Product life cycle simplified

1. Product Life Cycles
• Product Life Cycle (PLC):
– Each product may have a different life cycle
– PLC determines revenue earned
– Contributes to strategic marketing planning
– May help the firm to identify when
a product needs support, redesign,
reinvigorating, withdrawal, etc.
– May help in new product development planning
– May help in forecasting and managing cash
flow

2. Product Life Cycle
Sales &
Profit
Sales
Profit
Product
Development Introduction Growth Maturity Decline

3. Product Life Cycles
• The Stages of the Product Life Cycle:
– Development
– Introduction/Launch
– Growth
– Maturity
– Saturation
– Decline
– Withdrawal

4. Product Life Cycles
• The Development Stage:
• Initial Ideas – possibly large number
• May come from any of the following –
– Market research – identifies gaps in the market
– Monitoring competitors
– Planned research and development (R&D)
– Luck or intuition – stumble across ideas?
– Creative thinking – inventions, hunches?
– Futures thinking – what will people be
using/wanting/needing 5,10,20 years hence?

5. Product Life Cycles
• Product Development: Stages
– New ideas/possible inventions
– Market analysis – is it wanted? Can it be
produced at a profit? Who is it likely
to be aimed at?
– Product Development and refinement
– Test Marketing – possibly local/regional
– Analysis of test marketing results and
amendment of product/production process
– Preparations for launch – publicity, marketing
campaign

6. Product Life Cycles
• Introduction/Launch:
– Advertising and promotion campaigns
– Target campaign at specific audience?
– Monitor initial sales
– Maximise publicity
– High cost/low sales
– Length of time – type of product

7. Stages of the Product Life Cycle
Introduction
• Low sales
• High costs per
customer
• Negative profits
• Innovator customers
• Few competitors
• Objective: to create
awareness and trial
• Offer a basic product
• Price at cost-plus
• Selective distribution
• Awareness – dealers
and early adopters
• Induce trial via heavy
sales promotion

8. Stages of the Product Life Cycle
Growth
• Rising sales
• Average costs
• Rising profits
• Early adopters
customers
• Growing
competition
• Objective: maximize
market share
• Offer service, product
extensions, warranty
• Price to penetrate
• Intensive distribution
• Awareness and interest
– mass market
• Reduce promotions due
to heavy demand

9. Product Life Cycles
• Growth:
– Increased consumer awareness
– Sales rise
– Revenues increase
– Costs - fixed costs/variable costs, profits may
be made
– Monitor market – competitors reaction?

10. Product Life Cycles
• Maturity:
– Sales reach peak
– Cost of supporting the product declines
– Ratio of revenue to cost high
– Sales growth likely to be low
– Market share may be high
– Competition likely to be greater
– Price elasticity of demand?
– Monitor market – changes/amendments/new strategies?

11. Product Life Cycles
• Saturation:
• New entrants likely to mean market is ‘flooded’
• Necessity to develop new strategies becomes more
pressing:
– Searching out new markets:
• Linking to changing fashions
• Seeking new or exploiting market segments
• Linking to joint ventures – media/music, etc.
– Developing new uses
– Focus on adapting the product
– Re-packaging or format

12. Stages of the Product Life Cycle
Maturity
• Peak sales
• Low costs
• High profits
• Middle majority
customers
• Stable/declining
competition
• Objective: maximize profit
while defending market share
• Diversify brands/items
• Price to match or beat
competition
• Intensive distribution
• Stress brand differences and
benefits
• Increase promotions to
encourage switching

13. Product Life Cycles
• Decline and Withdrawal:
– Product outlives/outgrows its usefulness/value
– Fashions change
– Technology changes
– Sales decline
– Cost of supporting starts to rise too far
– Decision to withdraw may be dependent on availability
of new products and whether fashions/trends will come
around again?

14. Stages of the Product Life Cycle
Decline
• Declining sales
• Low costs
• Declining profits
• Laggard customers
• Declining competition
• Objective: reduce costs and
milk the brand
• Phase out weak models
• Cut price
• Selective distribution
• Reduce advertising to levels
needed to retain hard-core
loyalists
• Reduce promotions to
minimal levels

15. • The product life cycle concept can be applied to
a:
– Product class (soft drinks)
– Product form (diet colas)
– Brand (Diet Dr. Pepper)
• Using the PLC to forecast brand performance or to develop
marketing strategies is problematic
Product Life-Cycle Strategies

16. Product Life-Cycle Strategies
• Product development
• Introduction
• Growth
• Maturity
• Decline
• Begins when the
company develops a
new-product idea
• Sales are zero
• Investment costs are
high
• Profits are negative
PLC StagesPLC Stages

17. Product Life-Cycle Strategies
• Product development
• Introduction
• Growth
• Maturity
• Decline
• Low sales
• High cost per customer
acquired
• Negative profits
• Innovators are targeted
• Little competition
PLC StagesPLC Stages

18. The Strategies in The Product Life Cycle
• Introduction Stage:
High priceHigh price
Low promotionLow promotion
Low priceLow price
High promotionHigh promotion

19. • Product – Offer a basic product
• Price – Use cost-plus basis to set
• Distribution – Build selective distribution
• Advertising – Build awareness among early
adopters and dealers/resellers
• Sales Promotion – Heavy expenditures to
create trial
Marketing Strategies:
Introduction Stage

20. Four Introductory
Marketing Strategies
Rapid-Rapid-
skimmingskimming
strategystrategy
Rapid-Rapid-
skimmingskimming
strategystrategy
Rapid-Rapid-
penetrationpenetration
strategystrategy
Rapid-Rapid-
penetrationpenetration
strategystrategy
Slow-Slow-
penetrationpenetration
strategystrategy
Slow-Slow-
penetrationpenetration
strategystrategy
Slow-Slow-
skimmingskimming
strategystrategy
Slow-Slow-
skimmingskimming
strategystrategy
PricePrice
LowLow
HighHigh
PromotionPromotion
HighHigh LowLow

21. The Strategies in The Product Life Cycle
• Growth Stage:
High market
share
High market
share
High current
profit
High current
profit

22. • Product – Offer product extensions, service,
warranty
• Price – Penetration pricing
• Distribution – Build intensive distribution
• Advertising – Build awareness and interest in the
mass market
• Sales Promotion – Reduce expenditures to take
advantage of consumer demand
Marketing Strategies:
Growth Stage

23. • The Strategies in The Product Life Cycle
• Maturity Stage:
Modifying
the
Market
Modifying
the
Market
Modifying
the
Product
Modifying
the
Product
Modifying
the
Marketing
Mix
Modifying
the
Marketing
Mix

24. • Product – Diversify brand and models
• Price – Set to match or beat competition
• Distribution – Build more intensive distribution
• Advertising – Stress brand differences and
benefits
• Sales Promotion – Increase to encourage brand
switching
Marketing Strategies:
Maturity Stage

25. • The Strategies in The Product Life Cycle
• Decline Stage:
MaintainMaintain HarvestHarvest DropDrop

26. • Product – Phase out weak items
• Price – Cut price
• Distribution – Use selective distribution: phase
out unprofitable outlets
• Advertising – Reduce to level needed to retain
hard-core loyalists
• Sales Promotion – Reduce to minimal level
Marketing Strategies: Decline
Stage

27. Marketing Strategy & the Product Life Cycle

28. Product Life Cycle
http://www.tutor2u.net/business/marketing/products_lifecycle.asp
Introduction Growth Maturity Decline
E-conferencing email faxes Handwritten letters
Third generation
mobile phones
Portable CD players Personal Computers Typewriter
Iris-based personal
identity cards
Smart cards Credit cards Check books
Examples of products in various stages of the
product life cycle

29. Product Adoption Process
AwarenessAwareness The buyer becomes more aware of the
product
InterestInterest The buyer seeks information and is receptive
to learning about the product
EvaluationEvaluation The buyer considers the product’s benefits
and decides whether to try the product
TrialTrial The buyer examines, tests, or tries the
product to determine if it meets needs
AdoptionAdoption The buyer purchases the product and can be
expected to use it again when the need for
this type of product arises

31. Product Adoption Process
(cont’d)
• Categories of Product Adopters
– Innovators: First adopters of new products
– Early adopters: Careful choosers of new products
– Early majority: Those adopting new products just
before the average person
– Late majority: Skeptics who adopt new products
when they feel it is necessary
– Laggards: The last adopters, who distrust new
products

32. Product Life Cycle
EarlyAdopters
Innovators
EarlyM
ajority
LateM
ajority
Laggards

33. Product Life Cycle
Regeneration
“Natural”
Evolution
“Induced”
Regeneration

34. Product Life Cycle
Regeneration - Intel
386
486
Pentium

35. Introduction
Growth
Maturity
Decline
PLC Management
FasterFaster
More profitably …More profitably …
LongerLonger
HigherHigher

36. Consumer Product Adoption
Adoption
Steps in the Adoption Process
Trial
Evaluation
Interest
Awareness

37. Consumer Product Adoption
Adopter Categorization on the Basis of Relative Time of
Adoption of Innovation

38. Consumer Adoption Process
Communicability
Five product characteristics influence
the rate of adoption
Complexity
Relative Advantage
Divisibility
Compatibility

39. Why Some Products Fail and
Others Succeed
• Reasons for Product Failure
– Product’s value or features did not match customer
needs
– Ineffective or inconsistent branding that failed to
convey the right message or image to customers
– Technical or design problems
– Poor market timing
– Overestimation of market size
– Ineffective promotion
– Insufficient distribution

41. The Product Life Cycle
• Are there other types of the PLC curve?
– Growth-slump-maturity pattern
– Cycle-recycle pattern
– Scalloped pattern
– Styles, Fashions, Fads

42. Product Life Cycles
Sales
Time
Development Introduction Growth Maturity Saturation Decline

43. Product Life Cycles
Sales
Time
Effects of Extension
Strategies

44. Product Life Cycles
Sales/Profits
Time
PLC and Profits
PLC
Losses
Break Even
Profits

45. Case study

46. • Kellogg’s is the world’s leading
producer of breakfast cereal. In 2007, it
was Britain’s leading grocery brand.
• Its lines include both ready-to-eat cereal
(like Rice Krispies) and cereal bars.
• Kellogg’s divides its markets into six
segments so that marketing can be
targeted.
• Each brand has to hold its own in its
market. If a brand is not performing as
well as it should, the business must do
something about it.

47. • Nutri-grain was designed to meet the needs
of busy people who had
• missed breakfast, providing a healthy cereal
breakfast in a bar.
At launch in 1997, Nutri-Grain immediately
gained 50% market share;
• Growth was maintained by bringing out new
versions and repositioning the bar as an ‘all
day snack’.

48. • At maturity, competitor brands (like Alpen)
started to chip away at market share. Some
variants (such as Minis and Twists) struggled,
whilst some grew (like Elevenses) but could
not halt the overall decline.
• At saturation, the market is ‘full’. Better or
cheaper competing products have come to
market. By mid- 2004, Nutri-grain faced
declining sales in a growing market.
• Decline: at this point Kellogg had to decide
whether to let the product die or use an
extension strategy to lengthen its life.

49. • Kellogg had to decide whether the
problem with Nutri-Grain was the
market, the product or both. It could
see
– that the market was growing, but that
customer tastes were changing.
– The choice was therefore between product
development or diversification. The first of
these carries much lower costs and risks.

50. • Research showed Kellogg that:
• the brand message was not strong
enough
• some other Kellogg’s products (like
Minis) had taken the focus from Nutri-
Grain
• Soft Bake and Elevenses did not
receive enough marketing support,
despite having 80% of sales
• market growth was being driven by
discounts, rather than any permanent
factors.

51. Kellogg re-branded and re
launched Nutri-Grain in 2005. The
bars had a new brand image. They
also had a stronger unique selling
point (Nutri-Grain is more healthy
because it is baked). Kellogg also
put more promotional investment
into the core brands and dropped
some of the others.

52. • As a result, Soft Bake Bar sales
grew, with Elevenses sales up by
almost 50%.
• The Nutri-Grain brand grew at
almost three times that of the
market and maintained this even
after the re-launch was over

54. Definition
• New Product Development
– Development of original products, product
improvements, product modifications, and
new brands through the firm’s own R & D
efforts.

55. New Product Development
• Six product development options:
– New-to-the-world products (discontinuous innovations)
• I-Pod
– New product lines
• Sony MP3 players
– Product line extensions
• Pepsi Blue
– Improvements or revisions of existing products
• Shampoo w/ conditioner
– Repositioning
• Cadbury’s
– Cost reductions
• Hard back vs Paper back

56. • New products can be obtained via
acquisition or development.
• New products suffer from high failure
rates.
• Several reasons account for failure.
New Product Development
Strategy

57. • New Product Development Process:
– Stage 1: Idea Generation
• Internal idea sources:
– R & D
• External idea sources:
– Customers, competitors, distributors, suppliers
New Product Development
Strategy

58. • New Product Development Process:
– Stage 2: Idea Screening
• Product development costs increase
substantially in later stages.
• Ideas are evaluated against criteria; most are
eliminated.
New Product Development
Strategy

59. • New Product Development Process:
– Stage 3: Concept Development and Testing
• Product concepts provide detailed
versions of new product ideas.
• Concept tests ask target consumers to
evaluate product concepts.
New Product Development
Strategy

60. • New Product Development Process:
– Stage 4: Marketing Strategy Development
• Strategy statements describe:
– The target market, product positioning, and sales, share,
and profit goals for the first few years.
– Product price, distribution, and marketing budget for the
first year.
– Long-run sales and profit goals and the marketing mix
strategy.
New Product Development
Strategy

61. • New Product Development Process:
– Stage 5: Business Analysis
• Sales, cost, and profit projections
– Stage 6: Product Development
• Prototype development and testing
New Product Development
Strategy

62. • New Product Development Process:
– Stage 7: Test Marketing
• Standard test markets
• Controlled test markets
• Simulated test markets
– Stage 8: Commercialization
New Product Development
Strategy

63. Success rate of new products
• The success rate of new products is very low –
less than 5%.
• Product obsolescence is rapid with improvements
in technology
• Shorter PLCs
• Most new product development is an improvement
on existing products
• Less than 10% of new products are totally new
concepts.

64. • $50 billion in profits
over 27 years
• Early new-product
development relied
heavily on copying
the competition
• $4.2 billion annually
invested in R & D
• Innovation is critical to
Microsoft’s future
success
• Much of R & D efforts
are Internet related
• Many new products
and services are in
development
MicrosoftMicrosoft
Case Study