Life Cycle

1. Life Cycle

2. Product Strategy • What is a product? • people buy want satisfaction rather than objects • a product is a bundle of physical, service, and symbolic attributes designed to enhance consumer want satisfaction • with each product, consumers are purchasing a bundle of benefits

3. Classifying Consumer Products • Consumer products are destined for use by the ultimate consumer • Consumer products are classified on the basis of consumer buying habits • Categories of consumer products are: • convenience products • shopping products • specialty products

4. Figure 11.2 Classification of Consumer Products Specialty Products Luxury Cars, Designer Clothing, Health Foods Unsought Products Life Insurance, Self-Improvement Courses Cemetery Plots Consumer Products Convenience Products Impulse Items: Magazines Staples: Gas, Bread Emergency Items: Bandages, Candles Shopping Products Homogeneous: Washing Machine, Portable Fan Heterogeneous: Physical Fitness Training

5. Convenience Products • Products the consumer wants to purchase frequently, immediately, and with a minimum of effort (candy, chewing gum) • staples - goods which consumers replenish often to maintain a steady stock • impulse goods - products purchased on the spur of the moment, and out of habit when the supply is low (tattoos, cigarettes) • emergency goods - response to unexpected need (aspirin)

6. Shopping Products • Products purchased only after the consumer has made comparisons of competing products in competing stores on bases such as: • price • quality • style • color

7. Shopping Products • Examples • clothing • furniture • appliances • used cars • long-distance carriers • Some shopping products are considered homogeneous because the consumer views them as essentially the same (refrigerators)

8. Specialty Products • Products that possess some unique characteristics that cause the buyer to prize these particular brands • Examples: • original jewelry (Cartier); expensive cars (Audi) • Buyers will go out of their way to purchase specialty products

9. Table 11.1a Marketing Impact of the Consumer Products Classification System Factor Convenience Products Shopping Products Specialty Products CONSUMER FACTORS Planning time involved in purchase Very little Considerable Extensive Purchase frequency Frequent Less frequent Infrequent Importance of convenient location Critical Important Unimportant Comparison of price and quality Very little Considerable Very little

10. Table 11.1b Marketing Impact of the Consumer Products Classification System Factor Convenience Products Shopping Products Specialty Products MARKETING MIX FACTORS Price Low Relatively high High Promotion Advertising and promotion by producer Personal selling and advertising by both producer and retailer Personal selling and advertising by producer and retailer Distribution channel length Long Relatively short Very short Number of retail outlets Many Few Very few; often one per market area Importance of store image Unimportant Very important Important

11. Consumer Product Patterns • Consumer behavior patterns vary for each type of consumer product • Marketing strategies can be adjusted in accordance with these behavior patterns • Some goods/services are difficult to classify into just one category • Patterns differ - one person’s shopping products could be treated as a convenience product by someone else

12. Classifying Business Products • Business products are classified on the basis of product use • 6 principal categories • specialty products • accessory equipment • component parts and materials • raw materials, farm products, natural products • supplies and MRO items • business services

13. Figure 11.5 Classification of Business Products Installations Plant: Factories Major Equipment: Mining Equipment Business Services Advertising, Grounds Maintenance, Workshops Components Computer Chips, Lawn Mower Motors, Auto Stereos Business Products Accessory Equipment Advertising, Drill Presses, Desks, Delivery Trucks MRO Supplies Floor Cleaning Compounds, Pens, Staples Raw Materials Eggs, Cotton, Leather, Bauxite, Wheat

14. Table 11.2a Marketing Impact of the Business Products Classification System Factor Installations Accessory Equipment Component Parts & Materials Raw Materials Supplies Business Services ORGANIZATIONAL FACTORS Planning time involved in purchase Extensive Less extensive Less extensive Varies Very little Varies Purchase frequency Infrequent More frequent Frequent Infrequent Frequent Varies Comparison of price and quality Quality very important Quality and price important Quality important Quality important Price important Varies

15. Table 11.2b Marketing Impact of the Business Products Classification System Factor Installations Accessory Equipment Component Parts & Materials Raw Materials Supplies Business Services MARKETING MIX FACTORS Price High Relatively high Low to high Low to high Low Varies Promotion method Personal selling by producer Advertising Personal selling Personal selling Advertis-ing by producer Varies Distribution channel length Very short Relatively short Short Short Long Varies

16. Product Line Development • Firms usually offer a line of related products • Product lines are centered on a firm’s core competencies • Firms benefit from product lines by: • facilitating the desire to grow • optimal use of company resources • enhancing the company’s market position • exploiting the product life cycle

17. The Product Life Cycle • Four Stages • introduction • the firm stimulates demand for a new product • growth • the firm manages rapid or stimulates slow growth • maturity • the firm manages competitive threats as sales hit a plateau • decline • the firm manages price to maintain profitability

18. The Product Life Cycle • Product Life Cycle (PLC) is distinguished from fashion and fad cycles • fashion • short-lived, but often return in a long-term cycle • fad • short-lived fashions that rarely return to prominence • Marketing strategies will vary at each stage of the product’s lifecycle

19. The Product Life Cycle • Product life cycle for many products can be extended by: • increasing the frequency of use by present customers • increasing the number of users • finding new uses for the products • changing package sizes, labels, and product quality

20. The Product Life Cycle • Product Deletion Decisions • should be based on: • the product’s importance in the overall line • sales • profitability trends and projections • availability of replacement product • elimination decisions are usually made during the late maturity and early decline stages of the PLC • periodic product reviews should be made

21. Figure 11.8 Stages in the Product Life Cycle Introduction Growth Maturity Decline Food Processors Cassette Tapes Cellular Phones Network Computers Sales and Profits Industry Sales Industry Profits Time

22. Figure 11.10 Overlapping Life Cycles for Two Products Introduction Growth Maturity Decline Product A Industry Sales Product B Time

23. The Product Mix • The assortment of product lines and individual offerings • Typically measured in terms of: • width of assortment • number of product lines offered • consistency of assortment • degree of similarity of product lines

24. The Product Mix • Typically measured in terms of: • length of assortment • number of products in mix • depth of assortment • variations of each product in mix • Product width, length, consistency and depth must be balanced against: • consumer needs • firm competencies • competition

25. Table 11.3a The American Brands Product Mix Tobacco Products Distilled Spirits Office Products Home Improvement and Hardware Golf and Leisure PRODUCTS Cigarettes Bourbon Day-Timer calendars Tool chests Golf clubs Cigars Cordials Arts and crafts supplies Sinks Golf clothing Pipe tobacco Whiskey Appointment books Tool boxes Golf bags Roll-your-own supplies Gin Time management seminars Locks Vodka Binders Workbenches Golf balls Rum Fastener, paper clips Hospital carts Golf shoes Computer accessories and supplies Kitchen cabinets Office equipment Faucets Plumbing supplies

26. Table 11.3b The American Brands Product Mix Tobacco Products Distilled Spirits Office Products Home Improvement and Hardware Golf and Leisure BRANDS Benson & Hedges Jim Beam Day-Timer Master Lock Cobra Mayfair Ronrico AOOO Moen Hamlet Calvert Wilson-Jones Aristobraft Foot-Joy Old Holborn Titleist Gilbey’s Source: Data from American Brands, Inc., Annual Report, 1995; and American Brands Web page, http://www.ambrands.com, downloaded December 1, 1996.

27. Figure Types of Brands Generic Products No name cigarettes Manufacturer Brand Kodak, Heinz Private Brand Kenmore, DieHard Cragmont Family Brand KitchenAid Appliances, Johnsons & Johnson products Individual Brand Lever’s Aim, Close-Up & Pepsodent Toothpastes

28. Figure 12.3 Dimensions of Brand Equity: The Young & Rubicam Mode DIFFERENTIATION RELEVANCE ESTEEM KNOWLEDGE

29. Figure 12.8 Alternative Product Development Strategies Old Product New Product Market Penetration Product Development Old Market Market Development Product Diversification New Market

30. The Consumer Adoption Process • The series of stages potential consumers go through from: • first learning of the new product offering • eventually trying it • ultimately decision whether or not to purchase it regularly

31. The Consumer Adoption Process • Stages in consumer adoption process: • awareness • interest • evaluation • trial • adoption/rejection

32. The Consumer Adoption Process • Awareness • individuals first learn of the new product but lack information about it • Interest • potential buyers begin to seek information about the product • Evaluation • individuals consider whether or not the product is beneficial

33. The Consumer Adoption Process • Adoption Process • focuses on the individual and how fast he/she moves through various stages in deciding whether to adopt a new good, service, or idea • Five categories of adopters • innovators • early adopters • early majority • late majority • laggards

34. The Consumer Adoption Process • First adopters tend to be: • younger • have higher social status • be better educated • have higher income • be more mobile

35. The Consumer Adoption Process • Five characteristics of innovation influence adoption rate: • relative advantage • compatibility • complexity • possibility of trial use • observability

36. The Consumer Adoption Process • Relative advantage • the degree to which the innovations superior to previous ideas • Compatibility • the degree to which the innovation is consistent with the values and experiences of potential adopters • Complexity • the relative difficulty of understanding the innovation

37. The Consumer Adoption Process • Possibility of trial use • the degree to which the innovation can be used on a limited basis for examination • Observability • the degree to which the results of using the product are observable or communicable to others

38. The Consumer Adoption Process • Diffusion process • focuses on a number of persons • refers to the acceptance of new products by the members of a community or social system

39. Customer Service • Refers to the manner in which marketers deal with their customers • Dissatisfaction about poor customer service has accelerated in recent years • Proper handling of customer complaints is an important aspect of good customer relations • On-time, error-free delivery is another important element of customer service

40. The Consumer Adoption Process (cont) • Trial • individuals make trial purchases to determine its usefulness • Adoption/Rejection • If the trial purchase is satisfactory, individuals decide to use the product regularly

41. Stages in the adoption process 1. Awareness. Individuals first learn of the new product, but they lack full information about it. 2. Interest. Potential buyers begin to seek information about it. 3. Evaluation. They consider the likely benefits of the product. 4. Trial. They make trial purchases to determine its usefulness. 5. Adoption/Rejection. If the trial purchase produces satisfactory results, they decide to use the product regularly.* Everett M. Rogers and F. Floyd Shoemaker, Communication of Innovation (New York: Free Press, 1971), pp. 135-157. Rogers later relabeled his model as an innovation-decision process. He called the five steps knowledge, persuasion, decision, implementation, and confirmation. See Everett M. Rogers, Diffusion of Innovations, 3rd ed. (New York: Free Press, 1983), pp. 164-165.

42. Figure 12.10 Categories of Adopters Based on Relative Times of Adoption Time of Adoption of New Product Early Adopters 13.5% Early Majority 34% Consumer Innovators 2.5% Late Majority 34% Laggards 16%

43. Rate of Adoption Determinants • Relative Advantage • Compatibility • Complexity • Possibility of Trial Use • Observability