02[1]. product life cycle

8/9/2019 02[1]. Product Life Cycle

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Product life cycle.

y Concept of product life cycle

The product life cycle is an attempt to recognize

distinct stages in the sales history of the productcorresponding to these stages are distinctopportunities & problems with respect tomarketing strategy & profit potential. By

identifying the stage better marketing plans can beformulated.


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TotalIndustry

Sales

Total IndustryProfit

+

-

$ 0

MarketIntroduction MarketGrowth MarketMaturity SalesDecline

Time

Sales growslowly, at acost

Sales levels,but profitsdecline

Manage it orsay goodbye

Salesgrowth, butprofits level

off


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Product-market, not brand

Markets may have different

cycles

Timing of stages may vary

Strategy must change overtime

Key PointsAbout the

PLC...

Key PointsAbout the

PLC...


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TotalIndustryProfit

+

-

$ 0

MarketIntroduction

MarketGrowth

MarketMaturity

SalesDecline

Time

TotalIndustry

Sales

ProductOne of Few Variety - try tofind best

product

Build brand

familiarity

All the

same

Battle of the

brands

Some drop out

But favorites

may be

profitable for a

long time!


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TotalIndustryProfit

+

-

$ 0

MarketIntroduction

MarketGrowth

MarketMaturity

SalesDecline

Time

TotalIndustry

Sales

PlaceBuildChannels

Maybe

selective

distribution

More of the

same, but

more channel

outlets

available

Move toward

more

intensive

distribution

Find a way to

reach loyal

laggards


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TotalIndustryProfit

+

-

$ 0

MarketIntroduction

MarketGrowth

MarketMaturity

SalesDecline

Time

TotalIndustry

Sales

PromotionBuildprimary

demand

Build selective demand

Informing/Persuading Persuading/reminding

Frantically competitive!


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TotalIndustryProfit

+

-

$ 0

MarketIntroduction

MarketGrowth

MarketMaturity

SalesDecline

Time

TotalIndustry

Sales

PriceSkim thecream at a

high price

or

Low to

penetratefaster

Meet competition (especially in oligopoly)

or

Price dealing and price cutting

or

Value pricing for long-term relationships


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y Introduction Aperiod of sales growth as the product is introduced in the

market. Profits are non existence because of heavyexpenses of introduction.

y Growth Aperiod of rapid market acceptance & substantial profitimprovement.

yMaturity Aperiod of slow down in sales growth because acceptanceby most potential buyers. Profits stabilized or declinedbecause of increased marketing outlets to defend the

product against competitors.yDecline

The period when sales show strong downward drift &profits erode.


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y Product category, product form, brand life cycle.

y Rational for the product life cycle.

o Innovators early adopters middle majority -laggards.

y Stages & strategies -

Introduction stage

a. Sales growth is slow reasons.

o Delay in expansion of production capacity.

o Technical problems.

o Delay in obtaining distribution.


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b. Profits are negative or slow reasons.

o Low sales & heavy distribution, promotion expenses.

c. High level promotion required reasons.o Inform potential customers of new product.

o Induce trial of the product.

o Secure distribution in retail outlets.

d. The prices tend to be higher o Few competitors in the market.

o Produce basic versions since market is not ready forproduct refinement.

o Easy way to attract buyers i.e. high income group.

o Costs are high due to relatively low output rates.

o Technology problems in productions.

o High margins are required to support high promotionexpenditures.


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yMarketingstrategy in introduction

HighHigh LowLow

HighHigh RapidRapidskimmingskimming

strategystrategy

SlowSlowskimmingskimming

strategystrategy

LowLow RapidRapidpenetrationpenetration

strategystrategy

SlowSlowpenetrationpenetration

strategystrategy

Promotion

Price


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I. Rapid skimmingstrategy

y Large part of potential market is unaware

of the product.

y Aware are eager to have the product & ableto pay asking price.

y

Firm faces potential competition & wantsto build up brand preferences.

II. Slow skimmingstrategy

y Market is limited in size.

y Most of the market is aware of theproduct.

y Buyers are willing to pay high prices.

y

Potential competition is not imminent.


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III. Rapid penetration strategy

y The market is large.

y The market is unaware of the product.

y Most buyers are price sensitive.

y There is strong potential competition

y Unit manufacturing cost fall with the scaleof production & accumulatedmanufacturing experience.

IV. Slow penetration strategy

y Market is large.

y Market is highly aware of the product.

y Market is price sensitive.

y There is some potential competition.


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y Growth stage

y Rapid climb in sales.

y New competitors enter the market.

y Prices remain the same or fall slightly.

y Promotion same or slightly higher to meet competition.

y Profit increase as promotion sales ratio declines &experience curve effect.

y Growth initially accelerating then decelerating.


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yMarketingstrategies in growth stage

y The firm improves product quality & adds productfeatures & improved styling.

y The firm adds new models & f lanker products.

y It enters new market segment.

y It increases new distribution coverage.y Shifts from product awareness adds to product

preference advertisement.

y It lowers prices to attract next layer of price sensitive

buyers.


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y Maturitystage

1. Growth maturity

o Sales growth starts to decline.

o No new distribution channels to fill.2. Stable maturity

o Most potential buyers tried the product.

o Future sales govern by population growth &

replacement.


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3. Decaying maturity

o Absolute level of sales now starts to decline.

o Customers starts switching to other products &substitutes.

o Over capacity & intense competition enters niches.

o Increase R&D budget to improve product & flankerproducts.

o Increase advertising, trade & consumer deals.


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y Marketingstrategies in the maturitystage

a. Market modification y

Increase no. of brand users.o Convert non users.

o Enter new market segments.

o Win competitors customers.

y

Increase annual usage of brand by current brandusers -

o More frequent use.

o More usage per occasion.

o New & more varied uses.

b. Product modification y Quality improvement.

y Feature improvement .

y Style improvement.


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c. Marketing mix modification

y

Price.y Distribution.

y Advertising.

y Sales promotion.

y Personal selling.y Services.

Decline stage marketing strategy

y Identifying weak products.

y Determining marketing strategies.

y Drop decisions.


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y Summery

CharacteristCharacterist

--icsics

IntroductionIntroduction GrowthGrowth MaturityMaturity DeclineDecline

SalesSales LowLow RisingRising PeakPeak DeclineDecline

CostCost HighHigh AverageAverage LowLow LowLow

ProfitsProfits NegativeNegative RisingRising HighHigh DeclineDecline

CustomersCustomers InnovatorsInnovators EarlyEarlyadoptersadopters

MiddleMiddlemajoritymajority

LaggardsLaggards

CompetitorsCompetitors FewFew GrowingGrowing StableStable DeclineDecline


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MarketingMarketing

objectivesobjectives

IntroductionIntroduction GrowthGrowth MaturityMaturity DeclineDecline

AwarenessAwareness& trial& trial MaximizeMaximizeMarketMarket

shareshare

MaximizeMaximizeprofitprofit

whilewhile

defendingdefending

marketmarket

shareshare

ReduceReduceexpenditureexpenditure

& milk the& milk the

brand.brand.


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StrategiesStrategies IntroductionIntroduction GrowthGrowth MaturityMaturity DeclineDecline

ProductProduct Basic productBasic product ProductProduct

extension,extension,

warrantywarranty

DiversifyDiversify

brands &brands &

modelsmodels

Phase outPhase out

weak items.weak items.

PricePrice Cost plusCost plus PenetrationPenetration

pricingpricing

MatchMatch

competitorscompetitors

Cut priceCut price

DistributionDistribution SelectiveSelective IntensiveIntensive MoreMore

intensiveintensive

GoGo

selective,selective,

phase outphase out

weak outletsweak outlets

AdvertisingAdvertising AwarenessAwareness BrandBrand

preferencepreference

BrandBrand

differencedifference

ReduceReduce

level tolevel to

retain loyalretain loyal

PromotionPromotion Heavy for trialHeavy for trial ReduceReduce Increase forIncrease for

brandbrand

switchingswitching

ReduceReduce

minimumminimum

levellevel

02[1]. product life cycle

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