Marketing Exam 2

Four ways to extend the product life cycle

- Selling to new segments - Stimulate more frequent use - Encourage more use per occasion - Promoting more varied use

Strategy for the the introduction stage

- Starts when the new product is first launched. In this stage: profits are negative or low promotion spending is relatively high only basic versions of the product are produced. A company, especially the market pioneer, must choose a launch strategy that is consistent with the intended product positioning.

Designing support services

- Survey customers periodically ( to assess the quality of various support services) - Fix problems and add new services that will both delight customers and yield profits to the company.

Value Proposition

- The benefits that the consumer will receive when buying the product - Good products create value, articulated in the value proposition, via the benefits that the consumer will receive when buying the product. -Marketer must focus on: 1) creating a product or service that provides better value than existing alternatives 2) crafting marketing communication messages in a manner that convinces customers that the product is better than the competition.

Characteristics that affect the speed of innovation diffusion

- Relative Advantage

Continuous innovations

- Represent the bulk of new products, and are best described as a modification to an existing product. Ex: New flavors, bigger (or smaller) package sizes, or easy to open child-proof caps, as shown in the Aleve ad

Discontinuous innovation:

-A totally new product -Creates major changes (up heal) in the way we live -Consumers must engage in a great deal of new learning (Consumers must learn a lot to use these innovations and adoption is much slower are a result) Ex: personal computer (combined with the Internet) has fundamentally altered the way we communicate, shop, consume media, and work.

According to the Federal Trade Commission

- A product must be entirely new or changed significantly to be called "new" - A product may be called "new" for only six months.

Consumer products

- Are products and services bought by final consumers for personal consumption. - Consumer product type can change over the coarse of its life -products may span multiple categories at the same time, depending upon the nature of the specific brand or item being shopped. 4 types: - Convenience - Shopping - Speciality - Unsought

This product life cycle presents two major challenges:

- Because all products eventually decline, a firm must be good at developing new products to replace aging ones (the challenge of new-product development). - The firm must be good at adapting its marketing strategies in the face of changing tastes, technologies, and competition as products pass through life-cycle stages (the challenge of product life-cycle strategies).

Brand strength and brand stature are the BrandAsset ™.

- Brand strength: The relationship between a brand's differentiation and relevance factors is the yardstick for a brand's growth potential: the Brand Strength. A "relevant differentiation" is the vital prerequisite for dynamic and successful brand building. - Brand Stature: Esteem and knowledge indicate the involvement with a brand: the Brand Stature. It is the decisive gauge of the goodwill which a brand enjoys. Properly managing these relationships is the key to successful brand building and to retention of brand value.

Types of Consumers in the adoption of a product

- Innovators: risk takers and adventurous, young, individuals - Early adopters: produce that will enhance their social acceptance (fashion or cutting-edge) - Early majority: middle-class consumers slight above averages of education and income - Late majority: older consumers with lower levels of education and income (when no longer to be considered a risky product) - Laggards: last to adopt a product usually because there are no other options

The service-profit chain consists of five links:

- Internal service quality: superior employee selection and training, a quality work environment, and strong support for those dealing with customers - Satisfied and productive service employees: more satisfied, loyal, and hardworking employees - Greater service value: more effective and efficient customer value creation and service delivery - Satisfied and loyal customers: satisfied customers who remain loyal, make repeat purchases, and refer other customers - Healthy service profits and growth: superior service firm performance.

Brand Sponsorship A manufacturer has four sponsorship options:

- Manufacturer's brand (or national brand). -have long dominated the retail scene. In recent times, an increasing number of retailers and wholesalers have created their own store brands (or private brands). - Store/Private/Distributor brand: The manufacturer may sell to resellers who give it a private brand -yield on average a 25 percent savings. - Licensed brands. - Co-brand: Two companies can join forces and co-brand a product

4 types of marketing

- Organizational Mrkt - Person Mrkt - Place Mrkt - Social Mrkt

A product can be

- Pure Tangible Goods (ex: soap) - Pure Services: offer consist primarily in a service

1. Idea generation

- The systematic search for new-product ideas. Using 3 types of sources: - Internal Idea Sources: the company can find new ideas through formal research and development. Or it can pick the brains of employees—from executives to salespeople to scientists, engineers, and manufacturing staff. - External Idea Sources: distributors and suppliers or even competitors. The most important source of new-product ideas is customers themselves. - Crowdsourcing Crowdsourcing invites broad communities of people into the new-product innovation process.

Global Product Decisions

- critical dilemma is determining the optimal amount of standardization for individual products and lines across market regions.

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?

Industrial products

-Are those purchased for further processing or for use in conducting a business. -The distinction between a consumer product and an industrial product is based on the purpose for which the product is bought. 3 groups: -Materials and parts: include raw materials and manufactured materials and parts. -Capital items: are industrial products that aid in the buyer's production or operations, including installations and accessory equipment. -Supplies and services: include operating supplies and maintenance and repair services.

Adoption Pyramid

-Confirmation (reinforcement of consumer's choice) - Adoption - Trial - Evaluation - Interest - Awareness (masive advertisement)

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.

Brand Positioning Marketers can position brands at any of three levels.

-Product attributes. - Desirable benefit. - Beliefs and values. The brand should: Suggest something about the product's benefits and qualities. Be easy to pronounce, recognize, and remember. Be distinctive Extendable. Translate easily into foreign languages. It should be capable of registration and legal protection.

The traditional marketingmix (4 P's)

-Product: this element is an object or service an organization produces on a large scale in a specific volume of units. An example of a material product is the disposable razor. -Price: this is the price the customer pays for a service or product. The price is the most important factor for marketing. The price of a product or service is determined by all factors that an organization invests during the preparation of the product. For instance material costs, market share, product identity etc. The price of a product may go up or go down depending on time and the price of a certain product may vary because of market developments. -Place: this element represents the location where the product is available for the customers. It is possible that the product is not available in all locations but only in a certain selection of locations. -Promotion: this element comprises all the efforts the company or organization makes to stimulate the popularity of their product in the market, for instance by advertising, promotional programmes, etc. Jerome McCarthy's 4Ps marketing model is the world's most famous product marketing model. It gives a picture of a product/price mix of an organization, in combination with a promotion plan so it can approach and serve customers on the basis of well-considered distribution and customer contact channels. The 4Ps offer marketing managers focus areas with respect to objectives and the resources to achieve those objectives.

Benefits of products are communicated and delivered by 3 product attributes:

-Quality: involves creating customer value and satisfaction. - Features - Style and Design

Marketing Strategies for Service Firms

-The Service-Profit Chain In a service business, the customer and front-line service employee interact to create the service.

Advantages of grading

-The brand name becomes the basis on which a whole story can be built about a product. -The brand name and trademark provide legal protection for unique product features. -The brand name helps the seller to segment markets.

Labeling has been affected in recent times by:

-unit pricing (stating the price per unit of standard measure) -open dating (stating the expected shelf life of the product) -nutritional labeling (stating the nutritional values in the product).

A product idea is A product concept is A product image is

...an idea for a possible product that the company can see itself offering to the market. ...a detailed version of the idea stated in meaningful consumer terms. ...the way consumers perceive an actual or potential product.

Key reasons for new product failure include:

1) creating a product with no discernable benefit over existing alternatives; 2) overestimating the size of the market; 3) poor positioning strategy; 4) poor implementation of the marketing mix (bad product quality, pricing too high or low; inadequate distribution; targeting the wrong market; ineffective advertising). Ex: Diet Coke with Bacon, Crystal Pepsi 80% of New Products Fail

THE NEW-PRODUCT DEVELOPMENT PROCESS

1. Idea Generation 2. Idea screening 3. Concept Development and Testing 4. Marketing Strategy Development 5. Business Analysis 6. Product Development 7. Test Marketing 8. Commercialization

Product Line Decisions

1. Product line length 2. Product line filling 3. Product line stretching

When developing products, marketers first must identify...

1. The core customer value (What is the buyer really buying?) that consumers seek from the product 2. Design the actual product 3. Find ways to augment it in order to create this customer value and the most satisfying customer experience

SERVICES MARKETING (Characteristics and requirements)

4 characteristics: - Intangibility: means that services cannot be seen, tasted, felt, heard, or smelled before they are bought. - Inseparability: means that services cannot be separated from their providers, whether the providers are people or machines. Because the customer is also present as the service is produced, provider-customer interaction is a special feature of services marketing. - Variability: means that the quality of services depends on who provides them as well as when, where, and how they are provided. - Perishability: means that services cannot be stored for later sale or use. Service marketing requires: - Internal marketing: means that the service firm must orient and motivate its customer-contact employees and supporting service people to work as a team to provide customer satisfaction. - Interactive marketing: means that service quality depends heavily on the quality of the buyer-seller interaction during the service encounter.

Augmented products

A commodity that has both the primary physical attributes and the non-physical attributes that are added to increase the product's value. are built around the core benefit and actual product by offering additional consumer services and benefits. Ex: warranty

Brand Development

A company has four choices when it comes to developing brands - Line extensions occur when a company extends existing brand names to new forms, colors, sizes, ingredients, or flavors of an existing product category. - Brand extensions extend a current brand name to new or modified products in a new category. -Multibrands introduce additional brands in the same category. -New brands

NEW-PRODUCT DEVELOPMENT STRATEGY

A firm can obtain new products in two ways. Acquisition: by buying a whole company Patent/ License: to produce someone else's product.

Dynamically continuous innovation:

A pronounced modification to an existing product. Requires a modest amount of learning or behavior change - Characterized by a major product change - Adopted more slowly than continuous innovations Ex: Audio products: 8-track tapes, cassette tapes, CDs, MP3 Type of DCI -Convergence: Convergence refers to the coming together of two or more technologies to create a new system with greater benefit than its parts. Ex: . The merging of cell phones, cameras, personal organizers, games, and video found in today's smart phones

Innovation

Anything that a consumer PERCEIVES to be new or different from existing products. Remember, to the consumer, perception IS reality. -The type of innovation depends on the amount of behavioral change and learning involved. Most are continuous innovation.

Managing Brands

Brand position must be continuously communicated to consumers. The brand experience involves customers coming to know a brand through a wide range of contacts and touch points. Companies need to periodically audit their brands' strengths and weaknesses.

Product Modification

Changes to one or more characteristics of a product. (The old version usually doesn't stay in the line)

Co-branding

Co-branding occurs when two established brand names of different companies are used on the same product. Co-branding offers many advantages. The combined brands create broader consumer appeal and greater brand equity. Co-branding also allows a company to expand its existing brand into a category it might otherwise have difficulty entering alone. Co-branding also has limitations. Such relationships involve complex legal contracts and licenses. Co-branding partners must carefully coordinate their advertising, sales promotion, and other marketing efforts. Each partner must trust that the other will take good care of its brand.

Another way to add customer value is through:

Distinctive product style and design - Brand names help consumers identify products that might benefit them. Brands also say something about product quality and consistency. - Packaging involves designing the container or wrapper for a product. Increased competition means that packages must perform sales tasks. - Labels help to promote the brand, support its positioning, and connect with customers.

Samsung

Enriching Customer's Lives through New Product Innovation Samsung, the world's largest consumer electronics manufacturer, produces "gotta-have" electronics in just about every product category. A little over 20 years ago, Samsung made the decision to go from being a 'copy-cat' brand to being a premier brand and innovation leader. Samsung set out to create "lifestyle works of art." Every new product had to pass the "Wow!" test: If it didn't get a "Wow!" reaction during market testing, it was sent back to the design studio. Beyond TVs and mobile devices, Samsung is applying its new product Wow! to categories ranging from household appliances to digital imaging to notebook PCs. Through a dedication to customer-focused new product innovation, Samsung has become a world-leading innovator of stylish, high-performing premium products.

Apples top major failures

Ex 1: Apple Lisa Computer: too expensive Ex 2: Macintosh Portable: too heavy

Lego

Example of extending the product lifecycle through line extensions, product modifications, and brand extensions (theme park) A privately held Danish company that has produced the iconic toys since 1932. Name is derived from the Danish words "Leg godt," meaning "play well" Lego from 1958 would still work with a Lego from today. Poor performance in the core LEGO business led to recent changes to the existing products Now have 46 retail stores - 34 in the U.S. Five theme parks: Denmark, Germany, UK, San Diego and Orlando Someone built a real house out of Legos - even the toilet was made of Legos! Break down the Lego product offering into core, branded, and augmented products. What are customer buying - core plastic product and experience of building.

Several kinds of product life cycles are possible:

High-technology products, fads, and styles or fashions.

6. Product (Technical) Development

In product development, R&D or engineering develops the product concept into a physical product - The technical development stage is expensive for firms because engineers begin refining the product concept, develop detailed blueprints, schemata, and models, and actual product prototypes. Prototypes are fully functioning test versions of the product developed by the R&D department. Prototypes are often tested during focus groups, or by employees within the firm. - Example, Gillette employees constantly test new products by shaving when they first come to work. Prototypes are used by employees responsible for writing instructions, determining which parts will be manufactured internally versus purchased from a supplier as well as what type of new machinery will be needed for the production process. Often, firms will patent the product during the technical development stage to protect the firm's investment.

5. Business Analysis

Involves a review of the sales, costs, and profit projections for a new product to find out whether they satisfy the company's objectives. While the concept development and screening stage estimated the basic commercial viability of the product, the concept is scrutinized in greater detail during the business analysis phase. To be commercially viable, the product concept must make a positive contribution to the overall profit of the firm. Employees charged with determining the commercial viability of a product estimate product demand, and work hard to determine if the firm has adequate resources to introduce the new product. The new items fit in the overall product mix is also analyzed. In particular, marketers try to estimate if the new offering will cannibalize (e.g., steal sales from) existing brands. Possible synergies with existing brands are also evaluated. The business analysis must be thorough because the costs of new product development begin to climb rapidly from this stage forward.

Labeling

Labels perform several functions. - identifies the product or brand. - describes several things about the product. - promotes the brand. Labeling also raises concerns. As a result, several federal and state laws regulate labeling. The most prominent is the Fair Packaging and Labeling Act of 1966.

Experiences

Marketers are managing and creating experiences with their brand or company to differentiate their offers

Service Blueprinting

Method of organizing business around customer experiences. There are five components of a typical service blueprint: • Customer Actions (everything a costumer does. ex: making reservations) • Onstage/Visible Employee Actions Iface to face interaction with your organization • Backstage/Invisible Employee Actions (taking reservation via phone) • Support Processes • Physical Evidence.

Licensing

Name and character licensing has grown rapidly in recent years. Annual retail sales of licensed products in the United States and Canada have grown from only $4 billion in 1977 to $55 billion in 1987 and more than $182 billion today.

Product adoption:

Process by which a consumer or business customer begins to buy and use a new good, service, or idea

Diffusion:

Process by which the use of a product spreads throughout a population

Quality Modifications

Products at a lower price Products at Same Price at Lower Manufacturing Costs Internal modifications

Managing Service Productivity

Service firms are under great pressure to increase service productivity. They can train current employees better or hire new ones who will work harder or more skillfully. They can increase the quantity of their service by giving up some quality. They can harness the power of technology.

Managing Service Quality

Service quality is harder to define and judge than product quality. Service quality will always vary, depending on the interactions between employees and customers. Good service recovery can turn angry customers into loyal ones.

3. Concept Development and Testing

Several descriptions of the product are generated to find out how attractive each concept is to customers. From these concepts, the best one is chosen. Concept testing calls for testing new-product concepts with groups of target consumers

Strategy for the maturity stage

Slowing product growth. The slowdown in sales growth results in many producers with many products to sell. Competitors begin marking down prices, increasing their advertising and sales promotions, and upping their product-development budgets to find better versions of the product. These steps lead to a drop in profit. Product managers should consider modifying the market, product, and marketing mix. In modifying the market, the company tries to increase the consumption of the current product. - In modifying the product: the company tries changing characteristics such as quality, features, style, or packaging to attract new users and to inspire more usage. - In modifying the marketing mix: the company tries changing one or more marketing mix elements. - Modifying the market, product, and marketing mix: In modifying the market, the company tries to increase the consumption of the current product.

Knockoffs

Some firms create knockoffs of successful products to sell to a different market. Knockoffs change just enough of the original design of the product to avoid running a foul of the law, and often use cheaper and lower quality materials so the item can be sold for a lower price. Knock-offs are common in the fashion industry, where it is difficult to protect designs (as opposed to technological innovations which are much easier to patent and protect legally).

Cadbury Creme Eggs

The delicious confections have changed in two unsavory ways for their forthcoming Easter season: the eggs are gonna be pricier this year and the recipe in America is a farce. Let's break it down by individual controversy. First, if you live in the UK, you're about to face a price uptick that is hidden as a minimizing. Cadbury Creme Eggs are typically sold in packs of six and now will be sold in packs of five—but for the same price, The Daily Mail reports. Come on, man! That's not cool. Get it together. But worse: for consumers of the American version of this English delicacy, Kraft Foods admitted that they've tinkered with the recipe so that the eggs' outside chocolate shells are not made from Cadbury's delicious Dairy Milk chocolate. A Kraft spokesman told The Mirror that the chocolate will be made from a standard cocoa mix instead. Hell no, Cadbury!

McDonald's

The director of culinary innovation at McDonald's runs the chain's test kitchen and he's challenged with finding new menu concepts that work within the context of a McDonald's store. Recently, he came up with a simple idea: He took the breaded chicken the chain uses in its Chicken Selects strips, topped it with shredded cheddar jack cheese and lettuce, added a few squirts of ranch sauce, and wrapped it in a flour tortilla. McDonald's dubbed it the "Snack Wrap" and put it on the menu at a starter price of $1.29. A hit was born—the Snack Wrap is one of the most successful new product launches in company history with sales exceeding projections by 20 percent.

2. Idea screening

The first idea-reducing stage is idea screening, which helps spot good ideas and drop poor ones as soon as possible.

Strategy for the growth stage

The growth stage is where sales begin to climb quickly. New competitors will enter the market. They will introduce new product features, and the market will expand. The increase in competitors leads to an increase in the number of distribution outlets. Prices remain stable. Profits increase during the growth stage.

Managing Service Differentiation

The offer can include innovative features that set one company's offer apart from competitors' offers. Service companies can differentiate their service delivery by having more able and reliable customer-contact people, by developing a superior physical environment in which the service product is delivered, or by designing a superior delivery process. Service companies can work on differentiating their images through symbols and branding.

tipping point

The point where a product's sales spike from a slow climb to a new level

Strategy for the Decline Stage

The sales of most product forms and brands eventually dip. This is the decline stage. Management may decide to maintain its brand without change in the hope that competitors will leave the industry. Management may decide to harvest the product, which means reducing various costs (plant and equipment, maintenance, R&D, advertising, sales force) and hoping that sales hold up Management may decide to drop the product from the line.

Product Quality

Two dimensions: - Quality Level: performance quality or the ability of a product to perform its functions - Quality Consistency: freedom from defects, and consistency in delivering a targeted level of performance. (Quality conformance means quality consistency)

Market Extension

Up market extension: hershey's chocolate down -example: mercedes B class

Functional Modifications

Usually involves packaging or sizing

Product line filling involves

adding more items the present range of the line.

Product Mix Decisions and four dimensions

all the product lines and items that a particular seller offers for sale. 4 dimensions: - width: refers to the number of different product lines the company carries. -length: refers to the total number of items the company carries within its product lines. -depth: refers to the number of versions offered of each product in the line - consistency refers to how closely related the various product lines are in end use, production requirements, distribution channels, or some other way. The company can increase its business in four ways. - Add new product lines, widening its product mix. - Lengthen its existing product lines. - It can add more versions of each product, deepening its product mix. - It can pursue more product line consistency.

Staple products

are basic or necessary items that we simply can't do without. EX: Gasoline and milk are a couple of examples.

Impulse products

are bought on the spur of the moment. Package designs of items like candy bars need to be bright and colorful so they catch the consumers attention, enhancing the likelihood of an impulse by. Influenced by placement is also important; many manufacturers of impulse items try to obtain special point-of-purchase displays to make the product standout, or seek to have them stocked near the cash registers where they may be noticed by bored shoppers waiting their turn in line.

Convenience products

are consumer products and services that customers usually buy frequently, immediately, and with a minimum of comparison and buying effort (often non durable) - Staple Products - Impulse Products - Emergency Products

Specialty products

are consumer products and services with unique characteristics or brand identifications for which a significant group of buyers is willing to make a special purchase effort. - Tend to be brand loyal Ex: Rolex, Ferrari

Unsought products

are consumer products that the consumer either does not know about or knows about but does not normally think of buying. -Tend to be higher priced than convenience goods Ex: life insurance, blood donations, burial plots, insurance

Emergency products

are items that have to be purchased immediately because of dire need. Because immediate access to the product takes priority, consumers may not consider price or product quality when making their choice. Examples: include drain cleaner (when the sink is stopped or overflowing), diapers (when the baby is wet and none are in the house), umbrella when you're outside somewhere and have to stay there, despite the fact that it is raining.

Shopping products

are less frequently purchased consumer products and services that customers compare carefully on suitability, quality, price, and style. -Consumer buy this when comparing alternatives to make a decision - Intelligent agents or shopbots: computer programs that find sites selling a particular product (Ex: CN.net) Ex: furniture, clothes, cars, Tvs

Fads

are temporary periods of unusually high sales driven by consumer enthusiasm and immediate product or brand popularity.

battle of the brands

between national and private brands, retailers have many advantages. Retailers often price their store brands lower than comparable national brands. Store brands yield higher profit margins for the reseller. Store brands give resellers exclusive products that cannot be bought from competitors.

Person marketing

consists of activities undertaken to create, maintain, or change attitudes or behavior toward particular people.

Organization marketing

consists of activities undertaken to create, maintain, or change the attitudes and behavior of target consumers toward an organization.

Young & Rubicam's Brand Asset Evaluator measures brand strength along four consumer perception dimensions:

differentiation (what makes the brand stand out), relevance (how consumers feel it meets their needs), knowledge (how much consumers know about the brand), and esteem (how highly consumers regard and respect the brand).

Brand valuation

is the process of estimating the total financial value of a brand.

Social marketing

is the use of commercial marketing concepts and tools in programs designed to influence individuals' behavior to improve their well-being and that of society.

Megabrand strategies

involve weeding out weaker brands and focusing marketing dollars only on brands that can achieve the number-one or number-two market share positions in their categories.

Place marketing

involves activities undertaken to create, maintain, or change attitudes or behavior toward particular places.

4. Marketing strategy development

involves designing an initial marketing strategy for a new product based on the product concept. Needs a marketing strategy statement that consists of three parts: -A description of the target market; the planned value proposition; and the sales, market share, and profit goals for the first few years -An outline of the product's planned price, distribution, and marketing budget for the first year -A description of the planned long-run sales, profit goals, and marketing mix strategy

8. Commercialization

involves introducing the new product into the market. A full scale launch of the new product. Sometimes products are rolled nationally all at once; other times, a product may be released first into a specific geographic region, with future regional introductions occurring over time as production gears up or as sales grown in the original region. Commercialization requires careful preparation. Marketers begin by reaching out to the trade, such as retailers and wholesalers who are part of the distribution chain. These organizations must be convinced to carry the product. Publicity aimed at the media is often used to announce the new product, and accompanied by advertising, sales promotion, and other communication tactics geared towards consumers.

A product line

is a group of products that are closely related because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges.

Total quality management (TQM)

is an approach in which all of the company's people are involved in constantly improving the quality of products, services, and business processes. A product can be offered with varying features.

Brand equity

is the differential effect that knowing the brand name has on customer response to the product or its marketing.

Compatibility

is the extent to which the innovation is consistent with existing cultural values, customs, practices, and consumers way of "doing things." Metal roofs are commonly used in manufacturing and retailing facilities, but are not very prevalent in the consumer market, for several reasons that relate to compatibility, including aesthetics and cost/benefit ratio (metal roofs easily last 30 or more years, but consumers rarely want to pay the higher cost in light of the fact that people move around on average every 5 to 7 years). Lack of perceived compatibility will slow the rate of adoption.

Product line length

is the number of items in the product line.

Product line stretching

occurs when a company lengthens its product line beyond its current range. -Companies located at the upper end of the market can stretch their lines downward. -Companies located at the lower end of the market can stretch their product lines upward. -Companies located in the middle range of the market can stretch their lines in both directions.

Complexity

refers to the degree to which consumers perceive a new product as difficult to understand and use, and as one would expect, the higher the degree of perceived complexity, the slower the rate of adoption. Well-executed marketing communications can reduce consumer perceptions of complexity.

Typical product life cycle (PLC)

the course that a product's sales and profits take over its lifetime. The product life cycle has five distinct stages: Product Development Introduction Growth Maturity Decline

7. Test Marketing

the stage at which the product and marketing program are introduced into realistic market settings. Once the final product configuration is created, a firm may decide to launch the product in a test market for a limited amount of time. During the test market, the entire marketing plan is tested - the geographic market in which the test takes place is exposed to the actual promotion, distribution, and pricing strategy planned for the final product launch. Not all products warrant a test market though. A new flavored beverage for an established manufacturer probably wouldn't warrant the expense. Aside from the tremendous cost associated with test market which often run in the millions of dollars, a firm runs the risk of alerting the competition to the new product, which allows them to begin developing a competitive product that much sooner. However, the benefits can outweigh the costs. For example, test marketing allows marketers to fine tune their entire marketing strategy before taking the campaign and new product introduction national. Sometimes flaws in the product are discovered and fixed. Sometimes, the firm saves millions of dollars by pulling a product that "fails" its test market. As an alternative to actual test marketing, more and more firms are opting for simulated test markets that take place online, or in controlled warehouses which mimic a grocery store.