WEEK 3 - 4 Flashcards
5 stages in deployment process
- launch timing
- licensing and compatibility
- pricing
- distribution
- marketing
Cannibalization
when a firm’s sales of one product diminish its sales of another of its products
does a company launch the product when it is ready
no timing is important: business cycles, seasonal effects, technology positioning,
Why might a firm delay launching a next-generation product?
If the current product is still very profitable, the firm may wait to introduce the new version until profits start dropping — to maximize earnings from the existing product first.
What is the main decision a firm faces regarding technology compatibility during deployment?
Whether to make the new technology compatible or incompatible with other products or its own older versions.
Why might a firm choose compatibility with existing technology?
To leverage the installed base and complementary goods that customers already have, increasing value and adoption.
Why might a firm choose incompatibility?
To protect its own installed base and make it harder for future competitors to benefit from it.
What does backward compatible mean?
A new product can work with products of a previous generation.
What is a benefit of backward compatibility?
It helps customers transition smoothly to new products without losing the value of their old products.
What strategy combines continuous innovation with backward compatibility?
Developing new versions of products that improve technology while still working with older systems.
Survival pricing
when the price of a good is set to cover variable costs and part of fixed costs. This is a short-run strategy that does not create long-term profits for the firm
when is survival pricing used?
Used when the industry is plagued with overcapacity or intense price competition
Penetration pricing
when the price of a good is set very low to maximize the good’s market share.
when is penetration pricing used?
Often used in industries characterized by increasing returns
What is the Razor and Razor Blade Strategy?
A pricing strategy where the main product is sold cheap or below cost, but the company makes profits on complementary goods you need to use the product.
printer and cartridges
What is the Freemium Model?
A pricing strategy where a basic version of a product or service is free, but customers pay for premium features.
Give an example of a Freemium Model
spotify
How do both the Razor & Blade strategy and Freemium model make money?
By hooking customers early and earning profits later through complementary products or premium features.
Manufacturers’ representatives
independent agents that promote and sell the product lines of one or a few manufacturers. They are often used when direct selling is appropriate but the manufacturer does not have a sufficiently large direct sales force to reach all appropriate market segments
Wholesalers
companies that buy manufacturer’s products in bulk, and then resell them to other supply channel members such as retailers
Retailers
companies that sell goods to the public
Disintermediation
when the number of intermediaries in a supply channel is reduced; for example; when manufacturers
bypass wholesalers or retailers to sell directly to end user
Strategies for Accelerating Distribution
tactics companies use to get their new product into stores and in front of customers quickly
