Life Cycle

MKTG 370 PRODUCT Lars Perner, Instructor 1

PRODUCTS AND LIFE CYCLE STRATEGIES Products and

product lines New products:

Development, successes and failures

The Product Life Cycle and Diffusion of Innovations

Branding


Product Lines vs. Product Mix Product Line: A number of similar or related

products—e.g., BIC writing utensils Boeing Commercial Aircraft (aircraft and parts) Nike shoes; Nike clothing

Product Mix: assortment of different products offered E.g., “KFC—we do chicken right!” (Only one

product line) 3M: Tapes, adhesives, Post-its, chemicals,

computer disks, overhead projectors (things that are bonded together


Reasons for Product Failure

Insignificant “Point of Difference” Incomplete prior market and

product definition Insufficient market attractiveness Poor execution of the marketing

mix Poor product quality or customer

need sensitivity Bad timing Lack of economical access to

customers


Stages in New Product Development Process

Text, p. 279. Copyright © 2002 McGraw-Hill.


Idea Generation

Sources of new ideas Customer based

Outright suggestions Observation of customer problems and tasks Market research on processes and problems

Supplier suggestions Employee suggestions R&D Breakthroughs Competitive ideas Adaptation of products seen in foreign

markets


Screening

Internal screening Technical feasibility Consistency with

strategic objectives External screening

Marketing research Questionnaires Conjoint analysis

(determines importance of attributes)


Business Analysis and Development Business analysis

Financial feasibility

Legal issues Impact on sales

of existing products

Financial projections

Development Design Prototypes Refinements


Test Marketing and Commercialization Test marketing

Limited regional release

May pre-test prices and positioning

Simulated test markets

Laboratory Computer based

Commercialization Positioning Launching product Risks

Slotting fees Failure fees Withdrawal due to

insufficient sales


The Product Life Cycle

Text, p. 295. Copyright © 2002 McGraw-Hill.


Some PLC Stage Examples

Color TVs: Maturity Black and white TVs:

Decline HDTV: Growth VCRs: Decline DVD players: Growth Jeans: Maturity Fast food:

Growth/maturity Traditional

photography: Maturity

Digital photography: Growth

Fax machines: Maturity

Internet access (U.S.) Dial-up: Mature DSL, Cable: Growth

Travel agencies: Decline

Autism education: Introduction

Cranberry juice: Revitalization


The Product Life Cycle (PLC) involves ________ over time Demand for the

product Awareness of the

product Competition in

supplying the product Price Features Differentiation

Profitability Alternatives available

to the product

Investment opportunities (Boston Consulting Group model)

Appropriate strategies


Dimensions of the Product Life Cycle (PLC) Length

Tend to be increasingly short

Especially short in Japan

Shape Effects of learning

opportunities Product level

Class (e.g., TVs) Form (e.g., HDTV)

Diffusion among consumer segments


The International Life Cycle Market for older

technology tends to exist in less developed countries Manufacturing of

older generation technology--e.g., Pentium I computers

Resale of capital equipment—e.g., DC 8 aircraft, old three part canning machines

Some countries tend to be more receptive to innovation than others

“Leap frogging” Going directly

from old technology to the very newest, skipping intermediate step (e.g., wireless rather than wired technology)

Shortening of product life cycles


Types of Innovations

Continuous--same product, just small improvements over time--e.g., typical automobile/stereo system model changes

Dynamically continuous--product form changed, but function and usage are roughly similar--e.g., jet aircraft, ball point pen, word processor

Discontinuous--entirely new product; usage approach changes (e.g., fax)


Some Diffusion Examples

ATMs Easy observability Significant relative

advantage Credit cards

“Chicken-and-egg” problem

Jump-starting the cycle

Faded, torn jeans Fads Innovations do not

have to be high tech

Fax machines Network economies

Rap music Low barriers to

entry Spread to a new

consumer group Hybrid corn

Trialability Imitation


To Adopt or Not to Adopt: How Will Consumers Answer the Question?

Some causes of resistance to adoption perceived risk--financial and

social self image effort to implement and/or learn

to use the product incompatibility inertia


Influences on the Speed of Diffusion Risk to expected benefit ratio

(relative advantage) Product pricing Trialability Switching difficulties and learning

requirements/ ease of use


Branding

Brands Product or product line

specific brands E.g., Tide, DeWalt, Hayes

modem International issues

“Umbrella Brands” 3M

National vs. regional National vs. international Store brands

Trade marks and “genericide”

Branding has been tracedto whiskey casks that were identified for quality.


Brand as Category Label: A Mixed Blessing Brand names potentially in danger

Coke (“cola drink”) Kleenex (“facial tissue”) FedEx (“overnight express”) Xerox (“photo copy”)

Market share benefit of descriptive brand name Distributional Consumer “mind share”


Brand Value and Image

Brand equity: Value added to product based on brand name Choice likelihood Ability to charge higher price Use of product as loss leader

Benefit in market share, temporary revenue (Coca Cola)

Possible damage to long term brand image (Louis Vuitton suitcases in Japan)

Brand “personality:” Associations with product


Co-branding To take advantage of

assets of both firms Types

Distributional: Egalitarian: Carl’s Jr.

and Green Taco Hierarchical: Kodak

as official film of Disney Parks

Line filling—e.g., airline code sharing

Ingredients: Cooperative:

Dreyers’ ice cream with Mars M&Ms

Independent: Local computer maker advertises Maxtor hard drive components

Intrusive: “Intel Inside”

Partial: McD’s serves Coca Cola

Sponsorship: Good Housekeeping seal of approval


Branding Issues To extend or not to extend?

Congruence--are products consistent in image to be represented by the same brand name?

Coke and Diet Coke Miller vs. Miller Light Beer

Perception of ability to make product well Extention should not be exploitative (e.g.,

Heinecken Popcorn) Order of entry: First manufacturer of new

to market product should not extend

Life Cycle

Business

product mix product

product form

product competition

product awareness

branding brands product

product life cycle text

product lines new products

product line specific