PRODUCT LIFE CYCLE

The PLC
The Product Life cycle is a fundamental concept for planning, strategy, product development, marketing, and manufacturing Provides insight into a pdts s competitive dynamics
Is the course that a product s sales and profits take over its lifetime.

This term product life cycle was used for the first time in 1965, by Theodore Levitt in an Harvard Business Review article: "Exploit the Product Life Cycle".

Stages & PLC

A product's entry or launching phase into the market corresponds to the introduction stage. As the product gains popularity and wins the trust of consumers it begins to grow. With increasing sales, the product captures enough market share and gets stable in the market. This is the maturity stage. However, after some time, the product gets overpowered by latest technological developments and entry of superior competitors in the market. Soon the product becomes obsolete and needs to be withdrawn from the market. This is the decline phase. Graph of a product's life cycle looks like a bell-shaped curve

Introduction stage
Introduction stage is when the new product is first launched.

An awareness creating stage and is not associated with profits

Takes time Market size is small Slow sales growth Little or no profit High distribution and promotion expense Promotional expenditures at their highest ratios to sales

 Induce trail of the pdt Secure distribution in retail outlets

Need for high promotional expenditures Inform potential customers of the new & unknown pdt

Need for prices to be higher . Costs are high due to relatively low output rates Technological problems in pdtion may not yet be fully resolved High margins required to support the heavy promo exp that is necessary to achieve growth

Marketing Strategies: Intro Stage

Promotion HIGH
Rapid skimming strategy High price-high promotion To recover as much profit/unit as possible Promotes pdts merits althgh high price Increases rate of mkt penetration ASSUMP: Unaware of pdt, those who become aware are eager to have it & willing to pay the price Build brand preference Rapid penetration strategy Low price-high promotion Brings fastest mkt penetration & largest MS ASSUM: Mkt is large, unaware, price sensitive, strong compet, unit mfg cost falls with increased pdtion & mfg experience

LOW
Slow skimming strategy High price-low promotion To recover as much profit/unit as possible Low promo keeps mkting exp down Mkt is limited in size Most mkt is aware of pdt Willing to pay high price

HIGH

Price

LOW

Slow penetration strategy Low price-low promotion Rapid pdt acceptance Low promo cost brings profits up Demand is price sensitive, not to promotion ASSUM: Mkt is large, aware, PS, lesser compet

Market Pioneers
Highly rewarding but risky & expensive Eg: Coco Cola, Hallmark, P&G, Xerox Higher mkt share than early followers & late entrants 2nd entrant: 71% of pioneer s mkt share, 3rd entrant: 58% Advantages: Consumers prefer pioneering brands Captures more users Early users will favor PB because of trying & being satisfied with it PB establishes the attributes that the pdt class should possess Disadvantage: Late entrant can overcome the pioneer advantage

Growth stage
Growth stage is when the new product satisfies the market.
Sales increase Early adopters like the pdt & more consumers start buying New competitors enter the market Price stability or decline to increase volume Consumer education Profits increase: Promotion cost is spread over a larger volume. Unit mfg cost/unit falls faster than price Promotion and manufacturing costs gain economies of scale Decline in promotional sales ratio Product quality increases New features New market segments and distribution channels are entered

Marketing Strategies: Growth Stage

Uses several strategies to sustain rapid mkt growth for as long as possible

Improve product quality and add new product features and improved styling Add new models and flanker products Enter new market segments Increase distribution coverage and enter new distribution channels Shift from product-awareness advertising to product-preference advertising Lower prices to attract next layer of pricesensitive buyers

Maturity stage
Maturity stage is a long-lasting stage of a product that has gained consumer acceptance.
Slowdown in sales Many suppliers Substitute products Overcapacity leads to competition Increased promotion and R&D to support sales and profits

Can be divide into 3 phases: Growth maturity: Sales grwth rate starts to decline. No new distribution Channels to fill. Some laggard buyers still enter the mkt. Stable maturity: Sales flatten on a per capita basis becoz of mkt saturation. Most potential constumers have tried the pdt, future sales is dependent on population growth & replacement demand Decaying maturity: Sales starts to decline actually. Consumers start switching to othr pdts /substitutes

Marketers consider modifying strategies

Market modifying is when a company tries to increase consumption of the current product (New users; Increase usage of existing users; New market
segments)

Product modifying is changing characteristics (quality, features, or style) to attract new users and to inspire more usage. Marketing mix modifying is when a company changes one or more of the marketing mix elements.
Price Promotion Distribution channels

Marketing Strategies: Maturity Stage

Market Modification
Expand number of brand users by: 1. Converting nonusers 2. Entering new market segments 3. Winning competitors customers Convince current users to increase usage by: 1. Using the product on more occasions 2. Using more of the product on each occasion 3. Using the product in new ways

Decline stage
Decline stage is when sales decline or level off for an extended time, creating a weak product.

Maintain the product without change in the hope that

competitors leave the industry

Reposition or reformulate the product in hopes of

moving back into the growth stage

Harvest the product that means reducing various costs and hoping
that sales hold up

Drop the product by selling it to another firm or simply liquidate it at

salvage value

Marketing Strategies: Decline Stage

 Increase firm s investment (to dominate the market and strengthen its competitive position) Maintain the firm s investment level until the uncertainties about the industry are resolved. Decrease the firm s investment level selectively by dropping unprofitable customer groups, while simultaneously strengthening the firm s investment in lucrative niches Harvesting ( milking ) the firm s investment to recover cash quickly