Most expensive – big bucksLaunch new product oIssues:National or regional rolloutStart in Florida then expand west + national – spent money and get money back- national – high cost in inventory build up and if problem it’s hard to pull out Slotting Fee - fee charged to manufacturers by retailers to have their product placed on the retailers’ shelves. Fee variesgreatly depending on product, manufacturer, and market conditions. Cost charged by Kroger (big retailer) to make room for you on my shelf (4 months to prove success) risk for retailer and keeps the small manufacturer out Failure Fee – Marketer agrees to pay a penalty fee if a product stocked by a retailer does not meet agreed-upon sales levels.
Not all retailers charge this Ex. SnackWellsFirst decent tasting good-for-you cookie. 8 hours to do a single runand drying time for marshmallow couldn’t keep up with demand since people liked it so muchBuilt another plant and had to go through reintroduction again (national roll) New product: Tide PodsoLots of time and moneyo8 years to come with the miracle producto6000 consumer testsokids eating them- unforeseen – can happen to anyone Chapter 11- Managing Successful Products, Services, and Brands Product is like an living organism Stages of the product life cycle – Total industry sales and profit Not all equal in length (not all equal in time) Ex. Fly thought introduction and long time in maturity
IntroductionoSales lowoNegative profitsoLots of $$ in advertising and recovering from R&DoFew competitorsGrowthoPeaksoSales spikeoGrowing # of competitors MaturityoPrice competition (expensive to get new then keep)oSales level offDecline oDecrease number of competitors oReduce advertising and promotion, someone else does manufacturing Product Life CycleoUsed to describe class (gas automobiles)form (SUV, sedan)brand (Toyota Camry) Introduction StageoSales grow slowly (profits are low, maybe negative) oProfit is minimal due to investment in promotion and recovery of product development costs.
oObjective - gain awareness and product TRIAL(initial purchases). oPromotion – Stimulate Primary Demand.Demand for the category Ex. Rollerblades generated interest by van in parking lot to testEx. First iPhone oPricing is often high (Skimming) or low (Penetration). Skimming – first iPhone $600-700 (high price means high quality) Penetration- .19 cent pen (BIC) large enough market to sell in bulk Growth StageoRapid increase of sales and a peak in profitabilityoObjective – Stress Differentiation; Number of competitors growoPricing begins to get aggressive towards end of stage.