PRODUCTS AND LIFE CYCLE
STRATEGIES
 Products and
 Branding
product lines
 New products:
Development,
successes and
failures
 The Product Life
Cycle and Diffusion
of Innovations
MKTG 370
PRODUCT
Lars Perner, Instructor 1
Product Lines vs. Product Mix
 Product Line: A number of similar or related
products—e.g.,
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BIC writing utensils
Boeing Commercial Aircraft (aircraft and parts)
Nike shoes; Nike clothing
 Product Mix: assortment of different products
offered
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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
PRODUCT
Lars Perner, Instructor 2
Reasons for Product Failure
 Insignificant “Point of Difference”
 Incomplete prior market and
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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
PRODUCT
Lars Perner, Instructor 3
Stages in New Product
Development Process
Text, p. 279. Copyright © 2002 McGraw-Hill.
MKTG 370
PRODUCT
Lars Perner, Instructor 4
Idea Generation
 Sources of new ideas
 Customer based
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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
PRODUCT
Lars Perner, Instructor 5
Screening
 Internal screening
 Technical feasibility
 Consistency with
strategic objectives
 External screening
 Marketing research
 Questionnaires
 Conjoint analysis
(determines
importance of
attributes)
MKTG 370
PRODUCT
Lars Perner, Instructor 6
Business Analysis and Development
 Business analysis
 Development
Financial
feasibility
 Legal issues
 Impact on sales
of existing
products
 Financial
projections
Design
 Prototypes
 Refinements
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MKTG 370
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PRODUCT
Lars Perner, Instructor 7
Test Marketing and
Commercialization
 Test marketing
 Limited regional
release
 May pre-test prices
and positioning
 Simulated test
markets
 Laboratory
 Computer based
MKTG 370
 Commercialization
 Positioning
 Launching product
 Risks
 Slotting fees
 Failure fees
 Withdrawal due to
insufficient sales
PRODUCT
Lars Perner, Instructor 8
The Product Life Cycle
Text, p. 295. Copyright © 2002 McGraw-Hill.
MKTG 370
PRODUCT
Lars Perner, Instructor 9
Some PLC Stage Examples
 Color TVs: Maturity
 Black and white TVs:
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MKTG 370
 Digital photography:
Decline
HDTV: Growth
VCRs: Decline
DVD players: Growth
Jeans: Maturity
Fast food:
Growth/maturity
Traditional
photography: Maturity
Growth
 Fax machines: Maturity
 Internet access (U.S.)
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Dial-up: Mature
DSL, Cable: Growth
 Travel agencies:
Decline
 Autism education:
Introduction
 Cranberry juice:
Revitalization
PRODUCT
Lars Perner, Instructor 10
The Product Life Cycle (PLC)
involves ________ over time
 Demand for the
product
 Awareness of the
product
 Competition in
supplying the product
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 Investment
opportunities (Boston
Consulting Group
model)
 Appropriate strategies
Price
Features
Differentiation
 Profitability
 Alternatives available
to the product
MKTG 370
PRODUCT
Lars Perner, Instructor 11
Dimensions of the Product Life
Cycle (PLC)
 Length
 Tend to be
increasingly short
 Especially short in
Japan
 Diffusion among
consumer segments
 Shape
 Effects of learning
opportunities
 Product level
 Class (e.g., TVs)
 Form (e.g., HDTV)
MKTG 370
PRODUCT
Lars Perner, Instructor 12
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
MKTG 370
 “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
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PRODUCT
Lars Perner, Instructor 13
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)
MKTG 370
PRODUCT
Lars Perner, Instructor 14
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
MKTG 370
 Fax machines
 Network economies
 Rap music
 Low barriers to entry
 Spread to a new
consumer group
 Hybrid corn
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PRODUCT
Trialability
Imitation
Lars Perner, Instructor 15
To Adopt or Not to Adopt: How Will
Consumers Answer the Question?
 Some causes of resistance to
adoption
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perceived risk--financial and social
self image
effort to implement and/or learn to
use the product
incompatibility
inertia
PRODUCT
Lars Perner, Instructor 16
Influences on the Speed of
Diffusion
 Risk to expected benefit ratio
(relative advantage)
 Product pricing
 Trialability
 Switching difficulties and learning
requirements/ ease of use
MKTG 370
PRODUCT
Lars Perner, Instructor 17
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”
MKTG 370
PRODUCT
Branding has been traced
to whiskey casks that
were identified for quality.
Lars Perner, Instructor 18
Brand as Category Label: A Mixed
Blessing
 Brand names potentially in danger
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Coke (“cola drink”)
Kleenex (“facial tissue”)
FedEx (“overnight express”)
Xerox (“photo copy”)
 Market share benefit of descriptive brand
name
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Distributional
Consumer “mind share”
PRODUCT
Lars Perner, Instructor 19
Brand Value and Image
 Brand equity: Value added to product based
on brand name
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Choice likelihood
Ability to charge higher price
Use of product as loss leader
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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
MKTG 370
PRODUCT
Lars Perner, Instructor 20
Co-branding
 To take advantage of assets
of both firms
 Types
 Distributional:
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Egalitarian: Carl’s Jr.
and Green Taco
Hierarchical: Kodak
as official film of
Disney Parks
Line filling—e.g., airline
code sharing
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Ingredients:
PRODUCT
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
Lars Perner, Instructor 21
Branding Issues
 To extend or not to extend?
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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
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 Extention should not be exploitative (e.g.,
Heinecken Popcorn)
 Order of entry: First manufacturer of new
to market product should not extend
MKTG 370
PRODUCT
Lars Perner, Instructor 22