Transcript Product
(Ch.11)Product Line And Product Mix Main concepts: - Product Item: specific version of product among organization's products - Product Line: closely related product items viewed as a unit because of marketing, technical, or end-use considerations. - Product Mix: total group of products that an organization makes available to customers - Width of product mix: number of product lines in an organization. - Depth of product mix: average number of different products offered in each product line (product mix / width of product mix) - Depth of product line: number of different products in the product line Example: Product Width/Depth Of Proctor & Gamble Product Life Cycle The progression of a product through four stages: introduction, growth, maturity, and decline. Stage Of The Product Life Cycle Introduction Stage The initial stage of a product’s life cycle; its first appearance in the marketplace when sales start at zero and profits are negative. - Profits are below zero because initial revenues are low, and the company generally must cover large expenses for promotion and distribution. - While the importance of new products is significant, the risk of new product failure is quite high, depending on the industry. Introduction Stage - Product introduction include, new packaged convenience food, a new model of automobile, or a new fashion clothing rather than a major product innovation. - Potential buyers must be made aware of the new product’s features, uses, and advantages. - Two difficulties may arise at this point. First, sellers may lack the resources, technological knowledge, and marketing know- how to launch the product successfully. Second, the initial product price may have to be high to recoup expensive marketing research or developments costs. Introduction Stage - As buyers learn about the new product, marketers should be alert for product weaknesses and make corrections quickly to prevent early demise. - Marketing strategy should be designed to attract the segment that is most interested in the product and has fewest objections. - As the sales carve moves upward and the break-even is reached, the growth stage begins. Growth Stage - During this stage, sales rise rapidly and profits reach a peak, then start to decline. - The growth stage is critical to a product’s survival because competitive reactions to the product’s success during this period will affect the product’s life expectancy. - Profits begin to decline late in the growth stage as more competitors enter the market, driving prices down and creating the need for heavy promotional expenses. Main characteristics: - Sales rise rapidly - Profits peak, then starts to decline as more competitors enter the market, driving prices down and creating a need for heavy promotion - Competitors react to the product’s success Growth Stage Marketing Strategy - During the growth stage, the organization tries to strengthen it’s market share. - As sales increase, management must support the momentum by adjusting the marketing strategy. The goal is to establish and fortify the product’s market position by encouraging brand loyalty. - To achieve greater market penetration, segmentation may have to be used more intensely. That would require developing product variations to satisfy the need of people in different several segments. - Apple example page 313. Growth Stage Marketing Strategy - Marketers should also analyze competing brands’ product positions relative to their own brands and take corrective actions. - Gaps in geographic markets coverage should be filled during this stage period. As a product gain acceptance, new distribution outlets usually become easier to obtain. (exclusive, selective, intensive). - The distribution system should be running effectively . Growth Stage Marketing Strategy - Promotion expenditures may be slightly lower than introduction stage. - After recovering development costs, a business may be able to lower prices. - Also, as sales volume increase, efficiencies in production can result in lower costs. - If demand remains strong and there are few competitive threat, price tend to remain stable. - If price cuts are feasible, they can help a brand gain market share and discourage new competitors form entering the market. Growth Stage Marketing Strategy - Encourage brand loyalty- stress brand benefits - Strengthen market share - Emphasize product’s benefits - Aggressive pricing - Analyze production position - Efficient distribution system - Promotion costs drop as % of sales increase. Maturity Stage - The stage of a product’s life cycle when the sales curve peaks and starts to decline, and profits continue to fall. - This stage is characterized by intense competition because many brands are now in the market. - Competitors emphasize improvements and differences in their versions of products. As a result, weaker competitors are squeezed out or lose interest in the product. Maturity Stage - During the maturity stage , the producers who remain in the market are likely to change their promotional and distribution efforts. - When a product reaches maturity, buyers’ knowledge of it attains a high level. - Marketers of mature products sometimes expand distribution into global markets. - As table 11.1 shows there are many approaches to altering the marketing strategy during the maturity stage. As noted in the table, to increase the sales of mature products, marketers may suggest new uses for them. Managing Products In The Maturity Stage Maturity Stage - There are three general objectives can be pursued during the maturity stage: 1- generate cash flow: this is essential for recouping the initial investment and generating excess cash to support new products. 2- maintain share of market: companies with marginal market share must decide whether they have a reasonable chance to improve their position or whether they should drop out. 3- increase share of customer: share of customer relates to the percentage of total customers’ needs that the firm is meeting. Look at supermarket’s example p315. Maturity Stage - During the maturity stage, marketers actively encourage dealers to support the product. Dealers may be offered promotional assistance in lowering their inventory costs. - Maintaining market share during the maturity stage requires moderate, and sometimes large, promotion expenditures. Advertising messages focus on differentiating a brand from the field of competitors, and sales promotion efforts are aimed at both consumers and resellers. Maturity Stage Marketing Strategy - Intense competition - Emphasize improvements and differences - Advertising and dealer-oriented promotion - Global expansion Decline Stage The stage of a product’s life cycle when sales fall rapidly. Main characteristics: - Retail outlets with strong sales volumes are maintained, while unprofitable outlets are dropped out. - Spending on promotion is usually reduced. - Many firms lack the resources to revitalize the product’s demand and thus leave the market. Decline Stage The stage of a product’s life cycle when sales fall rapidly. When this happens, the marketer consider pruning item from the product line to eliminate those not earning a profit. The marketer may also cut promotion efforts, eliminate marginal distributors, and, finally, plan to phase out the product. In this stage marketers must determine whether to eliminate the product or try reposition it to extend its life. Usually a declining product has lost its distinctiveness because similar competing products have been introduced. Decline Stage - Competition engenders increased substitution and brand switching as buyers become insensitive to minor product differences. - For these reasons, marketers do little to change product’s style, design, or other attributes during its decline. - New technology or social trends, product substitution, or environmental consideration may also indicate that the time has come to delete the product. - During a product’s decline, outlets with strong sales volumes are maintained and unprofitable outlets are weeded out. Decline Stage - An entire marketing channel may be eliminated if it does not contribute adequately to profits. - Spending on promotional efforts is usually reduced considerably. - Sales promotion and advertising may temporarily recapture buyers attention. - As the product continues to decline, the sales staff shifts their emphasis to more profitable products. Decline Stage At this stage, the marketing manager has two options: attempt to postpone the decline or accept its inevitability. Many firms lack the resources to renew a product’s demand and are forced to consider harvesting or divesting the product. Harvesting approach employs a gradual reduction in marketing expenditures and a less resource-intensive marketing mix. In the divesting approach a company withdraws all marketing support form the declining product. It may continue to sell the product until losses are sustained . Decline Stage Marketing Strategy - Eliminate/reposition items - Cut promotion - Eliminate marginal distributors - Plan for phase out, through either Harvesting or Divesting: - Harvesting: gradual reduction in marketing expenditures and a less resource-intensive marketing mix. - Divesting: immediate withdrawal of the product from the market; the firm may sell the product to another firm.