Life Cycle

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  • Life Cycle

    1. 1. PRODUCTS AND LIFE CYCLE STRATEGIES <ul><li>Products and product lines </li></ul><ul><li>New products: Development, successes and failures </li></ul><ul><li>The Product Life Cycle and Diffusion of Innovations </li></ul><ul><li>Branding </li></ul>
    2. 2. Product Lines vs. Product Mix <ul><li>Product Line: A number of similar or related products—e.g., </li></ul><ul><ul><li>BIC writing utensils </li></ul></ul><ul><ul><li>Boeing Commercial Aircraft (aircraft and parts) </li></ul></ul><ul><ul><li>Nike shoes; Nike clothing </li></ul></ul><ul><li>Product Mix: assortment of different products offered </li></ul><ul><ul><li>E.g., “KFC—we do chicken right!” (Only one product line) </li></ul></ul><ul><ul><li>3M: Tapes, adhesives, Post-its, chemicals, computer disks, overhead projectors (things that are bonded together </li></ul></ul>
    3. 3. Reasons for Product Failure <ul><li>Insignificant “Point of Difference” </li></ul><ul><li>Incomplete prior market and product definition </li></ul><ul><li>Insufficient market attractiveness </li></ul><ul><li>Poor execution of the marketing mix </li></ul><ul><li>Poor product quality or customer need sensitivity </li></ul><ul><li>Bad timing </li></ul><ul><li>Lack of economical access to customers </li></ul>
    4. 4. Stages in New Product Development Process Text, p. 279. Copyright © 2002 McGraw-Hill.
    5. 5. Idea Generation <ul><li>Sources of new ideas </li></ul><ul><ul><li>Customer based </li></ul></ul><ul><ul><ul><li>Outright suggestions </li></ul></ul></ul><ul><ul><ul><li>Observation of customer problems and tasks </li></ul></ul></ul><ul><ul><ul><li>Market research on processes and problems </li></ul></ul></ul><ul><ul><li>Supplier suggestions </li></ul></ul><ul><ul><li>Employee suggestions </li></ul></ul><ul><ul><li>R&D Breakthroughs </li></ul></ul><ul><ul><li>Competitive ideas </li></ul></ul><ul><ul><li>Adaptation of products seen in foreign markets </li></ul></ul>
    6. 6. Screening <ul><li>Internal screening </li></ul><ul><ul><li>Technical feasibility </li></ul></ul><ul><ul><li>Consistency with strategic objectives </li></ul></ul><ul><li>External screening </li></ul><ul><ul><li>Marketing research </li></ul></ul><ul><ul><ul><li>Questionnaires </li></ul></ul></ul><ul><ul><ul><li>Conjoint analysis (determines importance of attributes) </li></ul></ul></ul>
    7. 7. Business Analysis and Development <ul><li>Business analysis </li></ul><ul><ul><li>Financial feasibility </li></ul></ul><ul><ul><li>Legal issues </li></ul></ul><ul><ul><li>Impact on sales of existing products </li></ul></ul><ul><ul><li>Financial projections </li></ul></ul><ul><li>Development </li></ul><ul><ul><li>Design </li></ul></ul><ul><ul><li>Prototypes </li></ul></ul><ul><ul><li>Refinements </li></ul></ul>
    8. 8. Test Marketing and Commercialization <ul><li>Test marketing </li></ul><ul><ul><li>Limited regional release </li></ul></ul><ul><ul><li>May pre-test prices and positioning </li></ul></ul><ul><ul><li>Simulated test markets </li></ul></ul><ul><ul><ul><li>Laboratory </li></ul></ul></ul><ul><ul><ul><li>Computer based </li></ul></ul></ul><ul><li>Commercialization </li></ul><ul><ul><li>Positioning </li></ul></ul><ul><ul><li>Launching product </li></ul></ul><ul><ul><li>Risks </li></ul></ul><ul><ul><ul><li>Slotting fees </li></ul></ul></ul><ul><ul><ul><li>Failure fees </li></ul></ul></ul><ul><ul><ul><li>Withdrawal due to insufficient sales </li></ul></ul></ul>
    9. 9. The Product Life Cycle Text, p. 295. Copyright © 2002 McGraw-Hill.
    10. 10. Some PLC Stage Examples <ul><li>Color TVs: Maturity </li></ul><ul><li>Black and white TVs: Decline </li></ul><ul><li>HDTV: Growth </li></ul><ul><li>VCRs: Decline </li></ul><ul><li>DVD players: Growth </li></ul><ul><li>Jeans: Maturity </li></ul><ul><li>Fast food: Growth/maturity </li></ul><ul><li>Traditional photography: Maturity </li></ul><ul><li>Digital photography: Growth </li></ul><ul><li>Fax machines: Maturity </li></ul><ul><li>Internet access (U.S.) </li></ul><ul><ul><li>Dial-up: Mature </li></ul></ul><ul><ul><li>DSL, Cable: Growth </li></ul></ul><ul><li>Travel agencies: Decline </li></ul><ul><li>Autism education: Introduction </li></ul><ul><li>Cranberry juice: Revitalization </li></ul>
    11. 11. The Product Life Cycle (PLC) involves ________ over time <ul><li>Demand for the product </li></ul><ul><li>Awareness of the product </li></ul><ul><li>Competition in supplying the product </li></ul><ul><ul><li>Price </li></ul></ul><ul><ul><li>Features </li></ul></ul><ul><ul><li>Differentiation </li></ul></ul><ul><li>Profitability </li></ul><ul><li>Alternatives available to the product </li></ul><ul><li>Investment opportunities (Boston Consulting Group model) </li></ul><ul><li>Appropriate strategies </li></ul>
    12. 12. Dimensions of the Product Life Cycle (PLC) <ul><li>Length </li></ul><ul><ul><li>Tend to be increasingly short </li></ul></ul><ul><ul><li>Especially short in Japan </li></ul></ul><ul><li>Shape </li></ul><ul><ul><li>Effects of learning opportunities </li></ul></ul><ul><li>Product level </li></ul><ul><ul><li>Class (e.g., TVs) </li></ul></ul><ul><ul><li>Form (e.g., HDTV) </li></ul></ul><ul><li>Diffusion among consumer segments </li></ul>
    13. 13. The International Life Cycle <ul><li>Market for older technology tends to exist in less developed countries </li></ul><ul><ul><li>Manufacturing of older generation technology--e.g., Pentium I computers </li></ul></ul><ul><ul><li>Resale of capital equipment—e.g., DC 8 aircraft, old three part canning machines </li></ul></ul><ul><li>Some countries tend to be more receptive to innovation than others </li></ul><ul><li>“ Leap frogging” </li></ul><ul><ul><li>Going directly from old technology to the very newest, skipping intermediate step (e.g., wireless rather than wired technology) </li></ul></ul><ul><li>Shortening of product life cycles </li></ul>
    14. 14. Types of Innovations <ul><li>Continuous --same product, just small improvements over time--e.g., typical automobile/stereo system model changes </li></ul><ul><li>Dynamically continuous --product form changed, but function and usage are roughly similar--e.g., jet aircraft, ball point pen, word processor </li></ul><ul><li>Discontinuous-- entirely new product; usage approach changes (e.g., fax) </li></ul>
    15. 15. Some Diffusion Examples <ul><li>ATMs </li></ul><ul><ul><li>Easy observability </li></ul></ul><ul><ul><li>Significant relative advantage </li></ul></ul><ul><li>Credit cards </li></ul><ul><ul><li>“ Chicken-and-egg” problem </li></ul></ul><ul><ul><li>Jump-starting the cycle </li></ul></ul><ul><li>Faded, torn jeans </li></ul><ul><ul><li>Fads </li></ul></ul><ul><ul><li>Innovations do not have to be high tech </li></ul></ul><ul><li>Fax machines </li></ul><ul><ul><li>Network economies </li></ul></ul><ul><li>Rap music </li></ul><ul><ul><li>Low barriers to entry </li></ul></ul><ul><ul><li>Spread to a new consumer group </li></ul></ul><ul><li>Hybrid corn </li></ul><ul><ul><li>Trialability </li></ul></ul><ul><ul><li>Imitation </li></ul></ul>
    16. 16. To Adopt or Not to Adopt: How Will Consumers Answer the Question? <ul><li>Some causes of resistance to adoption </li></ul><ul><ul><li>perceived risk--financial and social </li></ul></ul><ul><ul><li>self image </li></ul></ul><ul><ul><li>effort to implement and/or learn to use the product </li></ul></ul><ul><ul><li>incompatibility </li></ul></ul><ul><ul><li>inertia </li></ul></ul>
    17. 17. Influences on the Speed of Diffusion <ul><li>Risk to expected benefit ratio (relative advantage) </li></ul><ul><li>Product pricing </li></ul><ul><li>Trialability </li></ul><ul><li>Switching difficulties and learning requirements/ ease of use </li></ul>
    18. 18. Branding <ul><li>Brands </li></ul><ul><ul><li>Product or product line specific brands </li></ul></ul><ul><ul><ul><li>E.g., Tide, DeWalt, Hayes modem </li></ul></ul></ul><ul><ul><ul><li>International issues </li></ul></ul></ul><ul><ul><li>“ Umbrella Brands” </li></ul></ul><ul><ul><ul><li>3M </li></ul></ul></ul><ul><ul><li>National vs. regional </li></ul></ul><ul><ul><li>National vs. international </li></ul></ul><ul><ul><li>Store brands </li></ul></ul><ul><li>Trade marks and “genericide” </li></ul>Branding has been traced to whiskey casks that were identified for quality.
    19. 19. Brand as Category Label: A Mixed Blessing <ul><li>Brand names potentially in danger </li></ul><ul><ul><li>Coke (“cola drink”) </li></ul></ul><ul><ul><li>Kleenex (“facial tissue”) </li></ul></ul><ul><ul><li>FedEx (“overnight express”) </li></ul></ul><ul><ul><li>Xerox (“photo copy”) </li></ul></ul><ul><li>Market share benefit of descriptive brand name </li></ul><ul><ul><li>Distributional </li></ul></ul><ul><ul><li>Consumer “mind share” </li></ul></ul>
    20. 20. Brand Value and Image <ul><li>Brand equity: Value added to product based on brand name </li></ul><ul><ul><li>Choice likelihood </li></ul></ul><ul><ul><li>Ability to charge higher price </li></ul></ul><ul><ul><li>Use of product as loss leader </li></ul></ul><ul><ul><ul><li>Benefit in market share, temporary revenue (Coca Cola) </li></ul></ul></ul><ul><ul><ul><li>Possible damage to long term brand image (Louis Vuitton suitcases in Japan) </li></ul></ul></ul><ul><li>Brand “personality:” Associations with product </li></ul>
    21. 21. Co-branding <ul><li>To take advantage of assets of both firms </li></ul><ul><li>Types </li></ul><ul><ul><li>Distributional: </li></ul></ul><ul><ul><ul><li>Egalitarian: Carl’s Jr. and Green Taco </li></ul></ul></ul><ul><ul><ul><li>Hierarchical: Kodak as official film of Disney Parks </li></ul></ul></ul><ul><ul><li>Line filling—e.g., airline code sharing </li></ul></ul><ul><ul><li>Ingredients: </li></ul></ul><ul><ul><ul><li>Cooperative: Dreyers’ ice cream with Mars M&Ms </li></ul></ul></ul><ul><ul><ul><li>Independent: Local computer maker advertises Maxtor hard drive components </li></ul></ul></ul><ul><ul><li>Intrusive: “Intel Inside” </li></ul></ul><ul><ul><li>Partial: McD’s serves Coca Cola </li></ul></ul><ul><ul><li>Sponsorship: Good Housekeeping seal of approval </li></ul></ul>
    22. 22. Branding Issues <ul><li>To extend or not to extend? </li></ul><ul><ul><li>Congruence--are products consistent in image to be represented by the same brand name? </li></ul></ul><ul><ul><ul><li>Coke and Diet Coke </li></ul></ul></ul><ul><ul><ul><li>Miller vs. Miller Light Beer </li></ul></ul></ul><ul><li>Perception of ability to make product well </li></ul><ul><li>Extention should not be exploitative (e.g., Heinecken Popcorn) </li></ul><ul><li>Order of entry: First manufacturer of new to market product should not extend </li></ul>

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