There are Different Types of Product Life Cycles<br />Exhibit 1Types of PLCleft0<br />Thus far we have talked about life c...
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  1. 1. There are Different Types of Product Life Cycles<br />Exhibit 1Types of PLCleft0<br />Thus far we have talked about life cycles for entire product categories or product classes. However, life cycles exist at multiple levels of "product" (Exhibit 1).  Indeed, marketing managers generally are most interested in the life cycles of specific brands. I like to view life cycles at three levels. Drawing on actual cigarette sales data, this slide illustrates the three that I consider most important from a managerial perspective. At the top is the product category life cycle, illustrated by the sales curve for the cigarette product category as a whole. At the next level, is the life cycle of a specific product form -- plain filter cigarettes -- within this larger product category. Finally, is the brand product life cycle illustrated, in this case, by a brand of cigarettes that is no longer marketed -- Philip Morris. HYPERLINK "http://courses.unt.edu/kt3650_9/sld004.htm" l "1" [1]<br />Note that both the product category and product form life cycles follow the distinct "S- shaped" pattern from our discussion of the theoretical life cycle in earlier slides. In contrast, the branded life cycle exhibited by Philip Morris is much more erratic in shape. This is expected because the individual brand is the focus of management’s decisions. As marketing managers observe changes in the sales of their brands, particularly if sales are perceived to be declining, changes are made in one or more elements of the marketing mix. These changes are intended to offset, or reverse, sales declines. If successful, the declining sales trend will correct itself, at least for a period of time. However, sales again will eventually decline and changes will again be made to some aspect of the marketing program. It should be apparent that these ongoing decisions to change elements of marketing programs will cause the sales curves for individual brands to bounce around considerably. However, because the sales curves for many brands are summed to create the life cycle for the associated product form, and the curves for multiple product forms are summed to yield the life cycle for the entire product category, these latter two curves tend to be less erratic.<br />Exhibit 2Toothpaste Product Life Cycles<br />The life cycles of various brands of toothpaste illustrate quite well the erratic behavior of branded product life cycles. Exhibit 2 highlights the sales of specific brands of toothpaste between the years 1936 and 1982. Eighteen brands of toothpaste are illustrated. Note that most have very erratic life cycles that bounce around all over the place. A couple of brands (i.e. Colgate and Crest) possess the familiar "S- shaped" life cycle patterns. Other brands, however, possess curves with substantially greater degrees of variability.  Note also the differing lengths of the life cycles. The dominant brands, including Colgate and Crest, have been around for long periods of time and possess strong sales patterns. In contrast, other brands such as Ammident, Chlorodent, Macleans, Peak, Dr. Lyons and Squibb have seen relatively short life cycles. Shorter life cycles often are associated with brands targeting smaller, more narrowly defined market segments or niches<br />The Importance of Product Life Cycles<br />Exhibit 4:The Importance of PLCs<br />The importance of the product life cycle should, at this point, be apparent. Several key points relative to its importance to marketing managers are worth highlighting (Exhibit 4):<br />First, marketing strategy will vary from one stage in the PLC to the next. How the product is managed during growth or introduction will be much different from how the same product will have to be managed during maturity and decline.Because all products eventually transition into decline and face market death, we must continuously seek to introduce new products that will be in positions of market and competitive strength as these older products decline.Third, there is a strong relationship between the specific stage of a product’s life cycle and its profitability. We will look at this relationship shortly.<br /> <br />Some Life Cycle Stages Can 'Repeat'  <br />Exhibit 6"Re-Growth" PLC PatternsExhibit 7The Fashion Product Life Cycle<br />Some product categories apparently begin to transition into decline only to experience a substantial resurgence in sales leading to "re-growth." An excellent example is nylon. Additional new uses for nylon have been discovered by Dupont and other manufacturers since the product’s introduction, all of which have lead to substantial increases in sales and profits for Dupont <br />Fashions also tend to exhibit the recycle pattern illustrated on Exhibit 6. The stages in a fashion's life cycle have been given somewhat different names, as shown in Exhibit 7.  These stages are: the "distinctiveness stage," the "emulation stage," the "mass fashion stage," and the "decline stage."  These stages still essentially are the introduction, growth, maturity and decline stages of the standard product life cycle. What is most different about the fashion life cycle is its recycle period. Fashions can be, and are, reintroduced. The ability of fashions to exhibit such cycle-recycle life cycles can be traced to their introduction and popularity with different generations.<br />Summarizing Major Events During PLC Stages<br />Exhibit 8Summarizing the PLC<br />Exhibit 8 provides a summary of the major differences between the stages in the product life cycle with respect to sales, costs, profits, types of customers, and the nature of competition.<br />Introduction<br />To recap what occurs during the introductory stage:<br />Sales generally are low and somewhat slow to take off.  Customers are characterized as 'innovators.'Production costs tend to be high on a per unit basis because the firm has yet to experience any significant scale economies.Marketing costs required for creating customer awareness, interest, and trial and for introducing the product into distribution channels are high.Profits, because of low sales and high unit costs, tend to be negative or very low.Competitors tend to be few in number, indeed there may be only one major player in the marketplace -- the innovating firm.<br />Growth<br />Sales increase rapidly during the growth phase. This increase is due to: (1) consumers rapidly spreading positive word-of-mouth (WOM) about the product; (2) an increasing number of competitors enter the market with their own versions of the product; (3) and a "promotion effect" which is the result of individual firms employing, advertising and other forms of promotion to create market awareness, stimulate interest in the product, and encourage trial.Cost are declining on a per unit basis because increased sales lead to longer production runs and, therefore, scale economies in production. Similarly firms may experience experience curve effects which help to lower unit variable costs.Because sales are increasing and, at the same time, unit cost are declining, profits rise significantly and rapidly during this stage.Customers are mainly early adopters and early majority.  It is the early adopter, specifically, that is responsible for stimulating the WOM effect. During the latter part of growth, the first major segment of the mass market, called the early majority, enters the market. This category of consumers is somewhat more price sensitive and lower on the socio-economic spectrum. As a result, these consumers are somewhat more risk averse and, therefore, somewhat more hesitant to adopt the product.Competition continues to grow throughout this stage. As competitors recognize profit potential in the market, they enter the market with their own versions of the product. As competition intensifies, strategies turn to those that will best aid in differentiating the brand from those of competitors. Attempts are made to differentiate and find sources of competitive advantage. In addition, firms identify ways in which the market can be segmented and may develop focused marketing strategies for individual segments.<br />Maturity<br />Sales continue to grow during the early part of maturity, but at a much slower rate than experienced during the growth phase. At some point, sales peak. This peak may last for extended periods of time.  In fact, the maturity phase of the life cycle is the longest phase for most products. As a result, most products at any given point in time probably are at maturity. And, most decisions made by marketing managers will be decisions about managing the mature product.Costs continue to rise during maturity because of market saturation and continually intensifying competition. When this slowing of sales is combined with the increasing costs associated with this stage, the result is that profits will have reached their highest level and must, from this point on, decline.The only remaining customers to enter the market will be the late majority and the laggards. These customer groups are by far the most risk averse and most hesitant to adopt new products. These customers are quite price sensitive and, as a result, will not buy products until prices have seen significant declines. Many laggards, the last group to adopt, often do not do so until the product is virtually obsolete and in danger of being displaced by new technologies.Competition is most intense during this stage. The intensity of competitive in-fighting drives the changes in costs and profitability.<br />Decline<br />Sales continue to deteriorate through decline. And, unless major change in strategy or market conditions occur, sales are not likely to be revived. Costs, because competition is still intense, continue to rise. Large sums are still spent on promotion, particularly sales promotions aimed at providing customers with price concessions.Profits, as expected, continue to erode during this stage with little hope of recovery.Customers, again, are primarily laggards.There generally are a significant number of competitors still in the industry at the beginning of decline. However, as decline progresses, marginal competitors will flee the market. As a result, competitors remaining through decline tend to be the larger more entrenched competitors with significant market shares.<br />IN DETAIL-<br />Now that we have examined the fundamental characteristics of PLCs, we are ready to move into a detailed exposition of the strategies managers can employ during its different stages. As I indicated in my overview of the topic, an understanding of product life cycles for industries and brands provides some insight into how products should be managed at critical points in their lives. How we structure the marketing mix will change, in some cases quite drastically, from one life cycle stage to the next.  <br />Exhibit 1Strategies for Managing The PLC <br />Exhibit 1 contains the now familiar theoretical "S - shaped" industry life cycle. During the introductory stage, during which sales are slow to accumulate, the major marketing objective often is to create demand for the basic product category --  i.e. to create "primary demand." As a result, marketing strategy tends to focus on developing awareness, interest, trial, and acceptance for the product category.  These objectives are achieved via extensive use of advertising, sales promotions (coupons, free samples, games, contests, public demonstrations, trade shows), publicity and endorsements by celebrities.  These and other tools are employed to place the product in front of large customer groups and, at the same time, stimulate a high degree of interest surrounding the product. In general, the product must be promoted to both ultimate consumers and to the trade (middlemen). Heavy trade promotion is required to convince the channel to stock and sell the product. <br />Market Skimming as a Strategy for Introduction <br />Exhibit 2A Skimming Strategy<br />Several general strategies are available for introducing new products. One of the most common strategies is market skimming (Exhibit 2). When employing a skimming strategy, a high price is set for the product’s introduction and is generally accompanied by heavy promotional spending. Because of the high price employed, the product typically is positioned to innovators and early adopters. Of course, an assumption underlying the use of skimming is that the market is price inelastic and will be attracted to the unique characteristics of the innovation.  <br />In general, the product is promoted to emphasize its unique characteristics that make it attractive to innovators and early adopters.  Typically, products are promoted as unique, fashion-orientated, prestigious or very high in quality.  <br />Skimming is a particularly attractive strategy when marketers face high investments in research and development, or production and other marketing related start-up costs are high. Setting a high price for the product helps recover these costs quickly.  Skimming is also particularly attractive when the potential effects of competition can be minimized. This means that competitive entry can be forestalled, or delayed, because of patents, high investment costs, and customer preferences for particular brands. <br />Exhibit 3Sony's Digital Camera<br />A recent example of market skimming is provided by Sony’s Digital Mavica Camera (Exhibit 3). Introduced in 1997, this camera is targeted to innovators and early adopters of photographic and computer equipment. The camera was priced high, at around eight hundred dollars per unit. It was distributed in camera, computer, and electronics specialty stores. The camera was promoted heavily in print and electronic media targeted specifically to initial adopters. Little television and radio advertising was employed. Similarly, little use of sales promotions, such as coupons and rebates were used to support the initial launch. <br />Market Penetration as a Strategy for Introduction <br />Exhibit 4A Penetration Strategy<br />With a 'market penetration' strategy, price is set low for the product's initial introduction (Exhibit 4). Price is used aggressively to quickly buy market share via an appeal to the mass market -- the early majority and late majority adopter categories.  This strategy is attractive when the market is highly price elastic as the innovator and early adopter segments are rather small, but there exists a large mass market. The strategy is also attractive when the firm anticipates dramatic reductions in average unit costs of production and marketing, as a result of scale economies and experience curve effects that may be obtained with larger production runs.   <br />Market penetration is also useful when there exists a substantial threat of competitive entry, particularly when market entry is relatively easy. Employing a penetration strategy may allow the firm to gain market share quickly, thereby achieving scale economies and an associated low cost structure that cannot be matched by potential competitors. The firm's high market share combined with low unit costs may send a distinct signal to potential competitors that profitability will be difficult to obtain if the market is entered.  <br />The Pioneering Advantage of Early Entry <br />With both the market skimming and market penetration strategies there is a distinct advantage to being the first in the market. This advantage is referred to as the pioneering advantage. The market pioneer generally enjoys a competitive advantage stemming from higher market share and lower unit cost structures than do later market entrants. HYPERLINK "http://courses.unt.edu/kt3650_9/sld005.htm" l "1" [1]  <br />Being the market pioneer does not always guarantee market dominance and success. Some pioneers become complacent. They fail to continue to improve their products, have inadequate marketing programs that fail to properly position the product and, consequently, create and maintain sufficient customer demand. These weaker pioneers are highly susceptible to aggressive "followers" that enter a market later with lower prices, improved technologies and products, and more precisely targeted marketing programs<br />GROWTH-<br />Changing the Product to Enhance Sales<br />Changing the product can entail simple modifications to enhance its existing functionality, modifying the product in such a manner to allow the product to deliver additional benefits, expanding the product line by adding alternative colors, alternative styles, and sizes. We also may create flanker brands. Finally, the product can be modified by focusing on elements of the augmented product – service dimensions. <br />Functional Changes to the Product<br />Exhibit 2Functional ChangesExhibit 3Crest Multi-Care<br />Exhibit 4Ultra PampersExhibit 5LUVs<br />Products can be changed by improving their basic functionality (Exhibit 2). Usually such changes result in a "new and improved" version of the product in which enhancements are made to the product's existing characteristics. In other words, the product delivers the same benefits it always has delivered -- it just does a better job!  Procter & Gamble frequently promotes "new and improved" versions of many of its brands.  No new benefits are added with these new versions of the brand -- each delivers the same basic benefits as before. For example, Crest continuously modifies its product . Changes are made to its formula to improve its basic cavity-fighting properties.  These improvements are often referred to as simple quality improvements. They do not add any new benefits; they simply change the formula so it can do a better job. Crest's most recent 'quality improvement' is called Multi-Care (Exhibit 3). Prior to its introduction, Crest announced MultiCare on it’s web page.  Evidently, the modified formula does an even better job of fighting tooth decay because it now has a foaming action.  <br />Adding New Benefits to the Product<br />An alternative product modification strategy is to add new benefits to the product (Exhibit 6). In other words, we now make the product do something it did not do in the past. This is a more significant product modification. Examples might be model changes in cars where significant components like air conditioning or theft protection devices have been added. These are  important additional benefits that have been added to the product.  Personal computers are undergoing rapid advances in which significant new functions (benefits) are constantly added.  Similar advances are occurring in software development.  <br />Modify Other Aspects of the Tangible Product<br />Exhibit 9Repacking the Battery<br />Rather than focus on enhancing or adding to the physical characteristics of the product, we can :<br />Modify the product's packaging to make it seem almost like a new product;Make changes in the way the product looks -- make style improvements<br />Finding New Markets and Market Segments for Existing Products<br />Strategies for managing growth and maturity can focus on changing the market rather than the product. The firm can go after entirely new markets with virtually the same product, or search for new market segments or niches that might be interested in the product.  Repositioning offers another route for enhancing a product's sales.  <br />New Markets & Market Segments<br />Exhibit 13A New Market Segment for Handguns<br />Looking for new geographic markets in which the product has not before been sold often offers new revenue opportunities.  Firms also can seek new market segments in existing geographic markets.  For example, given current concerns for safety and trends in self-protection, Smith and Wesson identified an opportunity to market handguns to women (Exhibit 13). They've initiated a major campaign to target this market.  The product has been somewhat modified to better suit the new user, but it is fundamentally the same handgun sold in the past -- just a new market.<br />Repositioning to Different Markets<br />Exhibit 17Repositioning Miller High Life BeerExhibit 18Repositioning Marlboro<br />Products can also be reposition to different markets by changing the brand's image or personality.  Familiar examples of repositioning to the 'heavy half' include Miller High Life beer (Exhibit 17) and Marlboro cigarettes (Exhibit 18). Recall that Miller High Life was originally promoted as a substitute for table wine. The image was changed to better fit the masculine themes associated with a higher consumption beer market segment -- the male, blue-collar segment.  Always considered a "woman's cigarette" (its motto once was "Mild as May), the Marlboro brand was given the equivalent of a sex change in 1955 with the introduction of the first Marlboro cowboy . The point was to make filter cigarettes, then considered unmanly and tasteless, into a macho icon. To make sure no one confused the new Marlboro with its more feminine predecessor, it was packaged in a new flip-top, masculine red box. The cast of Marlboro men first included sailors, farmers, hunters, and other macho icons.  In 1964, Marlboro settled on the cowboy image and the "Marlboro Country" theme was born!  The repositioning effort worked wonders.  Marlboro sales rose at an annual rate of 10% and is still the dominant brand in the cigarette market.  <br />Promote Added Consumption in Existing Markets<br />Exhibit 19Arm & Hammer Super ScoopExhibit 20Mott's Apple Sauce<br />Rather than seeking new markets for products, firms often try to find ways to stimulated added consumption in their existing markets.  The objective is to convince current customers to buy and use  more of the product!  Arm & Hammer baking soda (see linked video) provides a great example of this strategy in action. Baking soda has been promoted by Arm & Hammer as having almost unlimited different uses ranging from removing odors in refrigerators to its use as a toothpaste.  The Arm & Hammer web site shows you the different ways that baking soda can be used around the house. The strategy underlying its ads and its web site is to induce greater use of the brand.  Arm and Hammer has been so good at finding new ways for you to use its baking soda that the firm has introduced dedicated products in some of the application areas. For example, you now can buy Arm and Hammer toothpastes, deodorants, kitty-litter (see Exhibit 19), carpet deodorizer, and the like.  The latest entry is an Arm & Hammer chewing gum!<br />Deletion Strategies for Declining Products<br />Exhibit 1Deletion Strategies for Declining Products<br />Once a product enters decline, the firm must consider its potential deletion from its product mix.  There are multiple deletion strategies firms can employ when anticipating a product's removal from the market (Thumbnail One).<br /> Harvest the Product.  Harvesting usually signals the firm's future intentions to drop a brand.   Harvesting entails finding  ways to cut production and marketing costs to the 'bare bones.'  The brand is eliminated from unprofitable distribution channels. All forms of promotion are cut back.  Most sales promotion is eliminated and advertising is refocused to provide only a 'reminder' effect -- just to let the consumer know the product is still available.  The firm knows that harvesting will effectively hasten the decline of the brand, but any remaining sales will be more profitable. <br />Discontinue the Product.  A firm can simply discontinue the product, just as Kodak did this with its Ultralife batteries and Buick did with the Reatta. <br />Sell the Product to Another Firm.  GE sold its small appliance line to Black and Decker and  Bristol Meyers sold its Ipana toothpaste brand to two entrepreneurs from Minneapolis who turned it into a low-overhead "garage-shop" operation.  These two men effectively milked the brand for substantial profits for its remaining life. <br />Considerations Prior to Deletion<br />Exhibit 2ConsiderationsDuring Decline<br />Thumbnail Two summarizes some of the major considerations that exist when a product does enter decline and becomes a candidate for deletion.  The potential impact of the product's withdrawal on the sales of other products in the firm's mix must be examined.  Most companies sell entire lines of products, not single product items. Generally, these products complement one another. If so, yanking one from the market potentially can hurt the sales of the other items. Sometimes it is better to keep the "money loser" on the market just because it leads to higher levels of sales of other products in the firm's mix.  Honoring warranties and service contracts, as well as providing replacement parts for existing product owners is a must when products are deleted.  The firm may choose to provide parts and essential services itself, or may contract these out to other firms.  <br />CONCLUSION-<br />Exhibit 1Managing the Mix of Products<br />If we understand how to manage the product life cycle for individual brands, then we are in a better position to  manage the firm's entire product portfolio to ensure that the overall mix of products generates the highest possible returns for the firm. <br />Products entering decline must be balanced with products that are in their growth and maturity phases (Exhibit 1).  This is the only way the firm can maintain stable levels of overall sales and profits.  Individual product life cycles must complement one another!<br />

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