Product life cycle1_ppt


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Product life cycle1_ppt

  1. 1. Product Life Cycle Prof Jayashree Vispute
  2. 2. Product Life Cycles • Product Life Cycle – shows the stages that products go through from development to withdrawal from the market
  3. 3. • Product Portfolio – the range of products a company has in development or available for consumers at any one time • Managing product portfolio is important for cash flow
  4. 4. 10- 4 • The Typical Product Life Cycle (PLC) Has Five Stages – Product Development, Introduction, Growth, Maturity, Decline – Not all products follow this cycle: • Fads • Styles • Fashions Product Life-Cycle Strategies
  5. 5. 10- 5 Figure 10-2: Sales and Profits Over A Product’s Life
  6. 6. Product Life Cycle length • style - comes, goes, comes back • fashion - come, goes away slowly • fad - comes and goes way quickly
  7. 7. 10- 7 Figure 10-3: Styles, Fashions, and Fads
  8. 8. The Product Life Cycle Concept is Based on Four Premises Products have a limited life. Product sales pass through distinct stages, each with different marketing implications. Profits from a product vary at different stages in the life cycle. Products require different strategies at different life cycle stages.
  9. 9. The Diffusion Process Innovators (2.5%) Early Adopters (13.5%) Early Majority (34%) Late Majority (34%) Laggards (16%) Laggards Late Majority Early Majority Early AdoptersInnovators "The Chasm" Technology Adoption Process
  10. 10. Customer Profile Each stage attracts a distinct customer profile
  11. 11. PLC Length and Shape Sales Sales Sales TimeTime Time Style Fashio n Fad
  12. 12. PLC Marketing Strategies Stage Objective Marketing Strategy Introduction Awareness & trial Communicate benefits Growth Usage of firm’s brand Specific brand communication, lower prices, expand distribution Maturity Maintain market share Sales promotion, drop price, Extend life cycle expand distribution, new uses & new versions of product Decline Decide what to do Maintain, harvest, or divest with product
  13. 13. Limitations of the PLC 1. The life cycle concept applies best to product forms rather than to classes of products or specific brands. 2. The life cycle concept may lead marketers to think that a product has a predetermined life, which may produce problems in interpreting sales and profits. 3. It is only a descriptive way of looking at the behavior of a product and the life cycle can not predict the behavior of a product.
  14. 14. The Product Life Cycle • PLC can be applied to: – product categories • have longest life cycles;indefinite maturity stage • examples: cigars, newspapers, cell phones, bottled water – product forms • example: manual, electric, electronic typewriter – products – branded products
  15. 15. The Product Life Cycle • PLC Shapes – Growth-slump-maturity pattern – Cycle-recycle pattern – Scalloped pattern • Style-Fashion-Fad Life Cycles – Style - distinctive mode of expression – Fashion - currently accepted or popular style – Fad - quick-peak, quick-decline fashions
  16. 16. Product Life Cycle • Product Life Cycle (PLC): o Each product may have a different life cycle o PLC determines revenue earned o Contributes to strategic marketing planning o May help the firm to identify when a product needs support, redesign, reinvigorating, withdrawal, etc. o May help in new product development planning o May help in forecasting and managing cash flow
  17. 17. Product Life Cycle • The Development Stage: • Initial Ideas – possibly large number • May come from any of the following – o Market research – identifies gaps in the market o Monitoring competitors o Planned research and development (R&D) o Luck or intuition – stumble across ideas? o Creative thinking – inventions, hunches? o Futures thinking – what will people be using/wanting/needing 5,10,20 years hence?
  18. 18. Product Life Cycle • Product Development: Stages o New ideas/possible inventions o Market analysis – is it wanted? Can it be produced at a profit? Who is it likely to be aimed at? o Product Development and refinement o Test Marketing – possibly local/regional o Analysis of test marketing results and amendment of product/production process o Preparations for launch – publicity, marketing campaign
  19. 19. Product Life Cycle • Introduction/Launch: o Advertising and promotion campaigns o Target campaign at specific audience? o Monitor initial sales o Maximise publicity o High cost/low sales o Length of time – type of product
  20. 20. Product Life Cycle • Growth: o Increased consumer awareness o Sales rise o Revenues increase o Costs - fixed costs/variable costs, profits may be made o Monitor market – competitors reaction?
  21. 21. Product Life Cycle • Maturity: o Sales reach peak o Cost of supporting the product declines o Ratio of revenue to cost high o Sales growth likely to be low o Market share may be high o Competition likely to be greater o Monitor market – changes/amendments/new strategies?
  22. 22. Product Life Cycle • Saturation: • New entrants likely to mean market is ‘flooded’ • Necessity to develop new strategies becomes more pressing: o Searching out new markets:  Linking to changing fashions  Seeking new or exploiting market segments  Linking to joint ventures – media/music, etc. o Developing new uses o Focus on adapting the product o Re-packaging or format o Improving the standard or quality o Developing the product range
  23. 23. Product Life Cycle • Decline and Withdrawal: o Product outlives/outgrows its usefulness/value o Fashions change o Technology changes o Sales decline o Cost of supporting starts to rise too far o Decision to withdraw may be dependent on availability of new products and whether fashions/trends will come around again?
  24. 24. PLC- Strategies Impact on marketing and the strategies to be followed
  25. 25. Introduction Stage: The firm seeks to build product awareness & develop market for the product. Product- - Branding & quality level is established & intellectual property protection such as patents and trademarks are obtained. Pricing- - May be low penetration pricing to build market share rapidly or high skim pricing to recover development costs. Distribution- - Is selective until customers show acceptance of the product. Promotion- - Is aimed at innovators & early adopters. - Marketing communications seek to build product awareness & to educate potential consumer about the product.
  26. 26. Growth Stage Firm seeks to build brand preference & increase market share. Product- - Quality s maintained & additional features & support services may be added. Pricing- - Is maintained as the firm enjoys increasing demand with little competition. Distribution- - Channels are added as demand increases & customers accept the product. Promotion- - Is aimed at a broader audience.
  27. 27. Maturity Stage Strong growth in sales diminishes, competition may appear with similar products, primary objective at this point is to defend market share while maximizing profit. Product- - Features may be enhanced to differentiate the product from that of competitors. Pricing- - May be lowered because of new competition Distribution- - Becomes more intensive & incentives may be offered to encourage preference over competing products. Promotion- - Emphasizes product differentiation.
  28. 28. Decline Stage The product dies, sales decline. In this case firm has several options. Product - Maintain the product, possibly rejuvenating it by adding new features and finding new uses. - Harvest the product or phase out weak product - Reduce costs & continue to offer it, possibly to a loyal niche segment. Pricing - Cut Price Distribution - Discontinue the inventory or selling it to another firm that is willing to continue the product. Promotion - Reduce to minimal level
  29. 29. The marketing mix decisions in the decline phase will depend on the selected strategy. e.g. The product may be changed if it is being rejuvenated/ left unchanged if it is being harvested or liquidated Similarly price may be reduced drastically If the product is liquidated or maintained if harvested.
  30. 30. Product Life Cycles and the Boston Matrix Sales Time Development Introduction Growth Maturity Saturation Decline
  31. 31. Product Life Cycles and the Boston Matrix Sales Time Effects of Extension Strategies
  32. 32. Product Life Cycles and the Boston Matrix Sales/Profits Time PLC and Profits PLC Losses Break Even Profits
  33. 33. The Product Life Cycle and the Boston Matrix Sales Time A B C D The product portfolio – four products in the portfolio (1) (1) ‘A’ is at maturity stage – cash cow. Generates funds for the development of ‘D’ (2) (2) Cash from ‘B’ used to support ‘C’ through growth stage and to launch ‘D’. ‘A’ now possibly a dog? (3) (3) Cash from ‘C’ used to support growth of ‘D’ and possibly to finance extension strategy for ‘B’? Importance of maintaining a balance of products in the portfolio at different stages of the PLC – Boston Matrix helps with the analysis