Product Life Cycle

Strategies
Dr. Kiran Sharma

K J Somaiya Institute of Management, India 1

Product Life Cycle

K J Somaiya Institute of Management, India 2

Generalized Product Life Cycle

Product category sales

(real dollars)
Life cycle
extension

Profit/unit
Sales
Profit per unit

Introduction
(real dollars)

Maturity Decline or
extension
Competitive
Growth turbulence
Time (years)
 Implications of PLC Stages
 Introductory Stage
 Marketing Mix in the Introductory Stage
 Skimming
 Penetration
 Distribution
 Promotion

K J Somaiya Institute of Management, India

 Implications of PLC Stages……
 Growth Stage
 Marketing Mix Changes
 Product line expands to attract new market
segments
 Prices
 Promotion Costs

K J Somaiya Institute of Management, India

 Implications of PLC Stages……..
 Maturity Stage
 Marketing Mix Changes
 Breakthroughs in R&D or engineering that help to differentiate the
product.
 Add value to the product.
 Providing services help in differentiating the product.
 Promotion expenses and Prices tend to remain stable.

K J Somaiya Institute of Management, India

Implications of PLC Stages………

 Decline Stage
 Sales decline, costs increase and efforts are needed to reduce costs.
 Marketing Mix changes
 Promotion expenditures decrease
 Prices remain stable

K J Somaiya Institute of Management, India

Limitations of the Product Life Cycle
o Considers only two variables.
o Strategies are based on assumptions about the features of each stage
– fails to consider the role of various other market forces.
Marketing Objectives for Share Leaders
• Maintaining/improving satisfaction and loyalty
• Encouraging/simplifying repeat purchase
• Reducing attractiveness of switching
• Head-to-head positioning against competitive or potential
offerings
• Differentiated positioning against competitive or potential
offerings
Maintaining/Improving Satisfaction and Loyalty

• Increase attention to quality control as output expands

• Continue product modification and improvement
• Expand post-sale service capabilities
Encouraging/Simplifying Repeat Purchase

• Expand production capacity in advance

• Continue to build distribution channels
• Consider developing long term contracts with
major customers.
Reducing Attractiveness of Switching
• Develop a product line with appealing features to
a specific segment of current customers.
• Develop multiple-line extensions – market
expansion (targeting several user segments)
• Meet or beat lower prices by competitors.
Head-to-head Positioning against Competitive
Offerings

• Develop a product line with more features or at a

more attractive prices.
• Make product modifications
• Meet or beat lower prices
• When resources are limited consider
withdrawing from smaller segments.
Differentiated Positioning against Competitive
Offerings

• Develop multiple-line extensions

• Build unique distribution channels
• Design multiple advertising targeted at
specific segments
Protecting Market Share

Responsive anticipation

Anticipative anticipation

Creative anticipation

K J Somaiya Institute of Management, India

Protecting Market Share
 A responsive marketer finds a stated need and fills it.
 An anticipative marketer looks ahead to needs
customers may have in the near future.
 A creative marketer discovers solutions customers
did not ask for but to which they enthusiastically
respond.

K J Somaiya Institute of Management, India

Types of Defense Strategies

K J Somaiya Institute of Management, India

K J Somaiya Institute of Management, India 18
Fortress, or position defense, strategy
 The most basic defensive strategy is to continually
strengthen a strongly held current position.
 Actions to improve customer satisfaction and loyalty.
 Actions to encourage and simplify repeat purchasing.

K J Somaiya Institute of Management, India

 Confrontation Strategy
 If the leader’s competitive intelligence is good, it may decide to move proactively and
change its marketing program before a suspected competitive challenge occurs.
 A confrontational strategy is more commonly reactive.

 With a preemptive defense, a more aggressive maneuver is to

attack first, perhaps with guerrilla action across the market—hitting
one competitor here, another there—and keeping everyone off
balance.
 Another is to achieve broad market envelopment that signals
competitors not to attack. In a counteroffensive, the market leader
can meet the attacker frontally and hit its flank, or launch a pincer
movement so it will have to pull back to defend itself.

K J Somaiya Institute of Management, India

 Flanker Strategy
 One shortcoming is that a challenger might simply choose to
bypass the leader’s fortress and try to capture territory where
the leader has not yet established a strong presence.

 To defend against an attack directed at a weakness in its current

offering, a leader might develop a second brand to compete
directly against the challenger’s offering.

K J Somaiya Institute of Management, India

Advantages to developing a flanker brand
 Gain more shelf space for the company
 Capture “brand switchers” by offering several brands.
 Develop excitement within the company by monitoring sales figures of the
different brands.
 Protect the company -- giving a product its own unique name means it will
not be readily associated with the existing brand. This reduces risk to the
existing brand and/or company if the product fails.
 Companies with a high-quality existing product can introduce lower-
quality brands without diluting their high-quality brand names

K J Somaiya Institute of Management, India

Market Expansion
 A more aggressive and proactive version of the
flanker strategy.
 The most obvious way a leader can implement a
market expansion strategy is to develop line
extensions, new brands, or even alternative product
forms utilizing similar technologies to appeal to
multiple market segments.

K J Somaiya Institute of Management, India

 In mobile defense, the leader stretches its domain over
new territories through market broadening and market
diversification.
 Market broadening shifts the company’s focus from the
current product to the underlying generic need.
 Market diversification shifts the company’s focus into
unrelated industries.

K J Somaiya Institute of Management, India

Market Challenger Strategies

 Define the strategic objective and opponents

 Can attack the market leader
 Can attack firms its own size that are not doing the job and are
underfinanced
 Can attack small local and regional firms
 Choose a general attack strategy
 Choose a specific attack strategy

K J Somaiya Institute of Management, India

In Sri Lanka, Tapal has challenged Unilever
to emerge as a serious competitor

K J Somaiya Institute of Management, India

 General Attack Strategies

(4) (Leapfrog) Bypass attack

(2) Flank attack

(1) Frontal attack

Attacker
Defender

(3) Encirclement attack

(5) Guerilla attack

Share-Growth Strategies for Followers
 Frontal attack strategy
 A follower wanting to capture an increased market share may use this
strategy:
 Where the market for a product category is relatively homogeneous,
 Has few untapped segments, and
 At least one well-established competitor.
 Attacker meets the opponent at all 4Ps

 Frontal attack strategy is most likely to succeed when:

 Most existing customers do not have strong brand preferences or loyalties,
 When the challenger’s resources and competencies—particularly in marketing (most
often) are greater than the target competitor’s.

K J Somaiya Institute of Management, India

Share-Growth Strategies for Followers
 Leapfrog (Bypass) strategy
 Attracting repeat or replacement purchases from a competitor’s
current customers by offering a product that is attractively
differentiated from the competitor’s offerings.
 The odds of success might be even greater if the challenger can
offer a far superior product based on advanced technology or a
more sophisticated design.
 Bypass – diversifying into unrelated products, diversifying into new geographical
markets, leapfrogging into new technologies
 Pepsi against Coke, purchasing Tropicana

K J Somaiya Institute of Management, India

Share-Growth Strategies for Followers

 Flanking strategies
 A flank attack is appropriate:
 When the market can be broken into two or more large segments
 When the leader and/or other major competitors hold a strong position in the
primary segment, and
 When no existing brand fully satisfies the needs of customers in at least one
other segment.
 In some cases, a successful flank attack need not involve unique
product features.
 Flank attack – May be directed at two strategic dimensions – geographic and segmental.
 LG – Sampoorna

K J Somaiya Institute of Management, India

Share-Growth Strategies for Followers

 Encirclement strategies
 Involves targeting several smaller untapped or underdeveloped
segments in the market simultaneously.
 It usually involves developing a varied line of products with
features tailored to the needs of different segments

K J Somaiya Institute of Management, India

Pepsi buys Gatorade in a
Bypass Strategy

K J Somaiya Institute of Management, India

Specific Attack Strategies

 Price discounts  Improved services

 Lower-priced goods  Distribution innovation
 Value-priced goods  Manufacturing-cost
 Product innovation reduction
 Intensive advertising
promotion

K J Somaiya Institute of Management, India

Market Follower Strategies

K J Somaiya Institute of Management, India

Market Follower Strategies
 Must know how to hold current customers
 Also win a sizeable number of new ones.
 Must also try and enter new markets.

K J Somaiya Institute of Management, India

Market Follower Strategies

Counterfeiter

Cloner

Imitator

Adapter

K J Somaiya Institute of Management, India

 Market Follower Strategies

 The counterfeiter duplicates the leader’s product and packages

and sells it on the black market or through disreputable dealers.
 The cloner emulates the leader’s products, name, and packaging,
with slight variations.
 The imitator copies some things from the leader but
differentiates on packaging, advertising, pricing, or location.
 The adapter takes the leader’s products and adapts or improves
them.

K J Somaiya Institute of Management, India

Market Nicher Strategies - Niche Specialist Roles
 End-User Specialist  Product-Line Specialist
 Vertical-Level Specialist  Quality-Price Specialist
 Customer-Size Specialist  Service-Specialist
 Specific-Customer Specialist
 Channel Specialist
 Geographic Specialist

K J Somaiya Institute of Management, India

Fake brands in Rural Markets
 Look-alike
 Spell-alike
 Duplicates

K J Somaiya Institute of Management, India

Strategic Choices in Mature Markets
 It is not always easy to tell when a market has reached
maturity.
 Variations in brands, marketing programs, and customer
groups can mean that different brands and market
segments reach maturity at different times.

K J Somaiya Institute of Management, India

Strategic Choices in Mature Markets
 As the maturity stage progresses, a variety of threats and
opportunities can disrupt an industry’s stability:
• Shifts in customer needs or preferences,
• Product substitutes,
• Increased raw material costs,
• Changes in government regulations,
• The entry of low-cost producers
• Mergers and acquisitions.

K J Somaiya Institute of Management, India

 SUCCESS IN MATURE MARKETS

o Two strategic actions:

o Development of a well-implemented business strategy to
o Sustain a competitive advantage
o Customer satisfaction
o Loyalty
o Flexible and creative marketing programs to
o Pursue growth or profit opportunities
METHODS OF MAINTAINING A LOW-COST
POSITION

o A no-frills product
o Innovative product design
o Cheaper raw materials
o Innovative production processes
o Low-cost distribution
o Reductions in overhead
Strategies for Maintaining Current Market Share

 Fortress defense - Involves actions:

 Aimed at improving customer satisfaction and loyalty
 Intended to encourage and simplify repeat purchasing

 Add flanker brands

 Niche strategy - Effective when the target
segment is too small to appeal to larger
competitors

K J Somaiya Institute of Management, India

STRATEGIES FOR EXTENDING VOLUME
GROWTH
o Increased penetration
o Convert current nonusers in target segment
into users
o Extended use
o Increase frequency of use among current users
o Market expansion
o Develop differentiated positioning focused on
untapped or underdeveloped segments
MARKETING ACTIONS FOR ACCOMPLISHING
GROWTH EXTENSION OBJECTIVES
o Increased penetration
o Enhance product’s value by:
o Adding features, benefits, or services
o Including it in the design of integrated systems
o Stimulate additional primary demand
o Extended use
o Move storage of the product closer to the point of end
use
o Encourage larger volume purchases
o Stress basic product benefits for a variety of usage
o Develop line extensions
MARKETING ACTIONS FOR
ACCOMPLISHING GROWTH EXTENSION
OBJECTIVES (CONTINUED)
o Market expansion
o Develop:
o Differentiated product line
o Multiple line extensions
o Build unique distribution channels
o Design service programs
FACTORS AFFECTING THE
ATTRACTIVENESS OF DECLINING
MARKET ENVIRONMENTS
o Conditions of demand
o Exit barriers
o Intensity of future competitive rivalry
STRATEGIES FOR DECLINING MARKETS

o Harvest
o Maximize short-term cash flow
o Maintenance
o Maintain market share for the short-term
o Profitable survivor
o Increase share of the declining market
o Niche
o Strengthen share position in one or a few segments
MARKETING ACTIONS FOR STRATEGIES
IN DECLINING MARKETS
o Harvesting strategy
o Eliminate R&D expenditures and capital investments
o Reduce marketing and sales budgets
o Reduce production costs
o Raise price if necessary to maintain margins
o Maintenance strategy
o Design service programs
o Continue trade promotion
o Focus sales force efforts
o Lower prices if necessary to maintain share
MARKETING ACTIONS FOR STRATEGIES IN
DECLINING MARKETS (CONTINUED)
o Profitable survivor strategy
o Encourage weak competitors to exit
o Introduce line extensions
o Lower prices if necessary to increase share
o Consider agreements to produce replacement parts
o Niche strategy
o Continued product and process R&D
o Produce for private labels
o Focus advertising, sales promotion, etc
o Maintain distribution channels
o Strengthen position in one or two segments with potential
for continued profit
Thank You
simsr.somaiya.edu

K J Somaiya Institute of Management, India 55