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MGMA01H3 (184)
Chapter 11

Chapter 11

9 Pages
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Department
Management (MGM)
Course Code
MGMA01H3
Professor
Ingrid L.Stefanovic

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INTRODUCTION
Product mix is the assortment of product lines and individual offerings available from a
company
oProduct line is a series of related products
oIndividual offering is a single product within a product line
THE EXISTING PRODUCT MIX
Starting point of product-planning is to assess the firms current product mix
Cannibalization
Cannibalizing is the situation involving one product taking sales from another offering in
a product line
oFirm wants to avoid a costly new-product introduction that will adversely affect
sales of one of its existing products
Line Extension
Line extension is the development of individual offerings that appeal to different market
segments but are closely related to the existing product line
oIf cannibalizing is minimized, line extension provides a relatively cheap way of
increasing sales revenues at minimal risk
THE IMPORTANT OF PRODUCT LINES
Most companies offer their customers product lines
Several factors account for the inclination of firms to develop complete product lines
rather than relying on just one product
Desire to Grow
A company places definite limitations on its growth potential when it concentrates on a
single product
Firms often introduce new products to offset seasonal variations in the sales of their
current products
Making Optimal Use of Company Resources
By spreading the costs of operations over a series of products, a company may find it
possible to reduce the average costs of all products
Production facilities can be used economically in producing related products
The expertise of all the firms personnel can be applied more widely to a line of products
than to a single one
Increasing Company Importance in the Market
Consumers and marketing intermediaries often expect a firm that manufactures and
markets small appliances to also offer related products under its brand name
The company with a line of products is often more important to both the consumer and
the retailer than is the company with only one product
Exploiting the Product Life Cycle
www.notesolution.com
The regular addition of new products help ensure that it will not become a victim of
product obsolescence
THE PRODUCT LIFE CYCLE
Product life cycle is a products progress through introduction, growth, maturity, and
decline stages
At each stage of the life cycle, the emphasis and focus of the marketing program should
change to fit the requirements at that phase
oIntroduction: emphasis on information
oGrowth: emphasis on comparative features and advantages
Stages of the Cycle
Introductory Stage
Firms objective in the early stages of the product life cycle is to stimulate demand for the
new market entry
The public is being acquainted with the merits of the new product, and acceptance is
being gained
Losses are common due to heavy promotion and extensive research
Firms expect to recover their costs when product enters growth stage
Growth Stage
Sales volume rises rapidly
Word of mouth and mass advertising induce hesitant buyers to make trial purchases
Attracts competitors
Maturity Stage
Industry sales continue to grow, but eventually reach a plateau
By this time a large number of competitors have entered the market, and profits decline as
competition intensifies
Differences among competing products have diminished as competitors have discovered
the product and promotional characteristics desired by the market
Promotion emphasizes subtle differences among products and brand competition
intensifies
Cut prices as competition grows
Decline Stage
New innovations or shifting consumer preferences bring about an absolute decline in total
industry sales
Profits decline and in some cases become negative as sales fall
Manufacturers gradually leave the industry
DEPARTURES FROM THE TRADITIONAL PRODUCT LIFE
CYCLE MODEL
The product life cycle concept has an enduring appeal because of the intuitive logic of the
birth-to-decline biological analogy
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Simplicity of this concept has led to simplistic uses and expectations of the model
oProblem lies in failing to distinguish between the life cycle of a product type and a
individual brand
oGreatest misuse of the theory is consider it as a predictive model for anticipating
when changers will occur and to presume that one stage will always succeed
another
oAnother criticism involves the use of the life cycle as a normative model
Which prescribes the alternative strategies that should be considered at
each stage
A more realistic view is that life-cycle serves several different roles in the formulation of
strategy
The stage of the life cycle also acts as a moderating variable through its influence on the
value of market-share position and the profitability consequences of strategic decisions
In the case of individual brand, stage in the life cycle is partly a consequence of
managerial decisions
Other Life-Cycle Issues
Length of Cycle Stages
Model should be drawn to show a broken horizontal axis to reflect the fact that stages
may be of varying lengths
Research suggests that the product life cycle may be getting shorter, especially in
introduction and growth stages
Alternative Product Life Cycle
Instant busts are products that simple do not make it
Aborted introduction” is a start-up, start again launch type of product
Some products become market specialty items and provide long and stable maturity
stages
Fashion and Fads
Fashions are current popular products that tend to follow recurring life cycles
Fads are fashions with abbreviated life cycles
PRODUCTS LIFE-CYCLE CONSIDERATIONS IN MARKETING
STRATEGY
Marketing strategy related to the product life cycle is most useful when it is carried out on
an individual brand basis rather than a generic product category basis
A firms marketing efforts should emphasize stimulated demand at the introductory stage
Emphasize shifts to cultivating selective demand during growth period
Market segmentation should be used extensively in the maturity period
During decline, emphasis again shifts to increasing primary demand
Extending the Product Life Cycle
The life cycle of a brand can often be affected by managerial strategy
www.notesolution.com

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Description
INTRODUCTION Product mix is the assortment of product lines and individual offerings available from a company o Product line is a series of related products o Individual offering is a single product within a product line THE EXISTING PRODUCT MIX Starting point of product-planning is to assess the firms current product mix Cannibalization Cannibalizing is the situation involving one product taking sales from another offering in a product line o Firm wants to avoid a costly new-product introduction that will adversely affect sales of one of its existing products Line Extension Line extension is the development of individual offerings that appeal to different market segments but are closely related to the existing product line o If cannibalizing is minimized, line extension provides a relatively cheap way of increasing sales revenues at minimal risk THE IMPORTANT OF PRODUCT LINES Most companies offer their customers product lines Several factors account for the inclination of firms to develop complete product lines rather than relying on just one product Desire to Grow A company places definite limitations on its growth potential when it concentrates on a single product Firms often introduce new products to offset seasonal variations in the sales of their current products Making Optimal Use of Company Resources By spreading the costs of operations over a series of products, a company may find it possible to reduce the average costs of all products Production facilities can be used economically in producing related products The expertise of all the firms personnel can be applied more widely to a line of products than to a single one Increasing Company Importance in the Market Consumers and marketing intermediaries often expect a firm that manufactures and markets small appliances to also offer related products under its brand name The company with a line of products is often more important to both the consumer and the retailer than is the company with only one product Exploiting the Product Life Cycle www.notesolution.com
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