The Product Life-Cycle This CTR corresponds to Figure 9-2 on p. 288 and relates to the material on pp. 287-293. Instructor’s Note: This CTR can be used to overview the life cycle concept. Strategies appropriate for each stage are discussed on the following CTRs. Product Life Cycle Stages Product Development. Development begins when the company finds and develops a new product idea. During development the product has costs but no sales. Development costs must be strategically weighed against the projected length of the product's PLC. Introduction. During the introduction of new products initial sales growth is slow as the market is just becoming aware of the product. Profits are usually nonexistent at this stage due to heavy promotional spending. Growth. This stage is characterized by rapid market acceptance of the product and increasing profits. Maturity . In maturity there is a slowdown in sales growth as the product has achieved acceptance by most potential customers. Profits may level off or decline as marketing costs increase to defend existing market share. Decline. In this period sales begin to fall off and profits decline dramatically.
Introduction. In this stage marketers spend heavily on promotions to inform the target market about the new product's benefits. Low or negative profits may encourage the company to price the product high to help offset expenses. companies can concentrate on skimming strategies to generate high profits now or on penetration strategies to build market share and dominant the market for larger profits once the market stabilizes. Product Life Cycle Strategies Product Life-Cycle Strategies This CTR relates to the material on pp. 289 and 293.
Product Life-Cycle Strategies This CTR relates to the material on pp. 289-290 and 293. Product Life-Cycle Strategies Growth. In this stage the company experiences both increasing sales and competition. Promotion costs are spread over larger volume and strategic decisions focus on growth strategies. Strategies include adding new features, improving quality, increasing distribution, and entering new market segments.
Product Life Cycle Strategies Maturity. In this stage the company must manage slower growth over a longer period of time. Strategic decisions made in the growth stage may limit choices now. Marketing managers must proactively seek advantage by either market modification to increase consumption, product modification to attract new users (quality, feature, and style improvements), or marketing mix modification in an attempt to improve competitive position. Product Life-Cycle Strategies This CTR relates to the material on pp. 290-292 and 293.
Product Life-Cycle Strategies This CTR relates to the material on pp. 292-293. Product Life Cycle Strategies Decline. In this stage the costs of managing the product may eventually exceed profits. Rate of decline is a major factor in setting strategy. Management may maintain the brand as competitors drop out, harvest the brand by reducing costs of support for short term profit increases, or drop the product (divest) altogether.
Product life cycle
DEFINITION“ The stages through which the individual products develop over a period of time is known as product life cycle.” The product life cycle concept is derived from the fact that a given product’s volume and revenue follow a typical pattern of four –phases cycle. This life cycle is the representative fact of the existence of every product. If we plot a graph of sales volume versus time for a product, generally, the PLC represents a bell- shaped or s-shaped curve.
THE FOUR STAGES OF PRODUCT LIFECYCLEIntroductionGrowthMaturityDecline
PRODUCT LIFE CYCLESales andProfits ($) Sales Profits Time Product Introduction Growth Maturity Decline Develop- mentLosses/Investments ($)
INTRODUCTION STAGE OF THEPLC Sales Low sales Costs High cost per customer Profits Negative Create product awareness Marketing Objectives and trial Product Offer a basic product Price Use cost-plus Distribution Build selective distribution Advertising Build product awareness among early adopters and dealers
Example- 3rd generation Mobile Phones. Marketing Strategy used in Introduction Stages- Rapid Skimming- Launching the new product at high price and high promotional level. Slow skimming- Launching the new product at high price and low promotional level. Rapid Penetration-Launching of product at low price with heavy promotion. Slow penetration- Launching the new product at a low price and low level of promotion.
Growth Stage of the PLC Sales Rapidly rising sales Costs Average cost per customer Profits Rising profits Marketing Objectives Maximize market share Offer product extensions, service, Product warranty Price Price to penetrate market Distribution Build intensive distribution Advertising Build awareness and interest in the mass market
Marketing Strategy Used in Growth Stage: Improved product quality and add new product features and styling. Add new models and products of different sizes, color, shapes etc. Enter new market segments. Increase distribution coverage enter new distribution channels. Shifts from product awareness to product preference advertising. Lower prices to attract next layer of price sensitive buyers. Examples- Hyundai-I10.
Maturity Stage of the PLC Sales Peak sales Costs Low cost per customer Profits High profits Marketing Objectives Maximize profit while defending market share Product Diversify brand and models Price Price to match or best competitors Distribution Build more intensive distribution Advertising Stress brand differences and benefits
Marketing Strategy Used in Maturity Stage:2. Mar ket Modification- Converting non users. Entering new market segments. Win competitors customers. Redefine target market.2. Product Modification- Quality Improvement. Adopting advance technology. Product Differentiation.
Decline Stage of the PLC Sales Declining sales Costs Low cost per customer Profits Declining profits Marketing Objectives Reduce expenditure and milk the brand Product Phase out weak items Price Cut price Go selective: phase out unprofitable Distribution outlets Advertising Reduce to level needed to retain hard-core loyal customers
MARKETING STRATEGY USED IN DECLINESTAGES Increase the given firms investment to dominate the market or strengthen its competitive position. Maintaining the given firms investment level until the uncertainties about the industry are resolved. Decrease the firms investment selectively, by dropping the unprofitable customers group, while simultaneously strengthening the firms investment niche segments. Harvesting the firms investment to recover cash quickly. Divesting the business quickly by dropping off its assets as advantageously as possible.
PLC CONCEPT IS BASED ON FOLLOWINGASSUMPTIONS- Not all product introduced in the market essentially pass through all stages of its life cycle. It is also possible that the product may attain introduction stage and then get phased out. There is no definite line of demarcation between the various stages of product life cycle. At the same time, a product may be in different stages of its life cycle in different segment of the market. For example, the product concerned may be in the introduction stage in Asian market while facing decline in western countries. The time span of each stage in product life cycle in respect of each product may vary. Thus, a product may experience longer period in growth stage and relatively short period in maturity stage.