Chapter 11 - Chapter 11: Managing Successful Products and...

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Chapter 11: Managing Successful Products and Brands Product life cycle : the stages a new product goes trough in the marketplace: introduction, growth, maturity, and decline. o Introduction : occurs when a product is introduced to its intended target market. Sales grow slowly and profit is minimal. (The objective for the company is to create consumer awareness and stimulate trial - the initial purchase of a product by a consumer.) Advertising and promotion expenditures are often made to stimulate primary demand (the desire for the product class rather than for a specific brand, since there are few competitors with the same product). As more competitors launch their own products = selective demand (the preference for a specific brand). A high initial price = skimming strategy to help the company recover the costs of development as well as capitalize on the price insensitivity of early buyers. Low initial price = penetration pricing to help build unit volume, but the company must closely monitor costs. o Growth : rapid increases in sales; competitors appear. The result of more competitors and more aggressive pricing is that profit usually peaks during the growth stage. Advertising shifts emphasis to stimulating selective demand; product benefits are compared with those of competitors’ offerings for the purpose of gaining market share. Product sales in the growth stage grow at an increasing rate because of new people trying of using the product and a growing proportion and repeat purchasers – people who tried the product, were satisfied, and bought again. CHANGES appear in the product; an improved version or new features are added to the original design, and product proliferation occurs. It is important to gain as much distribution for the product as possible. o Maturity : a slowing of total industrial sales or product class revenue. Marginal competitors begin to leave the market. Most consumers who would buy the product are either repeat purchasers of the item or have tried and abandoned it. Profit declines due to fierce price competition among many sellers, and the cost of gaining new buyers at this stage rises. Marketing attention is often directed toward holding market share through further product differentiation and finding new buyers. Ex: soft drinks and DVDs are currently in the maturity stage of their lifecycle. o Decline Stage : occurs when sales drop; a product frequently enters this stage due to environmental factors, not because of a wrong strategy on the part of the companies. Products tend to consume a disproportionate share of management and financial resources relative to their future worth – leads to deletion or harvesting.
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Deletion : dropping the product from the company’s product line (most drastic strategy) Ex: Sanford Corporation continues to sell its Liquid Paper correction fluid for use with typewriters in the era of wood-processing equipment. Harvesting
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This note was uploaded on 10/04/2011 for the course MKTG 3104 taught by Professor Ebcoupey during the Spring '08 term at Virginia Tech.

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Chapter 11 - Chapter 11: Managing Successful Products and...

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