Marketing Mix The Four Stages Product Life Cycle

PRODUCT
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A good, a service, or an idea received in an
exchange
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It can be tangible (a good) or intangible (a service or
an idea) or a combination of both.
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It can include functional, social, and psychological
utilities or benefits.
Formal, core and augmented products
The formal product
• What customers think they are buying
The core product
• What the customer is actually buying
The augmented product
• The totality of all benefits received or • Product Life Cycle
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experienced by customers The progression of a product through four stages:
Classifying Products introduction, growth, maturity, and decline
• Consumer Products • Introduction
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Products purchased to satisfy personal and family The initial stage of a product’s life cycle—its first
needs appearance in the marketplace—when sales start at
• Business Products zero and profits are negative
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Products bought to use in an organization’s • Growth
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operations, to resell, or to make other products (raw The stage of a product’s life cycle when sales rise
materials and components) rapidly and profits reach a peak and then start to
• Convenience Products decline
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Relatively inexpensive, frequently purchased items • Maturity
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for which buyers exert minimal purchasing effort The stage of a product’s life cycle when the sales
• Shopping Products curve peaks and starts to decline and profits continue
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Items for which buyers are willing to expend to fall
considerable effort in planning and making purchases • Decline
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• Specialty Products The stage of a product’s life cycle when sales fall
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Items with unique characteristics that buyers are rapidly
willing to expend considerable effort to obtain A technological life cycle (TLC) has six phases:
• Unsought Products 1. Cutting Edge: Technology development that
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Products purchased to solve a sudden problem, is ahead of the marketplace.
products of which the customers are unaware, and 2. State of the Art: Adapting cutting-edge
products that people do not necessarily think about techniques to market needs.
buying 3. Advanced: Increased competition and a less
Business Products sophisticated customer base.
• Installations 4. Mainstream: Market is fully developed with
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Facilities and nonportable major equipment standardized products.
• Accessory Equipment 5. Mature: Competition shifts to customer
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Equipment used in production or office activities service.
• Raw Materials 6. Decline: Other technologies replace the dying
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Basic natural materials that become part of a physical technology.
product such as ores, water, lumber, grains, and eggs
• Component Parts
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Items that become part of the physical product
• Process Materials
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Materials that are not readily identifiable when used
directly in the production of other products such as
screws, knobs, and handles
• MRO Supplies
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Maintenance, repair, and operating items that
facilitate production and do not become part of the
finished product such as cleaners, rubber bands, and ADOPTER CATEGORIES
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staples Innovators
• Business Services • First adopters of new products
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The intangible products that many organizations use Early adopters
in their operations such as cleaning, legal, consulting, • Careful choosers of new products
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and repair service. Early majority
THE PRODUCT LIFE CYCLE • Those adopting new products just
A PLC consists of four stages: before the average person
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– Introduction—most risky and expensive. Late majority
– Growth—both sales and profits rise, often • Skeptics who adopt new products
rapidly. when they feel it is necessary
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– Maturity—sales increase at a decreasing rate Laggards
and profits decline. • The last adopters, who distrust new
– Decline—demand drops, often because of products
another product development.
Production Adoption Process Assessment of the Target Market’s Evaluation of
Price
Stage Buyer’s response
Value Focus
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Awareness The buyer becomes aware of the product A combination of product’s price and quality attributes
Evaluation of Competitors’ Prices
Interest The buyer seeks information and is receptive to • Sources of Competitors’ Pricing Information
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learning about the product Comparative Shoppers
• Persons who systematically collect data on
Evaluation The buyer considers the product’s benefits and competitors’ prices
decides whether to try the product –
Purchased Price Lists
Developed by syndicated marketing research services
Trial The buyer examines, tests, or tries the product
Importance of Knowing Competitors’ Prices
to determine if it meets his or her needs –
Helps determine how important price will be to
Adoption The buyer purchases the product and can be customers
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expected to use it again whenever the need for Helps marketers in setting competitive prices for their
this general type of product arises products
FASHION-ADOPTION PROCESS Selection of a Basis for Pricing
• Fashion: Any style that is accepted and • Dimensions of Pricing
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purchased by successive groups of people over a Cost, demand, and competition
long period of time. • Bases for Pricing
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Three theories of fashion adoption: Type of product
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 Trickle-down—a given fashion flows down Market structure of the industry
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through several socioeconomic levels. Brand’s market share relative to competing brands
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 Trickle-across—the fashion moves horizontally Customer characteristics
and simultaneously within several socioeconomic • Cost-Based Pricing
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levels. Adding a dollar amount or percentage to the cost of
 Trickle-up—a style first becomes popular at lower the product
levels and then flows upward. • Cost-Plus Pricing
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Product Line and Product Mix Adding a specified dollar amount or percentage to the
• Product Item seller’s cost
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A specific version of a product • Markup Pricing
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• Product Line Adding to the cost of the product a predetermined
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A group of closely related product items viewed as a percentage of that cost
unit because of marketing, technical, or end-use • Demand-Based Pricing
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considerations Customers pay a higher price when demand for a
• Product Mix product is strong and and a lower price when demand
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The total group of products that an organization is weak.
makes available to customers • Competition-Based Pricing
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Width of product mix Pricing influenced primarily by competitors’ prices
• The number of product lines a company offers • Differential Pricing
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Depth of product mix Charging different prices to different buyers for the
• The average number of different products in each same quality and quantity of product
product line New Product Pricing
A product mix has two dimensions: • Price Skimming
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– Breadth - the number of product lines carried. Charging the highest possible price that buyers who
– Depth - the variety of sizes, colors, and desire the product will pay
models offered within each product line. • Penetration Pricing
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Seven factors help explain the lure of line Setting prices below those of competing brands to
extensions: penetrate a market and gain a significant market
1. Market fragmentation: Smaller and smaller share quickly
market segments. Product-Line Pricing
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2. Consumer desires: Trying “something different.” Establishing and adjusting prices of multiple products
3. Pricing breadth: A broader range of price points within a product line
to capture a wider audience. Psychological Pricing
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4. Excess capacity: When faster production lines Pricing that attempts to influence a customer’s
were added, many older lines were not scrapped. perception of price to make a product’s price more
5. Short-term gain: Way to boost sales quickly and attractive
inexpensively. Professional Pricing
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6. Competitive intensity: Build a brand’s market Fees set by people with great skill or experience in a
share and retail shelf space. particular field
7. Trade pressure: To satisfy new retail channels for Promotional Pricing
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consumer products. Price leaders
• Products priced below the usual markup, near
cost, or below cost
Price and Pricing –
Special-event pricing
• Pricing objectives • Advertised sales or price cutting linked to a
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are goals that describe what a firm wants to achieve holiday, season, or event
through pricing. –
Comparison discounting
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form the basis for decisions about other stages of • Setting a price at a specific level and
pricing. comparing it with a higher price