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Product Life Cycles

Product Life Cycles

2 Unit 2

Product Life Cycles
maturity

decline
Sales

growth
decision
point
introduction
Time

• The traditional product life cycle
consists of five stages.
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provincially. It may occur regionally. 4 Unit 2 . or nationally. Product Life Cycles • Introduction Stage • When a product is first introduced a product launch occurs. depending on predicted demand.

market research. training. so initially the price is high. Product Life Cycles • Introduction Stage • Launching a new product is very expensive. packaging. Costs involved include: machinery. storage. – PS3 during the introduction stage was $900 – Microwaves when they were introduced cost $999 5 Unit 2 . set- up. promotion.

trendsetters. those who always want new things first: . Product Life Cycles • Introduction Stage • Who buys at this stage? • Curious people. 6 Unit 2 .early adopters .

Product Life Cycles • Introduction Stage • Main purpose of marketing is to inform the consumer about new products and to establish the value equation as early as possible. – Communicate the benefits that this product/service will offer you 7 Unit 2 .

Product Life Cycle • Products currently in introduction .

Growth Stage Sales growth Time .

Reputation spreads through word of mouth and advertising. others will follow. consumers see/hear others use it. Product Life Cycles • Growth Stage • After adopters find and use a product. 10 Unit 2 . The product is visible.

Product Life Cycles • Growth Stage • Manufacturers advertise heavily— will the product profit or fail? • The product may even be scrapped at this stage. it is called a bust. 11 Unit 2 . If it is and it has lost money.

the sooner it starts making a profit. but it will have a major advantage: no competition. • The first company to enter a market will pay the most for development and advertising. 12 Unit 2 . Product Life Cycles • Growth Stage • The faster a product reaches the growth stage.

Growth Stage .

14 Unit 2 . Product Life Cycles • Growth Stage • As competitors enter the market. companies strive to maintain their market share: the company’s sales as a percentage of the total for the market.

Product Life Cycles • Growth Stage • Factors preventing companies from realizing profit are called barriers to entry... – These may include: • small market size • cost of R&D • ad expenses • equipment costs. 15 Unit 2 .

Competitors stimulate market growth through advertising and wide distribution. Product Life Cycles • Growth Stage • Eventually only the most competitive products remain on the market. 16 Unit 2 .

Product Life Cycles • Growth Stage • A company may produce a low-priced version of a product to establish a minimum price for a specific line. Usually not sold under a well-known brand name. called a low-end product. 17 Unit 2 .

Growth Stage .

Product Life Cycles • Maturity Stage • The period during which sales start to level off maturity Sales 19 Time Unit 2 .

20 Unit 2 . Product Life Cycles • Maturity Stage • Marketers keep the brand name in front of consumers. Often the success and longevity of the product is highlighted.

Product Life Cycles • Maturity Stage • Because major costs have been recuperated and the cost of sales and distribution is low. 21 Unit 2 . products usually make large profits during this stage.

Product Life Cycles • Maturity Stage • Often times companies will take this profit to develop new products and product launches. • EXAMPLE: Disney took profits from its amusement parks to launch a cruise ship line. This also expands their brand name into a new market. 22 Unit 2 .

Maturity Stage (LONG TIME) .

Maturity Stage (Shorter Time) .

marketers try to find the reason for the decline. decline Sales 25 Time Unit 2 . Product Life Cycles • Decline Stage • Occurs when a company cannot find new consumers for their product. Profits decrease.

Product Life Cycles • Decline Stage • If it is a temporary decline – it may be reversed by a small price – change in the design – new ad campaign – Change in the packaging 26 Unit 2 .

Decline Stage 27 Unit 2 .

Marketers must make important decisions regarding a product’s future. Sales decision point 28 Unit 2 Time . Product Life Cycles • Decision Point Stage • The final stage of the product life cycle.

and reintroduced. 29 Unit 2 . repackaged. • Most often maintenance of a product involves new promotion and new pricing. Product Life Cycles • Decision Point Stage • A product may be reformulated.

or otherwise–a suggestion may be made to abandon the product. decreased demand. Product Life Cycles • Decision Point Stage • If it looks like there is little hope for significant profit–due to market saturation. 30 Unit 2 .

Nontraditional Product Life Cycles .

Nontraditional Product Life Cycles • Fads 32 Unit 2 .

hummers. and loses popularity just as quickly. Nontraditional Product Life Cycles • Fads • A product which is extremely popular for a very brief period of time. Robotic Pets. Pet rock. Cabbage Patch Kids. “that’s hot” 33 Unit 2 .

34 Unit 2 . If they wait too long. they get stuck with excess inventory. Nontraditional Product Life Cycles • Fads • Fads are unpredictable. and high-risk. Companies try to get out of the market just as the fad peaks.

Nontraditional Product Life Cycles • Trends 35 Unit 2 .

Booster Juice. cell phones. Organic foods. A trend is usually a movement towards a style of product. Nontraditional Product Life Cycles • Trends • A trend has a more lasting effect on the market than a fad. Social Networking. Online Shopping 36 Unit 2 .

Nontraditional Product Life Cycles • Niche Markets 37 Unit 2 .

level maturity. The Whistle. Nontraditional Product Life Cycles • Niche Markets • A small section of the market dominated by a small group of products. 38 Unit 2 . • Short growth. sweetener packets. The Pet Hotel.

Nontraditional Product Life Cycles • Seasonal Markets 39 Unit 2 .

ice skates 40 Unit 2 . snow shovels. Marketers anticipate periods of high and low demand. Ice cream parlours. and work to create off- season opportunities. resorts. lawn mowers. Nontraditional Product Life Cycles • Seasonal Markets • Consumer demand changes and is effected by the weather.

ACTIVITY • Complete the “Product Life-Cycle with musical artists – Find an 5 musical artists that are currently in each stage of the product life cycle • Introduction – Just being introduced to the public – almost “underground” • Growth – is starting to make it big • Maturity – popularity has been steady • Decline – getting less and less popular by the year • Decision Point – either needs to redefine their career using AutoTune or should star on Celebrity Re-hab 41 Unit 2 .

• Companies often desire a balanced product portfolio. . and marketing emphasis from its beginning until it is removed from the market. portfolio • The life-cycle concept can be applied to a product class. customers. competitors. The Product Life Cycle • The product life cycle is a concept that seeks to describe a product’s sales. a product form. and a product brand.

Boom or Classic C. 7 Selected Product Life Cycles A. Traditional B. Fad Sales Time Extended Fad Seasonal or Fashion Revival Bust .

The Traditional Product Life Cycle S a l e s Typical product: Time Black and White TV’s .

slowly rises in Growth. Four Stages in Traditional Product Life Cycle Introduction Growth Maturity Decline S a l e Sales s Profits TIME Profit is negative in Introduction. peaks and then declines in Maturity stage and in Decline stage. .

Traditional Product Life Cycle and Advertising 1 13.5 Introduction 34 Growth Maturity Decline 34 16 40 30 S a le s 20 10 0 Time Advertising Goals Inform Persuade Highly Competitive Reassess/go back .

prophecy whereby they predict falling sales and then ensure this by reducing or removing marketing support. some products might not fail. Self-Fulfilling Prophecy • Many firms may engage in a self- fulfilling prophecy. . • With proper marketing.

new products may: • Offer differential advantages • Lead to sales growth or stability • Increase profits and control • Reduce risk through diversity • Improve distribution • Exploit technology • Utilize waste materials • Respond to consumer needs • Be a result of a government mandate . Importance of New Products To assure a firm’s survival.

Why Do Products Fail? • Poor long-term planning • Lack of a differential advantage • Incorrect pricing and product placement • Inattention to the environment of marketing and audit Who me? But.) . if it worked for one • Marketing myopia it will work for all. we have always done it sequences that way! As I say. (Previously successful companies have failed marketing 110.

The Importance of New Product Failure • Failure rate is 35% or more. • Despite careful planning. . • There is absolute failure and relative failure. products may still fail.

failure costs are not regained. • In relative product ??? failure. Types of Failures • In absolute product failure. failure even though a profit may be earned. goals are not met. .

7. Product 6. 3. Idea Business Generation Long-term planning is required to Analysis launch a successful new product. New-Product Planning Process 2. Commercialization Development Test Marketing . 5. 4. Product Concept Screening Testing 1.

1. Idea Generation Continuous. systematic search for new product opportunities 1 Idea Generation .

unsuitable products weeded out and patentability determined 1 Product Screening . 2. Product Screening Poor.

3. Concept Testing Present consumer with proposed product to measure attitudes and intentions Concept Testing .

costs. Business Analysis Detailed review of demand. break-even points. and potential profits for each new product Business Analysis .4. investments.

5. Product Development

Converts product idea
into tangible form and
identifies basic marketing
strategy

Product
Development

6. Test Marketing

Involves placing a fully developed
product into one or more selected areas
to observe it under a proposed
marketing plan

Test
Marketing

7. Commercialization

The product’s introduction to its
full target market, corresponding
to the introduction stage of the
product life cycle

1 Great product

1

Commercialization

• Minor innovations or product modifications have quicker growth from the start. . growth may be very slow at first and then rise quickly. as with the microwave oven. Growth Stage in Life Cycle • With major innovations.

• The rate of adoption depends on consumer traits. the product. Adoption Process • The adoption process is the procedure an individual consumer goes through when learning about and purchasing a new product. and the firm’s marketing efforts. The five stages are: – Knowledge – Persuasion – Decision – Implementation – Confirmation .

5% – Early Adopters—13. • Diffusion spans the time from product introduction through market saturation and affects the total sales level of a product as it moves through the life-cycle.5% – Early Majority—34% – Late Majority—34% – Laggards—16% . • Consumer segments include: – Innovators—2. Diffusion Process • The diffusion process describes the manner in which different members of the target market often accept and purchase a product.

The Diffusion Process Curve

Early Early Late
Majority Majority
Adopters

Laggards
Innovators
(68%)

This curve shows the manner in which different members
of the target market often accept and purchase a product.

Maturity Stage in Life
Cycle
Useful Strategies in Maturity:
1. Develop new uses for products
2. Develop new product features
3. Increase the market
4. Find new classes of consumers for
present products
5. Find new classes of consumers for
modified products
6. Increase product usage among
current users
7. Change marketing strategy

Decline Stage of Life Cycle

Questions to Consider When Deciding to Delete a
Product:
1. Replacement Parts—Who will make them?
How long will they be made?
2. Notification Time—How soon before the
actual deletion will an announcement be made?
Will distributors be alerted early enough so they
can line up other suppliers?
3. Warranties—How will warranties be honored?
After they expire, how will repairs be done?

New Product Development Process • Idea Generation and Screening • Concept Development and Testing • Marketing Strategy • Business Analysis • Product Development • Test Marketing • Commercialization .

New New Product Product Development Development Process Process Step Step 1. 1. Idea Idea Generation Generation Systematic Search for New Product Ideas Internal sources Customers Competitors Distributors Suppliers .

New New Product Product Development Development Process Process Step Step 2. Idea Idea Screening Screening • Process to spot good ideas and drop poor ones • Criteria – Market Size – Product Price – Development Time & Costs – Manufacturing Costs – Rate of Return . 2.

2. 1. 3. Concept ConceptTesting Testing--Test Testthe the Product Concepts with Groups Product Concepts with Groups of ofTarget TargetCustomers Customers 3. Develop DevelopProduct ProductIdeas Ideasinto into Alternative Alternative Product ProductConcepts Concepts 2. 3. Concept Concept Development Development & & Testing Testing 1.New New Product Product Development Development Process Process Step Step 3. Choose Choosethe theBest BestOne One .

4.Short-Term: Short-Term: Product’s Product’s Planned Planned Price Price Distribution Distribution Marketing Marketing Budget Budget Part Part Three Three -. Marketing Marketing Strategy Strategy Development Development Marketing Strategy Statement Formulation Part Part One One -.Overall: Overall: Target Target Market Market Planned Planned Product Product Positioning Positioning Sales Sales & & Profit Profit Goals Goals Market Market Share Share Part Part Two Two -.New New Product Product Development Development Process Process Step Step 4.Long-Term: Long-Term: Sales Sales & & Profit Profit Goals Goals Marketing Marketing Mix Mix Strategy Strategy .

Product Product Development Development Business BusinessAnalysis Analysis Review Review of of Product Product Sales. Yes. Move Move to to Product Product Development Development . Costs. 6. Costs.New New Product Product Development Development Process Process Step Step 5. Business Business Analysis Analysis Step Step 6. 5. No. and and Profits Profits Projections Projections to to See See ifif They TheyMeet Meet Company CompanyObjectives Objectives IfIf No. Eliminate Eliminate Product Product Concept Concept IfIfYes. Sales.

Test Test Marketing Marketing Standard Standard Controlled Controlled Test Test Market Market Test TestMarket Market Full Fullmarketing marketingcampaign AAfew in campaign fewstores storesthat thathave have in a small numberof a small number of agreed to carry new agreed to carry new representative cities. products representative cities. consumers. productsfor foraafee. . fee.New New Product Product Development Development Process Process Step Step 7. 7. Simulated Simulated Test Test Market Market Test Testin inaasimulated simulated shopping environment shopping environment to toaasample sampleofof consumers.

Product Life Cycle Sales and Profits ($) Sales Profits Time Product Introduction Growth Maturity Decline Develop- ment Losses/ Investments ($) .

Introduction Stage of the PLC Sales Sales Low Low sales sales Costs Costs High High cost cost per per customer customer Profits Profits Negative Negative Create Create product product awareness awareness Marketing Marketing Objectives Objectives and and trial trial Product Product Offer Offer aa basic basic product product Price Price Use Use cost-plus cost-plus Distribution Distribution Build Build selective selective distribution distribution Advertising Build Build product product awareness awareness among among early early Advertising adopters and dealers adopters and dealers .

Product warranty warranty Price Price Price Price to to penetrate penetrate market market Distribution Distribution Build Build intensive intensive distribution distribution Advertising Build Build awareness awareness and and interest interest in in the the Advertising mass mass market market . extensions.Growth Stage of the PLC Sales Sales Rapidly Rapidly rising rising sales sales Costs Costs Average Average cost cost per per customer customer Profits Profits Rising Rising profits profits Marketing Marketing Objectives Objectives Maximize Maximize market market share share Product Offer Offer product product extensions. service. service.

Maturity Stage of the PLC Sales Sales Peak Peak sales sales Costs Costs Low Low cost cost per per customer customer Profits Profits High High profits profits Marketing Maximize Maximize profit profit while while defending defending Marketing Objectives Objectives market market share share Product Product Diversify Diversify brand brand and and models models Price Price Price Price to to match match or or best best competitors competitors Distribution Distribution Build Build more more intensive intensive distribution distribution Advertising Advertising Stress Stress brand brand differences differences and and benefits benefits .

Decline Stage of the PLC Sales Sales Declining Declining sales sales Costs Costs Low Low cost cost per per customer customer Profits Profits Declining Declining profits profits Marketing Marketing Objectives Objectives Reduce Reduce expenditure expenditure and and milk milk the the brand brand Product Product Phase Phase out out weak weak items items Price Price Cut Cut price price Distribution Go Go selective: selective: phase phase out out unprofitable unprofitable Distribution outlets outlets Advertising Advertising Reduce Reduce to to level level needed needed toto retain retain hard-core hard-core loyal loyal customers customers .

Product Life Cycles and the Boston Matrix .

Product Life Cycles and the Boston Matrix • Product Life Cycle – shows the stages that products go through from development to withdrawal from the market • 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 .

– May help in new product development planning – May help in forecasting and managing cash flow . etc. withdrawal. redesign. Product Life Cycles and the Boston Matrix • 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. reinvigorating.

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

20 years hence? . hunches? – Futures thinking – what will people be using/wanting/needing 5.10. Product Life Cycles and the Boston Matrix • 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.

Product Life Cycles and the Boston Matrix • 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 .

Product Life Cycles and the Boston Matrix • 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 .

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

Product Life Cycles and the Boston Matrix • 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? .

Product Life Cycles and the Boston Matrix • 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. – Developing new uses – Focus on adapting the product – Re-packaging or format – Improving the standard or quality – Developing the product range . etc.

Product Life Cycles and the Boston Matrix • 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? .

Product Life Cycles and the Boston Matrix Sales Development Introduction Growth Maturity Saturation Decline Time .

Major stages in new product development • Idea generation • Idea screening • Concept development and testing • Marketing strategies • Business analysis • Product development • Test marketing • Commercialization .

New Product Development Process Marketing Strategy Business Development Analysis Concept Product Development Development and Testing Idea Market Screening Testing Idea Generation Commercialization .

3.Concept Development & Testing 1. Concept ConceptTesting Testing--Test Testthe theProduct Product Concepts Conceptswith withGroups GroupsofofTarget TargetCustomers Customers 3. 2. Choose Choosethe theBest BestOne One . 1. Develop DevelopProduct ProductIdeas Ideasinto into Alternative AlternativeProduct ProductConcepts Concepts 2.

. High in calories Low in calories Cold Brand C Bacon cereal and Quick Slow eggs Pancakes Instant Brand B breakfast Hot Brand A cereal Inexpensive Low price/oz. Product & Brand Positioning (a) Product-positioning b) Brand-positioning map map (breakfast market) (instant breakfast market) Expensive High price/oz.

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cities.consumers. consumers. periods. Wave Standard Standard Wave Research Test Test Market Market Research Test Testoffering offeringtrail trailto to Full Fullmarketing marketingcampaign campaign aasample sampleof of in inaasmall smallnumber numberof of consumers consumersin in representative representativecities. Consumer-Goods Market Testing Simulated Simulated Controlled Controlled Test Test Market Market Test Test Market Market Test AAfew fewstores storesthat thathave have Testin inaasimulated simulated agreed shopping shoppingenvironment environment agreedto tocarry carrynew new to products for a fee. . products for a fee. successive successive periods. toaasample sampleofof Sales- Sales.

Adopter Categorization of the Basis of Relative Time of Adoption of Innovations 34% 34% Early Late majority majority 2 1/2% 13 1/2% 16% Innovators Early Laggards adopters Time of adoption innovations .

6.product-line decision • Product mix • Product-line analysis • Product –line length .

Product mix(assortment) • The set of all products and items that a particular seller offers for sale. • A company’s product mix has a certain width. .length.depth. and consistency.

. • Consistency:how closely related the various product lines are in end use. • Length:the total number of items. or some other way.• Width:how many different product lines.production requirement.distribution channels. • Depth:how many variants are offered of each product in the line.

number number of of different different product product lines lines Consistency Length Length -.number number of of versions versions of of each each product product . Product Mix Width Width -.total total Product Product MixMix -- number number of of items items all all the the product product within within the the lines lines lines lines offered offered Depth Depth -.

Product-line analysis • Sales and profit • Market profile .

Product-Line Length • Line Stretching – Downmarket – Upmarket – Two-way • Line Filling • Line Modernization • Line Featuring & Line Pruning .

Line stretching • Downmarket stretch • Upmarket stretch • Two-way stretch .

Two-Way Product-Line Stretch: Marriott Hotels Quality Economy Standard Good Superior Marriott High Marquis (Top executives) Price Above Marriott average (Middle managers) Average Courtyard (Salespeople) Low Fairfield Inn (Vacationers) .

Line filling • Quality—price analysis .

Brand Decision • What is brand? • Band decision . 6.

or a combination of them. What is brand? • Brand is a name.intended to identify the goods or services of one seller or group of sellers and differentiate them from those of competitors.sign. .term.or design.symbol.

What is a Brand? User Culture Personality Attributes Benefits Values .

discussion • What is difference between product and brand? • How to define the line cycle of a brand? .

brands brand individual names •Cobrands . •Individual •Line facturer brand extension brand names •Blanket •Brand •Reposi- family extension tioning •Brand •Distribu- tor name •Multi- •No brand •Separate •No (private) family brands brand reposi- names •New tioning •Licensed •Company. Brand- Branding Sponsor Name Strategy Repositioning Decision Decision Decision Decision Decision •Manu. Brand. Brand. An Overview of Branding Decisions Brand.

Brand-name decision • 4.to brand or not to brand? • 2.brand-strategy decision • 5.brand-sponsor decision • 3.brand-reposition decision . Brand decision • 1.

brand-sponsor decision • Manufacturer brand • Distributor brand • Licensed brand .

Brand-name decision • Individual • Blanket family • Separated family • Company-individual family .

Good Brand Names: Lack Poor Foreign Distinctive Language Meanings Easy to: Suggest Suggest Pronounce Product Product Recognize Qualities Benefits Remember .

Brand Strategies Product Category Existing New Line Brand Brand Name Existing Extension Extension New Multibrands New Brands .

brand-strategy decision • Line extensions • Brand extensions • New brands • cobrands .