Page 351 - Introduction to Business

CHAPTER 9 Developing the Product and Pricing Mixes 325

The timing of the new product’s introduction needs to be decided. Some prod-
ucts will be introduced to all geographical segments of the market at the same time.
Some will be introduced on a rollout basis, that is, to the various geographical mar-
kets on a sequential basis. A rollout strategy provides the opportunity for marketers
to fix problems that might arise before they can affect the entire market. A problem
arises when new products are not available in stores when scheduled. This situa-
tion is especially disturbing to customers when the company has used preintro-
duction announcements to ballyhoo the new product. Customer expectations are
not met, and they may refuse to buy the product when it is available, as well as
other products that the offending company markets.
Early progress of the product must be tracked. The results will allow marketers
to decide if expected future sales appear to be significant enough to warrant the
product still being produced and marketed. The number of triers of the product,
the percentage of those who are repeat purchasers, the frequency of the purchase,
and the average purchase quantity can be used to predict the number of units sold
in the future.
It is especially important that marketers of new products closely monitor inno-
vators. Innovators are defined as the first 2.5 percent of adopters of new products. innovators The first 2.5 percent of
Innovators are quite receptive to new products (they are venturesome), but more adopters of new products who are
respected for their opinions and are
importantly, they are respected for their opinions and are sought out by other
sought out for these opinions by the
potential adopters for these opinions. If innovators are passing on negative com- market
ments about the new product, companies need to know this as soon as possible so
they can make proper adjustments in the product’s marketing strategies.

Managing Existing Products

LEARNING OBJECTIVE 6 introduction stage The first phase of the
Describe the product life cycle and how it can be used to manage product life cycle in which revenues
existing products. and profits are low but begin to
increase
Product Life Cycle. As a basis for managing a firm’s existing products, it is growth stage The second stage of the
product life cycle in which revenues
helpful to understand the product life cycle (PLC). Exhibit 9.5 shows that the PLC is increase rapidly and profits are
broken down into four stages over time and includes the curves that represent both maximized
revenues and profits. During the introduction stage, revenues increase from zero maturity stage The third stage of the
and continue to increase during the growth stage. A slower level of increase occurs product life cycle in which profits drop
and revenues are maximized
during the beginning of the maturity phase, reaches its high point during the mid-
decline stage The fourth step of the
dle of this stage, then begins to drop. Revenues continue to drop during the decline product life cycle in which profits and
stage. Low levels of profit exist during the introduction stage—sometimes there are revenues continue to fall

EXHIBIT 9.5
Growth
Introduction
Maturity
Decline
Sales volume and total net profits Revenue Profit
The Product Life Cycle

Time

Copyright 2010 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.