Final - 04 Product Policy #2

Question 1

DEFINE PLC

Answer 1

Product life cycle (PLC) = The course of a product’s sales and profits over its lifetime. It involves five distinct stages: product development, introduction, growth, maturity, and decline.

Question 2

describe the introduction phase of the PLC

Answer 2

Characteristics:

• sales are low
• High cost per customer
• profits are negative
• customers buying your product are innovators
• little competition from competitors

Marketing objectives: create product awareness and trail

Strategies:

• offer just the basic product
• use cost-plus pricing strategy
• build a selective distribution channel
• advertising should build product awareness among early adopters and dealers
• heavy use of sales promotion to entice the trail period

Introduction → is a period of slow sales growth as the product is introduced in the market. Profits are nonexistent in this stage because of the heavy expenses of product introduction.
The introduction stage starts when a new product is first launched. Introduction takes time, and sales growth is apt to be slow. Well-known products such as frozen foods and HDTVs lingered for many years before they entered a stage of more rapid growth

Question 3

what are the characteristics of the growth phase of the PLC

Answer 3

characteristics:
* sales - RAPIDLY RISING
* cost - average cost per customer.
* profits - rising
* custoemer type - early adopters
* competitors - growing in number

Marketing objectives = MAXIMIZE MARKET SHARE

MArketing Strategies:

• product strategy - offer product extensions, service, warranty
• price strategy - price to PENETRATE market
• distribution strategy - build awareness and interest in the MASS MARKET
• advertising strategies (promo) - build awareness and interest in MASS MARKET
• sales promotion - REDUCE to take advantage of heavy consumer demand

Growth → is a period of rapid market acceptance and increasing profits.
If the new product satisfies the market, it will enter a growth stage, in which sales will start climbing quickly. The early adopters will continue to buy, and later buyers will start following their lead, especially if they hear favorable word of mouth.
~~ Attracted by the opportunities for profit, new competitors will enter the market.

Question 4

what are the characteristics of the MATURITY phase of the PLC

Answer 4

characteristics:
- sales - sales peak
- profits - HIGH
- customer type: MIDDLE MAJORITY
- competition - stable numbers beginning to decline in comp.

marketing objectives:
to maximize profit while defending market share

Strategies:

• product strat = DIVERSIFY brand and models
• price = price to match or beat competitors
• distribution = build MORE INTENSIVE distribution
• advertising = stress brand difference
• sales promotion = increase to encourage brand switching

Maturity → is a period of slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profits level off or decline because of increased marketing outlays to defend the product against competition.
~~ At some point, a product’s sales growth will slow down, and it will enter the maturity stage. This maturity stage normally lasts longer than the previous stages, and it poses strong challenges to marketing management.
—> Maturity stage The PLC stage in which a product’s sales growth slows or levels off.

Question 5

what is the marketing objective during the maturity stage?

Answer 5

to maximize profit while defending market share

Question 6

what are the characteristics of the DECLINE phase of the PLC?

Answer 6

Characteristics:

• sales - declining
• costs - LOW cost per customer
• profits - declining
• customer type -LAGGARDS
• competitors - declining in numbers

Marketing Objective:
to reduce expenditure and milk the brand

MArketing strategies:

• product strategy = phase out weak items
• price = CUT PRICE
• distribution = SELECTIVE, phase out unprofitable outlets
• advertising = reduce to level needed to retain hard-core loyals
• sales promo = reduce to minimal level

Decline → is the period when sales fall off and profits drop
~~~ Sales decline for many reasons, including technological advances, shifts in consumer tastes, and increased competition. As sales and profits decline, some firms withdraw from the market.

Question 7

define new product developement

Answer 7

New-product development
The development of original products, product improvements, product
modifications, and new brands through the firm’s own product development efforts

– A firm can obtain new products in two ways. One is through acquisition—by buying a whole company, a patent, or a license to produce someone else’s product. The other is through the firm’s own new-product development effort

Question 8

what are the steps in the new product development process?

Answer 8

1 - idea generation
2 - idea screening
3 - concept and development testing
4 - marketing strategy development 
5 - business analysis
6 - product development
7- test marketing
8 - commercialization

Question 9

define crowd sprucing

Answer 9

Crowdsourcing – Inviting broad communities of people—
customers, employees, independent scientists and researchers, and even the
public at large—into the new-product innovation proces

Question 10

define commercialization

Answer 10

Commercialization -

Introducing a new product into the market.

Question 11

define style

Answer 11

A style is a basic and distinctive mode of expression. For example, styles appear in homes (colonial, ranch, transitional), clothing (formal, casual), and art (realist, surrealist, abstract). Once a style is invented, it may last
for generations, passing in and out of vogue. A style has a cycle showing several periods of renewed interest.

Question 12

define fashion trends

Answer 12

A fashion is a currently accepted or popular style in a given field.
— For example, the more formal “business attire” look of corporate dress of the 1980s and 1990s gave way to the “business casual” look of the 2000s. Fashions tend to grow slowly, remain popular for a while, and then decline slowly

Question 13

define fads

Answer 13

Fads are temporary periods of unusually high sales driven by consumer enthusiasm
and immediate product or brand popularity.29 A fad may be part of an otherwise normal life cycle, as in the case of recent surges in the sales of poker chips and accessories. Or the fad may comprise a brand’s or product’s entire life cycle.

Question 14

describe the efforts necessary for managing new product development

Answer 14

The new-product development process highlights the important activities needed to find, develop, and introduce new products. However, new-product development involves more than just going through a set of steps. Successful new-product development requires
1 - a customer-centered,
2- team-based, and
3- systematic effort.

Question 15

define Customer-centered new-product development (NPD management)

Answer 15

Customer-centered new-product development - - New-product development that focuses on finding new ways to solve customer problems and create more customers satisfying
experiences.

Question 16

define team based new-product development (NPD management)

Answer 16

Team-based new-product
development - An approach to developing new products
in which various company departments work closely together, overlapping the
steps in the product development process to save time and increase effectiveness

Question 17

define systematic new product development (NPD management)

Answer 17

the new-product development process should be holistic and systematic rather than
compartmentalized and haphazard. Otherwise, few new ideas will surface, and many good ideas will sputter and die. To avoid these problems, a company can install an innovation management
system to collect, review, evaluate, and manage new-product ideas

Question 18

describe step 3 in the new product development process

Answer 18

3 ) Concept Development and Testing

An attractive idea must be developed into a product concept. It is important to distinguish between a product idea, a product concept, and a product image. A product idea is an idea for a possible product that the company can see itself offering to the market. A product concept is a detailed version of the
idea stated in meaningful consumer terms. A product image is the way consumers perceive an actual or potential product.

Question 19

define product concept (NPD process step 3)

Answer 19

Product concept – A detailed version of the new-product idea stated in meaningful consumer terms.

Question 20

define concept testing (NPD process step 3)

Answer 20

Concept testing —
Testing new-product concepts with a group of target consumers to find out
if the concepts have strong consumer appeal.

Question 21

describe step 4 in the new product development process

Answer 21

4) Marketing Strategy Development - Designing an initial marketing strategy
for a new product based on the product concept.

*** The marketing strategy statement consists of three parts. The first part describes the target market; the planned value proposition; and the sales, market share, and profit goals for the first few years

Question 22

describe step 5 in the new product development process

Answer 22

Once management has decided on its product concept and marketing strategy, it can evaluate the business attractiveness of the proposal. Business analysis involves a review of the sales, costs, and profit projections for a new product to find out whether they satisfy the company’s objectives. If they do, the product can move to the product development stage

Question 23

describe step 7 in the new product development process

Answer 23

If the product passes both the concept test and the product test, the next step is test marketing, the stage at which the product and its proposed marketing program are introduced into realistic market settings.

Test marketing gives the marketer experience with marketing a product before going to the great expense of full introduction. It lets the company test the product and its entire marketing program—targeting and positioning strategy, advertising, distribution, pricing, branding and packaging, and budget levels.

Question 24

what are the marketing strategies that should be put in place when a product reaches the decline stage?

Answer 24

MArketing strategies:

• product strategy = phase out weak items
• price = CUT PRICE
• distribution = SELECTIVE, phase out unprofitable outlets
• advertising = reduce to level needed to retain hard-core loyals
• sales promo = reduce to minimal level

Question 25

describe the characteristics of the introduction phase (sales, profits..)

Answer 25

Characteristics:

• sales are low
• High cost per customer
• profits are negative
• customers buying your product are innovators
• little competition from competitors