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10Setting Product Strategy and Marketing through
the Life Cycle
Chapter QuestionsWhat are the characteristics of products, and how do marketers classify products? How can a company build and manage its product mix and product lines? How can companies use packaging, labeling, warranties, and guarantees as marketing tools?What are the main stages in developing and managing new products?What factors affect the rate of diffusion and consumer adoption of new products? What marketing strategies are appropriate at each product life-cycle stage?
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Components of the Market Offering
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What is a Product?
A product is anything that can be offered to a market to satisfy a want or need, including
physical goods, services, experiences, events, persons, places, properties,
organizations, information, and ideas.
Five Product Levels
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Product Classifications
Durability / Tangibility
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Nondurable goods
Durable goods
Services
Consumer Goods
Industrial Goods
Convenience goods
Shopping goods
Specialty goods
Unsought goods
Raw Materials
Manuf. MaterialsCapital Items
Supplies/Services
Product Differentiation
Product formFeaturesCustomizationPerformanceConformanceDurabilityReliabilityRepairabilityStyle
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Service Differentiation
Ordering easeDeliveryInstallationCustomer trainingCustomer consultingMaintenance and repairReturns
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The Product Hierarchy
Need family
Product family
Product class
Product line
Product type
Item
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Product-Line Analysis
Convenience items
Core product Staples
Specialties
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Product Systems and Mixes
Product systemProduct mix (Product assortment)DepthLengthWidthConsistency
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Product-Mix Pricing
Product-line pricingOptional-feature pricingCaptive-product pricingTwo-part pricingBy-product pricingProduct-bundling pricing
Product-Line Analysis
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Product Map for a Paper-Product Line
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Product-Line Length:Line Stretching
Down-Market StretchDown-Market Stretch
Up-Market StretchUp-Market Stretch
Two-Way StretchTwo-Way Stretch
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Co-Branding and Ingredient Branding
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Ingredient branding is a special case of co-branding that involves creating brand equity for materials, components, or parts that are necessarily contained with other branded products.
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What is the Fifth P?
Packaging, sometimes called the 5th P, is all the activities of designing and
producing the container for a product.
Primary packageSecondary package
Shipping package
Factors Contributing to the Emphasis on Packaging
Self-serviceSelf-service
Consumer affluenceConsumer affluence
Company/brand imageCompany/brand image
Innovation opportunityInnovation opportunity
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Packaging Objectives
Identify the brandConvey descriptive and persuasive informationFacilitate product transportation and protectionAssist at-home storageAid product consumption
Functions of Labels
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Identify the product/brandDemonstrate product gradingDescribe the product, use and precautionsPromote the product/brand
Warranties and Guarantees
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General Warranty is a formal or implied promise of product performance by manufacturer with remedy to resolve non-performance.Guarantees reduce buyer’s perceived risk.
Categories of New Products
New-to-the-world
Cost reductions
New product lines
Additions
Improvements
Repositionings
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New-Product Development Decision Process
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Idea Generation:Ways to Find Great New Ideas
Run informal sessions with customersAllow time off for technical people to “play” on pet projectsMake customer brainstorming a part of plant toursSet up a keyword search to scan trade publicationsTreat trade shows as intelligence missionsHave employees visit supplier labsSet up an idea vaultObserve customers using product, ask customers about problems with products and their dream productsUse a customer advisory board or a brand community of enthusiasts to discuss product
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Idea Generation:Creativity TechniquesAttribute listingForced relationshipsMorphological analysisReverse assumption analysisNew contextsMind mapping
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Lateral Mapping
Gas stations + foodCafeteria + InternetCereal + snackingCandy + toyAudio + portable
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Factors That Limit New Product Development
Shortage of ideasFragmented marketsSocial and governmental constraintsCost of developmentCapital shortagesFaster required development timeShorter product life cycles
Concept Development and Testing
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Product ideaProduct conceptCategory conceptBrand conceptConcept testing
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Concept Testing
Communicability and believabilityNeed levelGap levelPerceived valuePurchase intentionUser targets, purchase occasions, purchasing frequency
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Test Market Decisions
How many test cities?Which cities?Length of test?What information to collect?What action to take?
Conjoint Analysis
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Conjoint Analysis is a method for driving the utility values that consumers attach to varying levels of a product’s attributes.
Development of Marketing StrategyTarget market’s size, structure, and behaviorPlanned price, distribution, and promotion for year 1Long-run sales and profit goals and marketing-mix strategy over time
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Product Development
Quality function deployment (QFD)Desired customer attributesEngineering attributes
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Prototype and Market TestingAlpha testingBeta testing
Rank-order methodPaired-comparison methodMonadic-rating method
Market testingSales-Wave ResearchSimulated Test MarketingControlled Test MarketingTest Markets
Commercialization:Timing of Market Entry
First entryParallel entryLate entry
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What is Adoption? Adoption is an individual’s decision to
become a regular user of a product.
Awareness
Interest
Evaluation
Trial
Adoption
Adopter Categorization on the Basis of Relative time of Adoption
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Product Life Cycles
Products have a limited lifeProduct sales pass through distinct stages each with different challenges and opportunitiesProfits rise and fall at different stages Products require different strategies in each life cycle stage
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Sales and Profit Life Cycles
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Marketing Strategies: Introduction Stage
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Characteristics: Low sales, high cost per customer, negative profits, few competitors
Objective: Create product awareness and trial
Strategies:Offer a basic productCharge cost-plusBuild selective distributionBuild product awareness among early adopters and dealersUse heavy sales promotion to induce trial
Marketing Strategies: Growth Stage
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Characteristics: Rapidly rising sales, average cost per customer, rising profits, growing competition
Objective: Maximize market share
Strategies:Offer product extension, service, warrantyPrice to penetrate marketBuild intensive distributionBuild awareness and interest in the mass marketReduce sales promotion to take advantage of heavy consumer demand
Strategies for Sustaining Rapid Market Growth
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Improve product quality, add new features, and improve stylingAdd new models and flanker productsEnter new market segmentsIncrease distribution coverageShift from product-awareness advertising to product-preference advertisingLower prices to attract the next layer of price-sensitive buyers
Stages in the Maturity Stage
Growth Stable Decayingmaturity
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Marketing Strategies: Maturity Stage
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Characteristics: Peak sales, low cost per customer, high profits, stable competition declining
Objective: Maximize profit while defending market share
Strategies:Diversify brands and itemsPrice to match or best competitorsBuild more intensive distributionStress brand differences and benefitsIncrease sales promotion to encourage brand switching
Marketing Strategies: Maturity Stage
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Market modification to expand the market for the mature brand by increasing the number of users and usage rate.Product modification to simulate sales by improving quality, feature, or style.Marketing program modification through prices, distribution, advertising, sales promotion, personal selling, and services.
Ways to Increase Sales Volume
Convert non-usersEnter new market segmentsAttract competitors’ customersHave consumers use the product on more occasionsHave consumers use more of the product on each occasionHave consumers use the product in new ways
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Marketing Strategies: Decline Stage
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Characteristics: Declining sales, low cost per customer, declining profits, declining competition
Objective: Reduce expenditure and milk the brand
Strategies:Phase out weakCut price Go selective, phase out unprofitable outletsReduce advertising to retain hard-core loyalsReduce sales promotion to minimal level
Marketing Strategies:Decline Stage
Harvesting strategy – cut R&D, plant and equipment costs to maintain sales, reduce quality, sales force size, marginal services and advertising.Divesting strategy – selling the product to another firm if the offering has strong distribution and goodwill.Liquidate – either quickly or slowly
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Product-Life Cycle Characteristics and Objectives
Introduction Growth Maturity
Rapidly rising sales
Peak sales
Low cost per customer
Profits Negative Rising profits High profits Declining profits
Customers Innovators Early adopters Middle majority Laggards
Stable number beginning to decline
Stable number beginning to decline
Average cost per customer
Growing number
Maximize market share
Low sales
High cost per customer
Few
Create product awareness & trial
Decline
Sales Declining sales
Costs Low cost per customer
Competitors
Declining number
Marketing Objectives
Declining number
Product-Life Cycle StrategiesIntroduction Growth Maturity
Offer product extensions, service, warranty
Diversity brands and items models
Price to match or best competitors’
Distribution
Build selective distribution
Build intensive distribution
Build more intensive distribution
Get selective: phase out un-profitable outlets
Advertising
Build product awareness for early adopters & dealers
Build awareness & interest in the mass market
Stress brand differences and benefits
Reduce to level needed to retain hard-core loyals
Increase to encourage brand switching
Price to penetrate market
Reduce to take advantage of heavy consumer demand
Offer a basic product
Charge cost-plus
Use heavy sales promotion to entice trial
Decline
Product Phase out weak
Price Cut price
Sales promotion
Reduce to minimal level
Marketing in an Economic DownturnInvestGet close to customersReview budgetsUse a compelling value propositionFine-tune offerings
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Common PLC Patterns: Growth-Slump-Maturity (E.g., handheld mixers, bread maker)
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Common PLC Patterns: Cycle-Recycle(E.g., a new drug)
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Common PLC Patterns: Scalloped(E.g., nylon)
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Style, Fashion, and Fad Life Cycles
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