Product Life Cycle Strategies Marketing Essay

1504 words (6 pages) Essay

1st Jan 1970 Marketing Reference this

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Product development begins when the company finds and develop s a new — product idea. During product development, sales are zero and the company’s investment cost mount.

Introduction is a period of slow sales growth as the product is introduced in market. Profits are nonexistent in the stage because of heavy expenses Of product introduction.

Growth is a period of rapid market acceptance and increasing profits.

Maturity is a period of slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profits level off or decline because of increased marketing outlays to defined the product against competition.

Decline is the period when sales fall off and profits drop.

Not all products follow this life cycle. Some products are introduced and die quickly: others stay in the mature stage for a long, long time. Some enter the decline stage and then cycled back into the growth stage through strong promotion and repositioning. As one analyst notes, “well managed, a brand could live forever. American Express, Budweiser, camel, coca-cola, Gillette, western union and Wells-Fargo, for instance, are still going strong in their respective categories after 100+ years.

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The PLC concept can describe a product class (gasoline-powered automobiles), a product form (SUVs), or a brand (the FORD explorer). The PLC concept applies differently in each case. Product classes have the longest life cycles — the sales of many product cycles stay in the mature stage for a long time. Product forms such as “dial telephones” and “ cassette tapes” passed through a regular history of introduction, rapid growth, maturity, and decline.

The PLC concept also can be applied to what are known as styles , fashions, and fads.

The PLC concept can be applied by marketers as a useful framework for describing how products and market works. But using the PLC concept for forecasting product performance or for developing market strategies present some practical problems.

For example, managers may have trouble identifying which stage of the PLC the product is in or pinpointing when the product moves into a next stage.

We know look at strategies for each of the other life- cycle stages.

Introduction Stage

The introduction stage starts when the new product is first launched. Introduction takes time, and sales growth is apt to be slow. Well — known product such as instant coffee and frozen orange juice lingered for many years before they entered a stage of rapid growth.

In this stage, as compared with other stages, profits are negative or low because of the low sales and high distribution and promotion expenses. Much money is needed to attract distributors and build their inventories.

Growth Stage

If the new product satisfies the market, it will enter a growth stage, in which sales will start climbing quickly. The early adopters will continue to buy, and later buyers will start following their lead, especially if they hear favourable word of mouth. Attracted by the opportunities for profit, new competitors will enter the market. They will introduce new product features, and the market will expand. The increase in competitors leads to increase in the number of distribution outlets, and sales jump to build reseller inventories. Prices remain where they are or fall only slightly.

Profit increases during the growth stage, as promotion costs are spread over a large volume and as unit manufacturing costs fall. The firm uses several strategies to sustain rapid market growth as long as possible. It improves product quality and adds new product features and models.

By spending a lot of money on product improvement, promotion, and distribution the company can capture a dominant position. in doing so, it gives up maximum current profit, which it hopes to make up in the next stage.

Maturity Stage

At some point, a product’s sales growth will slow down, and the product will enter a maturity stage. This maturity stage normally lasts longer than the previous stages, and it poses strong challenges to marketing management deals with the mature product.

The slowdown in sales growth results in many producers with many products to sell. In turn, this overcapacity leads to greater competition. Competition begins marking down prices, increasing their advertising and sales promotions, and upping their R & D budgets to find better version of the products. These steps leads to a drop in profit. Some of the weaker competitors start dropping out, and the industry eventually contains only well established competitors.

Although many products in the maturity stage appear to remain unchanged for long periods, most successful ones are actually evolving to meet changing consumer needs. Product managers should do more than simply ride along with or defend their mature products — a good offense is the best defense.

Decline Stage

The stage of most product forms and brands eventually dip. The decline may be slow, as in the case of oatmeal cereal, or rapid, as in the case of phonograph records. Sales may plunge to zero, or they may drop to a low level where they continue for many years. This is the decline stage.

Sales decline for many reasons, including technological advances, shifts in consumer tastes, and increased competition. As sales and profit decline, some firm withdrawn from the market. Those remaining may prune their product offerings. They may drop smaller market segments and marginal trade channels, or they may cut the promotion budget and reduce their prices further.

Carrying a weak product can be very costly to a firm, and not just in profit terms. There are many hidden costs.

When in the decline stage, a firm may:

Maintain: enhance the product by finding new uses or by adding new features.

Harvest: reduce costs and continue to offer the product to a targeted niche.

Discontinue: sell the product to another firm, or liquidate inventory.

plc2

Characteristic

Introduction

Growth

Maturity

Decline

Sales

Low sales

Rapidly rising sales

Peak sales

Declining sales

Costs

High cost per customer

Average cost per customer

Low cost per customer

Low cost per costomer

Profits

Negative

Rising Profits

High profits

Declining profits

Customers

Innovators

Early adopters

Middle majority

Laggards

Competitors

Few

Growing number

Stable number beginning to decline

Declining number

Marketing Objectives

Create product awareness and trial

Maximize market share

Maximize profit while defending market share

Reduce expenditure and milk the brand

Strategies

Product

Offer a basic product

Offer product extensions

Diversity brand and models

Phase out weak teams

Price

Use cost- plus

Price to penetrate market

Price to match or beat competitors

Cut price

Distribution

Build service distribution

Build intensive distribution

Build more intensive distribution

Go selective

Advertising

Build product awareness among early adopters and dealers

Build awareness and interest in the mass market

Stress brand differences and benefits

Reduce to level needed to retain hard- core loyals

Sales Promotion

Use heavy sales promotion

Reduce to take advantage of heavy consumer demand

Increase to encourage brand switching

Reduce to minimal level

1st Product

Life Cycle Of Pepsi

Stage 1: Market Introduction

Pepsi bottles the new flavored product and places it on the market for consumers.

Pepsi also spends a lot of money advertising the new flavor creating awareness.

Stage 2: Market Growth

Customers like the flavor and begin to make routine purchases.

Coke introduces their competing flavor.

Stage 3: Market Maturity

More competitors enter the market taking some of Pepsi’s profits.

Stage 4: Sales Decline

Customers have moved on to the next new flavor.

Some loyal fans stay behind

Pros

The product life cycle is a useful model when deciding possible stages of a product or service.

Useful to help demonstrate how marketing strategies can vary at different stages of a product’s life.

Promotion

Pricing Strategies

Cons

Tends to be backward looking

We only know which stage we have been in after it has been completed.

Only looks at a single product when most firms have many products.

Determinism

Product development begins when the company finds and develop s a new — product idea. During product development, sales are zero and the company’s investment cost mount.

Introduction is a period of slow sales growth as the product is introduced in market. Profits are nonexistent in the stage because of heavy expenses Of product introduction.

Growth is a period of rapid market acceptance and increasing profits.

Maturity is a period of slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profits level off or decline because of increased marketing outlays to defined the product against competition.

Decline is the period when sales fall off and profits drop.

Not all products follow this life cycle. Some products are introduced and die quickly: others stay in the mature stage for a long, long time. Some enter the decline stage and then cycled back into the growth stage through strong promotion and repositioning. As one analyst notes, “well managed, a brand could live forever. American Express, Budweiser, camel, coca-cola, Gillette, western union and Wells-Fargo, for instance, are still going strong in their respective categories after 100+ years.

The PLC concept can describe a product class (gasoline-powered automobiles), a product form (SUVs), or a brand (the FORD explorer). The PLC concept applies differently in each case. Product classes have the longest life cycles — the sales of many product cycles stay in the mature stage for a long time. Product forms such as “dial telephones” and “ cassette tapes” passed through a regular history of introduction, rapid growth, maturity, and decline.

The PLC concept also can be applied to what are known as styles , fashions, and fads.

The PLC concept can be applied by marketers as a useful framework for describing how products and market works. But using the PLC concept for forecasting product performance or for developing market strategies present some practical problems.

For example, managers may have trouble identifying which stage of the PLC the product is in or pinpointing when the product moves into a next stage.

We know look at strategies for each of the other life- cycle stages.

Introduction Stage

The introduction stage starts when the new product is first launched. Introduction takes time, and sales growth is apt to be slow. Well — known product such as instant coffee and frozen orange juice lingered for many years before they entered a stage of rapid growth.

In this stage, as compared with other stages, profits are negative or low because of the low sales and high distribution and promotion expenses. Much money is needed to attract distributors and build their inventories.

Growth Stage

If the new product satisfies the market, it will enter a growth stage, in which sales will start climbing quickly. The early adopters will continue to buy, and later buyers will start following their lead, especially if they hear favourable word of mouth. Attracted by the opportunities for profit, new competitors will enter the market. They will introduce new product features, and the market will expand. The increase in competitors leads to increase in the number of distribution outlets, and sales jump to build reseller inventories. Prices remain where they are or fall only slightly.

Profit increases during the growth stage, as promotion costs are spread over a large volume and as unit manufacturing costs fall. The firm uses several strategies to sustain rapid market growth as long as possible. It improves product quality and adds new product features and models.

By spending a lot of money on product improvement, promotion, and distribution the company can capture a dominant position. in doing so, it gives up maximum current profit, which it hopes to make up in the next stage.

Maturity Stage

At some point, a product’s sales growth will slow down, and the product will enter a maturity stage. This maturity stage normally lasts longer than the previous stages, and it poses strong challenges to marketing management deals with the mature product.

The slowdown in sales growth results in many producers with many products to sell. In turn, this overcapacity leads to greater competition. Competition begins marking down prices, increasing their advertising and sales promotions, and upping their R & D budgets to find better version of the products. These steps leads to a drop in profit. Some of the weaker competitors start dropping out, and the industry eventually contains only well established competitors.

Although many products in the maturity stage appear to remain unchanged for long periods, most successful ones are actually evolving to meet changing consumer needs. Product managers should do more than simply ride along with or defend their mature products — a good offense is the best defense.

Decline Stage

The stage of most product forms and brands eventually dip. The decline may be slow, as in the case of oatmeal cereal, or rapid, as in the case of phonograph records. Sales may plunge to zero, or they may drop to a low level where they continue for many years. This is the decline stage.

Sales decline for many reasons, including technological advances, shifts in consumer tastes, and increased competition. As sales and profit decline, some firm withdrawn from the market. Those remaining may prune their product offerings. They may drop smaller market segments and marginal trade channels, or they may cut the promotion budget and reduce their prices further.

Carrying a weak product can be very costly to a firm, and not just in profit terms. There are many hidden costs.

When in the decline stage, a firm may:

Maintain: enhance the product by finding new uses or by adding new features.

Harvest: reduce costs and continue to offer the product to a targeted niche.

Discontinue: sell the product to another firm, or liquidate inventory.

plc2

Characteristic

Introduction

Growth

Maturity

Decline

Sales

Low sales

Rapidly rising sales

Peak sales

Declining sales

Costs

High cost per customer

Average cost per customer

Low cost per customer

Low cost per costomer

Profits

Negative

Rising Profits

High profits

Declining profits

Customers

Innovators

Early adopters

Middle majority

Laggards

Competitors

Few

Growing number

Stable number beginning to decline

Declining number

Marketing Objectives

Create product awareness and trial

Maximize market share

Maximize profit while defending market share

Reduce expenditure and milk the brand

Strategies

Product

Offer a basic product

Offer product extensions

Diversity brand and models

Phase out weak teams

Price

Use cost- plus

Price to penetrate market

Price to match or beat competitors

Cut price

Distribution

Build service distribution

Build intensive distribution

Build more intensive distribution

Go selective

Advertising

Build product awareness among early adopters and dealers

Build awareness and interest in the mass market

Stress brand differences and benefits

Reduce to level needed to retain hard- core loyals

Sales Promotion

Use heavy sales promotion

Reduce to take advantage of heavy consumer demand

Increase to encourage brand switching

Reduce to minimal level

1st Product

Life Cycle Of Pepsi

Stage 1: Market Introduction

Pepsi bottles the new flavored product and places it on the market for consumers.

Pepsi also spends a lot of money advertising the new flavor creating awareness.

Stage 2: Market Growth

Customers like the flavor and begin to make routine purchases.

Coke introduces their competing flavor.

Stage 3: Market Maturity

More competitors enter the market taking some of Pepsi’s profits.

Stage 4: Sales Decline

Customers have moved on to the next new flavor.

Some loyal fans stay behind

Pros

The product life cycle is a useful model when deciding possible stages of a product or service.

Useful to help demonstrate how marketing strategies can vary at different stages of a product’s life.

Promotion

Pricing Strategies

Cons

Tends to be backward looking

We only know which stage we have been in after it has been completed.

Only looks at a single product when most firms have many products.

Determinism

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