MKTG ch. 11

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Product life cycle
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a concept that describes the stages a new product goes through in the marketplace: introduction, growth, maturity, decline.
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Product life cycle stages
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Introduction Growth Maturity Decline
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Introduction stage
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occurs when a product is introduced to its intended target market
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how do sales change in the introduction stage?
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grow slowly
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What is the marketing objective in the introduction stage?
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to create consumer awareness and stimulate trail (the initial purchase by a consumer)
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Primary demand
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the desire for the product class rather than for a specific brand, since there are few competitors with the same product. This is stimulated in the introduction stage.
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Selective demand
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the preference for a specific brand, occurs as more competitors launch their own products and the product progresses along its life cycle
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Skimming strategy
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a high price set by the company, which helps the company recover the costs of development, and to capitalize on the price insensitivity of early buyers. 3M is a master
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Penetration pricing
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when the company enters the market at a low price which can help build unit volume. Requires close monitoring.
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Growth stage
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characterized by rapid increases in sales. Competitors appear in this stage.
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Maturity Stage
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characterized by a slowing of total industry sales or product class revenue (marginal competitors start to leave the market)
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Decline stage
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occurs when sales drop. A product enters this stage mostly due to environmental changes.
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3 things that the product life cycle tells us
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1. Products have a limited life 2. Profit and sales are not the same thing 3. Marketing strategies must change over time (most important)
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Profit=
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Total Revenue – Total Costs
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Marketing Strategy
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1. Define the target market 2. Create a marketing mix decision regarding the 4 p’s that will satisfy the target.
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FActors that influence the Length of the Product Life Cycle
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Rate of technological change Rate of market acceptance Ease of competitive entry
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Risk Hedges (to reduce the risk)
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Make changes gradually Keep old product Conduct marketing research
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product mix concepts
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the product mix affects company profits the optimal product mix is difficult to determine
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product mix sets the upper limit of
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how much profit you can make
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Suboptimal Product Mix
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Chronic excess production capacity Disproportionately Total profits/few products Exploit sales force Declining profits/sales
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Brand
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A name, a term, a symbol, or any other unique element of a product that identifies one firm’s product(s) and sets them apart from the competition
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Two strategies to handle a declining product
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deletion harvesting
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deletion
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dropping the product from the product line
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harvesting
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the company retains the product by reduces marketing costs
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Four aspects of the Product Life Cycle
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1. length 2. shape of sales curve 3. how they vary with different levels of products 4. the rate at which consumers adapt their products.
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product life cycle curves
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High learning Low learning Fashion products Fad Product
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High Learning product curve
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is a curve for which significant customer education is required and there is an extended period
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Low learning product curve
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sales begin immediately since little learning is required by the customer, and the benefits of purchase are readily apparent. Can be easily imitated by competitors, so marketing strategy is to broaden distribution quickly.
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Fashion products curve
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is a style of the times, appear in women’s and men’s apparel. These products are introduced, decline, and then seem to return.
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Fad Product curve
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experiences rapid sales on introduction and then an equally rapid decline. Short life cycle.
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Product class
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refers to the entire product category or industry, such as prerecorded music
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Product form
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refers to variations within the product class (technology to create cd’s and digital players in reference to the class of prerecorded music)
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the life cycle of a product depends on what?
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sales to consumers
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Diffusion of innovation
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when a product diffuses, or spreads, through the population
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Five categories of product adopters (the diffusion process)
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o Innovators (venturesome, higher educated, use multiple info sources) o Early adopters (leaders in social setting, slightly above average education) o Early Majority (deliberate, many informal social contacts) o Late Majority (Skeptical, below average social status) o Laggards (Fear of debt, neighbors and friends are info sources)
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Common reasons for resisting a product in the intro stage
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o Usage Barriers: this product is not comparable with existing habits o Value Barriers: the product provides no incentive to change. o Risk Barriers: physical, economic, or social. o Psychological barriers: cultural differences or image.
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Methods to overcome these barriers
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warranties, money back guarantees, extensive usage instructions, demonstrations, free samples.
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most popular means to gain a consumer
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free trial (71%)
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Three ways to manage a product through its life cycle
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1. Modifying the product 2. Modifying the market 3. Repositioning the product
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Examples of Modifying the product
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product bundling, new features
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Examples of modifying the market
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new customers (prunes and harley), increase product use among existing customers (Campbells soup) create new use (Dockers)
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Four factors that trigger the need for a repositioning action
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1. Reacting to a competitor’s position (new balance vs. Nike, etc.) 2. Reaching a new market (carbonated tea in England, St. Joseph aspirin low dose) 3. Catching a rising trend (Quaker oats, Kraft cheese, Uncle bens rice) all going healthy 4. Changing the value offered (trade up or down)
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Trading up
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involves adding value to the product (or line) through additional features or higher quality materials. (run flat tires)
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Trading down
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involves reducing the number of features, quality, or price. (Airlines have added more seats, reducing legroom, limited snacks.)
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Branding
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an organization uses a name, phrase, design, symbol or combination of these to identify its products and distinguish them from those of competitors.
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Brand name
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is any word, device (design, sound, shape or color) or combination of those used to distinguish a seller’s goods or services
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Trade name
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is a commercial, legal name under which a company does business
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Trademark
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identifies that a firm has legally registered its brand name or trade name so the firm has its exclusive use, thereby preventing others from using it.
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Product counterfeiting
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involves low cost copies of popular brands not manufactured by the original producer
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________________may benefit most from branding
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Consumers
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Brand personality
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a set of human characteristics associated with a brand name that successful and established brands have.
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Brand equity
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the added value a brand name gives to a product beyond the functional benefits provided.
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Two advantages of brand equity
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1. Provides competitive advantage 2. Consumers are willing to pay a higher price for a product with brand equity
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4 step brand equity building process
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1. Bottom: Brand awareness 2. Brand performance and brand imagery 3. Consumer judgements and consumer feelings 4. Top; consumer brand connection
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Brand licensing
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is a contractual agreement whereby one company allows its brand name or trademark to be used with products or services offered by another company for a royalty or fee. Comes from having brand equity.
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Branding strategies
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o Multiproduct branding strategy o Multibranding strategy o Private branding strategy o Mixed branding strategy
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Multiproduct branding strategy
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a company uses one name for all its products in a product class (Toro snowblower, Toro mower)
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Multibranding strategy
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involves giving each product a distinct name. Useful when each brand is intended for a different market segment (Tide, Cheer)
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Private branding strategy
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private labeling or re-seller branding, when it manufactures products but sells them under the brand name of a wholesaler or retailer (Kenmore)
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Mixed branding strategy
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a firm markets products under its own name and that of a reseller because the segment attracted to the reseller is different from its own market (Michelin makes sears tires)
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Packaging
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refers to any container in which it is offered for sale and on which label information is conveyed.
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Label
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is an integral part of the package and typically identifies the product or brand, who made it, where and when it was made, how it is to be used, and package contents and ingredients.
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The three major benefits of packaging and labeling
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Communication, functional, perceptional
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4 challenges of packaging and labeling
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1. The continuing need to connect with customers 2. Environmental concerns 3. Health, safety, and security issues 4. Cost reduction
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Warranty
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a statement indicating the liability of the manufacturer for product deficiencies
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regulates the content of consumer warranties.
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Magnuson-Moss Warranty/RTC Improvement Act of 1975
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Express warranty
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written statements of liabilities
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Full coverage warranty
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covers it all
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Implied warranties
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assign responsibility for product deficiencies to the manufacturer.
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It is easier to determine the product mix if you _______ have the best mix
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don’t
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You have a suboptimal product mix if your total profits are _______________ from a few products
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disproportionate
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Importance of Branding
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Brand equity Protect the brand “Act as if it is yours”
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Generic
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associate the name with the product class rather than with the brand.
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Good Brand Name
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Product benefits Memorable, etc. Image fit Legal Simple
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the electrolux vacuum cleaner example was relative to
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the power of expectations
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The ratchet effect can be applied to
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service expectations

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