All posts tagged Cash

Monopoly Revolution – Product Development Life-Cycle

Monopoly is probably the most famous board game in the world, and the Guinness Book of World Records acknowledges the board game as the most played, too. Patented in 1933, Monopoly is well-into the maturity stage of a product’s life-cycle, which is: research and development, market introduction, growth, maturity and finally decline. The typical maturity stage of any given product features sales levels that are consistent and flat; Monopoly has grown so popular in its existing market and so large globally that there is little scope for market development, by finding new markets, or even market penetration strategies, which would aim to boost repeat purchases. Although Monopoly makes a suitable cash-cow in a product portfolio, sales will inevitably decline until the product is no longer financially viable and discontinued after becoming a dead-dog. Despite this, how can Hasbro – the firm behind the board game – delay this decline and benefit from mature sales revenue for as long as possible? The answer is Monopoly Revolution…

The circular version of the board game – which features credit cards, inflated prices, and music from The Beatles – is what is known as an extension strategy. Monopoly Revolution, in theory, should re-engage consumers’ interests in the product and thereby provide a short-term boost to sales to offset the inevitable progression to the decline stage (see below).

Evidently, the extension strategy in the short-term increases sales revenue, and in the long-term delays the product reaching decline. However, it is not necessarily the product that will make the extension strategy work – ‘product’, after all, is only one element of the marketing mix. Hence, for marketing to be most-effective, each element on the marketing mix needs to inter-relate to one another; Monopoly Revolution needs effective promotion of the new product to be a success. And this is something their marketing department seems to realise.

To promote Monopoly Revolution, which is being sold as a celebration of 75 years of Monopoly, the ‘Go’ location – the starting square for players of the game – was located at the South Bank in London, next to the London Eye, which is half-way between Old Kent Road and Mayfair. Moreover, the first 75 visitors to the celebration at the aforementioned location were able to claim £200 ‘for passing go’, while throughout the day everyone had early access to play the updated version of the board game. This is truly innovative and effective. It appeals to those who are already obsessed about Monopoly, those who will nag you to play with them when they purchase Monopoly Revolution; by appealing to such an exclusive audience, those subjected to the marketing feel the need to tell somebody. This in turn unleashes the most influential form of promotion: word-of-mouth.

Hence, particularly given the product’s launch in the Autumn in time for Christmas, I believe the extension strategy will live-out Hasbros’ marketing aim of extending the maturity stage. But, not because of the product – I, personally, think it’s pointless and a cheap gimmick – but because of the promotion. I’d like to finish with something I think is important to remember: just because it’s the product that is being updated, does not mean you can ignore ‘promotion’, ‘packaging’, ‘place’ – the other elements of the marketing mix that combined are even more crucial to a successful marketing strategy.

© Joshua Blatchford author of Manifested Marketing 20/09/2010

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by Josh on September 20, 2010  •  Permalink
Posted in Product Life-Cycle
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Posted by Josh on September 20, 2010

https://manifestedmarketing.wordpress.com/2010/09/20/monopoly-revolution-product-development-life-cycle/

Pepsi Raw – New Product Development

Pepsi, the US cola giant that has also diversified into orange juice – through Tropicana – has discontinued Pepsi Raw, after two years in the U.K market. As part of a rebranding strategy to focus on healthy alternatives to cola, Pepsi Raw was launched exclusively in the U.K and sold with confusing healthy credentials: despite containing no flavourings, colourings, sweeteners or preservatives, it still had added sugar. Although the product was essentially an extension strategy of their cola – which is a cash cow that is well into the maturity stage of the product life-cycle – Pepsi Raw, itself, is an example of the risks associated with new product development. It ultimately failed for two reasons.

Despite being called Pepsi’s marketing director praising the drink as “the most significant innovation from Pepsi in fifteen years” at its launch, no one anticipated the high level of risk associated with product development, as outlined in Ansoff’s Matrix. Hence, albeit consumers are more concerned about healthy products, Pepsi, as an organisation of people, do not necessarily have the skills nor experience to exploit this trend. While they can make something innovative, does not mean that they can market it as a commercial success. This, however, is an inevitable part of new product development, which could be said for any company – not just Pepsi. Perhaps it was this lack of experience that created an inconsistent message for consumers: ‘is this product differentiated because of its natural ingredients or health benefits?’ – or maybe it was consumers will never associate the brand name Pepsi with healthy drinks.

The second reason for the failure of Pepsi Raw concerns the ‘place’ element of the marketing mix and the distribution used. Although the drink sold well in bars and pubs, according to Britvic, Pepsi’s bottler, the distribution channel failed to reach retailers; Pepsi Raw was a rare sight in supermarkets, where there is the mass-market potential for sales. Instead, the premium pricing and niche marketing limited the products influence in their product portfolio and Pepsi have now decided to focus on healthier, sugar-free products like Pepsi Max.

Evidently, as the drinks company is still keen to market its health values, one product failure does not matter. And in the long-term withdrawing a product and admitting its failure is far more sensible than having an inconsistent cola drinks range that is full of dead dog’s leaching off profitable cash cows. By discontinuing Pepsi Max, in effect, paves the way for their next product…

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by Josh on September 9, 2010  •  Permalink
Posted in Food and Drink
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Posted by Josh on September 9, 2010

https://manifestedmarketing.wordpress.com/2010/09/09/pepsi-raw-new-product-development/

Diageo – Market Development and Brand Repositioning

Diageo is the drinks group behind the likes of Johnnie Walker, the scotch; Guinness, the beer; and Blossom Hill, the wine – a well-rounded product portfolio. The group recently announced revenue had increased 5% to £9.78 billion and operating profit had risen 2% to £2.45 billion for their financial year. This was despite the weak consumer spending in the US and Europe – their largest markets, suffering from recent recessions – where the net sales in the former fell 3% and 2% in the later. So how did Diageo remain resilient? By Market Development – expanding across several markets with the current product portfolio. And, as marketing and planning is a cyclical process, Diageo has not forgotten its core market, the UK: Guinness is about to repositioned.

Although, according to Ansoff’s Matrix, Market Development poses high levels of risk when initially expanding – moreover given localised brand names used in alcoholic drinks – the spread of revenue channels in the long-term reduces Diageo’s reliance on one economy. Therefore, a PEST analysis is always a fundamental influence on the marketing strategy. Diageo has furthermore proven the benefits of risk-taking: scotch drinks returned a 15% net sales growth in Latin America and 10% in Africa; most importantly, however, their market share increased as well as volumes. When their sales are boosted by GDP growth, and higher overall consumer spending, of emerging markets and one-off factors, like the World Cup in South Africa, it is important for the sake of raw-competitiveness that market share grows by a greater proportion to be hailed a success.

However, Diageo have clearly identified the UK market as their ‘Cash Cow’, which needs to be milked for all its worth, where as Latin America and Africa can be considered ‘Rising Stars’ – if one uses the Boston Matrix to analyse markets rather than products of a firm. Diageo’s repositioning of Guinness as sports brand, therefore, is a form of market penetration; this is a low-risk strategy, albeit with low scope for growth. The ‘Bring it to life’ campaign involves above-the-line T.V promotions, sponsorship of Sky’s 3D sports coverage – which is currently only available in pubs – and nostalgic football advertisements in newspapers. While none of this is particularly innovative, Guinness’ brand image is consequently associated among sport viewers – and not sport hooligans.

If there is one lesson to be learnt from Diageo it’s diversity: a strong product portfolio in a variety of markets sold through a focus on traditional and new marketing strategies.

© Joshua Blatchford author of Manifested Marketing 30/08/2010

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by Josh on August 30, 2010  •  Permalink
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Posted by Josh on August 30, 2010

https://manifestedmarketing.wordpress.com/2010/08/30/diageo-market-development-and-brand-repositioning/

Quercus – Market Devlopment

Quercus is a book publisher that recently announced sales of £15 million. What – you have never heard of them? Well perhaps you would be more familiar with their core product: Steig Larsson’s ‘Millenium Triology’, which starts with ‘The Girl with the Dragon Tattoo’. As you are already to be likely aware of,  the trilogy has taken Britain by storm and a film adaptation, featuring Daniel Craig, is set for release later this year. But the trilogy’s success in Britain was preceded by a favourable reception in Sweden; Quercus, therefore, used a marketing strategy similar to what Ansoff’s Matrix would define as market development – finding new customers for existing products – by purchasing the English language publishing rights.

The benefits of such approach appear simple: the book had over 3 million sales in Scandinavia and even out sold the Bible in Denmark – so expanding sales abroad would seem an obvious move. But in fact, particularly as market development is viewed as high-risk, this proved to be a strategy hard to implement; it required strong leadership to negotiate with retailers and a tactical approach, which meant any form of marketing plan would be useless.

The critical issue with the majority of market development strategies are the difficulties associated with customers who do not recognise the product’s brand, in this case the author’s name. Not only does it make Quercus dependant on an effective promotional mix to create awareness, it weakened their negotiating power with major customers. As outlined by Michael Porter’s Five Forces, due to the high availability of substitutes – new books are constantly available for retailing – Quercus’s customers, high-street retailers, have the upper hand in negotiations. For instance, one retailer refused to stock the book after claiming their customers do not like authors with ‘funny’ names. Moreover, the books’ dark themes increased the degree of risk  that both stakeholders are exposed to, within the business to business distribution channel. This meant that there was no prior-reputation to exploit in order to gain a foothold in the market.

However, thanks to some desperate, ‘direct marketing’ – if you can consider giving away free copies directly to consumers a strategy – the books were released in 2008. Now, some what inevitably, the up-coming Hollywood film adaptation highlights further potential through diversification of the core product into new mediums, with the same aim of increasing sales revenue. Despite this, particularly as the books are published post-humourously, the product life cycle is likely to limited. Hence, Quercus now looks to be using the Millenium Trilogy as a Cash-Cow to fund the publication and promotion of the next big, Swedish hit: ‘Three Seconds’.

© Joshua Blatchford author of Manifested Marketing 09/08/2010

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by Josh on August 9, 2010  •  Permalink
Posted in Publishing
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Posted by Josh on August 9, 2010

https://manifestedmarketing.wordpress.com/2010/08/09/quercus-market-devlopment/

Audi – The Boston Matrix

All companies have various degrees of success throughout their product portfolios – this is particularly true at Audi, the German car manufacturer. To classify each car model’s success – and therefore allocate resources, like advertising budgets, more effectively – the Boston Matrix can be used by Marketing managers. This matrix essentially classifies products as follows: Rising Stars, which have a high market share of a quickly growing market; Cash Cows, which have a high market share of a slowly expanding market; Dead Dogs, which have a low market share of a stagnant market; and Question Marks that have a low market share of a quickly growing market.

What proactive, and innovative companies like Audi – ‘Vorsprung durch technik’, Audi’s ethos, translates as ‘lead through technology – aim to do is to have at least one Rising Star in their product portfolio; Audi’s new A8 (above) is packed with new technology that will eventually become widely available in the majority of cars. Hence, the Boston Matrix often, but not always, follows the Product Life Cycle. The car taps into the growth of the internet: Google Maps and Earth is integrated with SAT NAV and syncs with a home PC to plan routes and the car will soon function as a WLAN hotspot. A benefit of such innovation is that the first-mover advantage often leads to a dominant market position, which in turn has created a Rising Star. Although, the R&D behind the car is hugely expensive, this can be mainly funded by a cash-cow; for Audi, this has been their TT Cope and Roadster that provide healthy, and consistent, source of internal finance.

However, as with any major company, there are products in Audi’s portfolio that are not as successful – yet, they need to be fully integrated and managed as one within the Boston Matrix. The Question Mark of Audi’s portfolio is the e-tron A1, an electronic spin-off of their A1 hatchback car. As the cliché name may lead you to infer, Audi is hoping to compete in the niche for environmentally friendly cars. As a whole market, this niche has been rapidly expanding – for instance, Toyota’s Prius has become universally known as a market leader – as consumers become more concerned with the environment. However, Audi is synonymous among customers for quality, not ethics; the e-tron A1 thus has low market share and may need to be nurtured through its life cycle from the TT’s sales revenue. And Audi’s Dead Dog? Their clothing range. Despite not requiring myself to elaborate: generic clothing is not going anywhere and when was the last time you saw someone wearing and Audi-branded T-shirt?

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by Josh on July 19, 2010  •  Permalink
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Posted by Josh on July 19, 2010

https://manifestedmarketing.wordpress.com/2010/07/19/audi-the-boston-matrix/

Puma Trainers – Packaging

Packaging is a part of the Marketing Mix – although it is not one of the main 4 elements or ‘P’s – along with people, it is an important building block in any marketing strategy. Having been overlooked hitherto, a product’s packaging has become a more and more important issue with the growth of environmental concerns among consumers; and consumers, which are key stakeholders, need their demands to be met – the purpose of marketing. Which brings us to a new innovation from Puma: ‘Clever Little Bag’. This is designed to replace the shoe box, for environmental benefits, while eliminating the need for a plastic carrier bag from the retailer. See the video below.

This may be viewed as a tactical move to reduce become a more ‘green’ company, despite their distinctive red branding, and have thus embarked on a long-term strategy to reduce their carbon footprint by 25% by 2015. So how are short-term gains going to contribute to achieve the long-term ethical goal? The answer is through reduced raw materials: 65% less paper, 1 million less litres of water and 500,000 less litres of diesel will be used in manufacturing. This proves how setting ‘SMART’ objectives – specific, measured, agreed, realistic and timed – can help co-ordinate a major business to embarked on a new ethical vision. As well as doing good for the environment, the Clever Little Bag will, likewise, generate good PR and regenerate consumer interest – a particularly important aim in a competitive, slow-growth fashion/sports industry – in their ‘Cash Cows’. Therefore, on a competitive level Nike and Adidas’ traditional shoeboxes look somewhat substandard: the Clever Little Bag is young, trendy and innovative, which is what Puma’s products are all about.

Although this may be viewed as an operational efficiency or financial cost-minimisation strategy, it has been so well integrated into the Promotional Mix, through viral advertising, that the marketing benefits will initially outweight the increased competitiveness. A danger of trying to be ethical is in consumers’ perceptions of the companies objectives: the desire to do good or increase profit margins? But at Puma it appears to be the former; Puma CEO has stated the sustainable resources will increase short-term costs and become cost-neutral in the long-term. You have to give credit where credit is due – and this looks like a sound and bold move from Puma.

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by Josh on July 16, 2010  •  Permalink
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Posted by Josh on July 16, 2010

https://manifestedmarketing.wordpress.com/2010/07/16/puma-trainers-packaging/

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