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chapter 11 outline

chapter 11 outline - Chapter 11 Managing Products and...

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Chapter 11: Managing Products and Brands I. The Product Life Cycle Stages a new product goes through in the marketplace Introduction stage o Product introduced to intended market o Sales grow slowly, minimal profit due to large investment costs in product development and advertising o Primary demand: desire for the product class rather than for a specific brand o Selective demand: preference for a specific brand o Skimming strategy: helps company recover costs of development as well as capitalize on price insensitivity of early buyers o High prices initially attract competitors o Penetration pricing: price low to discourage competitive entry Growth stage o Rapid increases in sales o Competitors appear o Profits usually peak o Repeat purchases: tried product, were satisfied, bought again o Changes to help differentiate a company’s brand from competitors o Important to gain as much distribution as possible – fight for display and shelf space Maturity stage o Slowing of total industry sales or product class revenue o Most consumers are repeat buyers or tryers o Sales increase at a decreasing rate o Fewer new buyers enter market o Profit declines due to fierce price competition among many sellers o Marketing attention directed toward holding market share through further product differentiation and finding new buyers Decline stage o Sales drop o Environmental changes cause a product to enter this stage Example: cd players replaced by iPods o Deletion Dropping product from company’s product line Usually always a residual core of consumers still consuming product, so product elimination decisions are not taken lightly o Harvesting Company retains product but reduces marketing costs Some Dimensions of the Product Life Cycle o Length
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Consumer products have shorter life cycles Availability of mass communication vehicles informs consumers quickly and shortens life cycles Technological change replaces existing products o Shape High-learning product Significant customer education is required Extended introductory period Example: personal computers Low-learning product Sales begin immediately because little learning is required Benefits of purchase readily understood Can be easily imitated by competitors o Marketing strategy: broaden distribution quickly Example: Gillette’s fusion razor Fashion product Style of the times Introduced, decline, return Example: hosiery Fad product Rapid sales on introduction and then equally rapid decline Novelties, short life cycle Example: reusable car tattoos o The Product Level: Class and Form
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