MKTG ch. 11

Product life cycle
a concept that describes the stages a new product goes through in the marketplace: introduction, growth, maturity, decline.
Product life cycle stages
Introduction
Growth
Maturity
Decline
Introduction stage
occurs when a product is introduced to its intended target market
how do sales change in the introduction stage?
grow slowly
What is the marketing objective in the introduction stage?
to create consumer awareness and stimulate trail (the initial purchase by a consumer)
Primary demand
the desire for the product class rather than for a specific brand, since there are few competitors with the same product. This is stimulated in the introduction stage.
Selective demand
the preference for a specific brand, occurs as more competitors launch their own products and the product progresses along its life cycle
Skimming strategy
a high price set by the company, which helps the company recover the costs of development, and to capitalize on the price insensitivity of early buyers. 3M is a master
Penetration pricing
when the company enters the market at a low price which can help build unit volume. Requires close monitoring.
Growth stage
characterized by rapid increases in sales. Competitors appear in this stage.
Maturity Stage
characterized by a slowing of total industry sales or product class revenue (marginal competitors start to leave the market)
Decline stage
occurs when sales drop. A product enters this stage mostly due to environmental changes.
3 things that the product life cycle tells us
1. Products have a limited life
2. Profit and sales are not the same thing
3. Marketing strategies must change over time (most important)
Profit=
Total Revenue – Total Costs
Marketing Strategy
1. Define the target market
2. Create a marketing mix decision regarding the 4 p’s that will satisfy the target.
FActors that influence the Length of the Product Life Cycle
Rate of technological change
Rate of market acceptance
Ease of competitive entry
Risk Hedges (to reduce the risk)
Make changes gradually
Keep old product
Conduct marketing research
product mix concepts
the product mix affects company profits
the optimal product mix is difficult to determine
product mix sets the upper limit of
how much profit you can make
Suboptimal Product Mix
Chronic excess production capacity
Disproportionately Total profits/few products
Exploit sales force
Declining profits/sales
Brand
A name, a term, a symbol, or any other unique element of a product that identifies one firm’s product(s) and sets them apart from the competition
Two strategies to handle a declining product
deletion
harvesting
deletion
dropping the product from the product line
harvesting
the company retains the product by reduces marketing costs
Four aspects of the Product Life Cycle
1. length
2. shape of sales curve
3. how they vary with different levels of products
4. the rate at which consumers adapt their products.
product life cycle curves
High learning
Low learning
Fashion products
Fad Product
High Learning product curve
is a curve for which significant customer education is required and there is an extended period
Low learning product curve
sales begin immediately since little learning is required by the customer, and the benefits of purchase are readily apparent. Can be easily imitated by competitors, so marketing strategy is to broaden distribution quickly.
Fashion products curve
is a style of the times, appear in women’s and men’s apparel. These products are introduced, decline, and then seem to return.
Fad Product curve
experiences rapid sales on introduction and then an equally rapid decline. Short life cycle.
Product class
refers to the entire product category or industry, such as prerecorded music
Product form
refers to variations within the product class (technology to create cd’s and digital players in reference to the class of prerecorded music)
the life cycle of a product depends on what?
sales to consumers
Diffusion of innovation
when a product diffuses, or spreads, through the population
Five categories of product adopters (the diffusion process)
o Innovators (venturesome, higher educated, use multiple info sources)
o Early adopters (leaders in social setting, slightly above average education)
o Early Majority (deliberate, many informal social contacts)
o Late Majority (Skeptical, below average social status)
o Laggards (Fear of debt, neighbors and friends are info sources)
Common reasons for resisting a product in the intro stage
o Usage Barriers: this product is not comparable with existing habits
o Value Barriers: the product provides no incentive to change.
o Risk Barriers: physical, economic, or social.
o Psychological barriers: cultural differences or image.
Methods to overcome these barriers
warranties, money back guarantees, extensive usage instructions, demonstrations, free samples.
most popular means to gain a consumer
free trial (71%)
Three ways to manage a product through its life cycle
1. Modifying the product
2. Modifying the market
3. Repositioning the product
Examples of Modifying the product
product bundling, new features
Examples of modifying the market
new customers (prunes and harley), increase product use among existing customers (Campbells soup) create new use (Dockers)
Four factors that trigger the need for a repositioning action
1. Reacting to a competitor’s position (new balance vs. Nike, etc.)
2. Reaching a new market (carbonated tea in England, St. Joseph aspirin low dose)
3. Catching a rising trend (Quaker oats, Kraft cheese, Uncle bens rice) all going healthy
4. Changing the value offered (trade up or down)
Trading up
involves adding value to the product (or line) through additional features or higher quality materials. (run flat tires)
Trading down
involves reducing the number of features, quality, or price. (Airlines have added more seats, reducing legroom, limited snacks.)
Branding
an organization uses a name, phrase, design, symbol or combination of these to identify its products and distinguish them from those of competitors.
Brand name
is any word, device (design, sound, shape or color) or combination of those used to distinguish a seller’s goods or services
Trade name
is a commercial, legal name under which a company does business
Trademark
identifies that a firm has legally registered its brand name or trade name so the firm has its exclusive use, thereby preventing others from using it.
Product counterfeiting
involves low cost copies of popular brands not manufactured by the original producer
________________may benefit most from branding
Consumers
Brand personality
a set of human characteristics associated with a brand name that successful and established brands have.
Brand equity
the added value a brand name gives to a product beyond the functional benefits provided.
Two advantages of brand equity
1. Provides competitive advantage
2. Consumers are willing to pay a higher price for a product with brand equity
4 step brand equity building process
1. Bottom: Brand awareness
2. Brand performance and brand imagery
3. Consumer judgements and consumer feelings
4. Top; consumer brand connection
Brand licensing
is a contractual agreement whereby one company allows its brand name or trademark to be used with products or services offered by another company for a royalty or fee. Comes from having brand equity.
Branding strategies
o Multiproduct branding strategy
o Multibranding strategy
o Private branding strategy
o Mixed branding strategy
Multiproduct branding strategy
a company uses one name for all its products in a product class (Toro snowblower, Toro mower)
Multibranding strategy
involves giving each product a distinct name. Useful when each brand is intended for a different market segment (Tide, Cheer)
Private branding strategy
private labeling or re-seller branding, when it manufactures products but sells them under the brand name of a wholesaler or retailer (Kenmore)
Mixed branding strategy
a firm markets products under its own name and that of a reseller because the segment attracted to the reseller is different from its own market (Michelin makes sears tires)
Packaging
refers to any container in which it is offered for sale and on which label information is conveyed.
Label
is an integral part of the package and typically identifies the product or brand, who made it, where and when it was made, how it is to be used, and package contents and ingredients.
The three major benefits of packaging and labeling
Communication, functional, perceptional
4 challenges of packaging and labeling
1. The continuing need to connect with customers
2. Environmental concerns
3. Health, safety, and security issues
4. Cost reduction
Warranty
a statement indicating the liability of the manufacturer for product deficiencies
regulates the content of consumer warranties.
Magnuson-Moss Warranty/RTC Improvement Act of 1975
Express warranty
written statements of liabilities
Full coverage warranty
covers it all
Implied warranties
assign responsibility for product deficiencies to the manufacturer.
It is easier to determine the product mix if you _______ have the best mix
don’t
You have a suboptimal product mix if your total profits are _______________ from a few products
disproportionate
Importance of Branding
Brand equity
Protect the brand
“Act as if it is yours”
Generic
associate the name with the product class rather than with the brand.
Good Brand Name
Product benefits
Memorable, etc.
Image fit
Legal
Simple
the electrolux vacuum cleaner example was relative to
the power of expectations
The ratchet effect can be applied to
service expectations