Product Life Cycles
Product Life Cycles
Week 8 Lesson & Online Activities
PRODUCT STRATEGY & MANAGEMENT
Product line and product mix
• A product is a good, service, or idea consisting of a tangible and intangible attributes that satisfies consumers and is received in exchange for money or some other unit of value.
• A product line is a group of products that are closely related because they satisfy a class of need, are used together, are sold to same customer group, are distributed through the same type of outlets, and fall within a given price range.
• Companies also consider each product item, specific product, and product mix (the number of product lines offered by a company).
Type of user is another product classification consisting of either consumer or industrial goods.
• Consumer goods are products purchased by the ultimate consumer.
• Business goods are products used in the production of other products for ultimate consumers.
Classification of consumer goods
• Convenience goods are purchased frequently with minimum shopping effort,
• Consumers compare shopping goods on several attributes.
• Specialty goods are items for which the consumer makes a special effort to obtain.
The classification of a consumer good can change as a function of individual needs, income, or desires.
New Product Process Example
The CEO of WOW Toys, a UK company that manufactures pre-school toys discusses how his company develops new products. He talks about the importance of new product development in the success of a business. He emphasizes the importance of having a process for new product ideas and launch. [“Developing Products”, Linked video posted by Business Link.]
Q & A:
• How long does it take “Wow” to go from stage one of new product process to stage seven?
Answer: One year.
• When considering new product development, what are the three things “Wow” has to consider prior to offering a new product to the market place?
Answer: The three things “Wow” looks for are:
a. Trends in the market place
b. What is missing from their own products which would complement their product offerings yet met what competitors are offering
c. What the end consumer is looking for – what products they want
Managing Products and Brands
What is a product?
• A product is anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need.
• Broadly defined, “products” also include services, events, persons, places, organizations, ideas, or mixes of these.
What is a service?
• Services are a form of product that consists of activities, benefits, or satisfactions offered for sale that are essentially intangible and do not result in the ownership of anything.
• Services can be added to a tangible good such as the muffler on your car but they can also be a pure service such as counseling or a concert.
When you think of a product, it can also include personalities like Lady Gaga, Brad Pitt and Oprah Winfrey. They are their own brand. As well, places like Whistler and Disneyland are considered their own brand.
• How a company will create differentiated value for targeted segments and what positions it wants to occupy in those segments.
• A product’s position is the way the product is defined by consumers on important attributes.
The Product Life Cycle has five distinct stages:
1. Product development begins when the company finds and develops a new-product idea. During product development, sales are zero and the company’s investment costs mount.
2. Introduction is a period of slow sales growth as the product is introduced in the market. Profits are nonexistent in this stage because of the heavy expenses of product introduction.
3. Growth is a period of rapid market acceptance and increasing profits.
4. Maturity is a period of slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profits level off or decline because of increased marketing outlays to defend the product against competition.
5. Decline is the period when sales fall off and profits drop. Companies often follow one of two actions in this stage:
• Deletion. Product deletion is the most drastic strategic decision a company can make—to drop a product from the line.
• Harvesting. Harvesting is when a company reduces marketing support costs.
Product Life Cycle Video http://www.youtube.com/watch?v=CRfjJ9yOyp0
This video, produced in England, discusses the stages in product life cycle: Introduction, growth, maturity and decline. It identifies the characteristics of each stage in terms of sales, profitability, and cash flow as well as marketing objectives. [“Marketing Strategy: Product Life Cycle”; Linked video posted by James Slocombe]
Q & A:
1. What factors influence the length of the product life cycle?
Answer: There are four factors that influence the length of the product life cycle:
– type of product
– consumer preference
– marketing support
– levels of completion
2. Which strategies do marketers use to manage products at the decline stages?
Answer: Possible strategies include withdrawing the product, wait for competitors to withdraw their product, or use extension strategies such as reducing prices or intensifying promotions.
Four dimensions of the product life cycle:
1. The length of the product life cycle varies for products.
• Consumer products in general have shorter life cycle than do business products.
• Technological advances can move some products quickly through their life cycles and lead to the demise of others
2. The shape of the product life cycle is generalized.
• A high learning product has an extended introductory period.
• Low learning products have a short introductory period.
• Fashion curves decline and reappear.
• Fads have a rapid introduction and equally rapid decline.
3. The product level: class and form.
• Life cycles vary according to whether they’re applied to the class, form, or brand of the product.
o Product class refers to the entire product class or industry.
o Product form pertains to variations within the class.
4. The life cycle and consumers.
• The life cycle depends on the diffusion of innovation process – the time it takes for a product to spread through the population.
• The stages: innovators, early adopters, early majority, late majority, and laggards.
Common reasons for resistance in the introduction stage are usage barriers, value barriers, risk barriers, and psychological barriers. Companies strive to overcome these barriers in numerous ways.
Product Features are a competitive tool for differentiating the company’s product from competitors’ products. The company should periodically survey buyers who have used the product and ask these questions:
• How do you like the product?
• Which specific features of the product do you like most?
• Which features could we add to improve the product?
Product Style and Design is another way to add customer value.
• Style describes the appearance of a product.
• Design contributes to a product’s usefulness as well as to its looks.
• Packaging involves designing and producing the container or wrapper for a product.
o Packaging refers to any container and information on it in which a product is offered for sale.
o The label is an integral part of the package. Labels identify:
o the product or brand
o who made it
o where and when it was made
o how it is to be used
o the package contents and ingredients
Creating customer value through packaging and labelling marketers create value through packaging in three ways:
• Communication benefits. The information communicated on packages is one benefit
• Functional benefits. Packages play a functional role (convenience, storage, protection)
• Perceptual benefits. Packages also help create impressions in the consumer’s mind
Trends in packaging:
Connecting with customers. Packages and labels must be continually updated to connect with customers. The challenge lies in creating aesthetic and functional design features that attract customer attention and deliver customer value in their use. If done right, the rewards can be huge.
Environmental sensitivity. The amount, composition, and disposal of packaging materials continues to be a major concern for companies and consumers alike.
Health, safety and security concerns. A majority of North American and European consumers believe that products and packages should be safe regardless of the cost.
Cost reduction. About 80 percent of packaging material used in the world consists of paper, plastics, and glass. As the cost of these materials rise, companies are constantly challenged to find innovative ways to cut packaging costs while delivering value to their customers.
A warranty is a statement that indicates the liability of the manufacturer for product deficiencies.
Variations of a warranty:
• express warranties are written statements of liabilities
• limited coverage warranties state the bounds of coverage
• full warranties have no limits
• manufacturers are being held to implied warranties, which are unwritten responsibilities of the manufacturer even if the product is sold by a retailer
o Warranties are important in light of increasing product liability claims.
Managing the Product Life Cycle Role of a product manager
The product (or brand) manager manages the marketing efforts for a close knit family of
products or brands.
Modifying the product
Product modification strategies involve altering a product’s characteristic (quality, performance, appearance) to increase sales.
• Adding value to the product through additional features or higher quality is trading up.
• Trading down is reducing the number of features, quality, or price.
o This practice often exists when companies engage in downsizing (reducing the
content of packages without changing package size and maintaining or increasing the package price.) Example: Lays Potato Chips
Modifying the market
Market modification strategies involve:
• Finding new users
• Increasing use
• Creating new-use situations
Repositioning the product
Product Repositioning Example: http://www.youtube.com/watch?v=ghi9t_yANRU
The video features a former professional soccer player who wants to come back and play soccer after injury and at the age of 40. Chocolate milk was promoted as a means to help him achieve that goal. [“Peyvand Mossavat interview – Soccer – recharge with milk”; Linked video posted by Dairy Farmers of Canada.]
Q & A:
1. What segment is chocolate milk targeting? Answer: They are targeting athletes.
2. What product benefits are they using to try to entice this segment to use the product Answer: Will let the athlete recover faster from a work out.
Product repositioning involves changing the place a product occupies in a consumer’s mind relative to competitive offerings by changing one of the four marketing mix elements.
• Reacting to a competitor’s position
o One reason to reposition is to react to a competitor’s position that is adversely affecting sales and market share
• Reaching a new market
o Repositioning is also done to reach a new market
• Catching a rising trend
o Changing consumer trends can lead to repositioning a product
• Changing the value offered
o Repositioning often involves changing the value offered
Branding and Brand Management
A basic decision in marketing products is branding. Some important definitions associated with branding include:
• a brand name is any word or “device” or combination that distinguishes a seller’s offerings from those of competitors
• a trade name is a commercial, legal name under which a company does business
• a trademark is the brand name which is the exclusive right of the company and is legally registered in Canada under the trademarks act with Consumer and Corporate Affairs Canada
o An increasing problem is product counterfeiting, which is the production of low cost
copies of a popular brand not produced by the original manufacturer.
Brand personality and brand equity.
Established brands take on a brand personality which is a set of human characteristics often associated with a brand name.
A good brand name leads to brand equity, the added value a given brand name provides a product beyond the functional benefits provided. Brand equity is a competitive advantage and results in consumers being willing to pay a higher price for a product with brand equity.
A Good Brand Name
The name should:
• describe product benefits
• be memorable, distinctive, and positive
• fit with the company or product image
• have no legal restrictions
• be simple
• With multiproduct branding, one name is used for all products (also called blanket or family branding). This strategy makes:
o Line extensions possible which involves the use of a current brand to enter a new market segment in its product class Example: Sunrype Juice, fruit bars, energy snacks, etc.
o Brand extensions possible which involve the use of a current brand name to enter a completely different product class Example: Porsche kitchens
A recent variation on brand extensions is co-branding, the pairing of two brand names of two manufacturers on a single product. Examples of 20 co-branded products
? Each corporate product has a different name and intended for different market segments
Private branding (President’s Choice examples)
? exists when the product sells under the name of the wholesaler or retailer
Cohort brand management
? Bundling of one company’s multiple brands into a single marketing effort.
? Mixed branding exists when manufacturers market products under their own name and that of the reseller
Emerging branding concepts
? Social benefit brands are brands that have special value in terms of their core environmental or social benefits.
? Some of the brands that focus on environmental sustainability are sometimes called green brands.
Week 8 Online Activities
1. INDIVIDUAL ONLINE ACTIVITY: (no references are required in this individual activity)
(Value in course: Individual Online activities total 15%)
• Describe how target markets change over a product life cycle
• Identify product adoption rates
In this assignment, you will select a product and determine the product life cycle curve for it, analyze how the target market changes over the life cycle, and what the products’ adoption rates will be, throughout the life cycle.
Picture yourself as a product analyst working in a consulting firm. Your job is to evaluate and analyze a product’s life cycle.
PICK A SPECIFIC PRODUCT TO ANALYZE. Choose a product that has not been available for more than 5 years
Using Marketing terms when appropriate, in formal paragraph format:
• Write a brief introduction describing the product, including details about how long the product has been available in the market.
• CURRENT STATE: Identify what stage of the product life cycle the product is currently in. Provide a rationale to support your decision.
• PAST & CURRENT STATE: Describe the original target market, and if different, analyze the
product’s current target market. Provide a rationale to support your decision.
• FUTURE: Identify your estimate of the target market at each of the product’s various stages in the product life cycle. Provide a rationale to support your estimates. (Discuss any changes in the target market you believe will happen in the various stages)
• PAST & CURRENT: Speculate on what the product’s adoption rate, up to the present day, looked like. Provide a rationale to support your statements.
• FUTURE: Estimate what you believe the adoption rate will be throughout the product life cycle. Provide a rationale to support your estimates.
(You do NOT need to provide quantifiable information, this is a discussion of your opinion, based on your knowledge of the product and you readings in the text book and additional course
Be sure to state your points clearly and concisely. Check your work for grammar and spelling using the ENGLISH version of WORD. Use the Writing Centre resource if needed.
COPY and PASTE your document directly into a POST on the Week 8 – Product Life Cycles Discussion Board.
Due: 5pm Wednesday Oct 28.
2. SMALL GROUP DISCUSSION ACTIVITY:
(Value in course: Small Group Discussion total 10%)
• Learn from other students contributions
• Contribute to other students’ learning
Each student is tasked with responding to 2 other students’ postings. Ask questions, or provide experiences, further suggestions, opinions, etc. Approximately 100 – 150 words, with grammar and spelling correct, are expected in each thoughtful response.
Please check the discussion board Thursday and Friday to answer any questions other students ask you regarding your initial post.
Due 11pm Friday, Oct 30
Please note: marks will be allocated individually for the Small Group Discussion activity