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Chapter 11--Product Part 2 (Types of product that affect the length of PLC…
Chapter 11--Product Part 2
Product life cycle
Definition
Describes stages a new product goes thru in the marketplace
From the time it is 'born' (first made available to consumers) to the final stage where it 'dies' (consumers no longer desire the product anymore)
Four stages
Introduction
Awareness low
Sales increase slowly
Profit minimal or negative, high R&D costs
Distribution limited, retailers not willing to risk
Heavy advertising and promotion to build awareness
Marketing objective is to stimulate primary demand (sale to the first time customers)
Growth
Consumer start to become aware
Sales and profits rise, often at rapid rate
Competitors enter the market in large numbers, if profit outlook is attractive
Economies of scale allow cost of production to fall and marketers can drop prices to be more competitive
Marketing objectives is to shift to secondary demand ( sale to other segments of customers) because primary demand starts to get filled up already
Maturity
Sales reaches the highest point and starts to level off
There are many competitors and not enough new customers
Profits are falling for both the producer and the retailers but the amounts are usually still reasonable
Competitors (producers) who are marginal in performance are forced out of the market as price competition intensifies
Companies try to sell more by introducing new models of the products (broaden product line), hoping to attract more total sales. Extra services may be offered for free to consumers
Decline
Sales starts to fall as demand for product drops after a new product becomes available to replace the old obsolete one
Controlling costs is important to keep earning profits
Some surviving competitors may withdraw from the market
Company will decide whether to continue, delete, or harvest the product
Deletion: Dropping product from company's product line. May affect loyal customers who still desire the product
Harvest: Company continues to put product on offer but reduces the costs of marketing to increase profits earned
Types of product that affect the length of PLC
Fad product
A novelty product that experiences rapid sales for only a short season
The entire product life cycle is fairly short
Product that requires high amount of learning
Usually extended introductory period
consumers need a large amount of education before they feel ready to buy
High level of consumer involvement in the purchase decision
A lot of time and effort spent searching, comparing models, product features etc.
Product that requires low amounts of learning
Sales can start immediately when product is launched since consumers require little learning and the benefit of purchase are readily understood
Low level of consumer involvement in buying process
Little time, effort spent on info search and product comparison
Competitors can easily imitate the product, hence introduction and growth stages are relatively short
Fashion product
A product that makes a come-back. It is first introduced, gets popular but after a while it declines. Then, it returns to popularity again after some time
Product life cycle has a wave pattern
Dimensions
Length of the product life cycle
No exact time, consumer PLC shorter than business products
Technological change tends to shorten PLCs
Shape of the product life cycle
Different types, different marketing strategies
Strategies to extend a product's life cycle
Modifying the product
Involves changing a product's features, functions or design, such as its quality, performance or appearance to increase the product's value and appeal more to consumers
E.g. new features, new functions, new packaging
Modifying the market
Involves "changing" the targeted consumers, i.e. find new customers
E.g. find new users, find new segments to target (consumer users, business users); increase the usage of the product (ipad for restaurants, pre-schools); create a new use situation (Coke for cooking)
Re-positioning the product
Involves changing the perception that a brand/product occupies in consumers' minds relative to competitive products
E.g. react to competitor's position (move away); reach a new market that is not yet tapped (move closer); catch a rising tend; change the value offered: trading up/trading down
Branding benefits
Customers
Brand name: word, devise or combination of these used to distinguish a seller's goods or services
Branding: use of name, phrase, symbol or combination of these to identify and distinguish a company's products
Benefits: help to become efficient shoppers, recognize competing brands and avoid buying wrong items
Companies
Trade name: commercial, legal name
Trademark: legally registered brand name or trade name for exclusive use
Benefits: helps to sell a product, advertise and develops consumer's brands loyalty
Product counterfeiting: growing problem; steal sales; harm company's reputation
Brand personality & Equity
Personality
Set of human characteristics associated with brand name
Consumers choose brands consistent with own or desired self image
Thur advertising, marketers provide brand with personality
Equity
Added value, beyond product benefits
Provides a competitive advantage
Consumers willing to pay a premium
Benefits of packing & labeling
Communication benefits
Label info--usage directions, ingredients, approval seals
Functional benefits
Ease of storage, convenience, preserves contents (E.g. safety seals or pop-tops, expiry dates)
Perceptual benefits
Created in consumers' minds--"Country of manufacture" perception (E.g. "Made in Italy" leather goods, French perfume)
Global trends in packaging
Connecting with customers
Aesthetic and functional design features
Environmental sensitivity
Recycled materials for packaging
Health, safety, and security issues
Shelf life extension--> New packaging technology and materials