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What are the different characteristics of each of the stage of

a product life cycle and what are the marketing implications


to those products?

Product life cycle is a marketing theory in which products or brands follow a


sequence of stages. Product life cycle (PLC) has to do with the life of a product
in the market with respect to business/commercial costs and sales measures;
whereas product lifecycle management (PLM) has more to do with managing
descriptions and properties of a product through its development and useful
life, mainly from a business/engineering point of view.. Every product has a
limited life cycle. Each products sale has to pass through different stages
including: product development, introduction, growth, maturity, and sales
decline, posing various challenges, opportunities and problems to the sellers.
Profit also varies at different life cycle. Each cycle has its own characteristics
and strategy.

Product Life Cycle Stages

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Product development stage:
In business, new product development is the term used to describe the complete
process of bringing a new product or service to market. There are two parallel
paths involved in the process: one involves the idea generation, product design,
and detail engineering; the other involves market research and marketing
analysis. Companies typically see new product development as the first stage in
generating and commercializing new products within the overall strategic
process of product life cycle management used to maintain or grow their
market share. The key to success during this stage is to work closely as a team
to maintain design intent while making final improvements to the new product.
The significant characteristics of this stage are:
 Begins when the company develops a new product idea.
 Sales are zero.
 Investments cost are high.
 Profits are negative.

Introduction stage:
After developing the new product when it is introduced in the market, it
becomes in introduction stage. Following are the significant characteristics of
this stage.
 Low sales
 High cost per customer acquired
 Negative profits
 Innovators are targeted.
 Little competition.
 Demands has to be created
 Customers have to be prompted to try the product.

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Growth stage:
In this stage products have a rapid market acceptance and substantial profit
improvement take place. Company introduces new product features and
expands distribution. The following characteristics are salient in this stage:
 Rapidly rising sales.
 Average cost per customer
 Rising profits
 Early adopters are targeted.
 Growing competitors
 Public awareness
 Costs reduced due to economies of scale

Maturity stage:
A period of slowdown in sales growth because the product has achieved
acceptance by most potential buyers. Profits stabilize or decline because of
increased competition. Following are the noteworthy characteristics of this
stage:
 Low cost per customer
 Sales volume peaks
 Increase in competitive offerings
 Prices tend to drop due to the proliferation of competing products
 Each seller seeks to differentiate their product from competition
 Middle majority targeted.
 Industrial profits go down.

Decline stage:
Fourth and last stage of a product's life cycle, characterized by fast declining
sales revenue and fewer customers. Generally caused by obsolescence, changes
in customer preferences, global competition, or new regulatory requirements,

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such as environmental protection laws. We can draw some significant
characteristics about this stage:
 Declining sales
 Low cost per customer
 Declining profits
 Laggards are targeted.
 Declining competition.

Fig: sales and profits during each life cycle

MARKETING IMPLICATIONS

1. PRODUCT DEVELOPMENT PHASE


Product development phase begins when a company finds and develops a new
product idea. This involves translating various pieces of information and
incorporating them into a new product. A product is usually undergoing several
changes involving a lot of money and time during development, before it is
exposed to target customers via test markets. Those products that survive the
test market are then introduced into a real marketplace and the introduction
phase of the product begins. During the product development phase, sales are

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zero and revenues are negative. It is the time of spending with absolute no
return.
2. INTRODUCTION PHASE
The introduction phase of a product includes the product launch with its
requirements to getting it launch in such a way so that it will have maximum
impact at the moment of sale. A company must be prepared to spend a lot of money
and get only a small proportion of that back. In this phase distribution arrangements
are introduced. Having the product in every counter is very important and is regarded
as an impossible challenge. Some companies avoid this stress by hiring external
contractors or outsourcing the entire distribution arrangement. This has the benefit of
testing an important marketing tool such as outsourcing.
Pricing is something else for a company to consider during this phase. Product
pricing usually follows one or two well structured strategies. Early customers
will pay a lot for something new and this will help a bit to minimize that
sinkhole that was mentioned earlier. Later the pricing policy should be more
aggressive so that the product can become competitive. Another strategy is that
of a pre-set price believed to be the right one to maximize sales. This however
demands a very good knowledge of the market and of what a customer is
willing to pay for a newly introduced product.
In launching a new product marketing management can set a high or a low
level for each marketing variable (price, promotion, distribution, product
quality). Considering only price and promotion, management can pursue one of
our four strategies.
 Rapid skimming: High price and high promotional level.
 Slow skimming: High price and low promotion.
 Rapid penetration: Low price and high promotion.
 Slow penetration: Low price and low promotion.
A successful product introduction phase may also result from actions taken by the
company prior to the introduction of the product to the market. These actions are
included in the formulation of the marketing strategy. This is accomplished during
product development by the use of market research. Customer requirements on
design, pricing, servicing and packaging are invaluable to the formation of a product

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design. A customer can tell a company what features of the product is appealing and
what are the characteristics that should not appear on the product. He will describe the
ways of how the product will become handy and useful. So in this way a
company will know before its product is introduced to a market what to expect
from the customers and competitors. A marketing mix may also help in terms
of defining the targeted audience during promotion and advertising of the
product in the introduction phase.

3. GROWTH PHASE

The growth phase offers the satisfaction of seeing the product take-off in the
marketplace. This is the appropriate timing to focus on increasing the market
share. If the product has been introduced first into the market, then it is in a
position to gain market share relatively easily. A new growing market alerts the
competition’s attention. The company must show all the products offerings and
try to differentiate them from the competitors’ ones. A frequent modification
process of the product is an effective policy to discourage competitors from
gaining market share by copying or offering similar products. Other barriers are
licenses and copyrights, product complexity and low availability of product
components. Promotion and advertising continues, but not in the extent that
was in the introductory phase and it is oriented to the task of market leadership
and not in raising product awareness. This period is the time to develop
efficiencies and improve product availability and service. Cost efficiency and
time-to-market and pricing and discount policy are major factors in gaining
customer confidence. Managing the growth stage is essential. Companies
sometimes are consuming much more effort into the production process,
overestimating their market position. Accurate estimations in forecasting
customer needs will provide essential input into production planning process. It
is pointless to increase customer expectations and product demand without
having arranged for relative production capacity. A company must not make the
mistake of over committing. This will result into losing customers not finding
the product “on the self”.

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During this stage, the firm uses several strategies to sustain rapid market
growth:
 It improves product quality and adds new products features and
improved styling.
 It adds new models such as different sizes, flavors etc.
 It enters new market segments.
 Its increases its distribution coverage and enters new distribution
channels.
 It shifts from product awareness advertising to product-preference
advertising.
 It lower prices to attract the next layer of price sensitive buyers.

4. MATURITY PHASE

When the market becomes saturated with variations of the basic product, and
all competitors are represented in terms of an alternative product, the maturity
phase arrives. In this phase market share growth is at the expense of someone
else’s business, rather than the growth of the market itself. This period is the
period of the highest returns from the product. A company that has achieved its
market share goal enjoys the most profitable period, while a company that falls
behind its market share goal, must reconsider its marketing positioning into the
marketplace. During this period new brands are introduced even when they
compete with the company’s existing product and model changes are more
frequent (product, brand, and model). This is the time to extend the product’s
life.
Pricing and discount policies are often changed in relation to the competition
policies i.e. pricing moves up and down accordingly with the competitors’ one
and sales and coupons are introduced in the case of consumer products.
Promotion and advertising relocates from the scope of getting new customers,
to the scope of product differentiation in terms of quality and reliability.

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5. Decline stage:

The decision for withdrawing a product seems to be a complex task and there a
lot of issues to be resolved before with decide to move it out of the market.
Dilemmas such as maintenance, spare part availability, service competitions
reaction in filling the market gap are some issues that increase the complexity
of the decision process to withdraw a product from the market. Often
companies retain a high price policy for the declining products that increase the
profit margin and gradually discourage the “few” loyal remaining customers
from buying it.
This is the time to start withdrawing variations of the product from the market
that are weak in their market position. This must be done carefully since it is
not often apparent which product variation brings in the revenues. The prices
must be kept competitive and promotion should be pulled back at a level that
will make the product presence visible and at the same time retain the “loyal”
customer. Distribution is narrowed. The basic channel is should be kept
efficient but alternative channels should be abandoned.

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What are the different characteristics of each of the cell of
BCG matrix and what are the marketing implications of
those cells?

The BCG matrix method is based on the product life cycle theory that can be
used to determine what priorities should be given in the product portfolio of a
business unit. To ensure long-term value creation, a company should have a
portfolio of products that contains both high-growth products in need of cash
inputs and low-growth products that generate a lot of cash. It has 2 dimensions:
market share and market growth. Market share is the percentage of the total
market that is being serviced by a company, measured either in revenue terms
or unit volume terms. The higher the market share, the higher proportion of the
market in control. And market growth is used as a measure of a market’s
attractiveness. Markets experiencing high growth are ones where the total
market share available is expanding, and there’s plenty of opportunity for
everyone to make money. So the basic idea behind it is that the bigger the
market share a product has or the faster the product's market grows the better it
is for the company. We can understand the relationship of market share and
growth rate from the following graphical representation.

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There are four alternative positions for any business - the BCG Chart has four
cells called:
 Question Marks
 Stars
 Cash Cows
 Dogs
1. Question Marks:
The business unit has low market share compared to competitors, however it is
doing business in high-growth market. Most of the new businesses start in this
quadrant. There are well established businesses in this market and new
businesses try to grow and capture more market share. This market is growing
and there are opportunities for new businesses. At the same time there is risk
involved with investing in this business – because of that these businesses are
called question marks. Question Marks have to develop and grow by investing
and continuously improving their business. Grow sales by increasing market
share. Use cash from Cash Cows to support required investments

2. Stars:
The business has high market share compared to competitors and it is doing
business in high-growth market. This business is a market leader. Successful
Question Marks will grow their business and capture more market share and
will hopefully become Stars (move from the Question Marks quadrant to the
Stars quadrant). Successful and competitive organizations have at least one star
business unit or product. Stars have to improve their business continuously in
order to keep their position in the marketplace. As long as this market is
growing new question marks will try to capture new business. Invest for sales
growth and market share. Use cash from Cash Cows to support required
investments.

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3. Cash Cows:
The market is not very attractive – low market growth rate, however the
business has high market share compared to competitors. This business
generates a lot of cash and helps the organization invest in other businesses.
Since the market does not attract new players, this business does not need
substantial investments to keep the market share. Cash Cows have to protect
and keep the market share and maximize cash flow. Maintain the strong market
position and defend your market share. Take advantage of sales volume and
leverage the size of operations. Support other businesses.

4. Dogs:
This business has low market share and operates in low-growth market. It is
unlikely that this business is very profitable. This business is a loser. Such a
business needs consideration and new strategy development. Potential
strategies are withdrawal, selling the business, repositioning the current
business, and operating cost reduction. Optimize your current operations. Get
rid of all non value added activities and features. Reposition your offering to
generate positive cash flow or sell this business.

Market Implications:
For marketing implication of strategic business units the company needs to
determine what objective, strategy and budget to assign to each SBU. Four
strategies can be pursued-
1. Build:
To achieve this objective company have to increase market share and short
term earnings. Building is appropriate for question marks whose market
shares must grow if they are to come to stars.

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2. Hold:
Here the objective is to preserve the market share. This strategy is
appropriate for strong cash cows if they are continuing yielding a large
positive cash flow.
3. Harvest:
It involves a decision to withdraw from a business by implementing a
program of continuous cost cutback. In this term the objective is to increase
short term cash flow regardless of long term effect. This strategy is
appropriate for weak cash cows. It can also be used with question marks
and dogs.
4. Divest:
This strategy is appropriate for dogs and question marks. Here the objective
is to sell or liquidate the business because resources can be better used
elsewhere.

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