In order to cater to the requirements of identified market segment, an entrepreneur

has to develop an appropriate marketing mix. Marketing mix is a systematic and

balanced combination of the four inputs which constitute the core of a companys
marketing system the product, the price structure, the promotional activities and
the place or distribution system. These are popularly known as Four Ps of
marketing.
An appropriate combination of these four variables will help to influence demand.
The problem facing small firms is that they sometimes do not feel themselves
capable of controlling each o the four variables in order to influence the demand.

A brief description of the four elements of markets mix is as follows:

1. Product: The first element of marketing mix is product. A product is anything
that can be offered to a market for attention, acquisition, use, or consumption that
might satisfy a want or need. Products include physical objects, services, events,
persons, places, ideas or maxis of these. This element involves decisions concerning
product line, quality, design, brand name, label, after sales services, warranties,
product range, etc. An appropriate combination of features and benefits by the
small firm will provide the product with USP (unique selling proposition). This will
enhance the customer loyalty in favour of its products.
Products and services are broadly classified into consumer products and industrial
products. Consumer products are bought for final consumption; whereas industrial
products are bought by individuals and organisations for further processing or for
use in conducting business.
Other ways of classifying products are as follows:
(a) Convenience products: These are consumer products that the customer buys
very frequently, without much deliberation. They are low priced of low value and are
widely available at many outlets. They may be further subdivided as:

Staple Products: Items like milk, bread, butter etc. which the family
consumes regularly. Once in the beginning the decision is programmed and it is
usually carried on without change.

Impulse Products: Purchase of these is unplanned and impulsive. Usually

when the consumer is buying other products, he buys these spontaneously for e.g.
Magazines, toffees and chocolates. Usually these products are located where they
can be easily noticed.


Emergency Products: Purchase of these products is done in an emergency
as a result of urgent and compelling needs. Often a consumer pays more for these.
For example, while travelling if someone has forgotten his toothbrush or shaving it;
he will buy it at the available price.
(b) Shopping products: These are less frequently purchased and the customer
carefully checks suitability, quality, price and style. He spends much more time and
effort in gathering information and making comparisons. E.g. furniture, clothing and
sued cars.
(c)
Specialty products: These are consumer goods with unique
characteristics / brand identification for which a significant group of buyers is willing
to make a special purchase effort. For example, Mitsubishi Lancer, Ray ban glasses.
(d) Unsought product: These are products that potential buyers do not know exist
or do not yet want. For example Life Insurance, a Lawyers services in contesting a
Will.
The above product decisions are very important to ensure the sale of products. A
product has both tangible and intangible components. While buying a product, the
customer does not merely look for the physical product, but a bundle of satisfaction.
Thus, the impact that any product has upon a buyer goes well beyond its obvious
characteristics. There is a psychological dimension to all customer purchases; what
a customer thinks about a product is influenced by far more than the product itself.
For example, the buyer of an air conditioner is not purchasing cooling machine only.
He looks for attractive colour and design, durability, low noise, quick cooling, etc.
these influencing factors must be considered by the small firms to meet the
requirements of different kinds of customers.
2. Price: The second element is the price, which affects the volume of sales. It is
one of the most difficult tasks of the marketing manager to fix the right price. The
variables that significantly influence the price of a product are: demand of the
product, cost competition and government regulation. The product mix includes:
determination of unit price of the product, pricing policies and strategies, discounts
and level of margins, credit policy, terms of delivery, payment, etc. Pricing decisions
have direct influence on the sales volume and profits of the firm. Price, therefore, is
an important element of the marketing mix. Right price can be determined through
pricing research and by adopting test-marketing techniques.
Small firms should think of pricing as a method whereby prices are set with regard
to costs, profit targets, competition and the perceived value of products. Because of
their simplicity, cost-plus-pricing are attractive to small businesses, though this is
not the only mode of pricing utilized by small firms. For example, the profit margin
in the cost-plus approach may well be fixed after examining both the nature of the
market and the competitor activity within it. It is a mistake for small firms to rely

wholly on cost-plus, but very small firms do that to the detriment of profits and
market share.
The pricing policies mainly followed by the small firms are:

(a) Competitive pricing: This method is used when market is highly competitive
and the product is not differentiated significantly from the competitors products.
(b) Skimming-the-cream pricing: Under this pricing policy, higher prices are
charged during the initial stages of the introduction of a new product. The aim is to
recover the initial investment quickly. This policy is quite effective when the demand
for a product is likely to be more inelastic with respect to price in its early stages; to
segment the market into segments that differ in price elasticity of demand and to
restrict the demand to a level, which a firm can easily meet.
(c) Penetration pricing: Under this policy, prices are fixed below the competitive
level to obtain a larger share of the market. Penetration pricing is likely to be more
successful when the product has a highly elastic demand; the production is carried
out on a large scale to achieve low cost of production per unit; and there is strong
competition in the market.
3. Promotion: Promotion refers to the various activities undertaken by the
enterprise to communicate and promote its products to the target market. The
different methods of promoting a product are through advertisement, personal
selling, sales promotion and publicity.

1.
Place or Physical Distribution: This is another key marketing mix
tool, which stands for the various activities the company undertakes to make the
product available to target customers. Place mix or delivery mix is the physical
distribution of products at the right time and at the right place. It refers to finding
out the best means of selling, sources of selling (wholesaler, retailers, and agents),
inventory control, storage facility, location, warehousing, transportation, etc. This
includes decisions about the channels of distribution, which make the product
available to target customers at the right time, at the right place and at the right
price. By selecting wrong distribution channels or by using the ones it has
traditionally used, a small firm could be depriving it of new market opportunities.
In a situation where a small firm has only one primary product, the general rise and
fall of sales will lead to a rise and fall of the firm, unless the firm learns to
consistently adjust its marketing mix to match consumer demand.

Product Life Cycle

Product Life Cycle (PLC) is a term used to describe individual stages in the life of a
product. Product life cycle is an important aspect of conducting business which
affects strategic planning. Product life cycle can be divided into several stages
characterized by the revenue generated by the product.
What is the fundamental idea behind product life cycle?
Product life cycle is very similar to a life. A living being is first born (introduction).
Then it grows through its youth (growth) to become an adult (maturity). When it
gets old, it declines both mentally and physically (decline), after which it eventually
dies.
An analogy to this process can be observed in production as well. First, a product is
being developed. After we know what it is that we are selling and what the customer
wants, we introduce it to the market. As our product becomes known by consumers,
it grows until it establishes a solid position in the market. At this point, our product
is mature. After a period of time, the product is overtaken by development and the
introduction of superior competitors. Then it goes into decline and is eventually
withdrawn. All these phases together are called product life cycle.
What is the official definition of a product life cycle?
Business strategy and performance is affected to a great degree by life cycle stages
of a product or service. Business priorities, budgeting, funding, production,
distribution, marketing -- all these production aspects change depending on how
long a product or a service has been in the market.
The product life cycle method identifies the four (five) distinct stages affecting sales
of a product, from the product's inception until its retirement.

INTRODUCTION
In the Introduction stage of the product life cycle, a product or a service is
introduced to the market. This stage involves focused and intense marketing effort
designed to establish a clear identity and promote maximum awareness.
Consumers are testing the product in this phase.
GROWTH
After a product is introduced in the market, consumers become more interested in
it. This is called the Growth stage of the product life cycle. Sales are increasing and
competitors are emerging as well. Products become more profitable and companies
form alliances, joint ventures, and takeovers. Customers are accustomed to the
product and are starting to purchase it repetitively. Marketing efforts and costs are
still significant. Advertising costs are high. Market share tends to stabilize.
MATURITY
The market has reached saturation. Some producers at a later stage of the Maturity
stage of the product life cycle begin to leave the market due to poor profit margins.
Sales dynamics is beginning to decrease. Sales volume reaches a steady state
supported by loyal customers. Producers attempt to differentiate their products.
Brands, trademarks, and image are key tools in this production life cycle stage.
Price wars and intense competition are common.
DECLINE
Continuous decline in sales signals entry into the Decline stage of the production
life cycle. Competition is taking over your market share at this point. Economic and
production conditions are becoming unfavorable. Introduction of innovative
products or a change in consumer tastes is common reason for a decline. There is
intense price-cutting and many more products are withdrawn from the market.
Profits can be improved by reducing marketing and cutting other costs.

Production Life Cycle example

Why is it important to know the product life cycle?

Any for-profit business is constantly seeking ways to grow future cash flows by
maximizing revenue from the sale of products and services. Positive cash flow
allows a company to invest in development of new products and services, to expand
production capabilities, to improve its workforce, and so on. It is most companies'
goal to acquire key market share and become a leader in its respective industry.

A consistent and sustainable cash flow from product that is well established and
stabilized is the key to any long-term investment. And knowing the product life cycle
can help with this.
Does every product follow the same product life cycle curve?

No. It would be very easy if every product went through the same fate or product
life cycle. Most products in developed markets fail in the introduction phase. Their
product life cycle is very short, and they do not even make it to the maturity stage.

We can also find products with cyclical maturity phases. A product enters the
decline phase of the product life cycle where it is promoted to regain customers
again. If costs of getting the product back to the top of the market are small, and
the product is well positioned or even protected from major competitors, then we
talk about a cash cow. This concept is further explained in the BCG matrix model.
What are the trends in product life cycle?

Short...

One most observable trend is that product life cycles are becoming shorter and
shorter. This is given mostly by ever-increasing competition (see Michael Porter's
Five Forces model for more on competition). While a manufacturer of pots and
utensils faced competition only from another manufacturer in the same city
hundreds of years ago, a pot manufacturer these days faces competition from many
companies on the other side of the globe in addition to other local manufacturers.
Everyone is trying to come to the market with innovations.

Revitalization...

Many products in mature industries are revitalized by product differentiation and

market segmentation. It is not uncommon that companies try to find new niches
and market segments when they see their product is about to enter the Decline
phase. Companies are becoming very flexible in their ability to reassess product life
cycle costs and revenues.

Longer operating life...

Even though product life cycles shrink, the operating life of many products is
becoming longer. While a 10 years old car would be considered a wreck in 60's,
today's cars are relatively very durable and their life time is extending. Companies
have to take product operating life into account and adjust their planning
accordingly. Companies are attempting to optimize product life cycle revenue and
profits through warranties and upgrades to existing products.
Like human beings, products also have a limited life-cycle and they pass through
several stages in their life-cycle. A typical product moves through five stages,
namely, introduction, growth, maturity, saturation and decline.
These stages in the life of a product are collectively known as product life-cycle. The
length of the cycle and the duration of each stage may vary from product to
product, depending on the rate of market acceptance, rate of technical change,
nature of the product and ease of entry. But sales volume and profit level change
from stage to stage as shown in Fig.. Every stage creates unique problems and
opportunities and, therefore, requires a special marketing strategy. A brief
description of each stage and the marketing strategy required for it is given below:
1. Introduction: In the first stage, the product is introduced in the market and its
acceptance is obtained. As the product is not known to all consumers and they take
time to shift from the existing products, sales volume and profit margins are low.
Competition is very low, distribution is limited and price is relatively high. Heavy
expenditure is incurred on advertising and sales promotion to gain quick acceptance
and create primary demand. Growth rate of sales is very slow and costs are high
due to limited production and technological problems. Often a product incurs loss
during this stage due to high start up costs and low sales turnover.
2. Growth: As the product gains acceptance, demand and sales grow rapidly.
Competition increases and prices fall. Economies of scale occur as production and
distribution are widened. Attempt is made to improve the market share by deeper

penetration into the existing market or entry into new markets. The promotional
expenditure remains high because of increasing competiton and due to the need for
effective distribution. Profits are high on account of large scale production and rapid
sales turnover.
3. Maturity: During this stage prices and profits fall due to high competitive
pressures. Growth rate becomes stable and weak firms are forced to leave the
industry. Heavy expenditure is incurred on promotion to create brand loyalty. Finns
try to modify and improve the product, to develop new uses of the product and to
attract new customers in order to increase sales.
4. Saturation: Market peaks and levels off during saturation. Few new customers
buy the product and repeat orders disappear. Prices decline further due to stiff
competition and firms fight for retaining market share or replacement sales. Sales
and profits inevitably fall unless substantial improvements in the product or
reduction in costs are made. Product differentiation, market segmentation and
product improvement are the marketing strategies used in this stage.
5. Decline: The sales and profits of the product fall rapidly due to its gradual
displacement by new products or evolving change in consumer preferences. As cost
control becomes essential to avoid losses, promotion expenditure is considerably
reduced. Price becomes the main weapon of competition. Many firms ultimately
abandon the product to make better use of resources. New product innovations
enter the market to take the place of the obsolete and abandoned products. This is
the obsolescence stage. Finns' which fail to develop new or improved products to
arrest continuous decline in sales are forced out of business.
The concept of product life-cycle has important implications. Firstly, the concept
indicates that products have a limited life and management must develop new
products or improve existing ones to replace them to maintain sales and profits.
Secondly, the product life-cycle concept shows the expected sales volume and profit
margins for a new product at various stages in its life. It can, therefore, be used as a
tool of business forecasting. Thirdly, the concept serves as a framework for taking
sound marketing decisions at each stage of the product life-cycle. Fourthly, the
product life-cycle points out the need for significant and periodic adjustments in the
marketing strategy or marketing mix of the firm. Emphasis on different elements of
the marketing mix varies from one stage to another. In initial stages, product design
and promotion are important considerations. During the middle phase, skilled
distribution and effective dealer control become significant. In the final stage,
operating cost control becomes vital. Timely recognition of the need to change
marketing strategy is essential to maintain growth. In the introductory stage,
informative advertising is used to build up initial demand for the product while
during maturity, persuasive advertising is required to improve the competitive
status of the product.