Quiz 2: Chapter 9

Front 1

Product life cycle

Back 1

describes the stages a really new product goes through from beginning to end
o Concerned with new types (or categories) of products in the market, not just what happens to an individual brand
o Four major stages:
1. Market introduction
2. Market growth
3. Market maturity
4. Sales decline

Front 2

Market introduction

Back 2

—investing in the future
o Sales are low as a new idea is first introduced to a market
• Customers aren’t looking for the product, even if it offers amazing value, customers just don’t know about it
o Informative promotion is needed to tell potential customers about the advantages and uses of the new product concept
• Takes time for customers to catch on
o Not uncommon for companies to experience losses during this period
• Spending a LOT on Product, Place and Promotion development
• Hope for future profits

Front 3

Market growth

Back 3

—profits go up and down
o Industry sales grow fast—but industry profits rise and then start falling
• Initial growth, then competitors swoon in
• Some just copy the most successful product to try to improve it to compete better
• Others try to refine their offerings to do a better job of appealing to some target markets
o Monopolistic competition—with down-wad sloping demand curves—is typical
o Biggest profits for industry
o Time of rapid sales and earnings growth for companies with effective strategies
o BUT it is toward the end of this stage when industry profits begin to decline as competition and consumer price sensitivity increase

PROFITS ARE HIGHEST

Front 4

Market maturity

Back 4

—sales level off, profits continue down
o Occurs when industry sales level off and competition gets tougher
o Industry profits go down through out the stage
• Because promotion costs rise and some competitors cut prices to attract business
• Less efficient firms can’t compete with this pressure—drop out of market
o New firms may still enter
• Late entries skip the early life-cycle stages
• Including profitable market growth stage
• Have to try to steal share—difficult
• Customers already have preferences and pre-established companies will fight for their market share
o Persuasive promotion = IMPORTANT
• Products only differ slightly→ need persuasion
o Price sensitivity is a real factor
o Ex’s:
• Cars
• Household appliances
• Breakfast cereal
• Soda
• Laundry detergent

Front 5

Sales decline

Back 5

—a time of replacement
o New products replace the old
o Price competition from dying products becomes more vigorous—but firms with strong brands may make profits until the end
• Because they have successfully differentiated their products

Front 6

product move fast through the life cycle when:

Back 6

• Comparative advantage
• Easy to use
• Easy to communicate
• Can be tried
• Compatible
• = QUICK

Front 7

fashion

Back 7

—the currently accepted or popular style
• _______-related products tend to have short life cycles
• Ex: Zara’s quick passed changing strategy

Front 8

fad

Back 8

is an idea that is fashionable only to certain groups who are enthusiastic about it
• These groups or so fickle that a ___ is even more short lived than a regular fashion
• Ex: action figure for a movie that just came out

Front 9

“skim”

Back 9

• —Charging a relatively high price to help pay for the introductory costs

Front 10

(penetration)

Back 10

o When the early stages of the cycle will be fast, a low initial price may make sense to help develop loyal customers early and keep competitors out

Front 11

New product

Back 11

—is one that is new in any way for the company concerned
• A product can become “____” in many ways
1. A fresh idea can be turned into a ____ product and start a ____ product cycle
a. Ex: pills → skin patches
2. Variations on an existing idea can make a product new.
• FTC says product is “___” only six months
o Six months is the limit to calling a product “___” according to the Federal Trade Commission (FTC)—the federal government agency that policies antimonopoly laws
• To be call new:
• FTC says a product must be entirely ___ or changed in a “functionally significant or substantial respect”

Front 12

New-product development process:

Back 12

1. Idea generation
2. Screening
3. Idea evaluation
4. Development (of product and marketing mix)
5. Commercialization
• Process = same for consumer and business markets—and for both goods and services
• **this is a major departure from the usual production-oriented approach—in which a company develops a product first and then asks sales to “get rid of it”

Front 13

Consumer product safety act

Back 13

—set up the consumer product safety commission to encourage safety in product design and better quality control
• Set up because not all customers are willing to pay more for safer products
• Firm can be held liable for safety concerns

Front 14

• Product liability

Back 14

—the legal obligation to pay damages to individuals who are injured by defective or unsafe products

Front 15

concept testing

Back 15

(formal form of idea evaluation; informal = focus groups)
—getting reactions from customers about how well a new-product idea fits their needs
• Uses market research—ranging from focus groups to surveys of potential customers
• Can be online→ lower costs and faster responses
• Follow up survey questions

Front 16

Product managers/ brand managers

Back 16

manage specific products—often taking over the jobs formerly handled by an advertising manager
• Their responsibility = Promotion
• Popular in larger companies that produce many kinds of products
• Sometimes serve as “product champion”—concerned with planning and getting the promotion effort implemented
• Companies emphasizing marketing experience –this important job takes more than academic training and enthusiasm

Front 17

Total quality management (TQM)—

Back 17

—the philosophy that everyone in the organization is concerned about quality, throughout all of the firm’s activities, to better serve customer needs

Front 18

continuous improvement

Back 18

—a commitment to constantly make things better one step at a time

Front 19

TWO KEYS TO IMPROVING SERVICE QUALITY ARE:

Back 19

1. Training
2. Empowerment

Front 20

Empowerment

Back 20

giving employees the authority to correct a problem without first checking with management