MKT 650

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1. The Product Life Cycle is a fundamental model of marketing. First what is the product life cycle? How do the marketing mix elements have to respond as the product moves through its lifecycle? What are some of the key strategic choices that must be made at each stage of the lifecycle? Based on this discussion discuss the crucial importance of new products and developing strong brands. Why are new products and strong brands so crucial to marketers? How do most firms identify new products for the marketplace? Using any of the cases from this semester discuss the how the new product development process was followed. Was this product an innovation or a redesign of an existing product? As the text book says, “The product life cycle is concerned with the sales history of a product class which holds that a product’s sales change over time in a predictable way and that products go through a series of five distinct stages: introduction, growth, shakeout, maturity, and decline”(Mullins & Walker, 2010, p271). Each of these stages has opportunities and threats for the firm, and they can affect the strategy of the company. Thereby, the product life cycle is an important way for managers to make decisions in the future. In the first stage, the introductory stage, mentions by the text book that “a new product’s purchase is limited because members of the stage market are insufficiently aware of its existence; also the product often lacks easy availability” (Mullins & Walker, 2010, p271). The company should shorten the product line to reduce production costs and hold down inventories, and because the pricing is affected by many factors, companies usually use skimming and penetration pricing strategies for their new products. Skimming is “designed to obtain as much margin per unit as possible” (Mullins & Walker, 2010, p272), which means setting a high price for the product in the beginning of the product life cycle. It allows the company to recover investment of the new product more quickly. Penetration pricing is a pricing technique of offering a relatively low initial entry price for a product or service to attract new customers away from competitors. This pricing strategy “enables the firm to strive for quick market development and makes sense when there is a steep experience curve” (Mullins & Walker, 2010, p273). The channel intermediaries are often sold directly, which helps customers to get to know the new product more easily. Moreover, advertising and the sales force are in a high percentage of promotion expenditures. The communication at this stage is to let customers know the new product. In the growth stage, there are “more and more people learn about the product and it becomes more readily available; sales increase at a progressively faster rate” (Mullins & Walker, 2010, p271). In this stage, the product line expands to attract new market segments and price tends to be lower and the price difference among brands decreases. During this period, “sellers of both industrial and consumer goods strive to build a channel or a direct-sales system that provides maximum product availability and service at the lowest cost” (Mullins & Walker, 2010, p274). “Promotion costs become more concerned with building demand for a company’s brand” (Mullins & Walker, 2010, p274), which indicates that firms try to build their brands with the products’ unique features despite the high promotion costs. A drop in the overall growth rate and substantial price cuts are the advent of the shakeout stage. Firms continue pricing competition, which is more direct. Furthermore, firms try to maintain and enhance their distribution system by offering customers buying incentives. The mature stage is “characterized as the stability in terms of demand, technology, and competition” (Mullins & Walker, 2010, p275). Because of technical maturity, the marketplace become more similar, therefore firms seek benefits by improving the ease of use and adding extended...
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