Unit 4: Life Cycles, Offers, Supply Chains, and Pricing
Products do not last forever. New products typically cost more than existing products due to the high costs associated with production and development- this is best illustrated by technology products. The fact that initial customers will be early adopters of a new product affects the marketing strategy. As the product grows and matures, the strategy again changes; over time, marketers lower the price. When a product is in the declining stage, most competitors leave the market and prices are very low. At each stage, the marketing of the product is different.
When a new product is developed and offered, a company must consider what will develop the product's value to the customer, whether the customer is a consumer or another business. Marketers must always ask where a new product will fit in their current lineup and how the new product will serve as an extension of an existing brand. Take the car manufacturer BMW. They make sporty luxury vehicles aimed at the upper-middle and wealthy classes.
Developing an inexpensive and lower-quality vehicle to compete with cars in another class may dilute the brand and hurt sales. However, if BMW were to market the vehicle under a different brand, they could diversify their product portfolio, avoid the risk of diluting the BMW brand, and be able to reach new customers all at the same time. Some firms go to great lengths to disassociate their brands from one another, while others embrace a family of brands model. Appropriate decisions vary by industry and strategy.
Equally important in delivering value to the customer through an offering is how a company sources the goods and services necessary for production and delivers the end product for customers to purchase - otherwise known as the supply chain.
Finally in this unit, we will examine issues in pricing, including the costs of delivering a product, customer and societal perspectives, the impacts of competition, and ultimately the revenues a company may generate.
Completing this unit should take you approximately 7 hours.