Product Life-Cycle Strategies PDF

Chapter 5: What Is a Product? Product is anything that can be offered in a market for attention, acquisition, use, or consumption that might satisfy a need or want Include services, events, persons, places, organization, ideas or mixtures of these. What Is a Product? Service Consists...

Chapter 5: What Is a Product? Product is anything that can be offered in a market for attention, acquisition, use, or consumption that might satisfy a need or want Include services, events, persons, places, organization, ideas or mixtures of these. What Is a Product? Service Consists of activities, benefits or satisfaction offered for sale that are essentially intangible and do not result in the ownership of anything  What Is a Product? Experiences represent what buying the product or service will do for the customer Lost World of Tambun Kellie’s Castle Kidzania Kuala Lumpur  PRODUCT Tangible Intangible Refer to something Refers to something that that is felt, tasted, cannot be seen, smelled, heard, heard or touch. smelled or seen. Most of the products are Often referred to as in the form of services. goods Unlike tangible products Example: they are not stored, only available at the time of use Example:  Product can also be classifies based on its nature, characteristics and consumptions. 1.Durable Goods Tangibles goods that get used repetitively over a longer period of time example:  Product can also be classifies based on its nature, characteristics and consumptions. 2.Non-durable Goods Tangible goods that are normally consumed relatively fast in one or a few users. A repeat purchase is normally based on a short- term need and the fact that previous goods have been consumed Example:  Product can also be classifies based on its nature, characteristics and consumptions. 3. Services There 4 unique characteristic: i. Intangibility – means that services cannot be seen, tasted, felt, heard or smelled. i. Inseparability – means that services cannot be separated from their providers, whether the providers are people or machines.  Product can also be classifies based on its nature, characteristics and consumptions. 3. Services There 4 unique characteristic: iii. Variability – means that the quality of services depends on who provides them as well as when, where and how they are provided. iv. Perishability – means that services cannot be stored for later sale or use. Levels of Product Levels of Product Core benefits represent what the buyer is really buying Consist of core, problem solving benefits that consumers seek when they buy a product or service Example: handphone for communication Hotel for accommodation  Levels of Product Actual product represents the design, brand name, and packaging that delivers the core benefit to the customer Build around the core product 5 characteristic: quality level, features, design, brand name and packaging Design Brand Name Brand Name Packaging Packaging Features Design Features Levels of Product Augmented product represents additional services or benefits of the actual product Build around core and actual product Product Classification Consumer Product Product and services bought by final consumer for personal consumption. Industrial Product Product bought by individuals and organizations for further processing or for use in conducting a business Product and Service Classification Consumer Product Product Classification Industrial Product  Consumer Product Consumer products are products and services for personal consumption Classified by how consumers buy them 1. Convenience product 2. Shopping products 3. Specialty products 4. Unsought products Consumer product Convenience products are consumer products and services that the customer usually buys frequently, immediately, and with a minimum comparison and buying effort Usually low prices Marketers place them in many locations to make them readily available when customers need them. Example: sugar, candy, newspaper etc Consumer product Convenience products Divided into 3 categories: Staple Product – product that are bought on the most regular basis for regular use. Example: flour, rice, bread Consumer product Convenience products Divided into 3 categories: Impulse Product – product that are bought with a minimum planning or search effort. Example: newspapers, magazines and candy Consumer product Convenience products Divided into 3 categories: Emergency Product – product that are bought during emergency or critical condition. Example: plasters, umbrellas, raincoats etc Consumer Product Shopping products are consumer products and services that the customer compares carefully on suitability, quality, price, and style Consumer spends much time and effort gathering information and making comparisons. Distribute their products through fewer outlets Provide deeper sales support to help customers in their comparison efforts. Example: furniture, clothing, hand phone etc Consumer Product Shopping products There are 2 types of shopping Homogenous shopping product – product that consumers see as being basically the same and consumers shop for the lowest price Examples: clothing and accessories Consumer Product Shopping products There are 2 types of shopping Heterogeneous shopping product – these are seen by consumers to differ in quality, style, suitability and lifestyle compatibility. Comparisons between heterogeneous shopping product are often quite difficult because they may have unique features and different levels of quality and price. Examples: Television, hand phones etc  Consumer Product Specialty products are consumer products and services with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort Willing to travel great distances to buy one Buyer do not compare specialty product Example: Ferrari car, Rolex watch, Birkin Hermes Handbag Consumer Product Unsought products are consumer products that the consumer does not know about or knows about but does not normally think of buying Require a lot of advertising, personal selling and other marketing effort Example: Life insurance, Funeral services, Blood donations Consumer Product Industrial Product are products purchased for further processing or for use in conducting a business Classified by the purpose for which the product is purchased 1. Materials and parts 2. Capital 3. Supplies and services Industrial Product Materials and parts include raw materials and manufactured materials and parts usually sold directly to industrial users Raw material: wheat, fruits, fish, petroleum Material and parts: iron, cement, tires, casting  Industrial Product Capital Items are industrial products that aid in the buyer’s production or operations including installations and accessory equipment Installations like building, generators, elevators Accessory equipment like lift truck, fax machine, desk etc Industrial Product Supplies and services Supplies include operating supplies(paper, coal) and repair and maintenance items (nail, paint) Business services include maintenance and repair services(window cleaning, computer services) and business advisory services (consultation, advertising) Product Life-Cycle Strategies Product life cycle (PLC) is the course that a product’s sales and profits take over its lifetime Product development Introduction Growth Maturity Decline Product Development Stage ◼ Begins when the company develops a new- product idea ◼ Sales are zero ◼ Investment costs are high ◼ Profits are negative Product Life-Cycle Strategies Introduction stage is when the new product is first launched Takes time Slow sales growth Little or no profit High distribution and promotion expense Introduction stage ◼ Product – Offer a basic product ◼ Price – Use cost-plus basis to set ◼ Distribution – Build selective distribution ◼ Advertising – Build awareness among early adopters and dealers/resellers ◼ Sales Promotion – Heavy expenditures to create trial  Product Life-Cycle Strategies Growth stage is when the new product satisfies the market Sales increase New competitors enter the market Price stability or decline to increase volume Consumer education Profits increase Promotion and manufacturing costs gain economies of scale Product quality increases New features New market segments and distribution channels are entered Product Life-Cycle Strategies Growth stage ◼ Product – Offer product extensions, service, warranty ◼ Price – Penetration pricing ◼ Distribution – Build intensive distribution ◼ Advertising – Build awareness and interest in the mass market ◼ Sales Promotion – Reduce expenditures to take advantage of consumer demand  Product Life-Cycle Strategies Maturity stage is a long-lasting stage of a product that has gained consumer acceptance Slowdown in sales Many suppliers Substitute products Overcapacity leads to competition Should consider modifying the marketing, product and marketing mix Increased promotion and R&D to support sales and profits Maturity stage ◼ Product – Diversify brand and models ◼ Price – Set to match or beat competition ◼ Distribution – Build more intensive distribution ◼ Advertising – Stress brand differences and benefits ◼ Sales Promotion – Increase to encourage brand switching Product Life-Cycle Strategies Modifying Strategies Market modifying Product modifying Marketing mix modifying  Product Life-Cycle Strategies Modifying Strategies Market modifying - when a company tries to increase consumption of the current product New users Increase usage of existing users New market segments  Product Life-Cycle Strategies Modifying Strategies Product modifying changing characteristics such as quality, features, styles or packaging Improve the product quality and performance (durability, reliability, speed, taste)  Product Life-Cycle Strategies Modifying Strategies Product modifying Improve the product styling and attractiveness Introduce new flavors, colors, ingredients or packaging Product Life-Cycle Strategies Modifying Strategies Marketing mix modifying is when a company changes one or more of the marketing mix elements Product Price Promotion Distribution channels Product Life-Cycle Strategies Decline stage is when sales decline or level off for an extended time, creating a weak product Maintain the product Harvest the product Drop the product Product Life-Cycle Strategies Decline stage the market for a product will start to shrink because saturated - all the customers who will buy the product have already purchased it the consumers are switching to a different type of product. Product Life-Cycle Strategies Decline stage While this decline may be inevitable, it may still be possible for companies to make some profit by switching to less-expensive production methods and cheaper markets. Product Life-Cycle Strategies Decline stage ◼ Product – Phase out weak items ◼ Price – Cut price ◼ Distribution – Use selective distribution: phase out unprofitable outlets ◼ Advertising – Reduce to level needed to retain hard-core loyalists ◼ Sales Promotion – Reduce to minimal level PRODUCT LIFE-CYCLE STRATEGIES