Ch4. Product Strategy — PLC, Branding, and New Product Development

Product Classification

Consumer Products:
  Convenience goods:  low-involvement, low-price (groceries, household staples)
  Shopping goods:     compared before purchase (clothing, electronics)
  Specialty goods:    high-involvement, brand-specific loyalty (luxury goods, cars)
  Unsought goods:     products the consumer doesn't know they need (life insurance, funeral services)

Three Product Levels:
  Core benefit:   what the customer is really buying
  Actual product: brand, packaging, features
  Augmented product: after-sales service, warranty, delivery

Product Life Cycle (PLC)

Introduction Stage:
  Low sales, high costs
  Pioneer advantage, building awareness
  Skimming or penetration pricing

Growth Stage:
  Rapid increase in sales and profits
  Competitors enter the market
  Focus on capturing market share

Maturity Stage:
  Sales peak, profits decline
  Intense competition, price pressure
  Differentiation and segment focus

Decline Stage:
  Falling sales and profits
  Harvest or exit strategy
  Cost reduction

Brand Strategy

Brand Equity:
  Brand awareness
  Brand associations
  Perceived quality
  Brand loyalty

Brand Strategy Types:
  Individual branding:  different names for different products (P&G)
  Family branding:      same name across all products (GE)
  Line extension:       new products under existing brand name
  Brand extension:      existing brand enters a new product category

Co-branding:
  Combining two brands (e.g., Nike + Apple Watch, Intel Inside)
  Ingredient branding

New Product Development Process

Idea Generation:
  Internal R&D, customer suggestions, competitor analysis

Idea Screening:
  Feasibility, profitability, strategic fit

Concept Development and Testing:
  Present product concept to consumers
  Gauge reactions

Marketing Strategy Development:
  Target market, positioning, pricing, distribution plan

Business Analysis:
  Demand, cost, and revenue forecasting

Product Development and Market Testing:
  Build prototype → test market

Commercialization:
  Full-scale launch, national rollout

Key Concept Cards

PLC = Introduction → Growth → Maturity → Decline ★★★★★ : The four stages of the product life cycle. Memory tip: every product has a lifespan — think of it like a human life arc

Maturity Stage = Sales Peak, Profit Decline ★★★★★ : Sales are at their maximum, but profits fall due to intense competition. Memory tip: Maturity = highest revenue, not highest profit

Brand Equity = Awareness · Associations · Quality · Loyalty ★★★★☆ : Four dimensions of brand equity (Keller/Aaker framework). Memory tip: AAQAL — the building blocks of a strong brand

Practice Quiz

Q. What determines whether a company should use skimming vs. penetration pricing at product introduction?

Skimming (high price): innovative or differentiated product, price-insensitive consumers, slow competitive entry expected. Penetration (low price): price-sensitive mass market, need to capture share quickly, economies of scale achievable. Example: new smartphone launches typically use skimming; Netflix used penetration pricing at launch.

Q. What are the benefits and risks of brand extension?

Benefits: faster awareness for the new product, lower marketing costs, leverages existing brand image. Risks: brand dilution — the existing image can be damaged. Negative associations can transfer. Example: if a luxury brand launches a low-price product line, its premium image suffers.