Chapter 8 Flashcards
(29 cards)
define a product life cycle
The stages that a new product goes through, starting with introduction and evolving into growth, maturity, and decline.
Describe the introduction stage of the product life cycle
- This occurs when a product is first introduced to its intended market
- During this period profits are minimal typically due to slow sales growth, high product development costs, and high levels of marketing spending needed to launch the new product
- the marketing objective is to create consumer awareness and stimulate trial of product
- little competition and lack of consumer awareness about the product
- pricing can be high or low (price skimming strategy vs. penetration pricing strategy)
- distribution is challenging and listing fees may be present
Price skimming strategy vs penetration pricing strategy
- price skimming: Pricing strategy where a company charges a high price initially and lowers the price over time –> to help recover costs
- penetration pricing strategy: entering market with a low price, used to encourage rapid acceptance of an innovation or to combat a competitive threat
Describe the growth stage of the product life cycle
- increase in competition and a rapid rise in sales and profits
- marketers focus on differentiating products from competitive offerings (new features are added to original designs and products proliferation often occurs)
- pricing levels are lowered to become more competitive and distribution increases
- promotion becomes more product specific, advertising plays a key role
- profits reach their peak at this stage
Describe the maturity stage of the product life cycle
- slowdown of sales growth and profit
- competitors are established and few new customers enter the market
- marketing focuses on holding or gaining market share by continuing to differentiate the product and building on existing customer loyalty
- profits level off often due to price competition
- company strategy to control overall marketing costs by improving promotional and distribution efficiency
- the longest stage
Describe the decline stage of the product life cycle
- occurs when sales and profits steadily drop over time
- products become obsolete due to technological innovation or changes in consumer needs
- company either deletes or harvests the product
What are the 4 product life cycle curves (look at image)
- high learning products
- low learning products
- fashion products
- fad products
define high learning products
Significant consumer education is required for these products, which have an extended introductory period.
Define low learning products
Little consumer education is required, resulting in a short introductory stage for the product.
Define a fashion product
The life cycle for fashion is relatively short and cyclical, going from introduction to decline within two to three years, only to resurface again a few years later.
Define a fad
Novelty products with very short product life cycles that experience immediate rapid growth, followed by an equally rapid decline.
ex. children’s toys
product life cycles can be extended through which 4 ways
- modifying the product
- modifying the market
- repositioning a product
- introducing a new product
Describe modifying the product
Product improvements and line extensions (The addition of a new item to an already existing product line.) are used to ensure that products remain competitive and address new trends in the market
Describe modifying the market
- finding new customers
- Increasing a product’s use (encourage more frequent usage of a product by existing customers)
- Creating a new use situation
Describe repositioning a product
Once a product reaches maturity stage it often needs an injection of newness to focus the market on the product and to provide it with a renewed competitive advantage, this can be achieved through repositioning the product to meet changing consumer needs, to react to a competitors move, or to improve the value offered to the consumer
Describe introducing a new product
Adding a new product to a line can provide the focus that a mature product needs, bringing it back in the product life cycle to either the growth or early maturity stage.
New products are categorized depending on the degree of newness involved, and how much time a consumer needs to learn to use the product, based on this innovations are classified into what 3 categories
- Minor innovations
- Continuous innovations
- Radical innovations
Define minor innovations
Minor product modifications that require no adjustments on behalf of the consumer. (so requires no new learning by consumers)
ex. toothpaste improvements
–> so here marketing efforts are focused on generating awareness for the innovation
Define continuous innovations
New products with more than just a minor product improvement, but that do not require radical changes by the consumer. (changes consumers normal routine but does not require totally new learning)
–> marketers must invest in marketing communication programs to launch these innovative products and to communicate their benefits to consumers –> these require extensive product development by a company
- ex. electric cars
Define radical innovations
New products that involve the introduction of a product that is entirely new and innovative to the market. (least common)
–> success of these products is often dependent on the education of the consumer, usually through advertising and/or public relations efforts
ex. drones
Define the adoption curve
The sequential diffusion and acceptance of an innovation into the market by consumers. (the success of a new product and how quickly it is adopted by consumers is shown in the adoption curve)
Describe the stages of the adoption curve
- innovators
- early adopters
- early majority
- late majority
- laggards
What are the types of barriers that can deter a consumer from adopting a new product
- usage barriers (product is not consistent with existing usage habits)
- value barriers (there is no incentive to change)
- risk barriers (the existence of physical, economic, or social risks if the product is purchased)
- psychological barriers (cultural or image differences)
What are some reasons that new products and services fail
- insignificant point of difference
- incomplete new concept definition
- insufficient market attractiveness
- poor execution of the marketing mix
- bad timing
