:

Operational skills are the core competences that a business has which can provide the foundation
for a growth strategy. For example, the business may have strong competencies in customer service;
distribution, technology.
Privileged assets are those assets held by the business that are hard to replicate by competitors.
For example, in a direct marketing-based business these assets might include a particularly large
customer database, or a well-established brand.
Growth skills are the skills that businesses need if they are to successfully manage a growth
strategy. These include the skills of new product development, or negotiating and integrating
acquisitions.

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 Special relationships are those that can open up new options. For example, the business may have
specially string relationships with trade bodies in the industry that can make the process of growing in
export markets easier than for the competition.
The model outlines seven ways of achieving growth, which are summarised below:
Existing products to existing customers
The lowest-risk option; try to increase sales to the existing customer base; this is about increasing the
frequency of purchase and maintaining customer loyalty
Existing products to new customers
Taking the existing customer base, the objective is to find entirely new products that these customers
might buy, or start to provide products that existing customers currently buy from competitors
New products and services
A combination of Ansoffs market development & diversification strategy taking a risk by developing
and marketing new products. Some of these can be sold to existing customers who may trust the
business (and its brands) to deliver; entirely new customers may need more persuasion
New delivery approaches
This option focuses on the use of distribution channels as a possible source of growth. Are there ways
in which existing products and services can be sold via new or emerging channels which might boost
sales?
New geographies
With this method, businesses are encouraged to consider new geographic areas into which to sell
their products. Geographical expansion is one of the most powerful options for growth but also one
of the most difficult.
New industry structure
This option considers the possibility of acquiring troubled competitors or consolidating the industry
through a general acquisition programme
New competitive arenas
This option requires a business to think about opportunities to integrate vertically or consider whether
the skills of the business could be used in other industries.

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Value Chain Analysis

Introduction
Value Chain Analysis describes the activities that take place in a business and relates
them to an analysis of the competitive strength of the business.

Influential work by Michael Porter suggested that the activities of a business could be
grouped under two headings:
(1) Primary Activities - those that are directly concerned with creating and
delivering a product (e.g. component assembly); and
(2) Support Activities, which whilst they are not directly involved in production,
may increase effectiveness or efficiency (e.g. human resource management). It is
rare for a business to undertake all primary and support activities.
Value Chain Analysis is one way of identifying which activities are best undertaken by
a business and which are best provided by others ("out sourced").

Linking Value Chain Analysis to Competitive Advantage

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What activities a business undertakes is directly linked to achieving competitive

advantage. For example, a business which wishes to outperform its competitors
through differentiating itself through higher quality will have to perform its value
chain activities better than the opposition. By contrast, a strategy based on seeking
cost leadership will require a reduction in the costs associated with the value chain
activities, or a reduction in the total amount of resources used.
Primary Activities
Primary value chain activities include:
Primary Activity

Description

Inbound
logistics

All those activities concerned with receiving and storing externally sourced
materials

Operations

The manufacture of products and services - the way in which resource

inputs (e.g. materials) are converted to outputs (e.g. products)

Outbound
logistics

All those activities associated with getting finished goods and services to
buyers

Marketing and
sales

Essentially an information activity - informing buyers and consumers about

products and services (benefits, use, price etc.)

Service

All those activities associated with maintaining product performance after the
product has been sold

Support Activities
Support activities include:

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Secondary
Activity

Description

Procurement

This concerns how resources are acquired for a business (e.g. sourcing and
negotiating with materials suppliers)

Human Resource
Management

Those activities concerned with recruiting, developing, motivating and

rewarding the workforce of a business

Technology
Development

Activities concerned with managing information processing and the

development and protection of "knowledge" in a business

Infrastructure

Concerned with a wide range of support systems and functions such as

finance, planning, quality control and general senior management

Steps in Value Chain Analysis

Value chain analysis can be broken down into a three sequential steps:
(1) Break down a market/organisation into its key activities under each of the major
headings in the model;
(2) Assess the potential for adding value via cost advantage or differentiation, or
identify current activities where a business appears to be at a competitive
disadvantage;
(3) Determine strategies built around focusing on activities where competitive
advantage can be sustained

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