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Chapter 9-Product Management and New-Product Development

Chapter 9-Product Management and New-Product Development -...

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Chapter 9-Product Management and New-Product Development Thursday, March 17, 2011 5:36 PM 1. Managing Products Over Their Life Cycles 1.a. Product life cycle: describes the stages a really new product idea goes through from beginning to end; concerned with new types (or categories) of products in the market, not just what happens to an individual brand 1.a.i. Market introduction: sales are slow as a new idea is first introduced to a market 1.a.i.1. Customers aren't looking for the product 1.a.i.1. Informative promotion is needed to tell potential customers about the advantages and uses of the new product concept 1.a.i.1. Most companies experience losses 1.a.i. Market growth: industry sales grow fast-but industry profits rise and then start falling 1.a.i.1. Competitors see the opportunity and enter the market- >monopolistic competition is typical 1.a.i.1. Time of the biggest profits for the industry; also a time for rapid sales and earnings growth for companies with effective strategies 1.a.i.1. It is toward the end of this stage when industry profits begin to decline as competition and consumer price sensitivity increase 1.a.i.1. Important to pay attention to competitor analysis 1.a.i. Market maturity: occurs when industry sales level off and competition gets tougher 1.a.i.1. Many aggressive competitors have entered the race for profits (except in oligopoly situations) 1.a.i.1. Industry profits go down because promotion costs rise and some competitors cut prices to attract business->long-run downward pressure on prices 1.a.i.2. Persuasive promotion is important 1.a.i. Sales decline: new products replace the old 1.a.i.1. Price competition from dying products becomes more vigorous 1.a.i.1. Firms with strong brands may make profits until the end because they have successfully differentiated their products 1.a. Industry profits decline while industry sales are still rising 1. Product Life Cycles Should be Related to Specific Markets 1.a. Sales and profits of an individual brand may not (often do not) follow the life- cycle pattern 1.a. Firm may introduce or drop a specific product during any stage of the product life cycle 1. Product Life Cycles Vary in Length 1.a. Some products move fast 1.a.i. The greater the comparative advantage of a new product over those already on the market, the more rapidly its sales will grow 1.a.i. Sales growth is also faster when the product is easy to use and if its advantages are easy to communicate
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1.a.i. If the product can be tried on a limited basis-without a lot of risk to the customer-it can usually be introduced more quickly 1.a.ii.
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