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Principles of Marketing
Lecture-22
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Summary of Lecture-21
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New Product Development
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Idea Generation Screening Concept Development and Testing Marketing
Strategy Business Analysis Product Test Commercialization
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Today’s Topics
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New Product Development (cont..)
Product Life Cycle (PLC)
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Types of New Products Include
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New-To-The World Repositionings Product Line Additions New Category Entries Product Improvements
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Consumer Adoption Process
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Awareness Interest Evaluation Trial Adoption
Communicate Availability Communicate Benefits Emphasize Advantages Motivate Consumers Ensure Satisfaction Strategy Awareness Interest Evaluation Trial Adoption
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Product Life-Cycle (PLC)
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Time Product Development Stage Introduction Profits Sales Growth Maturity Decline Sales and Profits ($) Sales and Profits Over the Product’s Life From Inception to Demise
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The Typical Product Life Cycle (PLC) Has Five Stages
Product Development, Introduction, Growth, Maturity, Decline Not all products follow this cycle
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The four basic stages through which a successful product progresses-introduction, growth, maturity, and decline. Some products move rapidly through the product life cycle, while others pass through those stages over long time periods.
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Product Life-Cycle Strategies
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Product Development Stage
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Time Product Development Stage Introduction Profits Sales Growth Maturity Decline Sales and Profits ($) Sales and Profits Over the Product’s Life From Inception to Demise
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PLC Stages Product development
Begins when the company develops a new-product idea Sales are zero Investment costs are high Profits are negative Product development Introduction Growth Maturity Decline
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Introduction Stage
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Time Product Development Stage Introduction Profits Sales Growth Maturity Decline Sales and Profits ($) Sales and Profits Over the Product’s Life From Inception to Demise
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PLC Stages Introduction Low sales High cost per customer acquired
Negative profits Innovators are targeted Little competition PLC Stages Product development Introduction Growth Maturity Decline
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Low sales Negative Offer a basic product Sales Costs Profits Product
Product Life-Cycle Strategies This CTR relates to the material on pp. 289 and 293. Low sales Sales High cost per customer Costs Negative Profits Product Life Cycle Strategies Introduction. In this stage marketers spend heavily on promotions to inform the target market about the new product's benefits. Low or negative profits may encourage the company to price the product high to help offset expenses. companies can concentrate on skimming strategies to generate high profits now or on penetration strategies to build market share and dominant the market for larger profits once the market stabilizes. Create product awareness and trial Marketing Objectives Product Offer a basic product Price Use cost-plus Distribution Build selective distribution Advertising Build product awareness among early adopters and dealers
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Growth Stage
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Time Product Development Stage Introduction Profits Sales Growth Maturity Decline Sales and Profits ($) Sales and Profits Over the Product’s Life From Inception to Demise
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PLC Stages Growth Rapidly rising sales Average cost per customer
Rising profits Early adopters are targeted Growing competition PLC Stages Product development Introduction Growth Maturity Decline
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Rising profits Sales Costs Profits Product Price Rapidly rising sales
Product Life-Cycle Strategies This CTR relates to the material on pp and 293. Sales Rapidly rising sales Average cost per customer Costs Rising profits Profits Product Life-Cycle Strategies Growth. In this stage the company experiences both increasing sales and competition. Promotion costs are spread over larger volume and strategic decisions focus on growth strategies. Strategies include adding new features, improving quality, increasing distribution, and entering new market segments. Marketing Objectives Maximize market share Offer product extensions, service, warranty Product Price Price to penetrate market Distribution Build intensive distribution Build awareness and interest in the mass market Advertising
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Maturity Stage
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Time Product Development Stage Introduction Profits Sales Growth Maturity Decline Sales and Profits ($) Sales and Profits Over the Product’s Life From Inception to Demise
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PLC Stages Maturity Sales peak Low cost per customer High profits
Middle majority are targeted Competition begins to decline Product development Introduction Growth Maturity Decline
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Price High profits Sales Costs Profits Product Peak sales
Product Life-Cycle Strategies This CTR relates to the material on pp and 293. Sales Peak sales Costs Low cost per customer High profits Profits Product Life Cycle Strategies Maturity. In this stage the company must manage slower growth over a longer period of time. Strategic decisions made in the growth stage may limit choices now. Marketing managers must proactively seek advantage by either market modification to increase consumption, product modification to attract new users (quality, feature, and style improvements), or marketing mix modification in an attempt to improve competitive position. Maximize profit while defending market share Marketing Objectives Product Diversify brand and models Price Price to match or best competitors Distribution Build more intensive distribution Advertising Stress brand differences and benefits
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Decline Stage
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Time Product Development Stage Introduction Profits Sales Growth Maturity Decline Sales and Profits ($) Sales and Profits Over the Product’s Life From Inception to Demise
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PLC Stages Decline Declining sales Low cost per customer
Declining profits Laggards are targeted Declining competition Product development Introduction Growth Maturity Decline
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Sales Costs Profits Product Price Declining profits Cut price
Product Life-Cycle Strategies This CTR relates to the material on pp Sales Declining sales Low cost per customer Costs Profits Declining profits Marketing Objectives Reduce expenditure and milk the brand Product Life Cycle Strategies Decline. In this stage the costs of managing the product may eventually exceed profits. Rate of decline is a major factor in setting strategy. Management may maintain the brand as competitors drop out, harvest the brand by reducing costs of support for short term profit increases, or drop the product (divest) altogether. Product Phase out weak items Price Cut price Distribution Go selective: phase out unprofitable outlets Advertising Reduce to level needed to retain hard-core loyal customers
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Overlap of Life Cycle for Products A and B
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WINDOWS 3.1 WINDOWS 95
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Extending the Product Life Cycle
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Market Modification Product Modification
1. Increase frequency of use by present customers 2. Add new users 3. Find new uses 4. Change product quality or packaging Product Modification
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To prevent the product going into decline you modify the product
Adding new features, variations, model varieties will change the consumer reaction - create more demand therefore you attract more users
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Enough for today. . .
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Summary
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Consumer Adoption Process
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Awareness Interest Evaluation Trial Adoption
Communicate Availability Communicate Benefits Emphasize Advantages Motivate Consumers Ensure Satisfaction Strategy Awareness Interest Evaluation Trial Adoption
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Product Life-Cycle (PLC)
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Time Product Development Stage Introduction Profits Sales Growth Maturity Decline Sales and Profits ($) Sales and Profits Over the Product’s Life From Inception to Demise
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Extending the Product Life Cycle
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Next….
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Review of 1st P of Marketing Mix (4P’s)…Product
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Principles of Marketing
Lecture-22
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