Business

11 Pages 2661 Words

1. Product Life Cycle
a. 1. Product development begins when the company finds and develops a new-product idea. During product development, sales are zero and the companyÂ’s investment costs mount.
2. Introduction is a period of slow sales growth as the product is introduced in the market. Profits are nonexistent in this stage because of the heavy expenses of product introduction.
3. Growth is a period of rapid market acceptance and increasing profits.
4. Maturity is a period of slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profits level off or decline because of increased marketing outlays to defend the product against competition.
5. Decline is the period when sales fall off and profits drop.
b. 1. Introduction: Product- offer a basic product
Price- Use cost-plus formula
Distribution- build selective distribution

Growth: Product- Offer product extensions, service, warranty
Price- Price to penetrate market
Distribution- increase distribution outlets
Maturity: Product- diversify brand and models
Price- Price to match or best competitors
Distribution- build more intensive distribution
Decline: Product- phase out weak items
Price- cut price
Distribution- go selective: Phase out unprofitable outlets
2. Pricing Approaches
a. Cost-based- adding a standard markup to the cost of the product
Ex. An appliance retailer might pay a manufacturer $20 for a
Toaster and mark it up to sell at $30, a 50% markup on cost.
Value-based- uses buyersÂ’ perceptions of value rather than on the sellerÂ’s
cost.
Ex. People are looking...