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Chapter 11 Managing Products and Brands

Chapter 11 Managing Products and Brands - Chapter 11...

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Chapter 11 Managing Products and Brands THE PRODUCT LIFE CYCLE 1) Introduction Stage- occurs when a product is first introduced to its intended target market i) Sales grow slowly ii) Profit is minimal (a) The result of large investment costs in product development iii) Marketing objective is to create consumer awareness and stimulate trial (initial purchase by a customer) iv) Spend heavily on advertising (a) Made to stimulate primary demand, the desire for the product class rather than for a specific brand (b) As more competitors introduce their own products attention is focused on creating selective demand, the preference for a specific brand v) Gaining distribution can be a challenge b/c channel intermediaries may be hesitant to carry a new product vi) Price can be either high or low (a) A high initial price may be used as part of a skimming strategy to help the company recover the costs of development as well as capitalize on the price insensitivity of early buyers 1. high prices tend to attract competitors eager to enter the market b/c they see opportunity for profit (b) To discourage competitive entry a company can price low referred to as penetration pricing 1. helps build unit volume but must monitor costs vii)examples: high-definition television and hybrid 2) Growth Stage- rapid increases in sales i) Competitors appear ii) With more competitors and more aggressive pricing the profit usually peaks iii) Product sales grow at an increasing rate b/c of new people trying or using the product and a growing proportion of repeat purchasers iv) Changes start to appear in the product during the growth stage (a) To help differentiate a company’s brand from its competitors, in improved version or new features are added to the original design, and product proliferation occurs v) Important to gain as much distribution for the product as possible (a) Competing companies fight for display and shelf space vi) Examples: DVD players and digital cameras 3) Maturity Stage- slowing of total industry sales or product class revenue i) Marginal competitors begin to leave the market ii) Buy now most consumers have tried it and either are repeat purchasers or they have abandoned it iii) Sales increase at a decreasing rate as fewer new buyers enter the market iv) Profit declines b/c there is fierce price competition among many sellers and the cost of gaining new buyers at this stage increases
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v) Directed toward holding market share through further product differentiation and finding new buyers
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