Text 13. Product Life Cycle

The Product Life Cycle (PLC) is based upon the biological life cycle. For example, a seed is planted (introduction); it begins to sprout (growth); it shoots out leaves and puts down roots as it becomes an adult (maturity); after a long period as an adult the plant begins to shrink and die out (decline).In theory it's the same for a product. After a period of development it is introduced or launched into the market; it gains more and more customers as it grows; eventually the market stabilises and the product becomes mature; then after a period of time the product is overtaken by development and the introduction of superior competitors, it goes into decline and is eventually withdrawn.

The Boston Consulting Group Matrix was devised in the 1970s as a planning tool for marketers to help them analyze their product lines and decide where to allocate money. Market growth rate, the speed at which the market is expanding, is plotted against relative market share - the percentage of consumers in the market that buy your service or product. Products or services have either high or low market growth rates or relative market shares. In the Matrix, products or services are divided into four different types. They relate to four stages in the product life cycle (PLC).

 

low  high   relative  market growth	Stars	Problem children
	Cash cows	Dogs

                                                      high            low

                                                     relative market share

Product Launch: Problem children are products or services that are not yet established, or well known, in the market. They will consume resources - for example, time or money - before giving a return on investment (ROI). This introduction stage is characterized by high costs, slow sales volumes, little or no competition. In some cases these products or services may never be profitable - make the company money - especially if they are in a slow-growing business sector or a saturated market, such as diet drinks or the mobile phone market.

Growth: Stars have both high market growth rate and high relative market share. These products or services are probable in a fast-growing business sector. They generate high cash flows, but are not always profitable. Profitability depends on the amount invested in the star.

Maturity: Cash cows have high relative market share, but little market growth. They are products or services that consumers know, trust and consume. They generate profit as they don't need much investment. They can be used to feed research and development for other products

Decline: Dogs are products or services that have low relative market share and low market growth. They consume resources and do not create profit. They may generate a negative cash flow - that is, they make a loss. The best course of action is to raise prices to maximize income, known as harvesting, before finally dropping the line - taking the product or service off the market.

How do companies decide what to sell? There are four paths:

1. Selling something that already exists.

2. Making something that someone asks for.

3. Anticipating something that someone will ask for.

4. Making something that no one asked for but that will give
buyers great delight.

The last path involves much higher risk but the chance of much higher gain.

Exercise 9 9 . Answer the questions.

1. Why is t he Product Life Cycle (PLC) compared with the biological life cycle? 2. What was the Boston Consulting Group Matrix devised for? 3. How many types are products or services divided into in the Matrix? 4. What are the stages and their characteristics? 5. What are four paths for companies to decide what to sell?

Exercise 100. Give Ukrainian equivalents.

Biological life cycle, to sprout, to shoot out leaves, to shrink, to launch into the market, superior competitor, percentage of consumers, little or no competition, to raise prices, to maximize income, harvesting, to allocate money, maturity, introduction.

Exercise 10 1. Give English equivalents.

Ставати дорослим, розширювати, життєвий цикл товару, прибутковий, швидко зростаючий комерційний сектор, приносити прибуток, повернення від інвестицій, споживати ресурси, від’ємний потік готівки, показник ринкового росту, засіб планування, насичений ринок.

Exercise 10 2 . Complete the text with the words in the box.

advertising budgets                                   consumer tastes                         differentiate products early adopters

making a loss                         reaches saturation similar offerings                                        withdrawn from the market

The classic product life cycle is Introduction, Growth, Maturity and Decline. In the Introduction stage the product is promoted to create awareness. It has low sales and will still be (1) … If the product has few competitors, a skimming price strategy can be used (a high price for (2) … which is then gradually lowered). In the Growth phase sales are rising rapidly and profits are high. However, competitors are attracted to the market with (3) … The market is characterized by alliances, joint ventures and takeovers. (4)… are large and focus on building the brand. In the Maturity phase sales growth slows and then stabilizes. Producers attempt to (5) and brands are key to this. Price wars and competition occur as the market (6) … In the Decline phase there is a downturn in the market. The product is starting to look old-fashioned or (7) … have changed. There is intense price-cutting and many products are (8) ….

Exercise 10 3. Complete the sentences with proper prepositions.

1. The Boston Consulting Group Matrix was devised … the 1970s as a planning tool … marketers to help them analyze their product lines and decide where to allocate money. 2. The Product Life Cycle (PLC) is based … the biological life cycle. 3. … some cases these products or services may never be profitable. 4. The best course … action is to raise prices to maximize income, known as harvesting, … finally dropping the line - taking the product or service … the market. 5. This introduction stage is characterized … high costs, slow sales volumes, little or no competition. 6. They will consume resources - … example, time or money - … giving a return … investment (ROI).

Exercise 1 0 4 . Learn the following words and word combinations.

brand values	– цінність бренда
rival	– конкуруючий
brand name	– назва торгової марки
brand image	– престиж торгівельної марки
brand essence	– суть бренда
brand promise	– обіцянка бренда
brand vision	– представлення бренда
communication tool	– засіб комунікації

 

Exercise 10 5 . Read, translate and give the gist of text 14.

Text 14. Branding

Most companies decide to brand their products or services by using a name, a symbol or a design to identify it and differentiate it from the competitive product- that is, rival brands. Consumers can easily recognize the brand and the brand values - what it stands for.

A brand name is the name given to a product or a range of products - goods of a similar type that are marketed together. This may be the same name as the company (for example, Coca-Cola) or it may be a different name (for example, Apple's iPod). The trademark is the legal protection for the brand, its logo and its brand name. A brand manager is responsible for branding - creating, maintaining and building a brand. He or she works on all aspects of the brand:

- the brand image: how the consumers see the brand: the values they associate with it;

- the brand essence: one core concept which defines the brand. It is normally expressed in a short phrase or just one word. A good example is 'Volvo equals safety';

- the brand promise: the explicit promise the organization makes to its target audiences, including employees, about the quality and use of the brand;

- the brand vision: the brand vision communicates where the brand is and where the brand can go. It talks about the values the brand has today and the values it will need in the future, as well as the communication tools needed to achieve this.

 There are local and global brands. Global Brands are brands which sold to international markets. They are sold in many different countries. Examples of Global Brands are Coca-Cola, McDonald's, Marlboro, Levi's etc. Local brand is sold and marketed (distributed and promoted) in a relatively small and restricted geographical area. A local brand is a brand that can be found in only one country or region.

When creating brand strategy for a product or service it is important to perform a careful analysis to determine principal barriers that one may come in contact with. These barriers are also known as market conditions that can keep the product or service from achieving success. For example they could include the following: competition, timing, financing, location, lack of demand.

In order to be prepared to face these obstacles or barriers it is important to spend time doing a careful analysis of the product or service. This analysis will assist brand manager not only in the development of the brand, but also in the positioning of the product or service.

 

Exercise 10 6 . Answer the questions.

1. What is a brand name? 2. What aspects does a brand manager work on? Describe each aspect. 3. What is the difference between local and global brands? 4. Why is it important to perform a careful analysis when creating brand strategy for a product or service? 5. What could barriers that can keep the product or service from achieving success include? 6. What is important to do in order to be prepared to face obstacles or barriers?

Exercise 10 7. Give Ukrainian equivalents.

To identify, to differentiate, competitive product, rival brands,  target audience,  lack of demand, to perform a careful analysis, to create brand strategy, to determine principal barriers.

Exercise 108. Give English equivalents.

Легко впізнавати бренд, правовий захист, торгова марка, місцеві та світові бренди, визначення строків, конкуренція, допомагати, зіткнутися з перешкодою.

 

Exercise 10 9 . Match the marketing terms to their definitions.

1. premium brand	a) a brand that is cheaper than its competitors
2. own brand	b) two brands working together to create a new product - for example, Intel Corporation and Apple Computers Inc
3. brand leader	c) the brand for which a business is best known, and which represents its image most appropriately
4. no brand	d) a brand that is made exclusively for the retailer that sells it; also known as an own-label brand or a private label brand
5. economy brand	e) a product that doesn't have a brand associated with it; also known as a generic brand
6. co-branding	f) the best-selling brand in a particular market
7. the flagship brand	g) a high quality brand, more expensive than its competitors
8. brand name	h) brand which is sold to international markets
9. local brand	i) the name given to a product or a range of products
10. brand promise	j) brand which is sold and marketed in a relatively small and restricted geographical area
11. global brand	k) the explicit promise the organization makes to its target audiences, including employees, about the quality and use of the brand

 

Exercise 1 10 . Put questions on the underlined words.

1. Consumers can easily recognize the brand and the brand values .

2. This analysis will assist brand manager in the development of the brand.

3. Global Brands are brands which sold to international markets.

4. A brand manager is responsible for branding .

5. These barriers are also known as market conditions.

 

Exercise 11 1 . Find sentences with modal verbs, analyze and translate them.

 

Exercise 11 2 . Learn the following words and word combinations.

local utility	– місцеві комунальне підприємство
interest	– відсоток
guest lecturer	– запрошений лектор
government official	– державний службовець
take a bribe	– брати хабар
shady character	– підозріла особа
retainer	– попередній гонорар
bargain	– торгуватися
commodity product	– товар
produce revenue	– приносити прибуток
fixed costs	– постійні витрати
variable costs	– змінні витрати
pure competition	– чиста конкуренція
produce good revenue	– приносити хороший дохід
yield a 'fair return'	– приносити хороший прибуток

 

Exercise 11 3 . Read, translate and give the gist of text 15.

Text 15. Price

Price is all around us. You pay rent for your apartment, tuition for your education and fee to your physician or dentist. The airline, railway, taxi and bus companies charge you a fare; the local utilities call their price a rate; and the local bank charges you interest for the money you borrow. The guest lecturer charges an honorarium to tell you about a government official who took a bribe to help a shady character steal dues collected by a trade association. Clubs or societies to which you belong may make a special assessment to pay unusual expenses. Your regular lawyer may ask for a retainer to cover her services. The 'price' of an executive is a salary, the price of a salesperson may be a commission and the price of a worker is a wage. Finally, although economists would disagree, many of us feel that income taxes are the price we pay for the privilege of making money.

In the narrowest sense, price is the amount of money charged for a product or service. More broadly, price is the sum of all the values that consumers exchange for the benefits of having or using the product or service.

How are prices set? Historically, prices were usually set by buyers and sellers bargaining with each other. Sellers would ask for a higher price than they expected to get and buyers would offer less than they expected to pay. Through bargaining, they would arrive at an acceptable price. Individual buyers paid different prices for the same products, depending on their needs and bargaining skills.

Historically, price has been the most significant factor affecting buyer’s choice. This is still true in poorer nations, among poorer groups and with commodity products. However, non-price factors have become more important in buyer’s choice behavior in recent decades.

Price is the only element in the marketing mix that produces revenue; all other elements represent costs. Price is also one of the most flexibly elements of the marketing mix. Price can be changed quickly. At the same time, pricing and price competition is the no.1 problem facing many marketing executives.

The marketer must consider the total marketing mix when setting prices. Costs set the floor for the price that the company can charge for its product. The company wants to charge a price that both covers all its costs for producing, distributing, selling the product and produce good revenue. A company's costs may be an important element in its pricing strategy. Many companies work to become the 'low-cost producers' in their industries. Companies with lower costs can set lower prices that result in greater sales and profits.

TYPES OF COSTS: fixed and variable. Fixed costs (also known as overhead) are costs that do not vary with production or sales level. For example, a company must pay each month's bills for rent, heat, interest and executive salaries, whatever the company's output.

Variable costs vary directly with the level of production. Each personal computer produced by Compaq involves a cost of computer chips, wires, plastic, packaging and other inputs. These costs tend to be the same for each unit produced. They arc called variable because their total varies with the number of units produced.

There are some external factors that affect pricing decisions. They include the nature of the market and demand, competition and other environmental elements. The seller's pricing freedom varies with different types of market:

1) Pure competition is a market in which there are many potential and actual buyers and sellers, each being too small to be an individual influence on the price; there are no barriers to entry or exit; and the products being traded are identical (e.g. salt, milk). At the same time, the producers are seeking the maximum profit and consumers the best value for money.

2) Monopolistic competition is a market in which there are many producers and many consumers in a given market, and no business has total control over the market price. Consumers perceive that there are non-price differences among the competitors' products. There are few barriers to entry and exit. Producers have a degree of control over price. The characteristics of a monopolistically competitive market are almost the same as in p ure competition, with the exception of heterogeneous products, and that monopolistic competition involves a great deal of non-price competition (the physical product can be varied in quality, features or style, or the accompanying services can be varied).

3) Under oligopolistic competition, the market consists of a few sellers that are highly sensitive to each other's pricing and marketing strategies. The product can be uniform (steel, aluminium) or non-uniform (cars, computers). There are few-sellers because it is difficult for new sellers to enter the market.

4) In a pure monopoly, the market consists of one seller. The seller may be a government monopoly (a Postal Service), a private regulated monopoly (a power company) or a private non-regulated monopoly (Microsoft with DOS and Windows). Pricing is handled differently in each ease. A government monopoly can have a variety of pricing objectives. It might set a price below cost because the product is important to buyers who cannot afford to pay full cost. Or the price might be set either to cover costs or to produce good revenue. It can even be set quite high to slow down consumption. In a regulated monopoly, the government permits the company to set rates that will yield a 'fair return', one that will let the company maintain and expand its operations as needed. Non-regulated mon­opolies are free to price at what the market will bear. However, they do not always charge the full price for a number of reasons: for example, a desire not to attract competition, a desire to penetrate the market faster with a low price, or a fear of government regulation.

Exercise 11 4 . Answer the questions.

1. Why is price all around us? 2. What is price? 3. How were prices historically set? 4. What differentiates price from other elements in the marketing mix? 5. Why may a company's costs be an important element in its pricing strategy? 6. What are two forms of a company's costs? 7. What are external factors that affect pricing decisions? 8. What is pure competition? 9. What are characteristics of monopolistic competition? 10. What is oligopolistic competition? 11. What are the types of a pure monopoly?

Exercise 11 5 . Give Ukrainian equivalents.

To charge a fare, fee, rate, honorarium, government official, to steal dues, to pay unusual expenses, salary, wage, salesperson, to make money, to set a price, to arrive at an acceptable price, to affect buyer’s choice, non-price factors, to produce revenue, pure competition, to seek the maximum profit, barriers to entry and exit, to have a degree of control over price, to enter the market, oligopolistic competition, pricing objectives, to afford to pay full cost, to cover costs.

Exercise 116. Give English equivalents.

Плата за навчання, місцеве комунальне підприємство, нараховувати відсотки, запрошений лектор, брати хабар, підозріла особа, внесок, попередній гонорар, комісійні, податок на прибуток, торгуватися, протягом останніх десятиліть, виробник з низькими витратами виробництва, постійні витрати, змінні витрати, попит, найкраще співвідношення ціни та якості, монополістична конкуренція, гетерогенні (неоднорідні) товари, бути різним за якістю, встановлювати ціну нижчу за собівартість, приносити гарний прибуток.

Exercise 117 . Match the marketing terms to their definitions.

1. competitor	a) any organisation that offers the same, a similar, or a substitute product or service in the field of endeavour in which a company operates
2. variable costs	b) the ability and desire to purchase goods and services
3. oligopolistic competition	c) a market in which one company has control over the entire market for a product, usually because of a barrier to entry such as a technology only available to that company
4. supply	d) offering goods and services for sale
5. financing	e) business expenses that are not dependent on the activities of the business and capital
6. pure competition	f) business expenses that change in proportion to the activity of a business
7. demand	g) the commercial activity of providing funds
8. pure monopoly	i) a market form in which a market or industry is dominated by a small number of sellers
9. fixed costs	j) a market characterized by a large number of independent sellers of standardized products, free flow of information, and free entry and exit. Each seller is a "price taker" rather than a "price maker"

 

Exercise 11 8.  Complete the sentences.

1. Fixed costs (also known as overhead) are costs that ….

2. Monopolistic competition is a market in which ….

3. In a pure monopoly, the market consists of ….

4. Under oligopolistic competition, the market consists of ….

5. In the narrowest sense, price is ….

6. Variable costs vary directly with ….

 

Exercise 119. Learn the following words and word combinations.

mature market	– розвинений, сформований ринок
penetration pricing	– ціноутворення з метою проникнення на ринок
price-sensitive	– чутливий до коливань ціни
market-skimming pricing	– „зняття вершків” (початкова стратегія ціноутворення, при якій встановлюється максимально можлива висока ціна на товар-новинку)
economies of scale	– економія за рахунок масштабів виробництва
bar	– заважати; стримувати
predatory compe­tition	– хижацька конкуренція із штучним заниженням цін (з метою розорити конкурента)

 

Exercise 120. Read, translate and give the gist of text 16.

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