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.
3 Unit 2
 Product Life Cycles
Introduction Stage
When a product is first introduced
a product launch occurs. It may occur
regionally, provincially, or nationally,
depending on predicted demand.

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

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

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

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

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

12 Unit 2
Growth Stage
 Product Life Cycles
Growth Stage
As competitors enter the market,
companies strive to maintain their
market share: the companys sales
as a percentage of the total for the
market.

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

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,
called a low-end product. Usually
not sold under a well-known brand
name.

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

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

21 Unit 2
 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)
 Product Life Cycles
Decline Stage
Occurs when a company cannot find
new consumers for their product.
Profits decrease; marketers try to
find the reason for the decline.

decline
Sales

25 Time Unit 2
 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
 Product Life Cycles
Decision Point Stage
The final stage of the product life
cycle. Marketers must make
important decisions regarding a
products future.
Sales

decision
point
28 Unit 2
Time
 Product Life Cycles
Decision Point Stage
A product may be reformulated,
repackaged, and reintroduced.
Most often maintenance of a product
involves new promotion and new
pricing.

29 Unit 2
 Product Life Cycles
Decision Point Stage
If it looks like there is little hope for
significant profitdue to market
saturation, decreased demand, or
otherwisea suggestion may be
made to abandon the product.

30 Unit 2
Nontraditional Product Life
Cycles
 Nontraditional Product Life Cycles

Fads

32 Unit 2
 Nontraditional Product Life Cycles

Fads
A product which is extremely popular
for a very brief period of time, and
loses popularity just as quickly.

Robotic Pets, Cabbage Patch Kids,

hummers, Pet rock, thats hot

33 Unit 2
 Nontraditional Product Life Cycles

Fads
Fads are unpredictable, and high-risk.
Companies try to get out of the
market just as the fad peaks. If they
wait too long, they get stuck with
excess inventory.

34 Unit 2
 Nontraditional Product Life Cycles

Trends

35 Unit 2
 Nontraditional Product Life Cycles

Trends
A trend has a more lasting effect on
the market than a fad. A trend is
usually a movement towards a style
of product.
Organic foods, Booster Juice, Social
Networking, cell phones, Online Shopping

36 Unit 2
 Nontraditional Product Life Cycles

Niche Markets

37 Unit 2
 Nontraditional Product Life Cycles

Niche Markets
A small section of the market
dominated by a small group of
products.
Short growth, level maturity.
The Pet Hotel, The Whistle, sweetener
packets,

38 Unit 2
 Nontraditional Product Life Cycles

Seasonal Markets

39 Unit 2
 Nontraditional Product Life Cycles

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

The product life cycle is a concept that

seeks to describe a products sales,
competitors, customers, and marketing
emphasis from its beginning until it is removed
from the market.
Companies often desire a balanced product
portfolio.
portfolio
The life-cycle concept can be applied to a
product class, a product form, and a product
brand.
 7 Selected Product Life Cycles

A. Traditional B. Boom or Classic C. 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 TVs
 Four Stages in Traditional
Product Life Cycle

Introduction Growth Maturity Decline

S
a
l
e Sales
s

Profits

TIME
Profit is negative in Introduction, slowly rises in Growth, 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
 Self-Fulfilling Prophecy

Many firms may

engage in a self-
fulfilling prophecy,
prophecy
whereby they predict
falling sales and then
ensure this by
reducing or removing
marketing support.
With proper
marketing, some
products might not
fail.
 Importance of New Products
To assure a firms survival, 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
 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, we have always done it
sequences that way! As I say, if it worked for one
Marketing myopia it will work for all. (Previously
successful companies have failed
marketing 110.)
The Importance of New
Product Failure
Failure rate is 35%
or more.
Despite careful
planning, products
may still fail.
There is absolute
failure and relative
failure.
 Types of Failures

In absolute product
failure,
failure costs are not
regained.
In relative product ???
failure,
failure even though
a profit may be
earned, goals are not
met.
 New-Product Planning Process

2. 3.
Product Concept
Screening Testing
1. 4.
Idea Business
Generation Long-term planning is required to Analysis
launch a successful new product.

5.
7. Product
6.
Commercialization Development
Test Marketing
 1. Idea Generation

Continuous, systematic
search for new
product opportunities

1
Idea
Generation
 2. Product Screening

Poor, unsuitable
products weeded out
and patentability
determined

1
Product
Screening
3. Concept Testing

Present consumer with

proposed product to
measure attitudes and
intentions

Concept
Testing
4. Business Analysis

Detailed review of demand,

costs, break-even points,
investments, and potential
profits for each new product

Business
Analysis
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 products introduction to its

full target market, corresponding
to the introduction stage of the
product life cycle

1 Great product

Commercialization
 Growth Stage in Life Cycle

With major innovations, growth may be

very slow at first and then rise quickly, as
with the microwave oven.
Minor innovations or product modifications
have quicker growth from the start.
 Adoption Process

The adoption process is the procedure an

individual consumer goes through when learning
about and purchasing a new product.
The rate of adoption depends on consumer traits,
the product, and the firms marketing efforts. The
five stages are:
Knowledge
Persuasion
Decision
Implementation
Confirmation
 Diffusion Process

The diffusion process describes the manner in which

different members of the target market often accept
and purchase a product.
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.
Consumer segments include:
Innovators2.5%
Early Adopters13.5%
Early Majority34%
Late Majority34%
Laggards16%
 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 PartsWho will make them?
How long will they be made?
2. Notification TimeHow soon before the
actual deletion will an announcement be made?
Will distributors be alerted early enough so they
can line up other suppliers?
3. WarrantiesHow 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.
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
New
New Product
Product Development
Development Process
Process
Step
Step 3.
3. Concept
Concept Development
Development &
& Testing
Testing

1.
1. Develop
DevelopProduct
ProductIdeas
Ideasinto
into
Alternative
Alternative
Product
ProductConcepts
Concepts

2.
2. Concept
ConceptTesting
Testing--Test
Testthe
the
Product Concepts with Groups
Product Concepts with Groups
of
ofTarget
TargetCustomers
Customers

3.
3. Choose
Choosethe
theBest
BestOne
One
New
New Product
Product Development
Development Process
Process
Step
Step 4.
4. 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 -- Short-Term:
Short-Term:
Products
Products Planned
Planned Price
Price
Distribution
Distribution
Marketing
Marketing Budget
Budget

Part
Part Three
Three -- Long-Term:
Long-Term:
Sales
Sales &
& Profit
Profit Goals
Goals
Marketing
Marketing Mix
Mix Strategy
Strategy
New
New Product
Product Development
Development Process
Process
Step
Step 5.
5. Business
Business Analysis
Analysis
Step
Step 6.
6. Product
Product Development
Development

Business
BusinessAnalysis
Analysis

Review
Review of
of Product
Product Sales,
Sales, Costs,
Costs,
and
and Profits
Profits Projections
Projections to
to See
See ifif
They
TheyMeet
Meet Company
CompanyObjectives
Objectives

IfIf No,
No, Eliminate
Eliminate
Product
Product Concept
Concept

IfIfYes,
Yes, Move
Move to
to
Product
Product Development
Development
New
New Product
Product Development
Development Process
Process
Step
Step 7.
7. 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. productsfor
foraafee.
fee.

Simulated
Simulated
Test
Test Market
Market
Test
Testin
inaasimulated
simulated
shopping environment
shopping environment
to
toaasample
sampleofof
consumers.
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
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,
extensions, service,
service,
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
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
 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, redesign,
reinvigorating, withdrawal, etc.
May help in new product development
planning
May help in forecasting and managing cash
flow
Product Life Cycles and the Boston
Matrix
The Stages of the Product Life
Cycle:
Development
Introduction/Launch
Growth
Maturity
Saturation
Decline
Withdrawal
 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, hunches?
Futures thinking what will people be
using/wanting/needing 5,10,20 years hence?
 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
 Product Life Cycles and the Boston
Matrix
Growth:
Increased consumer awareness
Sales rise
Revenues increase
Costs - fixed costs/variable 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, etc.
Developing new uses
Focus on adapting the product
Re-packaging or format
Improving the standard or quality
Developing the product range
 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
Concept Development &
Testing
1.
1. Develop
DevelopProduct
ProductIdeas
Ideasinto
into
Alternative
AlternativeProduct
ProductConcepts
Concepts

2.
2. Concept
ConceptTesting
Testing--Test
Testthe
theProduct
Product
Concepts
Conceptswith
withGroups
GroupsofofTarget
TargetCustomers
Customers

3.
3. Choose
Choosethe
theBest
BestOne
One
 Product & Brand Positioning

(a) Product-positioning b) Brand-positioning

map map
(breakfast market) (instant breakfast market)

Expensive High price/oz.

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.

 Conjoint Analysis
Brand name Retail Price
1.0 -- 1.0 --
-- --
-- --
Utility

Utility
-- --
-- --

0 K2R| Glory
| |
Bissell 0
| | |
$1.19 $1.39 $1.59 Money-Back
Good Housekeeping Seal? Guarantee?
1.0 -- 1.0 --
-- --
-- --

Utility
Utility

-- --
-- --

0 | | | |
No Yes 0 No Yes
 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.
toaasample
sampleofof
Sales-
Sales- consumers.
consumers.
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.
cities.
successive
successive
periods.
periods.
 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 companys product mix has a
certain width,length,depth, and
consistency.
 Width:how many different product
lines.
Length:the total number of items.
Depth:how many variants are offered of
each product in the line.
Consistency:how closely related the
various product lines are in end
use,production requirement,distribution
channels, or some other way.
 Product Mix

Width
Width -- number
number of
of
different
different product
product
lines
lines
Consistency

Length
Length -- 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 -- number
number of
of
versions
versions of
of each
each
product
product
 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
Qualityprice analysis
 6.Brand Decision
What is brand?
Band decision
 What is brand?
Brand is a name,term,sign,symbol,or
design,or a combination of
them,intended to identify the goods
or services of one seller or group of
sellers and differentiate them from
those of competitors.
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?
 An Overview of
Branding Decisions

Brand- Brand- Brand- Brand-

Branding Sponsor Name Strategy Repositioning
Decision Decision Decision Decision Decision
Manu- 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- brands
brand individual
names Cobrands
 Brand decision
1.to brand or not to brand?
2.brand-sponsor decision
3.Brand-name decision
4.brand-strategy decision
5.brand-reposition decision
 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