9.3. Product Performance

Evaluating marketing communications

The effectiveness of marketing communications in targeting their audience and delivering the right message can be judged by a number of factors:

Sales (volumes, values, and growth). Businesses will often set annual targets for sales levels in both absolute terms and in terms of growth. For example, a company may set an objective to sell 10% more units than last year and attain a total of 3 million pounds in revenues. Failure to achieve these targets may indicate a failure of marketing communications.

Repeat sales. Firms which sell fast-moving consumer goods rely on repeat purchase of their products by consumers. For example, a firm that sells biscuits will try to use marketing communications to ensure that once the consumer has finished the packet, they will immediately want to purchase another one.

Brand loyalty. Through advertising and promotion, a firm will try to make very similar products, like washing powders, appear different and better than their competitors. Creating a strong brand image with which consumers can identify will encourage repeat sales.

Extending product life-cycles. Changes in consumer wants and spending patterns over time will mean that most products have a limited commercial lifespan. However, through appropriate marketing, demand for a product can be maintained and the lifetime of a product extended.

Consumer awareness. Marketing can be judged as effective if it heightens awareness of the product among consumers. If consumers are able to remember a catchy name, logo, or advertising jingle for a product, then there is greater chance they will buy it.

Product life-cycles

Like people, products are born and will eventually die as consumer demand and technology move on. Goods and services change and develop during their lifetimes, and marketing objectives will need to change to match changes in the product. A major marketing tool to help a business plan for the future is product life-cycle analysis.

The commercial stages through which a product may pass are known as the product life-cycle. For example, when a new product is launched, it is likely to be relatively unknown, and marketing will need to persuade potential customers, distributors, and retailers to purchase it. The marketing objective will be to get the product established, with sales rising as quickly as possible. On the other hand, a firm with an established product and a large market share may wish to concentrate on making as much profit as possible by creating a strong brand image with higher prices.

There are five main product life-cycle stages:

Research and Development. A business will research the market to find out what the consumer wants and whether it is possible to make and sell the product at a profit. R&D involves research into all aspects of the product, including technical aspects of production, packaging, pricing, and possible market segments.

Launch. This is a very expensive stage because the product is new and the firm may have to charge customers a low price and invest heavily in informative advertising to ensure that the market becomes familiar with it.

Growth. Sales will start to rise and advertising will shift from being primarily informative to persuasive advertising to ensure continued demand for the product. Many products falter at this stage, when sales fail to take off in spite of heavy marketing. This indicates insufficient care in R&D and/or a poor advertising strategy.

Maturity. The product is well-known and established, reaching its maximum level of sales and profitability. However, by this time new firms may be entering the market, and advertising will be needed to maintain market share.

Decline. Eventually sales for all products will start to decline. This can be caused by the change in fashion or, more likely, by new technology which either replaces the product or allows competitors to offer a new or improved version at a lower price.

The sixth stage, known as Extension, is possible where a firm may wish to re-launch an old product as ‘new’ or ‘improved’. Most successful extension strategies start well before the product goes into decline.

The product portfolio

Although different products have life-cycles of different lengths, it is true to say that, on average, most life-cycles are getting shorter and shorter. In consumer electronics, new models of camcorders, TVs, and video recorders are launched every three to six months. Shortening product life-cycles are due to rapid advances in technology and heavy international competition in markets where consumers expect to be able to buy the latest developments.

Because of shortening product life-cycles, many modern organisations produce more than one product and operate in a number of different markets. Diversification into other products enables a company to spread the risk of falling consumer demand for one or more of its products. The product portfolio (or mix) of a firm will include the whole range of products they offer, including all the brands, life extensions, sizes, and, types of packaging available.