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Marketing Basics - Kotler Philip

Summary

Organizations and enterprises are increasingly aware of the need to develop new products and services and the related benefits. The life span of existing products is shrinking, and they have to be replaced with new products.

However, the novelty may fail. The risk associated with innovation is great, but the material benefits associated with it are also great. The key to successful innovation is the creation of a solid organizational structure for working with the ideas of new products, conducting serious research and making informed decisions at each stage of creating new items.

The process of creating a new product includes eight stages: the formation of ideas, the selection of ideas, the development of an idea and its verification, the development of a marketing strategy, the analysis of production and marketing opportunities, the development of goods, testing in market conditions, and the deployment of commercial production. The goal of each stage is to decide on whether or not to continue working on an idea. The company seeks to minimize the chances of developing weak ideas and good screenings.

Each product launched into commercial production has its own life cycle , marked by a number of constantly arising problems and emerging opportunities. The trading history of a typical product can be represented as a curve in which four stages are distinguished. The market launch phase is characterized by slow sales growth and minimal profits while the goods are pushed through distribution channels. If successful, the product enters the growth phase, which is characterized by rapid sales growth and increased profits. At this stage, the company seeks to improve the product, penetrate new market segments and distribution channels, as well as slightly reduce prices. Then comes the maturity stage, in which sales growth slows down and profits stabilize. To revitalize sales, the company seeks various innovative techniques, including, in particular, market modification, product modification and marketing mix modification. And finally, the product enters a stage of decline, when sales and profits are reduced. The task of the company at this stage is to identify decrepit goods and make decisions regarding each of them either to continue production, or to “reap the benefits”, or to exclude it from the range. In the latter case, the goods can be sold to another company or simply removed from production.

Table 13. Product life cycle: main characteristics and typical responses of manufacturers

Breeding stage

To the market

Growth stage

Maturity stage

Stage of decline

Characteristic

 

 

 

 

Sales

Weak

Fast growing

Slow growing

Falling

Profit

Insignificant

Maximum

Falling

Low or zero

Consumers

Lovers of the new

Mass market

Mass market

Lagging behind

Number of competitors

Small

Ever growing

Big

Waning

Manufacturers response

Key strategic efforts

Market expansion

Penetration

deep into the market

Upholding

its market share

Improving production profitability

Marketing costs

High

Tall but slightly lower

as a percentage

Shrinking

Low

Key Marketing Efforts

Product Awareness

Creating preference

to brand

Building commitment

to brand

Selective effect

Distribution of goods

Uneven

Intense

Intense

Selective

Price

High

Somewhat lower

Lowest

Increasing

Product

Main option

Improved

Differentiated

Increased profitability