11

Chapter 8Chapter 8 New-Product Development and New-Product Development and

Product Life-Cycle StrategiesProduct Life-Cycle Strategies

Professor MarshallProfessor Marshall

Queens CollegeQueens College

22 of 55 of 55

Example: MicrosoftExample: Microsoft

Owns 97% of Operating System MarketOwns 97% of Operating System Market

Owns 90% of office applications MarketOwns 90% of office applications Market

Internet Explorer, MSN, HotmailInternet Explorer, MSN, Hotmail

How does Microsoft stay on top?How does Microsoft stay on top?

33 of 55 of 55

Answer:Answer:They don’t just sit back.They don’t just sit back.

Microsoft continues to pour resources into Microsoft continues to pour resources into Research & Development.Research & Development.

New Products that have or will launch soon:New Products that have or will launch soon:– .NET (allows unrelated websites to communicate).NET (allows unrelated websites to communicate)– Smartphone (allows users to email, instant message, Smartphone (allows users to email, instant message,

listen to music, surf the web, etc.)listen to music, surf the web, etc.)– Face mapping (for gamers)Face mapping (for gamers)– The digital home (connects everything in the house)The digital home (connects everything in the house)

44 of 55 of 55

To Stay in Business…To Stay in Business…

Companies have to be good at developing and Companies have to be good at developing and managing products.managing products.Each product goes through a product life cycle Each product goes through a product life cycle – it’s born, matures, and eventually dies as newer it’s born, matures, and eventually dies as newer

products come along that serve consumers betterproducts come along that serve consumers better

Firms must be good at developing new products Firms must be good at developing new products to replace older ones.to replace older ones.As products go through these life-cycle stages, As products go through these life-cycle stages, firms must be good at adapting marketing firms must be good at adapting marketing strategies to consumers’ changing tastes, new strategies to consumers’ changing tastes, new technology, and competition.technology, and competition.

55 of 55 of 55

Stages in The Product Life CycleStages in The Product Life Cycle

Product developmentProduct development

IntroductionIntroduction

GrowthGrowth

MaturityMaturity

Decline Decline

66 of 55 of 55

New-Product Development New-Product Development StrategyStrategy

Strategies for Obtaining New-Product Ideas:Strategies for Obtaining New-Product Ideas:– AcquisitionAcquisition

Buying a whole company, patent, or licenseBuying a whole company, patent, or license

– New Product DevelopmentNew Product DevelopmentCreating Original products, improvements, modifications, Creating Original products, improvements, modifications, or new brands, through your own R&D departmentor new brands, through your own R&D department

– Modifications are not always Modifications are not always addingadding features – may also be features – may also be taking away features!taking away features!

77 of 55 of 55

Acquisition - ExamplesAcquisition - Examples

Merger of Cingular and AT&TMerger of Cingular and AT&T– Buying a whole companyBuying a whole company

Handheld PDAs buy Palm OS Operating Handheld PDAs buy Palm OS Operating System software from Palm to use on System software from Palm to use on competing products.competing products.– Buying a license or buying a patentBuying a license or buying a patent

88 of 55 of 55

New-Product Development: FailuresNew-Product Development: FailuresOnly 10% of new products still on the market and Only 10% of new products still on the market and profitable after 3 years.profitable after 3 years.250,000 new consumer food, beverage, beauty 250,000 new consumer food, beverage, beauty and health care products are developed each and health care products are developed each year. Only 40% of them will be around 5 years year. Only 40% of them will be around 5 years later.later.Innovation is very risky- Ford lost $350 million on Innovation is very risky- Ford lost $350 million on the Edsel automobile.the Edsel automobile.

Examples of failures:Examples of failures:– Gerber food for AdultsGerber food for Adults– Ben-Gay AspirinBen-Gay Aspirin– Exxon Fruit PunchExxon Fruit Punch– Smucker’s premium KetchupSmucker’s premium Ketchup– Fruit of the Loom Laundry DetergentFruit of the Loom Laundry Detergent

http://www.newproductworks.com/product_poll/product_poll.html

99 of 55 of 55

Why do New Products Fail?Why do New Products Fail?

Overestimation of market sizeOverestimation of market size

Design problemsDesign problems

Incorrectly positioned, priced, or Incorrectly positioned, priced, or advertisedadvertised

Pushed despite poor marketing research Pushed despite poor marketing research findingsfindings

High development costsHigh development costs

Competition might be too fierceCompetition might be too fierce

1010 of 55 of 55

Major Stages in New-Product Major Stages in New-Product DevelopmentDevelopment

IdeaIdeaGenerationGeneration

IdeaIdeaScreeningScreening

Concept Concept Development Development

& Testing& Testing

Marketing Marketing Strategy Strategy

DevelopmentDevelopment

Business Business AnalysisAnalysis

Product Product DevelopmentDevelopment

Test Test MarketingMarketing

CommercializationCommercialization

1111 of 55 of 55

Idea GenerationIdea Generation

Where do Product Ideas Come From?Where do Product Ideas Come From?– InternalInternal

Company employees – example: 3M allows 15% of employee time to be spent Company employees – example: 3M allows 15% of employee time to be spent working on projects of personal interest. Post-it notes evolved from this.working on projects of personal interest. Post-it notes evolved from this.

– ExternalExternalCustomers – analyze customer complaintsCustomers – analyze customer complaints

CompetitorsCompetitors

Distributors – can pass along consumer problemsDistributors – can pass along consumer problems

Suppliers – can provide insight on materials and techniques to use in new Suppliers – can provide insight on materials and techniques to use in new product developmentproduct development

1212 of 55 of 55

Ways to foster Idea GenerationWays to foster Idea Generation

Creating an Idea Management System Creating an Idea Management System that directs ideas to a central location for that directs ideas to a central location for reviewreview

Set up a public toll-free number or website Set up a public toll-free number or website for anyone who wants to send ideas for anyone who wants to send ideas

Set up a rewards program for those who Set up a rewards program for those who contributecontribute

1313 of 55 of 55

Idea ScreeningIdea Screening

Process to spot good ideas and drop poor ones.Process to spot good ideas and drop poor ones.Develop system to estimate: market size, product price, Develop system to estimate: market size, product price, development time and costs, manufacturing costs, and rate of development time and costs, manufacturing costs, and rate of return.return.Evaluate these findings against set of company criteria for new Evaluate these findings against set of company criteria for new products.products.

Example of questions to ask: Example of questions to ask: – Is the product truly useful to consumers and society?Is the product truly useful to consumers and society?– Is it a good move for our company?Is it a good move for our company?– Does it mesh with our company objectives and strategies?Does it mesh with our company objectives and strategies?– Do we have the resources, people, and skills to make it succeed?Do we have the resources, people, and skills to make it succeed?– Does it deliver more value to customers than competitive products? Does it deliver more value to customers than competitive products? – Is it easy to advertise and distribute?Is it easy to advertise and distribute?

1414 of 55 of 55

Concept Development TerminologyConcept Development Terminology

Product IdeaProduct Idea: idea for a possible product that : idea for a possible product that the company can see itself offering.the company can see itself offering.Product ConceptProduct Concept: detailed version of the idea : detailed version of the idea stated in meaningful consumer terms.stated in meaningful consumer terms.Product ImageProduct Image: the way consumers perceive : the way consumers perceive an actual or potential product.an actual or potential product.

Attractive Product Ideas are developed into Product Attractive Product Ideas are developed into Product Concepts.Concepts.

1515 of 55 of 55

Concept Development ExampleConcept Development Example

DaimlerChrysler is getting ready to commercialize DaimlerChrysler is getting ready to commercialize its experimental fuel-cell powered electric car. It its experimental fuel-cell powered electric car. It is highly efficient and environmentally superior to is highly efficient and environmentally superior to gasoline powered cars. The company is gasoline powered cars. The company is currently road testing prototypes.currently road testing prototypes.

DaimlerChrysler’s task is to develop this new DaimlerChrysler’s task is to develop this new product into alternative product concepts, find product into alternative product concepts, find out how attractive each concept is to customers, out how attractive each concept is to customers, and choose the best one.and choose the best one.

1616 of 55 of 55

Concept Development ExampleConcept Development Example

Concept 1Concept 1 - A moderately priced subcompact - A moderately priced subcompact designed as a second family car to be used designed as a second family car to be used around town. Ideal for running errands and around town. Ideal for running errands and visiting friends.visiting friends.Concept 2Concept 2 – A medium-cost sporty compact – A medium-cost sporty compact appealing to young people.appealing to young people.Concept 3Concept 3 – An inexpensive subcompact “green” – An inexpensive subcompact “green” car, appealing to environmentally conscious car, appealing to environmentally conscious people who want practical transportation and low people who want practical transportation and low pollution.pollution.Concept 4Concept 4 – A high-end SUV appealing to those – A high-end SUV appealing to those who love the space SUVs provide but hate the who love the space SUVs provide but hate the poor gas mileage.poor gas mileage.

1717 of 55 of 55

Concept TestingConcept Testing

Testing new product concepts with groups of target Testing new product concepts with groups of target consumers. consumers. Products may be presented physically or described. Products may be presented physically or described. Some marketers use virtual reality programs. Physical Some marketers use virtual reality programs. Physical tests are the most reliable.tests are the most reliable.

For Concept 3:For Concept 3:An efficient, fun-to-drive, fuel-cell powered electric An efficient, fun-to-drive, fuel-cell powered electric

subcompact car that seats four. This methanol-powered subcompact car that seats four. This methanol-powered high-tech wonder provides practical and reliable high-tech wonder provides practical and reliable transportation with virtually no pollution. It goes up to 90 transportation with virtually no pollution. It goes up to 90 mph and, unlike battery-powered electric cars, it never mph and, unlike battery-powered electric cars, it never needs recharging. It’s priced, fully-equipped, at $20,000.needs recharging. It’s priced, fully-equipped, at $20,000.

1818 of 55 of 55

Questions for Target Consumers of Questions for Target Consumers of Concept Test to AnswerConcept Test to Answer

Do you understand the concept of a fuel-cell powered Do you understand the concept of a fuel-cell powered electric car?electric car?Do you believe the claims about the car’s performance?Do you believe the claims about the car’s performance?What are the major benefits of the fuel-cell powered What are the major benefits of the fuel-cell powered electric car compared to a conventional car?electric car compared to a conventional car?What improvements would you suggest?What improvements would you suggest?For what uses would you prefer a fuel-cell powered For what uses would you prefer a fuel-cell powered electric car to a conventional car?electric car to a conventional car?What would be a reasonable price for such a car?What would be a reasonable price for such a car?Who would be involved in your decision to buy such a Who would be involved in your decision to buy such a car? Who would drive it?car? Who would drive it?Would you buy such a car? (definitely, probably, Would you buy such a car? (definitely, probably, probably not, definitely not) probably not, definitely not)

1919 of 55 of 55

Studying the ResultsStudying the Results

Answers to the questions give marketers Answers to the questions give marketers insight as to which concept has the insight as to which concept has the strongest appeal. They can use the strongest appeal. They can use the answers to the ‘would you buy’ question to answers to the ‘would you buy’ question to project sales for the entire target audience.project sales for the entire target audience.

AcuPOLL http://www.acupoll.com/homenglish/pag1english3.html is a market research company that tests new products for client companies and rates them based on the results of the test.

2020 of 55 of 55

Marketing Strategy DevelopmentMarketing Strategy Development

Now that we have chosen a concept, we can design an Now that we have chosen a concept, we can design an initial marketing strategy for introducing the product to initial marketing strategy for introducing the product to market.market.

Part One Describes:Part One Describes:– The target market, planned product positions. It also contains The target market, planned product positions. It also contains

sales, market share, and profit goals.sales, market share, and profit goals.

Part Two Outlines the First Year’s:Part Two Outlines the First Year’s:– Product’s planned price, distribution, and marketing budgetProduct’s planned price, distribution, and marketing budget

Part Three Describes Long-Run:Part Three Describes Long-Run:– Sales and profit goals, marketing mix strategySales and profit goals, marketing mix strategy

2121 of 55 of 55

Marketing Strategy for the Electric CarMarketing Strategy for the Electric Car

Part 1 – target market, positioning, slaes market Part 1 – target market, positioning, slaes market share, profit goals for first few years:share, profit goals for first few years:

Target market is younger, well-educated, moderate Target market is younger, well-educated, moderate to high income individuals, couples or small to high income individuals, couples or small families seeking practical environmentally families seeking practical environmentally responsible transportation. The car will be responsible transportation. The car will be positioned as more economical to operate, more positioned as more economical to operate, more fun to drive, and less polluting than other cars. It fun to drive, and less polluting than other cars. It is also less restricting than battery powered is also less restricting than battery powered electric cars which frequently have to be charged. electric cars which frequently have to be charged. The company aims to sell 100,000 cars in the first The company aims to sell 100,000 cars in the first year, at a loss of not more than $15 million. In the year, at a loss of not more than $15 million. In the second year, the company will aim to sell 120,000 second year, the company will aim to sell 120,000 cars and profit $25 million.cars and profit $25 million.

2222 of 55 of 55

Marketing Strategy for the Electric CarMarketing Strategy for the Electric Car

Part 2 – price, distribution, marketing budget:Part 2 – price, distribution, marketing budget:The vehicle will be offered in three colors – red, white, The vehicle will be offered in three colors – red, white,

and blue. It will have optional air conditioning and and blue. It will have optional air conditioning and power drive features. It will sell at a retail price of power drive features. It will sell at a retail price of $20,000 with 15% off the list price to dealers. $20,000 with 15% off the list price to dealers. Dealers who sell more than 10 cars per month will Dealers who sell more than 10 cars per month will get an additional 5% discount on each car sold that get an additional 5% discount on each car sold that month. An advertising budget of $50 million will be month. An advertising budget of $50 million will be split 50-50 between national and local advertising. split 50-50 between national and local advertising. Advertising will emphasize the car’s fun spirit and Advertising will emphasize the car’s fun spirit and low emissions. During the first year, $100,000 will low emissions. During the first year, $100,000 will be spent on market research to find out who is be spent on market research to find out who is buying and their levels of satisfaction.buying and their levels of satisfaction.

2323 of 55 of 55

Marketing Strategy for the Electric CarMarketing Strategy for the Electric Car

Part 3 – long run:Part 3 – long run:

DaimlerChrysler intends in the long run to capture DaimlerChrysler intends in the long run to capture a 3% share in the total auto market, realizing a a 3% share in the total auto market, realizing a 15% net return on investment. To achieve this, 15% net return on investment. To achieve this, product quality will start high and improve over product quality will start high and improve over time. Price will be raised in the second and third time. Price will be raised in the second and third years if competition permits. The total years if competition permits. The total advertising budget will rise each year by about advertising budget will rise each year by about 10%. Market research will be reduced to 10%. Market research will be reduced to $60,000 per year after the first year.$60,000 per year after the first year.

2424 of 55 of 55

Business AnalysisBusiness Analysis

Involves a review of the sales, costs, and profit Involves a review of the sales, costs, and profit projections to assess fit with company objectives.projections to assess fit with company objectives.

– To estimate sales, the company will look at sales of To estimate sales, the company will look at sales of similar items and conduct surveys to gather market similar items and conduct surveys to gather market opinion. Generally it will come up with a minimum and opinion. Generally it will come up with a minimum and maximum range of sales to asses risk.maximum range of sales to asses risk.

– Then the company can assign costs (marketing, R&D, Then the company can assign costs (marketing, R&D, operations, accounting, and finance costs).operations, accounting, and finance costs).

If yes If yes move to the product development phase. move to the product development phase.

2525 of 55 of 55

Product DevelopmentProduct Development

Develop concept into physical productDevelop concept into physical productCalls for large jump in investmentCalls for large jump in investmentPrototypes are made (can take days, weeks, Prototypes are made (can take days, weeks, even years)even years)Prototype must have correct physical features Prototype must have correct physical features and convey psychological characteristicsand convey psychological characteristics

– Prototypes have to undergo many tests to ensure Prototypes have to undergo many tests to ensure performance and safetyperformance and safety

New product testing is often conducted by volunteers in New product testing is often conducted by volunteers in focus groups or individually. Often subjects are paid to focus groups or individually. Often subjects are paid to test new products. At Gillette, employees can volunteer test new products. At Gillette, employees can volunteer to test new products.to test new products.

2626 of 55 of 55

Test MarketingTest Marketing

Once the product passes initial testing Once the product passes initial testing it moves it moves on to Test Marketingon to Test Marketing

Product and entire marketing program Product and entire marketing program (pricing, positioning distribution, advertising, (pricing, positioning distribution, advertising, etc.) are introduced in a more realistic market etc.) are introduced in a more realistic market setting.setting.

Not needed for all products.Not needed for all products.

Can be expensive and time consuming, but Can be expensive and time consuming, but better than making major marketing mistake.better than making major marketing mistake.

2727 of 55 of 55

CommercializationCommercialization

CommercializationCommercialization – introducing a new product – introducing a new product into the marketinto the market

Must decide on Must decide on timingtiming (i.e., when to introduce (i.e., when to introduce the product).the product).Must decide on Must decide on wherewhere to introduce the product to introduce the product (e.g., single location, state, region, nationally, (e.g., single location, state, region, nationally, internationally).internationally).Must develop a Must develop a market rolloutmarket rollout plan. Small plan. Small companies might enter cities one by one, companies might enter cities one by one, while larger companies might enter the while larger companies might enter the national market more quickly or all at once.national market more quickly or all at once.

2828 of 55 of 55

Organizing New-Product DevelopmentOrganizing New-Product DevelopmentSequential Approach: each stage completed before moving Sequential Approach: each stage completed before moving to next phase of the project.to next phase of the project.

Simultaneous Approach: Cross-functional teams work Simultaneous Approach: Cross-functional teams work through overlapping steps to save time and increase through overlapping steps to save time and increase effectiveness. – Riskier - Must be careful not to rush and effectiveness. – Riskier - Must be careful not to rush and lose product quality.lose product quality.

IdeaIdeaGenerationGeneration

IdeaIdeaScreeningScreening

Concept Concept Development Development

& Testing& Testing

Marketing Marketing Strategy Strategy

DevelopmentDevelopment

Business Business AnalysisAnalysis

Product Product DevelopmentDevelopment

Test Test MarketingMarketing

CommercializationCommercialization

2929

Video CaseVideo Case

eGo VehicleseGo Vehicles(14 minutes)(14 minutes)

http://www.egovehicles.com/

3030 of 55 of 55

ThoughtsThoughtsHow does eGo’s strategy differ from say How does eGo’s strategy differ from say Coca-Cola introducing a new flavor to the Coca-Cola introducing a new flavor to the market?market?

– The marketing of beverages are fairly The marketing of beverages are fairly straightforward – consumers have a basic straightforward – consumers have a basic understanding of the use of the product, and understanding of the use of the product, and marketers can use existing channels of marketers can use existing channels of distribution. A brand new product, such as eGo distribution. A brand new product, such as eGo has to pave the way by educating consumers has to pave the way by educating consumers about the product and creating its own distribution about the product and creating its own distribution channels.channels.

Who is eGo’s likely target market?Who is eGo’s likely target market?

3131 of 55 of 55

Stages in The Product Life CycleStages in The Product Life CycleProduct developmentProduct development – finding and developing a new – finding and developing a new product – no sales yet and high costsproduct – no sales yet and high costs

Introduction Introduction – slow sales growth as the product is – slow sales growth as the product is introduced in the market – due to heavy expenses, introduced in the market – due to heavy expenses, profits are not realized yetprofits are not realized yet

GrowthGrowth – rapid market acceptance and increasing – rapid market acceptance and increasing profitsprofits

MaturityMaturity – sales growth slows down because the – sales growth slows down because the product has been accepted by most potential buyers. product has been accepted by most potential buyers. Profits level off or decline because of increased Profits level off or decline because of increased marketing expenses to defend against competitionmarketing expenses to defend against competition

DeclineDecline – sales fall off and profits drop – sales fall off and profits drop

3232 of 55 of 55

Stages in The Product Life CycleStages in The Product Life Cycle

Many products never make it past introduction. Others stay in Maturity for a long time. Some products enter the decline stage and later come back to the growth stage through strong promotion or repositioning.

3333 of 55 of 55

Stages in the Adoption Process Stages in the Adoption Process (from chapter 5 – buyer behavior)(from chapter 5 – buyer behavior)

Time of adoption of innovations

2.5% Innovators 13.5%

Early Adopters

34%Early

Majority

34%Late

Majority16%Laggards

X - 2σ X - σ X X + σ

Try new ideas at some risk.

Opinion Leaders – adopt new ideas early but carefully

Before the average person

Only after majority has tried it

Suspicious of change

Introduction Growth Maturity Decline

3434 of 55 of 55

Product Life Cycle ApplicationsProduct Life Cycle ApplicationsProduct classProduct class (ex:(ex: gas-powered cars) has gas-powered cars) has the longest life cycle – stays in the mature the longest life cycle – stays in the mature stage for a very long timestage for a very long timeProduct formProduct form (ex: SUVs) tends to have the (ex: SUVs) tends to have the standard PLC shape – pass through each standard PLC shape – pass through each of the stages in the of the stages in the BrandBrand (ex: Ford Explorer)(ex: Ford Explorer) can change can change quickly because of changing competitive quickly because of changing competitive attacks and responses attacks and responses

3535 of 55 of 55

Product Life Cycle ApplicationsProduct Life Cycle Applications

StyleStyle is a basic and distinctive mode of expression (ex: is a basic and distinctive mode of expression (ex: clothing: formal, casual) – once a style is born it may last clothing: formal, casual) – once a style is born it may last for generations passing in and out of voguefor generations passing in and out of vogueFashionFashion is a popular style in a given field (ex: business is a popular style in a given field (ex: business casual) – tends to grow slowly, remain popular for a casual) – tends to grow slowly, remain popular for a while and decline slowlywhile and decline slowlyFadFad is a fashion that enters quickly, is adopted quickly, is a fashion that enters quickly, is adopted quickly, and declines fast (ex: lava lamps, Pokeman)and declines fast (ex: lava lamps, Pokeman)

Sal

es

Time

Sal

es

Time

Sal

es

Time

Style Fashion Fad

3636 of 55 of 55

Practical Problems of PLCPractical Problems of PLC

Hard to identify which stage of the PLC the Hard to identify which stage of the PLC the product is in and when the product will product is in and when the product will move to the next stage.move to the next stage.

Hard to identify factors that affect Hard to identify factors that affect product’s movement through stages.product’s movement through stages.

Hard to forecast sales level, length of each Hard to forecast sales level, length of each stage, and shape of PLC.stage, and shape of PLC.

Strategy is both a cause and result of the Strategy is both a cause and result of the PLC.PLC.

When used carefully, the PLC can help in developing good marketing strategies for different stages of the product life cycle.

3737 of 55 of 55

Stages in The Product Life CycleStages in The Product Life Cycle

Product development Product development

IntroductionIntroduction

GrowthGrowth

MaturityMaturity

Decline Decline

3838 of 55 of 55

Marketing ExampleMarketing Example

http://www.apple.com/ipod/

3939 of 55 of 55

Introduction Stage of PLCIntroduction Stage of PLCSales: lowSales: low

Costs: high cost per customerCosts: high cost per customer

Profits: negativeProfits: negative

Marketing Objective: create product awareness and trialMarketing Objective: create product awareness and trial

Product: offer a basic product – generally want to educate Product: offer a basic product – generally want to educate consumers without confusing them – can add additional consumers without confusing them – can add additional features laterfeatures later

Price: use cost-plus formula (little more than break-even)Price: use cost-plus formula (little more than break-even)

Distribution: Attract distributors – Consumers drive the Distribution: Attract distributors – Consumers drive the demand demand causing distributors to supply the product causing distributors to supply the product

Promotion: heavy to inform consumer and entice product Promotion: heavy to inform consumer and entice product trial – aim the promotion toward early adopterstrial – aim the promotion toward early adopters

4040 of 55 of 55

Stages in The Product Life CycleStages in The Product Life Cycle

Product development Product development

IntroductionIntroduction

GrowthGrowth

MaturityMaturity

Decline Decline

4141 of 55 of 55

Marketing ExampleMarketing Example

4242 of 55 of 55

Growth Stage of PLCGrowth Stage of PLCSales: rapidly risingSales: rapidly rising

Costs: average cost per customerCosts: average cost per customer

Profits: risingProfits: rising

Marketing Objective: maximize market share – build Marketing Objective: maximize market share – build awareness and interest in the mass marketawareness and interest in the mass market

Product: offer extension, service, warrantyProduct: offer extension, service, warranty

Price: penetration strategy – remain where they are Price: penetration strategy – remain where they are or fall slightly to competeor fall slightly to compete

Distribution: increasing distributionDistribution: increasing distribution

Promotion: depends on the market situation – Promotion: depends on the market situation – generally reduce to take advantage of demand generally reduce to take advantage of demand (unless competition is fierce)(unless competition is fierce)

4343 of 55 of 55

Stages in The Product Life CycleStages in The Product Life Cycle

Product development Product development

IntroductionIntroduction

GrowthGrowth

MaturityMaturity

Decline Decline

4444 of 55 of 55

Marketing ExampleMarketing Example

4545 of 55 of 55

Maturity Stage of PLCMaturity Stage of PLCSales: peakSales: peak

Costs: low cost per customerCosts: low cost per customer

Profits: high but may drop due to competition and Profits: high but may drop due to competition and R&D spending to improve product R&D spending to improve product

Marketing Objective: maximize profits while defending Marketing Objective: maximize profits while defending market share – Usually a lot of competition in this market share – Usually a lot of competition in this stage - stress brand differences and benefitsstage - stress brand differences and benefits

Product: diversify brand and modelsProduct: diversify brand and models

Price: match or beat competitorsPrice: match or beat competitors

Distribution: keep building more intensive distributionDistribution: keep building more intensive distribution

Promotion: Increase to encourage brand switchingPromotion: Increase to encourage brand switching

4646 of 55 of 55

Mature StageMature Stage

How can we increase consumption (sales How can we increase consumption (sales and profits) in this stage?and profits) in this stage?

4747 of 55 of 55

Maturity Stage of the PLCMaturity Stage of the PLC

Modifying the Market: Increase the consumption of the Modifying the Market: Increase the consumption of the current product.current product.How?How?

– Look for new users and market segmentsLook for new users and market segments– Reposition the brand to appeal to larger or faster-growing Reposition the brand to appeal to larger or faster-growing

segmentsegment– Look for ways to increase usage among present customersLook for ways to increase usage among present customers

http://www.wd40.com/Brands/wd40.cfm

4848 of 55 of 55

Maturity Stage of the PLCMaturity Stage of the PLC

Modifying the Product: Changing characteristics such Modifying the Product: Changing characteristics such as quality, features, or style to attract new users and as quality, features, or style to attract new users and to inspire more usage.to inspire more usage.How?How?

– Improve durability, reliability, speed, tasteImprove durability, reliability, speed, taste– Improve styling and attractivenessImprove styling and attractiveness– Add new featuresAdd new features– Expand usefulness, safety, convenienceExpand usefulness, safety, convenience

http://www.heinz.com/jsp/new_prod.jsp

4949 of 55 of 55

Maturity Stage of the PLCMaturity Stage of the PLC

Modifying the Marketing Mix: Improving sales by Modifying the Marketing Mix: Improving sales by changing one or more marketing mix elements.changing one or more marketing mix elements.How?How?

– Cut pricesCut prices– Launch a better ad campaignLaunch a better ad campaign– Move into larger market channelsMove into larger market channels– Offer new or improved services to buyersOffer new or improved services to buyers

http://www.spammobile.com/

5050 of 55 of 55

Stages in The Product Life CycleStages in The Product Life Cycle

Product development Product development

IntroductionIntroduction

GrowthGrowth

MaturityMaturity

Decline Decline

5151 of 55 of 55

Marketing ExampleMarketing Example

Blockbuster Ticker: BBIBlockbuster Ticker: BBI

How have their ads changed?How have their ads changed?

http://www.ifilm.com/player/?ifilmId=2419643&pg=superbowl2002&skin=default&refsite=default&mediaSize=default&context=product&launchVal=1&data=null&realId=2419643&bw=300&mt=WMP

5252 of 55 of 55

Decline Stage of PLCDecline Stage of PLCSales: decliningSales: declining

Costs: low cost per customerCosts: low cost per customer

Profits: decliningProfits: declining

Marketing Objective: reduce expenditures and milk Marketing Objective: reduce expenditures and milk the brand - just try to retain the hard-core loyals the brand - just try to retain the hard-core loyals

Product: phase out weak itemsProduct: phase out weak items

Price: cut pricePrice: cut price

Distribution: selective--phase out unprofitable outletsDistribution: selective--phase out unprofitable outlets

Promotion: reduce to minimal levelPromotion: reduce to minimal level

5353 of 55 of 55

Decline Stage of PLCDecline Stage of PLC

Management may decide to drop the product altogether (selling it to another firm or simply liquidating it).

Alternatively, it may decide to maintain it hoping that competitors will leave the market.

•P&G remained in the liquid soap business while competitors withdrew.

Management may decide to reposition the brand and bring it back to the growth stage. http://www.crackerjack.com/home.htm

5454 of 55 of 55

Are there any Age-Defying Products?Are there any Age-Defying Products?

BarbieBarbie

Crayola CrayonsCrayola Crayons

These products have remained in the These products have remained in the marketplace for generations. marketplace for generations.

How did they do it?How did they do it?

5555 of 55 of 55

They may seem like they defy the PLC, but actually, Barbie They may seem like they defy the PLC, but actually, Barbie continually adds new dolls and collections (product lines). continually adds new dolls and collections (product lines).

Crayola has added new colors, shapes, sizes and packages. Crayola has added new colors, shapes, sizes and packages. Crayola also extended the brand to new markets (scissors, paints, Crayola also extended the brand to new markets (scissors, paints, pens, stamps, stickers, etc.)pens, stamps, stickers, etc.)

Bottom Line:Bottom Line:– To stay in business, companies must adapt their strategies To stay in business, companies must adapt their strategies

to a constantly changing environment.to a constantly changing environment.

http://www.barbiecollector.com/showcase/

http://www.crayolastore.com/category.asp?NAV=DRAW