Final - 04 Product Policy #2 Flashcards
DEFINE PLC
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.
describe the introduction phase of the PLC
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
what are the characteristics of the growth phase of the PLC
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.
what are the characteristics of the MATURITY phase of the PLC
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.
what is the marketing objective during the maturity stage?
to maximize profit while defending market share
what are the characteristics of the DECLINE phase of the PLC?
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.
define new product developement
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
what are the steps in the new product development process?
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
define crowd sprucing
Crowdsourcing – Inviting broad communities of people—
customers, employees, independent scientists and researchers, and even the
public at large—into the new-product innovation proces
define commercialization
Commercialization -
Introducing a new product into the market.
define style
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.
define fashion trends
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
define fads
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.
describe the efforts necessary for managing new product development
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.
define Customer-centered new-product development (NPD management)
Customer-centered new-product development - - New-product development that focuses on finding new ways to solve customer problems and create more customers satisfying
experiences.
define team based new-product development (NPD management)
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
define systematic new product development (NPD management)
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
describe step 3 in the new product development process
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.
define product concept (NPD process step 3)
Product concept – A detailed version of the new-product idea stated in meaningful consumer terms.
define concept testing (NPD process step 3)
Concept testing —
Testing new-product concepts with a group of target consumers to find out
if the concepts have strong consumer appeal.
describe step 4 in the new product development process
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
describe step 5 in the new product development process
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
describe step 7 in the new product development process
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.
what are the marketing strategies that should be put in place when a product reaches the decline stage?
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
