Marketing Test Quizlet 2.03

Keep in Mind

As you continue to learn about and consider the marketing implications involved in the product life cycle, remember that the cycle can be applied to a few different types of "product." The product life cycle can apply to: -A product category—e.g., packaged breakfast foods -A product form—e.g., hot cereal -A product—e.g., oatmeal -A brand—e.g., Quaker Can you think of some more ways to break down the term "product" along these lines?

That's Life

Introduction, growth, maturity, decline—each unique stage of the product life cycle has a great influence on the decisions marketers make. Successful marketers take the time to "know their stuff," letting knowledge and experience guide the way. Approaching the product life cycle appropriately can lead to greater marketing success and higher profits.

Summary (A) - 9

The product life cycle refers to the stages a product moves through from the time it is introduced to the market until the time it is taken off the market. There are four stages in the product life cycle—introduction, growth, maturity, and decline. The product life cycle can apply to a product category, a product form, a product, or a brand.

Circle of Life

What are some products you have used today? You can probably think of at least a dozen—your shampoo, your toothpaste, your cereal, your shoes, your car, your phone, etc. Every product you use is in a certain stage of the product life cycle. The product life cycle refers to the stages a product moves through from the time it is introduced to the market until the time it is taken off the market. There are four stages in the product life cycle—introduction, growth, maturity, and decline. Let's take a closer look at each.

Stayin' Alive

A new product isn't easy or cheap to introduce to the market. Companies invest a lot of time, energy, and money into creating products, and they want to maximize profits until the very end. Marketers may attempt to extend the product life cycle in a number of different ways. Let's take a look at a few of them. Increasing the number of users. Marketers can always try to attract new customers or entice customers of different brands. If a domestic market is saturated, they might try offering the product in foreign countries. A product that's declining in one country may be ready to grow in another. Entertainment products, such as music groups, often find new markets overseas after their popularity has waned in their home countries. Increasing frequency of use by current customers. If marketers can convince current customers to buy the product more often, they can increase sales even if they don't win over any new customers. A frozen-food manufacturer, for instance, might promote its freezer pops as being good for soothing sore throats in the winter in addition to being summertime treats. Current customers might be persuaded to purchase year-round instead of just during the warmer months. Finding new uses for the product. Marketers sometimes have luck extending a product's life by promoting new uses for it during the maturity stage. Here are just a few examples: -Using salt to soften jeans in the laundry -Substituting yogurt for oil in baking recipes -Using baking soda to remove tape residue -Using charcoal as an air freshener -Using coffee grounds to fertilize houseplants The list could go on and on. If marketers can hit on a new product use that satisfies customer needs and wants, the product's sales may perk up. You may not consider the pharmaceutical industry a "traditional retailer," but drugs are big business. Pharmaceutical companies are constantly trying to sell their products to doctors and hospitals—and directly to customers. So when an established medication starts to drop in popularity, drug manufacturers employ many of the same strategies as other companies—such as finding new uses for an old product. To learn more about drugs with multiple uses, read this article from TedBlog titled "9 Old Drugs That Learned New Tricks: The Head of the National Institutes of Health Shares Medicines That Turned Out To Have Multiple Uses." (Links to an external site.) Altering the product physically. Sometimes, changing a product's packaging, labeling, or size can revitalize it and lengthen its life. Offering a food product in bulk or in single-serving sizes can attract customers. Updated packaging works wonders for a number of products, especially cosmetics.

Introduction

A product enters the market during the introduction stage. During this time, profits are usually nonexistent. That's because sales are usually slow at first—after all, customers are just now finding out that the product even exists. In addition, the costs of introducing a new product are very high. Researching and developing the product, testing it, producing it, and marketing it are all expensive ventures. Believe it or not, a high number of products fail during the introduction stage. It might be because the company neglected to complete its research, and there is no viable market for the product. It might be because the product is not quite ready. It might be because the company does not have an effective plan for launching the product. Or, it might be that the company simply does not have the resources necessary to market the product successfully. The introduction stage is critical for the product, its marketers, and the company itself. Later in the LAP, you'll learn more about the important marketing decisions to be made during the introduction stage.

Decline

A product's decline stage may be very slow or very fast, depending on the circumstances. In this stage, a product's sales decrease, and its profits begin to erode. Decline can happen for a number of reasons, such as: Market saturation—Market saturation occurs when a product has been distributed throughout the population, and the only chance for increased sales occurs with population growth or a shift in market share. Fast food, for instance, has reached most of its potential customers in the United States. For certain fast-food restaurants that are not competing well and losing market share, this state of saturation can spell the end of business. There are simply no new customers to reach. The availability of superior products—Sometimes, products just become outdated. Better products come along that meet the same customer needs and wants. This is why the decline stage of a certain product often coincides with the growth stage of a new product in the same category. A classic example of this involves traditional film cameras. After digital cameras were introduced to the market, their popularity exploded. Traditional film cameras were sent into a quick decline. Today, it would be nearly impossible to find a film camera at your local Target. In fact, even digital cameras are experiencing a decline stage—can you think of why that might be? (Hint: It's probably in your pocket!) Unfortunately, once a product becomes outdated, it's unlikely that it will ever experience the same success as it did during its growth and maturation stages. A shift in customer tastes, preferences, or values—Nothing stays the same, and that includes what customers want and need. Today, many people enjoy receiving news and information online. This trend has led to the decline of certain print editions of newspapers and magazines, most notably Newsweek. In late 2012, it switched to a Web-only format after nearly 80 years of being a paper publication. Many people called it "the end of an era." What happens to companies whose products reach a decline stage? Many simply move on to selling new, better products—but others try to reignite interest in their aging products by remodeling them for a new era.

Let me introduce you

As you know, the introduction stage is a critical one, and the product failure rate is very high. The decisions marketers make at this stage will impact the product's survival and future profitability. Here are some common marketing strategies that marketers use during the introduction stage: Product. Now is the time to establish the quality of the product and to set up any necessary intellectual-property protections such as patents or trademarks. No company would want to be without these when competitors enter the market! During the introduction stage, marketers tend to keep the product line short and simple. It enables them to hold down costs and inventory as much as possible. Promotion. The three main goals of promotion during the introduction stage are to: -Inform potential customers that the new product exists -Build awareness of the product's unique ability to meet needs and wants -Stimulate demand for the new product Companies spend a lot of money on promotion during this stage. Since sales are slow at first, the amount spent on building product awareness tends to be greater than actual sales. Price. Marketers tend to use one of two pricing strategies during the introduction stage: -Price skimming—Using a skimming strategy means setting prices high. Marketers use this strategy when they want to recover the costs of product introduction as quickly as they can. It works best in niche (specialty) markets where marketers know that customers are willing and able to spend the money. Marketers often use a price-skimming strategy to introduce high-end electronics to the market. Early adopters are often eager to get their hands on the new product and have no problem paying premium prices to do so. Apple is notorious for implementing price skimming on the newest models of its devices. (When it was released in late 2017, the iPhone X retailed for $999!) To learn more about Apple's strategy, read this article from the Daily Mail titled "iPhone X Puts Exclamation Point on Apple's Pricing Strategy." (Links to an external site.) -Penetration pricing—Using a penetration strategy means setting prices low. Marketers use this strategy when their goal is rapid market development—getting the new product into the hands or homes of as many customers as possible. It's an appropriate strategy in large markets with potentially tough competition. A new type of candy bar, for instance, would call for a penetration-pricing strategy. It's unlikely that customers would be willing to pay top-dollar for it since there are so many other kinds to choose from. An attractively low price, however, might encourage them to give it a try. Place. Place, or distribution, is of the utmost importance during the introduction stage. You can effectively promote a great product at a great price, but customers have to know where to find it. Marketers must convince distributors to carry the new product. At this point, it's acceptable to have just a few distributors on board. Marketers may choose to keep distribution limited and to focus it on key outlets for their target market.

Real Mature

As you learned earlier, the maturity stage poses a great challenge for marketers. A product may remain in this stage for a very long time (decades upon decades), so keeping it "fresh" and keeping customers interested can be a daunting task. Marketers approach decision-making during the maturity stage in the following ways: Product. At this point, even brands have become similar in customers' minds. Marketers must focus on differentiating their product from the rest of the pack. They may do this by: -Making the product easier to use—Adding a new, "no-drip" spout to a detergent bottle or providing built-in voice-dialing features on a cell phone can work wonders for revitalizing the product. -Selling packages rather than single products—Often called bundling, this strategy involves selling a number of products together for one price. You might see this with video game systems or software packages. -Focusing on service—Marketers in service businesses already know how vital it is to provide excellent customer service. But, service is important even when the product is a tangible good. For example, a tire manufacturer can set itself apart by offering the best warranties in the industry or by training retailers to educate customers on proper tire care. Promotion. Promotion costs usually remain stable during the maturity stage; however, marketers usually "mix it up" a bit from time to time. They often decrease the amount of media advertising they use for the product and increase in-store promotions or incentives. For example, you might not see a certain mature brand of body lotion or soap advertised on TV very often, but you can probably easily find a coupon for it. Price. During the maturity stage, marketers either keep prices stable or decrease them due to competition. This decision may depend on a number of different factors, including the state of the industry and the overall economy. Place. Marketers continue to strive for intensive distribution during the maturity stage of the product life cycle. However, distributors may not be as easy to find as they were during the growth stage. For this reason, marketers may offer distribution incentives during this time as a method for keeping the product front and center for customers.

Fading Away

At some point, a product will enter the final phase of the product life cycle—the decline phase. Marketers must make careful decisions during this time period to ensure that the company can still reap every possible benefit from the product without losing money. Here are some time-tested strategies for doing so: Product. Marketers have a few options for what to do with a declining product. They can: -Attempt to maintain it—Marketers might attempt to breathe new life into an old product by adding new features to it or finding additional uses for it. We'll discuss the topic of extending the product life cycle a little later in the LAP. -Harvest it—Harvesting is a strategy in which a company continues to offer a declining product but reduces its costs as much as possible. For instance, the company would no longer spend any money advertising the product. However, loyal customers would continue to buy it, allowing the company to maintain some cash flow from product sales. Most marketers agree that harvesting is an ideal strategy but can be difficult to execute with the right balance. -Discontinue it—With this strategy, marketers stop offering the product. They liquidate the remaining inventory, either by selling it to customers at deep discounts or by selling it to another company. Promotion. Promotion expenditures decrease during the decline stage. If marketers are attempting to maintain the product, they may spend money promoting its new features or uses. However, marketers often limit promotion to frequent customers only or stop it altogether. Price. If a product's decline is slow, marketers may choose to keep prices stable. But, if the decline occurs rapidly, marketers will want to lower prices so that they can sell as much of the product as possible before it becomes obsolete. Pricing decisions often hinge on whether the product is being maintained, harvested, or discontinued. Place. During the decline stage, marketers must convince distributors to continue carrying the product even though they're not spending money to promote it. Distributors may be reluctant to carry a product they might lose money on. In some cases, marketers might find it useful to transfer the product to nontraditional channels or to offer it exclusively online.

Growth

During the growth stage, a product quickly becomes established in the market. Profits improve as sales increase rapidly and costs go down. Sales go up, of course, because customers are now aware of the product and have begun buying it. Customers who began purchasing the product in the introduction stage, known as early adopters, are buying replacement products, and new customers are buying for the first time. Costs are decreasing due to economies of scale—in other words, as the company produces a greater number of goods, the more efficient the process becomes, and the cost per unit goes down. Think about a construction company building new homes. If the company builds 10 new homes on one street, rather than just one, the cost per home will likely be lower since many of the same resources (carpenters, plumbers, electricians, equipment, etc.) can be used in the same place at the same time. The growth stage is also the time when competitors begin to arrive on the scene. When a product is selling and making money, other companies want to get in on the action! The growth stage presents interesting opportunities and challenges for marketers, which we'll discuss in more detail later.

Set the Stage

Each stage of the product life cycle is unique and presents specific opportunities and challenges for marketers. The decisions they make regarding the four P's of marketing—product, promotion, price, and place—depend greatly on where the product is in its life cycle. Let's examine how marketers approach their products during each individual stage.

Summary (B)-9

Each stage of the product life cycle is unique and presents specific opportunities and challenges for marketers. The decisions they make regarding the four P's of marketing—product, promotion, price, and place—depend greatly on where the product is in its life cycle. Marketers may try to extend the product life cycle by increasing the number of users, increasing frequency of use by current customers, finding new uses for the product, or altering the product physically.

Here we grow

If marketers can successfully navigate the introduction stage, sales of their product will begin to grow. The growth stage brings with it new marketing challenges and opportunities. Let's take a look at some of the strategies that work well during this stage of the product life cycle. Product. Now is the time to offer new product features or to expand the product line to attract new market segments. It may also be appropriate to upgrade product quality as well. Let's say your new restaurant is thriving. The growth stage may be the perfect time to introduce additional menu items, to extend your hours to include breakfast, or to start offering catering services. Promotion. Promotion expenditures remain high during the growth stage, but since sales are rising, they decrease as a percentage of sales revenue. By this time, competitors have entered the market. Promotion efforts aim to outmuscle the competition and often shift from focusing on the product to focusing on the brand. A car manufacturer, for instance, may have a model in the growth stage, but its promotional efforts may highlight the quality and value of the overall brand. Price. Marketers have a couple of options for setting prices during the growth stage. They can lower prices as costs decrease due to economies of scale. This might be a good strategy if there are a lot of competitors present. Or, if demand for the product is greater than supply, they can keep prices the same to try to boost profits. Place. During the growth stage, marketers work to expand the product's distribution. Since sales are increasing, it should be easier now to find distributors willing to take on the product. As a matter of fact, there may even be competition among distributors to carry the product!

Maturity

The maturity stage is usually the longest-lasting stage of the product life cycle. Most of the products you use are in the maturity stage right now. In this stage, the product has achieved acceptance by most of its potential buyers. Sales are still high, but sales growth slows down. Profits from the product stabilize or start to decrease a bit. Competition is still intense in the maturity stage. Weaker competitors have left the market, but the remaining, strong competitors are "duking it out" for market share. Most marketers agree that marketing a product during the maturity stage is one of the most difficult tasks they face. We'll learn more about this job as the LAP goes on.