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MGM 301: Final
Product Life Cycle
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Indicates 4 successive stages of the new product in a market place. Shows how total sales and profit move during stages of the product life cycle. (introduction, growth, maturity, and decline.
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Introduction Phase
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When a new product is first introduced into the market. Sales grow really slowly during this stage and profit is minimal in this stage, Main Objective Is To Create Awareness and Stimulate Consumer Trial. Primary demand and pricing strategies. (skimming and penetrations)
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Growth Phase
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Rapid increase in sales and appearance of competitors. Companies use aggressive pricing strategies to remain competitive and gain market share. Relies on repeat purchases, product proliferation and broad distributions to survive.
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Maturity Phase
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Industry and Product Sales Slows: Sales are increasing but at a decreasing rate. (Sloping/become negative) Fierce competition among many sellers to help buy, focus on holding on to market share.
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Decline Phase
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Due to changes in the marketing environment: New Technological Innovation need to choose either deletion and harvesting. Declining sales and profits.
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Skimming
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Pricing strategy: High Initial Price
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Penetration
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Pricing strategy: Low initial price
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Primary Demand
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Consumers preference to a certain product class.
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Selective Demand
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Consumers preference for specific brand within a product class.
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Product Proliferation
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Add improved versions or new feature onto product to differentiate their own product from others.
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Deletion
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Drop a product from the company's product line (No longer deal with product in decline stage)
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Harvesting
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Maintain portion of market share: Continue to offer product but reduce marketing costs. Maintaining product line, assign minimal amount in promotion and advertising.
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Four aspects of product life cycle
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1. Length of product cycles
2. Shape of product life cycle
3. The product level (product class and form)
4. The life cycle consumer characteristics
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High learning product
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This kind of product has an extended introduction stage. Company really needed to educate in introduction stage: Advertising, Promotion, Sales Reps (PLC) (personal computers in 1980)
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Low learning product
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Introduction stage is short and sales immediately grow at introduction. (PLC) (Food)
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Fashion product
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Introduces declines and returns again. No fixed timeline (PLC) (clothing)
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Fad product
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Very elaborate increase in sale at introduction but also has a very rapid decline in sales. Extremely short product life cycle.
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Product Class
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Entire product category or industry (Music Industry) (PLC)
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Product Form
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Variations within a product class (Variety in Music Industry: CD, Cassette, Record, Ipod) (PLC)
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Diffusion of innovations
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How a product spreads through the population
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Consumers during the PLC
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Innovators, early adopters, (People who effect purchase decisions and stimulate demand) early majority, late majority, laggards.
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Reason people do not adopt new product: barriers to entry
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Usage(not compatible with existing usage pattern), value(adopting not beneficial with design, price or efficiency) , risk (economic value, psychological and physical), and psychological (cultural differences or self-identity)
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Product Modification
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Managing PLC: Strategy where changing one or more of the existing product characteristics to increase sales and profit. (product bundling or add new characteristics)
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Market Modification
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Managing PLC: Strategy of finding new customers, increasing product use or creating new usage situations. (Lego's for girls)
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Product Positioning
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Managing PLC: Changes the place a product occupies in consumer's mind relative to competitive
(other) products (react to a customers position, reach a new market, catching a rising trend, and changing the value added)
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Trading up
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Changing Value by Adding more value to product or line with additional features or higher quality.
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Trading down
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Changing Value by Strategy of reducing the number of product features, quality or price.
Including: Downsizing: Way of reducing content without changing product size or price.
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Brand Name
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Any element that can help identifying product (spoken work or logotype)
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Trade name
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Commercial or legal name under which one company does business. (Coke Company)
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Trademark
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Ensures that brand name is legally registered and prevents others from using it.
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Brand Personality
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Hoping to provide and create brand equity for company. Provides a competitive advantage
Customers willingness to pay a higher price for one brand when their functions benefit identical. Set of human characteristics associated with a brand name. Important because consumers assign personality traits to some brands and will buys due to self-identity.
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Brand Equity
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Added value a brand name gives to a product beyond the function benefit provided.
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Customer-based brand equity pyramid
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1.Brand Awareness: One brand should be associated immediately with a certain product class.considered the best in product class
2. Brand Performance/Imagery: Brand managers must create brand meaning.
Performance: Functional Factors. Imagery: Emotional Factors 3. Consumers Judgment/ Feeling: Brand manager must create positive consumer responses. Judgment: Brand performance
Feeling: Good feelings about brand image.
4. Consumers-Brand Connections: Psychological relationship between consumers and their brand.
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Good brand name characteristics
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should suggest product benefit, memorable and positive, fits the company, no legal restriction, simple and emotional, positive phonetic/ semantic in other languages.
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Multi Product Branding
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Uses the same name for all of the products in company's product lines. Also known as family or corporate branding. (product line extensions, brand extensions, subbranding, and co-branding)
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Product line extensions
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Use current brand name to introduce new product within the same product class. (cause cannibalization, do not need to advertise)
Multi product branding
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Brand extensions
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Use the same brand name to enter different product class. multi product branding
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Subbranding
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Combines a corporate or family brand with a new brand to distinguish a part of its product line from others.
multi product branding
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Co-branding
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Pairing of two brand names of two manufacturers. increases awareness and luxurious.
multi product branding
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Multi-Branding
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Give each product a distinct name, do not use the same name for different products. Advantage: Each brand is unique to each market segment, no cannibalization.
Disadvantage: Complex and expensive because company needs to make new brand name every
time causing higher advertising and promotion costs.
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Private Branding
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Sell products under the name of a wholesaler or retailer.
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Mixed Branding
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Use own & reseller's brand name. (At Sear's: Sear's tires, At Michelin: Michelin tires)
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Packaging
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Component of product that refers to any container in which it is offered for sale and label
information is conveyed.
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Labeling
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Gives information about product and brand, who made it, where/when it was made, how to use,
package contents and ingredients.
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Benefits of packaging and labeling
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1.Communication Benefit: packing and labeling gives a lot of product information
2. Functional Benefit: Storage, convenience, protection, gives signal of product quality (beats)
3. Perceptual Benefit: Design that make the package different to signal quality/benefit.
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Product
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Good, service or idea consisting of a bundle of tangible or intangible attributes that satisfies consumers and is received in exchange for money or some other unit of value.
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Goods
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Tangible attributes that a consumer's five senses can perceive. Can also contain intangible attributes such as delivery or warranty. (product)
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Nondurable Goods
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Item you can use up in one or few uses (Pack of gum)
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Durable Goods
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Item that usually lasts over many uses (Cars and equipment)
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Services
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Intangible activity or benefit that organization provide to satisfy consumers' needs and wants. (type of product)
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Ideas
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thought that leads to a product or action. (First step in generating a new product- type of product)
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Consumers Products
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Products purchased by the ultimate consumer. Based on effort, attribute and frequency of purchasing product.
(convenience, shopping, specialty, and unsought products)
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Business Products
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Products that assist directly or indirectly in providing products for resale (B2B or industrial products) Sales of business product derived from sales of consumer product.
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Convenience Product
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Consumer Product: Item consumers can purchase very conveniently and frequently with
minimal effort. (Groceries or Candy Bar)
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Shopping Product
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Consumer Product: Consumers compare attributes based on its products quality, price or
design. Some effort when buying (Clothing or Smart Phone)
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Specialty Product
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Consumer Product:Consumers use a lot effort and time to make decision. Usually a large, once in a life time purchase. (Car or House)
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Unsought Product
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Consumer Product: Item consumers do not know about or initially do not want to buy. (Funeral Service: will only buy when you desperately need it)
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Derived Demand
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If demand for Audi car increases. Audi manufacturing need to order more product to match consumers demand. (components and support products)
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Product Item
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Specific product that has unique brand, size or price. (Each item has specific SKU)
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Stock Keeping Unit(SKU)
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Company will issue specific identification number for each product, to order or make inventory. (Bar Code)
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Product lines
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Group of product items that are grouped together because they: satisfy a similar class of needs,
distributed at same outlet, used together, within same price range, sold to the same consumer.
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Product Mixes
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All of the product lines offered by the organization.
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4 perspectives of newness
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comparing to existing products, the consumers perspective, the firms perspective, legal perspective
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Comparing to existing product
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Newness perspective: When new product has different functions than an existing product we consider it new.
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The consumers perspective
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Newness perspective: We could consider the degree of consumer learning and education based on
benefit is needed (3 types continuous, dynamically continuous, discontinuous)
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The firms perspective
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Newness perspective: three levels Product line extension, jump in innovation/brand extension, and radical innovation.
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Legal Proceptive
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Newness perspective: US Federal Trade Commission (FTC) allows a product to be called new for 6 months after it
enters regular distribution.
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Continuous Innovation
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Consumers newness perspective: Requires no new learning by customers by adding new features. (Focus on gaining consumer awareness and wide distribution)
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Dynamically Continuous Innovation:
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Consumers newness perspective: Disrupts consumer's normal routine but does not require totally new learning. (focus on Advertising points of difference and benefits to consumers.)
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Discontinuous innovation
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Consumers newness perspective:Requires new learning and consumption patterns by customers. (focus on Educating consumers through product trail and personal selling)
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Jump in innovation
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Firms newness perspective: Adding new technology (changing from 3g to LTE Cell Phone)
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Radical innovation
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Firms newness perspective: Totally new innovation. (First personal computer is introduced)
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Protocol
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How to stop product from failing: Identifies well-defined target market, specifies customers' needs, wants and preferences and it
identifies what the product will do and be to satisfy customers.
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Marketing Reasons for new product failure
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Insignificant point of different, Incomplete market and product protocol before product development starts, Not satisfying customer needs on critical factors/Bad timing/No economical access to buyers,Poor quality/execution of the marketing mix,
Too little market attractiveness.
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Organizational reasons for new product failure:
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Group think and the NIH problem.
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Group Think
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organizational reason for failure: in Task Force and Committee Meetings: Person in planning meeting knows what is happening is a bad idea but is afraid to speak against the group.
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Avoiding the "NIH" Problem
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organizational reason for failure: "Not invented here" great ideas are great no matter who the source is.
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7 stages of new product process
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new product strategy development, idea generation, screening and evaluation, business analysis, development, market testing, commercialization.
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New product strategy development
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Stage of new product process: (SWOT analysis for internal and external risk and rewards), Protocol strategic role defined, disruptive innovation can occur.
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idea generation
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stage of new product process: Develop a pool of concepts to serve as candidates for new products. (employee/co-worker suggestions "internal", customer and supplies suggestions "external", R&D labs "Industrial design=internal" and external labs, competitive product analysis and smaller firms/universities/inventors)
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screening and evaluation
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stage of new product process:Internally and externally evaluating the feasibility of new-product ideas
Internal:Feasibility analysis, consider cost/technology, Customer Experience Management.
External:Concept tests: evaluation with consumers that consist of preliminary testing of new-product idea rather than an actual product.
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business analysis
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stage of new product process:specifies the features of the product and the marketing strategy needed to bring it to market and make financial projections (Last checkpoint before developing prototype): assess business "fit" with finanical projection, synergies with company's operations, and legal exams than look at capacity management.
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development
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stage of new product process:turns the idea on paper into a prototype. Results in a demonstrable product that involves not
only manufacturing the products efficiently but also performing laboratory and consumer tests.
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market testing
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stage of new product process:Involves exposing actual products to perspective consumers under realistic purchase
conditions to see if they would buy product-
Standard test market: testing new product through normal distribution (test city)
Simulated test market: testing new products potential customers in select places
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commercialization
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stage of new product process: Positions and launches a new product in full-scale production and sales, through Sequential rollout (by region) or simultaneous rollout.
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Crowdfunding:
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idea generation in new product process: way to gather an online community of supporters to financially rally around a specific project that would be unachievable traditionally.
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Risks of grocery products
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why manufacturers use region roll outs: slotting and failure fee.
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Slotting Fee
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Payment manufacturer's makes to place a new item on shelf.
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Failure Fee
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Penalty payment a manufacturers makes to compensate retailer for
devoting shelf space to a product that failed to sell.
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Speed in new product
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Time to market (TtM) is vital when introducing new products.
1. Parallel Development: Cross-functional team members conduct the simultaneous
development of both the product and the production process.
2. Fast Prototyping: "do it, try it, fix it" continuous improvement even after initial design.
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Middle-men
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Any intermediary between manufacturer and end-user markets.
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Agent or broker
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Any intermediary with legal authority to act on behalf of the manufacturer. (Century 21: Help owner and potential customer without owning house)
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Wholesaler
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An intermediary who sells to other intermediaries usually to retailers:
Usually in consumer market.
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Retailer
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An Intermediary who sells to final consumers. (Target and Walmart)
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Distributor
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Intermediary who performs a variety of distribution function in business market: B2B (selling, maintaining inventory)
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Dealer
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imprecise term means the same as distributor, retailer and wholesaler.
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Functions intermediaries perform
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1.Transactional Function: most intermediaries buy product from manufacturers and sell product to final consumers. Share the risk of ownership of inventory that can become obsolete.
Target buys product from Samsung, shares in risk of deterioration or obsolete products.
2. Logistical Function: Create product assortments, sort them to sell product to final customers.Gathering, sorting and disbursing.
3. Facilitating Function: Financing (extending credit to customers), grading (inspecting and judging products to assure quality) and providing marketing information/research.
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Timing
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intermediary function utility:
Having a product when you want it.
FedEx: Next morning delivery you can have product when you want it.
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Place
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intermediary function utility: Having a product available where you want it Example Gas Stations in highway.
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Form
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intermediary function utility: Enhancing a product to make it more appealing to you. Example: Bottlers for soft drinks make bottle look better for you.
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Possession
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intermediary function utility:Helping you take possession of a product.
Example: Kayak: Travel agency delivering flight ticket.
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Intermediary Function Utilities
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Time, Form, Place, and Possession
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Two types of marketing channels for consumer goods
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Direct Channel, Indirect Channel (retailers, wholesaler, and agents)
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Direct Channel
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Marketing channel for consumer goods: Manufacturer and final user make a deal directly with each other. Example Food Truck: Buy food directly from food truck.
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Indirect Channel
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Marketing channel for consumer goods: 1. Retailers: in between products and final users there is no wholesaler. (When product has many variations, a lot of costs)
2. Wholesalers: in between producers and retailers (candy bars, buy at low price)
3. Agents: In between producers and wholesalers too many small manufacturers and
too many small wholesalers (many individuals hard to negotiate)
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Direct Marketing
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Allows consumers to purchase product by interacting with various mediums without face to face meeting person (mail-order, telemarketing)
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Multichannel Marketing:
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Blends of different communication and delivery channels. Leverages the value-adding capabilities of different channels by combining functions.
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Dual Distribution
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Arrangement whereby a firm reaches different buyers by employing two or more different types of channels for the same basic product. (GE uses direct/indirect channels)
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Strategic Channel Alliance
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One firm's marketing channel used to sell another firm's product.
Cereal Partners Worldwide(CPW): General Mills use Nestlé's brand
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Vertical Marketing System
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Professionally managed and centrally coordinated marketing channel.
Designed to achieve channel economies and maximum marketing impact.
(Corporate,contractual, and administered systems)
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Corporate Stystem
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Vertical Marketing System: Combination of successive stages of production and distribution under a single owner.
Forward Integration: Producers owns an intermediary at the next level down in
channel. Reduces cost (Ralph Lauren owns their own retail store)
Backward Integration: Retailer owns their own manufacturing operation. Access to supply whenever they want.
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Contractual System
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Vertical Marketing System:Wholesaler-Sponsored Voluntary Chains: a wholesaler that
develops a contractual relationship with small, independent retailers. Wholesalers own retailers.
Retailer-Sponsored Cooperative: Small, independent retailers form an organization that operates a wholesale facility cooperatively.
Franchising: Contractual arrangement between a parent company(franchisor) and an individual or firm(franchisee)
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Administered System
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Vertical Marketing System:Achieve coordination at successive stages of production and
distribution by the size and influence of one channel member rather than owning.
Example: P&G as a manufacturer, Walmart as a retailer.
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Market Channel Conflicts
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Disintermediation: Channel member bypasses another member.
Horizontal Conflict: Occurs between Intermediaries at the same level in marketing channel.
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Channel Captain
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Channel member(producer, wholesaler or retailer) that coordinates, directs
and supports other channel members. (Walmart)
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Target Market Coverage (Density or Number of Retailers)
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Intensive Distribution: Put product in as many places as possible (Soda industry)
Exclusive Distribution: Select one channel or retailer in specific geographic area (Gucci)
Selective Distribution: Firm selects a few retailers in a specific geographical area to carry it's products (Best Buy)
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Marketing Channel
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Controls outbound flow of finished product from producers to consumer.
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Buyer Requirments
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Information(communication), convenience, variety, pre or post test service.
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Classification of Retail outlets
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form of ownership, level of service, merchandise line(breadth and depth)
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Retailing
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Activates involved in selling, renting and providing products and services to ultimate consumers. (Producers/consumers meet and make a deal)
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Forms of ownership
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1. Independent Retailers: Retail store owned by individuals. (Local store in Buffalo)
2. Corporate Chain: Multiple outlets under common ownership. Purchase decisions are made by the centralized owner, strong buying power. (Macy's)
3. Contractual Systems: Franchise and Legal rights (McDonalds)
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Franchise Types
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1. Business Format: Precise procedures/guidelines are provided by franchiser.
Subway: Sets up stores, facility, price, advertising..
2. Product Distribution: Franchisee is more independent have more power to distribute the product. (Dealership)
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Levels of service
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1. Self Service: Consumers perform most functions, higher price because of
maintenance fee and operating cost. (Red Box)
2. Limited Service: Offers more service but customers perform most shopping
activities.(Walmart)
3. Full Service: Upscale, offers some many services, price is relatively high, offer
high quality product.(Bloomingdales)
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Breadth
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Number of different product lines.
1. General merchandise stores- Limited depth, assortment of product line (tops)
2.Scrambled Merchandising: Carries multiple unrelated products causes'
intertype competition- having to compete with different store types.
Hypermarket: Has small portion of grocery store
Supercenter: Full portion of grocery store.
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Depth
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1. Limited-line stores: Carries considerable assortment of products. (Dicks)
2. Single-line stores: Tremendous Depths for limited line category. (Victoria's)
Specialty Outlets- Focus on one product category, provide
competitive price. Dominate market (category killer)
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Nonstore Retailing
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1. Automatic Vending: serves customers when retail stores can't higher price
due to fixed costs low customer/retailer involvement.
2. Direct Mail and Catalogs: people do not focus on message, try to increase engagement on the catalog.
3. TV Home Shopping: Major target elderly.
4. Online Retailing: Access to internet allows people to go on whenever they
want it gives variety/ability to compare and in-home privacy. (Enhance customer's personal experience)
5. Telemarketing: Do-not-call registry is becoming major problem.
6. Direct Selling: highest level of customer/retailers involvement outdated uses demonstrations and display (Mary Kay)
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Retailing Mix
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retailing activities for managing store and merchandising. 4 aspects Retail pricing, store location, retail communication and merchandise.
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Original Markup
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initial selling price-retailers cost
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Maintained Markup
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Gross Margin- If product isn't sold as quickly as expected retailers
need to reduce cost to sell product and reduce stock. (Final selling price-Retailer Cost)
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Markdown
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Reducing the selling price because there is a new model of product
introduced in the market or to increase demand for complementary product.
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Pricing Strategy Retail
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Everyday Low Pricing. (EDLP- creates image of bargain and sale)
Everyday fair pricing (higher than EDLP but provide more services)
Benchmark or signpost items (forms overall impression about the price level)
Off-Price Retailing: Buy product from manufacturers in a large quantity at a relative low price so that they could sell items cheaper. Take small markup to provide low price.
(warehouse club, outlet store, single/extreme value)
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Central Business District
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Retail setting located into the communities downtown Problems: People in the suburbs, lack of parking and crime rate.
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Regional Shopping Center
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Retail stores serve the population 5 to 10 minutes from the downtown district and include 2 or 3 anchor stores.
Anchor Stores: Macy's and Sears at Boulevard Mall
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Community Shopping Center
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One major anchors store serves people 10 to 20
minutes from the downtown district.
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Strip Mall
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Cluster of several different stores in a neighborhood.
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Power Center
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If strip mall has one major anchor store like target or best buy.
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Retail communication
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retailers try to position their stores by creating a store image.
Store Image: Way of which a consumer describes a store in their mind.
Functional qualities: Store layout, breadth and depth of line categories. Psychological attributes: customers personal feeling of the store.
Psychological attributes are enhanced through store atmosphere or ambiance like store
layout, color, lighting, music, scent, crowdedness.
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Shopper Marketing
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Use of display, coupons, product samples, and other brand communications to influence shopping behavior in a store.
Examples: Narrow Aisles Seek Variety and Fewer Shoppers Bigger Sales.
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Merchandise
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Actual content that retailers provide to consumers. Retailers need to be aware
of the needs of the target market and also alternative products that are available.
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Category Management
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Strategy to assign a manager to handle assortment of products in the store. Doing research about all available products and decides the quantity to buy.
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Wheel Of Marketing
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extremely dynamic as time passes outlets add services and as more time passes outlet adds even more services. (4 stages increase in price, margin, and status as time passes)
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Advertising
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is any paid form of non-personal communication about an organization, product, service or idea by an identified sponsor. (Broken into two types of advertisements: Product and Institutional Advertisements.)
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Pioneering (informational: Product and institutional advertisement)
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Give information about what the product is, what the product can do, and where consumers can find the product.
Introduction Stage: Main purpose is to increase awareness and give knowledge about product.
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Competitive (Persuasive: Product and institutional Advertisement)
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Emphasizes the strengths of one brand over competitors.
Focus on their competitive benefit and unique features.
Comparative: Focus on specific and unique features and try to say theirs is better.
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Reminder (Reinforcement: Product and institutional advertisement )
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Give information and remind consumers of what they already know.Try to reinforce that the product they already bought is a good one.Assure that they choose the correct product.
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Advocacy (Institutional Advertisment)
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Attempt to expression the organizations position on some sort of issue and request some viewers to change behaviors or actions. (Red Cross Blood Donation)
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Developing the advertising program
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1. Identifying the Target Audience: Know about lifestyle, demographic and potential targets attitude towards brand or product class.
2. Specifying the Advertising Objectives: What is the purpose of the advertisements, setting a specific media to
target your specific audience and evaluate the advertisement campaign.
3. Setting the Advertisement Budget: Need to set money aside for advertisement. (Super Bowl Ad: 3.8 Million)
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Managing Content:
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Designing the advertisement: 1.Informational Element: Information about product and brand (Location, price and brand name) Broad information to persuade consumers to use product.
2. Persuasive Element: Trying to persuade consumer through appeal of broad information.
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Types of Appeal in Advertising
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1. Fear Appeals: Consumers can avoid negative experience of event by using their products. Try to change behavior. (If fear is too strong consumers will avoid advertisement)
2. Sex Appeals: Increasing attractiveness of one female or male. (Usually for fashion products)
3. Humorous Appeals: Consumers like humorous appeals and give more attention to the humorous appeals. (Geico Advertisements)
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