The stages a new product goes through in the marketplace.
Product Life Cycle
Stages of the Product Life Cycle
- Introduction
- Growth
- Maturity
- Decline
When a product is introduced to its intended market.
Sales grow slowly and profit is minimal due to the large investment costs in product development.
Introduction Stage
The desire for a product class rather than for a specific brand, since there are few competitors with the same product.
Primary Demand
The preference for a specific brand
Selective Demand
When a company sets a high initial price for a new product to recover the development costs.
Skimming Strategy
When a company sets a low price on a new product to discourage competitive entry.
Penetration Pricing
Product life cycle stage characterized by rapid increases in sales.
- It is in this stage when competitors appear
- Changes are added to improve the original design to differentiate from competitors
Growth Stage
Product life cycle stage characterized by a slowing of total industry sales or product class revenue.
- Marginal competitors begin to leave the market
- Marketing attention is often directed toward holding market share through further product differentiat
Maturity Stage
Product life cycle stage characterized by a drop in sales.
- Company will handle a declining product though either: Deletion or Harvesting
Decline Stage
Dropping a declining product from the company's product line.
Deletion
When a company retains a declining product but reduces its marketing costs
Harvesting
Important Aspects of Product Life Cycles
1. Length
2. Shape of sales curves
3. Variation with different levels of products
4. Rate at which consumers adopt products
Product for which significant customer education is required and there is an extended introductory period (e.g., personal computers in the 1980's).
High-Learning Product Sales Curve
Product for which sales begin immediately because little learning is required by the consumer, and the benefits of purchase are readily understood (e.g., Gillette's Fusion Razor).
- Product can easily be imitated by competitors, so the marketing strategy
Low-Learing Product
A style of the times (e.g., Clothes).
- Products are introduced, decline, and then seem to return
Fashion Product
A product that experiences rapid sales on introduction and then equally fast decline.
- Typically are novelties and have a short life cycle
Fad Product
An entire product category or industry (e.g., prerecorded music).
Product Class
Variations within a product class (e.g., cassette tapes, CDs, ipods).
Product Form
When a new product spreads through the population.
Diffusion of innovation
Five Categories of Product Adopters
1. Innovators
2. Early Adopters
3. Early Majority
4. Late Majority
5. Laggards
Factors Affecting Product Adoption
1. Usage Barriers (Existing Habits)
2. Value Barriers (No Reason to Change)
3. Risk Barriers (Physical, Economic, Social)
4. Psychological Barriers (Cultural Differences or image)
Ways to Managing Product Through Life Cycle
1. Product Modification
2. Market Modification
3. Product Repositioning
Changing product characteristics to increase the product's value.
Product Modification
Strategy to find new customers, increase a product's use among existing customers, or create new use situations.
Market Modification
Changing the place a product occupies in a consumer's mind relative to competitive products.
Product Repositioning
Reasons to Reposition a Product
1. Reaction to competitor's position
2. Reach a new market
3. Catch a rising trend (health foods)
4. Change the value offered (trading up or down)
Adding value to a product (or line) through additional features or higher-quality materials.
Trading Up
Reducing a product's number of features, quality, or price.
Trading Down
When an organization uses a name, phrase, design, symbol, etc. to identify its products and distinguish them from those of its competitors.
Branding
Any word, device, etc. used to distinguish a seller's goods or services.
- Can be spoken (Gatorade) or not spoken (Apple's apple logo)
Brand Name
A commercial, legal name under which a company does business.
Trade Name
Identifies that a firm has legally registered its brand name or trade name so the firm has its exclusive use, thereby preventing others from using it.
Trademark
A set of human characteristics associated with a brand name (e.g., Harley-Davidson associated with masculinity, defiance, and rugged individualism).
Brand Personality
The added value a brand name gives to a product beyond the functional benefits provided.
Brand Equity
Steps to Creating Brand Equity
1. Develop positive brand awareness
2. Establish the meaning in consumer's minds
3. Elicit proper consumer response to brand's identity and meaning
4. Create consumer-brand connection evident in loyal behavior (deep psychological bond - Apple)
A contractual agreement whereby one company allows its brand name or trademark be used with products or services offered by another company for a royalty.
Brand Licensing
Picking a Good Brand Name
1. Should suggest product benefits
2. Be memorable, distinctive, and positive
3. Should fit the company or product image
4. No legal restrictions
5. Should be simple and emotional
Branding Strategies
- Multiproduct Branding
- Multibranding
- Private Branding
- Mixed Branding
When a company uses one name for all its products in a product class (e.g., GE and Sony)
Multiproduct Branding (Corporate/Family Branding)
The practice of using a current brand name to enter a new market segment in its product class.
Line Extension
Combining a corporate/family brand with a new brand, to distinguish a part of its product line from others (e.g., Gatorade, Gatorade Rain, Gatorade Frost, etc.).
Subbranding
Using a current brand name to enter a completely different product class (e.g., Honda expanding into lawn equipment).
Brand Extension
Pairing two brand names of two manufacturers on a single product (e.g., Hershey Foods and General Mills offering Reese's Peanut Butter Puffs).
Co-Branding
When a company gives each of its products a distinct name (e.g., P&G)
- Useful when each brand is intended for a different market segment
Multibranding
When multibrand companies introduce new products as a defensive move to counteract competition (e.g., Frito-Lay introduced Santitas brand tortilla chips to combat a regional tortilla chip that was taking sales from Doritos and Tostitos).
Fighting Brands
When a company manufactures products but sells them under the brand name of a wholesaler or retailer.
Private Branding
When a firm markets products under its own name and that of a reseller because the segment attracted to the reseller is different from its own market (e.g., Elizabeth Arden fragrances are sold in department stores, but also at Wal-Mart under the "skinsimp
Mixed Branding
Benefits of Packaging and Labeling
- Communicate with customers
- Functional (e.g., stacking, storing, protecting)
- Perceptual (e.g., consumer perception of product)
Four Challenges in Packing and Labeling
1. Connecting with customers
2. Environmental sensitivity (e.g., disposal)
3. Health, safety, and security
4. Cost reduction
A statement indicating the liability of the manufacturer for product deficiencies.
Product Warranty
Types of Warranties
- Express
- Limited Coverage
- Implied