Product life Cycle Dope #PLC

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Some conceptual dope on product life cycle

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Product life Cycle Dope #PLC

  1. 1. Some Dope On Product Life Cycle 17/04/2014 PLC
  2. 2. Product Life Cycle 17/04/2014 PLC
  3. 3. Product Life Cycle 17/04/2014 PLC • A PLC consists of four stages: – Introduction—most risky and expensive. – Growth—both sales and profits rise, often rapidly. – Maturity—sales increase at a decreasing rate and profits decline. – Decline—demand drops, often because of another product development.
  4. 4. Product Life Cycle 17/04/2014 PLC Time Dollars Product Category Profits Product Category Sales Introductory Stage Growth Stage Maturity Stage Decline Stage 0
  5. 5. Product Life Cycle - Concept 17/04/2014 PLC  Concept describes sales and profit margin of a given product category over a prolonged period .  Concept holds that a product’s sales and profits change over time in a predictable manner - in four stages of introduction , growth , maturity and decline.
  6. 6. PLC Concept Implications 17/04/2014 PLC  Firms must generate new products or enter new markets to sustain its profitability over time.  Objectives and strategy for a given product change as it passes through various life cycle stages.  Opportunities and threats in each stage are sufficiently well known to aid in the formulation of the most appropriate marketing mix for each stage.
  7. 7. PLC - Applications 17/04/2014 PLC • To suggest appropriate functional area emphasis by stages of life cycle • To suggest appropriate grand strategy alternatives • To time strategy changes • To assess the balance of a corporate portfolio of SBU’s to ensure that developing products are introduced as others pass through growth to maturity
  8. 8. Introduction - Market Development 17/04/2014 PLC • This is when a new product is first brought to market , before there is a proven demand for it. • Technical capability in all respects is still not established. • How long this stage lasts depend on :- -product’s complexity -its degree of newness in market -its fit into consumer needs -presence of competitive substitutes.
  9. 9. Introduction - Characteristics 17/04/2014 PLC Market growth : slow growth Technological change : high  Profits : negative  Cash flow : low  Customers : innovators (limited)  Competition : limited
  10. 10. Introduction - Responses 17/04/2014 PLC  Strategic focus : build awareness  Marketing expenditures: very high  Marketing emphasis : create primary demand  Product : limited standardized version  Price : low/ high  Distribution : limited  Promotion : educate on basic features of product
  11. 11. Market Growth 17/04/2014 PLC • Demand begins to accelerate and size of total market expands rapidly. • It is the “Takeoff Stage”. • Potential competitors jump in to the fray. Some join with carbon copies of originals and others with improved versions. • Product and brand differentiations begin to develop at this stage. • Instead of seeking ways to get customers to try the product the originator has to establish his brand identity
  12. 12. Product Life Cycle: Growth 17/04/2014 PLC • Sales increase at accelerating rate • Profits increase • Competition increases • Strategies: Invest in product improvements, promotion.
  13. 13. Growth Stage - Characteristics 17/04/2014 PLC  Market growth : fast growth  Technological change : moderate  Profits : peak levels  Cash flow : moderate  Customers : mass markets  Competition : growing
  14. 14. Growth - Responses 17/04/2014 PLC  Strategic focus : market penetration  Marketing expenditures: high ( declining %)  Marketing emphasis : brand preference  Product : improved versions  Price : lower  Distribution : intensive  Promotion : focus on brand building
  15. 15. Maturity Stage 17/04/2014 PLC • Evidence of market saturation. • Over capacity becomes apparent. • Sales now grow about on a par with population. • Major focus is on creation of brand loyalty and holding on to brand preference. • Emphasis on competing more effectively.
  16. 16. Product Life Cycle: Maturity 17/04/2014 PLC • Sales slow down • Profits level off • Competition intense
  17. 17. Maturity Stage - Characteristics 17/04/2014 PLC  Market growth : slow growth  Technological change : limited  Profits : substantial but declining %  Cash flow : high  Customers : mass markets  Competition : intense
  18. 18. Maturity - Responses 17/04/2014 PLC  Strategic focus : defend share  Marketing expenditures : declining  Marketing emphasis : brand loyalty  Product : highly differentiated  Price : lowest  Distribution : intensive  Promotion : focus on brand preference by emphasis on product tangibles or intangibles
  19. 19. Decline Stage 17/04/2014 PLC • Market decline triggered by industry transformation. • Over capacity becomes endemic. • Few companies weather the storm well while others voluntarily / or forcibly quit the market.
  20. 20. Product Life Cycle: Decline 17/04/2014 PLC • Lose market acceptance. • Diminished popularity, obsolete technology, or market saturation.
  21. 21. Decline Stage - Characteristics 17/04/2014 PLC  Market growth : decline  Technological change : limited  Profits : low to negative  Cash flow : low  Customers : laggards  Competition : declining number
  22. 22. Decline - Responses 17/04/2014 PLC  Strategic focus : productivity  Marketing expenditures: low  Marketing emphasis : focused segments/ markets  Product : Rationalized  Price : raise with increased features  Distribution : selective  Promotion : selective promotion only to attractive segments
  23. 23. The PLC, Marketing Objectives and Marketing Mix Marketing objective Gain Awareness Stress differentiation Maintain brand loyalty Harvesting, deletion Competition None Growing Many Reduced Stage of the product life cycle Salesrevenue orprofit Introduction Growth Maturity Decline + 0 – Total industry sales revenue Total industry profit 17/04/2014 PLC
  24. 24. Marketing Strategies for PLC INTRODUCTION GROWTH MATURITY DECLINE Product Strategy Distribution Strategy Promotion Strategy Pricing Strategy Limited models Frequent changes More models Frequent changes. Large number of models. Eliminate unprofitable models Limited Wholesale/ retail distributors Expanded dealers. Long- term relations Extensive. Margins drop. Shelf space Phase out unprofitable outlets Awareness. Stimulate demand.Sampling Aggressive ads. Stimulate demand Advertise. Promote heavily Phase out promotion Higher/recoup development costs Fall as result of competition & efficient produc- tion. Prices fall (usually). Prices stabilize at low level. PLC17/04/2014
  25. 25. Extending the PLC 17/04/2014 PLC • Change product • Change product use • Change product image • Change product positioning
  26. 26. PLC Length Depends on ….. 17/04/2014 PLC • Needs the product satisfies • Changes in market conditions • Competitive activity • Marketing strategy of company
  27. 27. Diffusion Process and PLC Curve Innovators Early adopters Early majority Late majority Laggards Product life cycle curve Diffusion curve Introduction Growth Maturity Decline Sales PLC17/04/2014
  28. 28. Innovators Early Adopters Early Majority Late Majority Laggards Adoption and Diffusion PLC17/04/2014
  29. 29. Innovators • First adopters of a new product • Venturesome • Risk-taking • 2.5% of all adopters Innovators PLC17/04/2014
  30. 30. Early Adopters  Second adopters of a new product  Self-confident  Opinion leaders  13.5% of all adopters Early adopters 17/04/2014 PLC
  31. 31. Early Majority  Third adopters of a new product  Middle-class consumers  Cautious with new products  34% of all adopters Early Majority PLC17/04/2014
  32. 32. Late Majority  Fourth adopters of a new product  Older, more conservative  Skeptical of new products  34% of all adopters Late Majority PLC17/04/2014
  33. 33. Laggards  Last adopters of a new product  Innovations not welcome  Resist change  16% of all adopters Laggards PLC17/04/2014

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