Product Life Cycle Product Concepts Part 3 0f 3 “ All products, no matter how successful, are mortal”

How long do things last? Dishwasher 10 Freezer 16 Microwave 11 Dryer/washer 13 Gas water heater 12 Furnace(gas or oil) 18 Carpeting 11 Paint,interior 5-10 Product Years Product Item vs Product Category

Dishwasher 10

Freezer 16

Microwave 11

Dryer/washer 13

Gas water heater 12

Furnace(gas or oil) 18

Carpeting 11

Paint,interior 5-10

Product Life Cycle Introduction Growth Maturity Decline Post Mortem Loss/profit Time $ Sales Profit Progression of product “life” stages (sales & time)

Source: WSJ 30 Sept 03, B1 You’re on Candid Cellphone! World wide National Economies Applied Marketing Growth stage

Traditional–Digital Camera PLC • Digital camera sales have increased since their beginnings in the mid-1990’s • Estimated sales projections are shown to likely surpass traditional cameras Decline stage Growth Stage

• Digital camera

sales have

increased since

their beginnings

in the mid-1990’s

• Estimated sales

projections are

shown to likely

surpass traditional

cameras

Product Life Cycles & R & D time ) Stages have varied Time Dollars R & D Introduction Growth Maturity Decline Industry Sales Industry Profits Be Proactive in planning not reactive Negative cash flow (12 yrs for medicines) WSJ,2001

Product Life Cycle Introduction Stage Primary Demand Slow sales/Low revenue Promotion: Gain awareness, Push or Pull Strategy Develop distribution channel Growth Stage Increasing sales & profits Market expansion brings increasing competition Product refinement Profits peak Promote to create brand preference

Introduction Stage

Primary Demand

Slow sales/Low revenue

Promotion: Gain awareness, Push or Pull Strategy

Develop distribution channel

Growth Stage

Increasing sales & profits

Market expansion brings increasing competition

Product refinement

Profits peak

Promote to create brand preference

Ad Objectives & the Product life Cycle Stimulate Primary demand for a Product class via informational Ads Stimulate selective demand for a brand via psychological dimensions 0 5 10 15 20 25 30 35 40 SALES Introduction Primary demand: Inform Growth Extensive advertising spending: Persuade Maturity Reminder & emotional ads : Remind Decline Minimal if any

Stimulate Primary demand for a Product class via informational Ads

Varied length of Time Dollars Introduction Growth Maturity Decline Industry Sales Industry Profits Competition Private brands Maturity Stage : Sales plateau and profits decline with intense selective demand Defend brand position against competition

Maturity Stage : Sales plateau and profits decline with intense selective demand

The Decline Stage Maturity -Decline Obsolescence New Technology Changing Consumer Tastes Low promotion Price discounting

The Decline Stage

Obsolescence

New Technology

Changing Consumer Tastes

Low promotion

Price discounting

What’s In this Holiday Season 130,000 394,000 Flat Panel TV Units Sept.2003 Sept.2002 Source: WSJ,Nov13, 2003 Product Life Cycle, reality competition New technology

1st Nine Months 2003 Big screen & home theater systems Profit Margins: High end TV’s 30% Stereo speakers 50 %  Sales of high end stereos & PC’s Plasma and LCD TV’s are in the early stages of PLC Panasonic 42 in. Plasma HDTV Monitor/PC Monitor, Widescreen Stereo Amplifiers  18% PCs  28% CD Players  22%

Big screen & home theater systems

Profit Margins: High end TV’s 30%

Stereo speakers 50 %

Product Life Extensions ( Maturity/Decline Stages) Cost Reductions : retool product with less expensive material, production, location, etc. Product Quality : refocus on quality level based on target audience satisfaction. Reposition : change product design, image Product Modifications Domestic & International product life cycle sewing machines/washing machines to So. Am. (Brazil)

Cost Reductions : retool product with less expensive material, production, location, etc.

Product Quality : refocus on quality level based on target audience satisfaction.

Reposition : change product design, image

Domestic & International product life cycle sewing machines/washing machines to So. Am. (Brazil)

Styles, Fashions, and Fads Style, Fashion cycle , Fads (Hula Hoop-6 mos.)

Product Modifications (Differentiation) in a mature overcrowded & declining market. Feature Modification Quality Modification Style Modification Image Modification

Life Cycles and Marketing Strategy Introduction Growth Maturity Maximize distribution Build awareness & obtain trial Decline Extend distribution Advertise & promote heavily Advertise product image Persuade customers to switch Milk the product for profits Determine if to terminate product Postmortem Plan for postmortem expenses Develop phase-out plan

Want to Add a Little Excitement to Your Food? Hellmann’s Plan : * Garlic Paradise * Bacon and Tomato Twist * Herb Sensation Mayonnaise Isn’t So Mayonnaise Anymore Applied Example

French’s plan: “Gourmayo” Italian Pesto, Sun-Dried Tomato Wasabi Horseradish Chipotle Chili Just Not the Same Old Mayonnaise Kraft’s Plan: Create a new Stimulating line called, “ MAYO WITH HEAT”

Italian Pesto, Sun-Dried Tomato

Wasabi Horseradish

Chipotle Chili

A clean, visually attractive cabin. Spacious and comfortable seats. An environment that promotes safety. Adequate temperature & quietness On-time flights. Entertainment. Case Example: Airlines Assess Customer Needs

A clean, visually attractive cabin.

Spacious and comfortable seats.

An environment that promotes safety.

Adequate temperature & quietness

On-time flights.

Entertainment.

THE SOLUTION: A product redesign Smaller/bigger gyms/bars Reality: airport nightmares, lost luggage, cramped seating, arrival departure lateness, no food , service

The Re Positioning Strategy Physical or psychological Differentiation Product Focus on Brand Name Focus on product Benefits and/or The people who use the product and/or The way people classify the products

Physical or psychological Differentiation

Product

Focus on Brand Name

Focus on product Benefits and/or

The people who use the product and/or

The way people classify the products

Pricey TVs are siphoning sales from electronic gadgets with higher price margins A proliferation of outlets now sell fancy TVs online merchants & Wal-Mart Stores, Inc.. computer retailers-i.e., Gateway Inc. Prices and profit margins are plummeting Consumer-electronic Retailers are entering a squeeze --- Some Early signs Dell Inc.– sells PCs at 18% gross margin compared to electronic retailer 30% gross margin

Pricey TVs are siphoning sales from electronic gadgets with higher price margins

A proliferation of outlets now sell fancy TVs

online merchants & Wal-Mart Stores, Inc..

computer retailers-i.e., Gateway Inc.

Prices and profit margins are plummeting

Dell Inc.– sells PCs at 18% gross margin

compared to electronic retailer 30% gross margin

Apple looks to Sell Videos…and iPods to Play Them Music videos make sense because of the iPod's ready-made audience of music lovers. For Example, when a user pays $9.99 for the latest album by the White Stripes, they get a video for a song by the rock duo called Blue Orchid that can be downloaded to a computer. Apple has a joint venture with SONY to license music videos to sell on I pods

iPod Revenue