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 Marketing Management
Product Life Cycle:Implications for Business Strategy Stage of the product life cycle Introduction Growth Maturity Decline Sales revenue Total industry sales revenue or profit Total industry profit + 0 –
Introduction Stage of the PLC Sales Sales Low sales Low sales Costs Costs High cost per customer High cost per customer Profits Profits Negative NegativeMarketing Objectives Create product awareness Create product awarenessMarketing Objectives and trial and trial Product Product Offer a basic product Offer a basic product Price Price Use cost-plus Use cost-plus Distribution Distribution Build selective distribution Build selective distribution Advertising Advertising Build product awareness among Build product awareness among early adopters and dealers early adopters and dealers
Growth Stage of the PLC Sales Sales Rapidly rising sales Rapidly rising sales Costs Costs Average cost per customer Average cost per customer Profits Profits Rising profits Rising profits Marketing Objectives Marketing Objectives Maximize market share Maximize market share Product Product Offer product extensions, Offer product extensions, service, warranty service, warranty Price Price Price to penetrate market Price to penetrate market Distribution Distribution Build intensive distribution Build intensive distribution Advertising Advertising Build awareness and interest in Build awareness and interest in the mass market the mass market
Maturity Stage of the PLC Sales Sales Peak sales Peak sales Costs Costs Low cost per customer Low cost per customer Profits Profits High profits High profits Marketing Objectives Marketing Objectives Maximize profit while defending Maximize profit while defending market share market share Product Product Diversify brand and models Diversify brand and models Price Price Price to match or best Price to match or best competitors competitors Distribution Distribution Build more intensive distribution Build more intensive distribution Advertising Advertising Stress brand differences and Stress brand differences and benefits benefits
Decline Stage of the PLC Sales Sales Declining sales Declining sales Costs Costs Low cost per customer Low cost per customer Profits Profits Declining profits Declining profits Marketing Objectives Marketing Objectives Reduce expenditure and milk the Reduce expenditure and milk the brand brand Product Product Phase out weak items Phase out weak items Price Price Cut price Cut price Distribution Distribution Go selective: phase out Go selective: phase out unprofitable outlets unprofitable outlets Advertising Advertising Reduce to level needed to retain Reduce to level needed to retain hard-core loyal customers hard-core loyal customers
PLC- Important Observations Individual brands may not follow this pattern – Sometimes a product may crash and not get to the maturity stage Product Life Cycle - length of time at each stage - varies – depends on the products – can be a few months in each stage – or it can be years Generally speaking, due to the – Competitive Environment – Technological Environment – The PLC is getting shorter
Extending Product Life Cycle Market Modification: – Increase Frequency of use by Present Customers – Add New Users – Find New Users Product Modification: – Change Product Quality or Packaging
Intro Stage Competitive Situation – Monopoly or Monopolistic Competition - your company has no competition because you originated the product first and are the first to get customers Product: – One or a few number of people selling the product Place: – Try to find good channels to get exposure - maybe offer exclusive distribution rights Promotion: – AIDA begins - informative type ads Price: – skimming or penetration pricing
Growth Stage Competitive Situation – Monopolistic Competition or Oligopoly - once the market grows, other vendors will want to get involved so you will lose your monopoly position Product: – There are several companies selling so there is competition to make the "best" product -many companies at this stage will add variations, color changes, and new FABs to the product to make it more competitive - companies in the lead will also work to develop brand familiarity Promotion: – Competitive ads Price: – "meet the competition" pricing or price cutting
Maturity/ Decline Stage Competitive Situation – Monopolistic Competition or Oligolpoly or Pure Competition - more and more vendors get involved as more companies learn to make the product and people try to "cash in" on the original idea - because there are so many vendors, the supply/demand situation will cause the price to drop and eventually the price will be so low, nobody will want to make the product anymore because it will be unprofitable Product: – Several companies make the product - it will become a battle of the brands Promotion: – Discount price oriented ads Price: – Some companies drop out if they cannot afford to compete at a lower price
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