Chapter 9

Chapter 9 - Chapter 9 Successful new products are critical...

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Chapter 9 Successful new products are critical in driving profitable growth for both new and established companies Constant life and death struggle where old products are replaced by new products Innovations show that products, customer behavior, and competition change over time o Create opportunities for marketing managers and pose challenges as well o Developing new products and managing existing products to meet changing conditions is important to the success of every firm Managing products over their life cycles o Revolutionary products create new product markets Make existing products out of date more quickly than ever o Product life cycle : describes the stages a really new product idea goes through from beginning to end Concerned with new types of products in the market, not just what happens to an individual brand Marketing mix usually must change during the product life cycle Total sales of the product-by all competitors in the industry vary in its 4 stages 4 stages Market introduction : sales are low as a new idea is first introduced to a market Customers aren't looking for the product Informative promotion is needed to tell potential customers about the advantages and uses of the new product concept Takes time for customers to learn that the product is available Most companies experience losses during this stage because they spend so much money for product, place, and promotion development Market growth : industry sales grow fast but industry profits rise and then start falling Begin to make more profits as more customer buy But competitors see the opportunity and enter the market Monopolistic competition with down sloping demand curves is typical of this stage Time of biggest profits for the industry Rapid sales and earnings growth for companies with effective strategies Toward the end of the stage when industry profits begin to decline as competition and price sensitivity increase Marketing managers who understand the cycle and pay attention to competitor analysis are less likely to encounter this problem Market maturity : occurs when industry sales level off and competition gets tougher Many aggressive competitors have entered the market except in oligopoly situations
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Industry profits go down throughout this stage because promotion costs rise and some competitors cut prices to attract business Late entries may occur but they skip the earlier stages Persuasive promotion becomes even more important Products may only differ slightly In US: cars, boats, and many household appliances Stage may continue for many years until a new idea comes along Ex. HDTV Sales decline : new products replace the old Price competition from dying products become more vigorous but firms with strong brands may make profits until the end because they have successfully differentiated their products
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Chapter 9 - Chapter 9 Successful new products are critical...

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