Chapter 11 PPT - Chapter 11 The Product Life Cycle Product...

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Chapter 11 The Product Life Cycle Product life cycle     - different stages the product goes through in the marketplace o Introduction o Growth o Maturity o Decline 1. Introduction Stage o Occurs when product is first introduced to intended target market o Sales grow slowly, minimal profit Lack of profit- often result of large investment costs in product development o Create Consumer awareness, stimulate: TRIAL - initial purchase of a product by a consumer By heavy spending on advertising/promotion o Primary and Selective Demand Primary demand - desire for the product class rather than for a specific brand, since there are few competitors  with same product Selective demand - preference for a specific brand; used when more competitors launch their own products o Skimming vs. penetration pricing Skimming strategy-  high initial price to help company recover costs of development as well as capitalize on the  price insensitivity of early buyers Penetration pricing-  price low to discourage competitive entry, helps build unit volume, co. must closely monitor  costs 2. Growth Stage o Rapid increases in sales o Competitors appear More aggressive pricing   profit usually peaks Product sales grow as a result of new people using the product and repeat users Increase distribution Important to gain as much distribution as possible If the brand can’t generate repeat purchase           brand death     o During the Growth Stage Changes to Product- A company differentiates its brand during this time in order to separate from competition  (offer different benefits); product proliferation occurs There are numerous product classes or industries 3. Maturity Stage o Slowing of total industry sales o Marginal competitors exit the market Most consumers have tried (and abandoned) the product Repeat consumers o Profit declines Sales increase at a decreasing rate as fewer new buyers enter market Fierce price competition among many sellers, and cost of gaining new buyers rises o Strategy is to control marketing costs By improving promotional and distribution efficiency Holding marketing share through further differentiation and find new buyers 4. Decline Stage o Sales and profits decline Often occurs due to environmental factors NOT wrong strategy o Consume disproportionate share of management/financial resources relative to future worth o 2 Strategies to handle declining product: Deletion and Harvest Product Deletion
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Drop the product from the product line Most drastic strategy Harvesting Company retains the product but reduces the costs of marketing
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This note was uploaded on 05/17/2010 for the course MKT 337 taught by Professor Mcallister during the Spring '07 term at University of Texas at Austin.

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Chapter 11 PPT - Chapter 11 The Product Life Cycle Product...

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