Chapter 3 Flashcards
What are the features of a successful product?
- It satisfies the need or wants of consumers, and provides value for money
- It provides quality that complements the set price
- It is designed in an appealing, durable, safe way
- It incurs low production costs, allowing the business to make enough profits
- It is a novelty or can stimulate new consumer markets
What are the benefits and costs of developing new products?
Benefits:
- A business can diversify and spread the risks of failure if it develops new products. If a product does not sell, others might
- New products can be developed to target a wider range of customers resulting in higher market share
- Product development helps the business respond to market changes. New products can create additional customer interest in the company, especially if up-to-date products are available
- The development of new products with unique features allows the business to set a higher price for its product or even increase brand loyalty
Costs:
- Developing new products incurs high investment costs in research
- Without sales, the development process affects the profit of the business
- In order for a business to benefit from developing products, it has to research the market to determine the appropriate marketing mix
- It has to guarantee that the developed product has a market, meets customer expectations, and is readily available
What are the extension strategies a business can use?
- Sell in a new market
- Target a different market segment
- Add new features to, or improve the existing product
- Sell through additional retail outlets
- Encourage customers to use the product more often
What are the benefits of packaging?
- Protection
- Improvement of the selling appeal
- Display of information
- Promotion of the brand
- Extension of the life cycle
- Ease of use
[G] What are the features of successful products?
- It serves the purpose it is intended to serve
- It has an attractive design and a good package
- Its price reflects its quality
- It allows the business to make profit through acquiring lower costs
- It can attract more customers and increase demand
[G] What are the benefits to businesses of developing new products?
A business can diversify and enter new markets, allowing it to increase its market share and respond to market changes. Also, a business can develop genuine products, and sell them at higher prices to make additional profits. It does so to win a competitive edge.
[G] What are the four types of products?
Consumer goods and services and producers goods and services.
A marketing manager believes it is better to always introduce new products, rather than extend the life of existing ones. Do you agree with this view? Justify your answer.
The development of new products requires high investment in research and acquires high costs which could affect the financial situation of a business. It is better to add features to existing products and extend their life cycle, since it is cheaper and incurs less risk.
Sales of most products, even the successful ones, reach maturity. Companies introduce extension policies in order to avoid a decline in sales.
a) Use the following life cycle diagram to draw the effect of extension strategies.
b) Explain two possible extension strategies that a computer game manufacturer can use.
c) Explain the disadvantages of having a short product life cycle.
b) He can target a different market segment by developing games for different age groups. He can also add new features or improve the existing games by changing the design or making it an online game.
c) A product with a short life cycle incurs losses for a firm and requires it to either develop a new product or shut down its operations. In the decline stage, no profit is generated encouraging competitors to take advantage of their rival’s declining products to develop a better alternative. This reduces the market share and reflects negatively on the image of the business.
[G] What are the stages of the product life cycle?
Development, introduction, growth, maturity, saturation, decline
[G] What are the features of the product life cycle?
Different products have different life cycles and they are usually bell-shaped. A business can find ways to extend the maturity stage and prevent the product from declining.
[G] What does extension strategies involve?
- Lowering the price of the product
- Entering new markets
- Redesigning the product and adding new features
- Changing the use of the product
[T] Breakfast Cereal (BC) produces a wide range of cornflakes. After launching a new cereal for children, promotion meant that the product sold well, but eventually, sales fell.
a) Label the following product life cycle to show the various stages of the new cereal.
b) Outline one strategy that BC can use to extend the life cycle of its declining product.
b) It could sell the product in a new market: The business might consider selling its products overseas, especially if foreign markets are less competitive than domestic ones.
a) Explain the difference between a product’s brand and its package.
b) Would a product that is not well-packaged appeal to customers? Justify your answer.
c) Why do most businesses package their products?
a) Branding, involves giving a product a distinctive name or “brand name” and building a brand image and helps the business differentiate its products. However, packaging refers to how a product is presented. It is the physical container or wrapping for a product.
b) It will not appeal to customers because packing improves the selling appeal. A proper package is a means to attract customers. For instance, the use of colours and shapes can help a product stand out against competition.
c) They package their products because a package protects the product, improves the selling appeal, displays information, promotes the brand, extends the life cycle and facilitates the use of the product. It is also a mean to promote the products.
McDonald’s is considered one of the most prominent multinational companies worldwide. Its brand value was ranked 5th internationally at $66,600 million (2009). Every year, rumors spread about the quality of food at McDonald’s, yet sales are rarely affected.
a) Using McDonald’s as an example, explain the meaning of brand.
b) Explain how McDonald’s benefits from having a well-established brand name.
c) In your opinion, why are McDonald’s sales not affected negatively by bad rumors?
a) McDonald’s chose a distinctive name to differentiate it from other businesses in the same industry and developed it into a trademark that cannot be used by others and that can be identified by all customers easily through the letter “M”.
b) A well-established brand name ensures high sales for McDonald’s and allows it to diversify since launching new items can easily attract consumers who know the brand and trust it.
c) Because of brand loyalty developed towards McDonald’s. Consumers trust the brand even if bad rumors surround it. Successful marketing strategies also allow McDonald’s to maintain its high sales in such situations.
