MKT 337 Lecture Notes - Lecture 11: Umbrella Brand, Product Bundling, Product Differentiation

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4 Jan 2017
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Chapter 11: Managing Successful Products and Brands
Charting the product life cycle
Product life cycle: stages a new product goes through in the marketplace:
introduction, growth, maturity and decline
Introduction: when a product is introduced to its intended target market. Sales
grow slowly and profit is minimal
Trial- the initial purchase of a product by a consumer
Primary demand: desire for the product class rather than for a specific
brand
Selective demand: preference for a selected brand
Skimming price strategy: initial price is high to help the company recover
the costs of development as well as capitalize on the price insensitivity
Penetration price strategy: discourages competitive entry and helps to
build unit volume
Growth: rapid increase in sales. The stage when competitors appear. The result
of more competitors and more aggressive pricing is that profit usually peaks
during the growth stage.
Repeat purchasers: People, who tried the product, were satisfied and
bought it again.
Changes appear in the product in the growth stage. To help differentiate a
company’s brand from competitors, an improved version or new features
are added to the original design and product proliferation occurs.
Maturity: slowing of total industry sales or product class revenue. Also, marginal
competitors begin to leave the market. Sales increase at a decreasing rate as
fewer new buyers enter the market. Marketing attention is focused on holding
market share through further product differentiation and finding new buyers.
Decline: Occurs when sales drop. Products in the decline stage tend to consume a
disproportionate share of management and financial resources relative to their
future worth.
o Deletion: dropping the product from the company’s product line, is the most
drastic strategy.
o Harvesting: company retains the product but reduces marketing costs. The
product continues to be offered but salespeople do no allocate time in selling nor
are advertising dollars spent.
Four aspects of the product life cycle
Length of the product life cycle
Shape of the product life cycle
High learning: significant customer education is required and
there is an extended introductory period.
Low learning: begin immediately because the customer requires
little learning, and the benefits of purchase are readily understood.
Can be easily imitated by competitors, so the market strategy is to
broaden distribution quickly.
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