Session 12 Flashcards
What is a product?
anything of value that can be
offered to consumers in an exchange
What does product include (6)
- core benefit
- actual good / service
- package / label
- brand name / logo
- customer service activities
- warranty / guarantee
What are layers of a product (starting from center of circle and moving towards the edges)
Core benefits–> actual product—> augmented product
Ways to classify product (2)
- Degree of tangibility (goods vs services)
- End users (B2C vs B2B)
What are the 4 types of B2C products?
- Convenience products
- Shopping products
- Specialty products
- Unsought products
What are convenience products + examples (2)?
Items that consumers purchase frequently and with a minimum
of searching and comparison effort
- e.g., toothpaste, groceries
What are shopping products + examples (2)?
Items that consumers compare several alternatives on such criteria
as price, quality, or suitability
– e.g., cameras, TVs
What are specialty products + examples (2)?
Items that consumers make special effort to search for but less
effort to compare due to unique characteristics or brand loyalty
– e.g., luxury sports car, legal specialists,…
What are unsought products + examples (3)?
Items that consumers either do not know about or know about but
do not initially want
– e.g., 3D printing, VR headsets, AR glasses
see slide 38
What are 5 phases of product life cycle (PLC)
- R&D
- Introduction
- Growth
- Maturity
- Decline
What is introduction stage?
A product is first introduced in the market
Sales, costs and profit
– Sales start at zero and grow slowly
– Large sunk investment in R&D, high costs on promotions
– Profit is minimal (often negative)
Customers and competitors
– Innovators (and then early adopters)
– Few competitors
Marketing objective
– Create awareness, educate consumers
– Stimulate primary demand for the whole product category
→ maximize market size
Price:
Skimming strategy: high price
* Capitalize on the price insensitivity of early adopters
* Recover the costs at the initial stage
* Products that can signal exclusivity, e.g., Tesla’s electric car
Penetration strategy: low price
* Large volume, accelerate growth
*Products that rely on large consumer base or network effects,
e.g., Netflix, Amazon Prime membership, free trials, etc.
Promotion:
– Heavy advertising, providing free trials
Place:
– Limited distribution channels
What is growth stage?
- A product succeeds in satisfying the market (many new
products fail…) - Sales, costs and profit
– Sales grows rapidly
– Profit increases and peaks - Customers and competitors
– Majority
– More competitors enter the market - Marketing objective
– Sustain the growth and stimulate selective demand for the brand
→ maximize market share - Product:
– Improved version with unique features - Price:
– Lower price to penetrate the market - Promotion:
– Emphasizing product/brand uniqueness - Place:
– Build extensive distribution channels
What is maturity stage?
- Most products we see daily are in the maturity stage
- Sales, costs and profit
– sales growth slows down
– average cost decreases
– profit growth slows down - Customers and competitors
– Repeat purchasers and/or late majorities
– Intense competition and weak competitors exit the market - Marketing objective
– Prevent profit from declining
– Defend market share - Product:
– Create new versions, modify the product characteristics such as
features, style or packaging to inspire more usage - Price:
– Beat competitors
Promotion:
– Advertising to remind consumers with frequent sales
promotions
– New advertising on modified products to regain consumer
attention - Place:
– Maintain current distribution channels and expand to new
markets if possible (e.g., foreign market)
What are X and Y axis of BCG matrix?
X: Relative market share
Y: Market growth rate
What is decline stage?
- Many mature products continue to be useful; but for
others, the decline is unpreventable… - Sales, costs and profit
– Sales drop and profit continues to decline
– Reduce the costs - Customers and competitors
– Laggards
– More competitors leave the market - Marketing objective
– Product deletion
– Retain the product by minimizing the costs and harvesting the
residual sales - Maintain the product without incurring further costs until
other competitors leave
– Product, price, promotion remain unchanged
– Place: close down unprofitable channels
– e.g., Dove’s bar soaps - Completely redefine the product
- Treat as a new product and redesign marketing mix
accordingly
- Treat as a new product and redesign marketing mix
How is company/ industry/product between introduction and growth stage called?
Stars
