session 14 - mabd

7/30/2019 Session 14 - MABD

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Product Life Cycle

GrowthIntroduction Maturity Decline

Sales

Profits

Time


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Product Life Cycle

Ninety percent of the products we use today did not exist in

their current form five years ago.

Similarly, 90% of the products we will be using five years from

now do not currently exist.

With today's rapid changes in technology, almost every product

will undergo some sort of modification during its lifetime. This

leads us to the concept of Product Life Cycle.

Product Life Cycle is a path, a typical new product takes from

its inception to its discontinuation.

It describes the stages a product goes through from its

introduction, through its growth until it is mature and then finally

its decline.

Each stage of the product life cycle calls for a specially

designed marketing strategy and a different marketing mix.


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Product Life Cycle

Product life cycle Management is the succession of strategies

used by management as a product goes through its product

life cycle. The conditions in which a product is sold changes

over time and must be managed as it moves through its

succession of stages.

The fact that products have a life cycle imply the following:

The products have a limited life,

Product sales pass through distinct stages, each posingdifferent challenges, opportunities, and problems to the seller,

Profits rise and fall at different stages of product life cycle.

Products require different marketing, financial, manufacturing,purchasing, and human resource strategies in each life cyclestage.


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Product Life Cycle

Stages of PLC


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Product Life Cycle

Stage I: Introduction

In the introduction stage, the product is launched in the

market. The firm will create product awareness & develop a

market for the product. No profits are made at this time, as

the development costs have not yet been covered. The

impact on the marketing mix is as follows:

Product branding & quality level is established, and

intellectual property protection such as patents & trademarks

are obtained (ifits a new product).

Price skimming may be used if the product is a new

development & there are no competitors. Or pricing may be

low penetration pricing to build market share rapidly.

Informative advertising is used until the product becomes

known. Promotion is aimed at innovators & early adopters.

Limited product availability in few outlets/locations.


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Product Life Cycle

Stage II: Growth

In the growth stage, sales start to grow rapidly. Profits start tobe made as more and more customers buy the product. Butcompetitors see the opportunity and enter the market. Some

just copy the most successful product, or try to improve it to

compete better. Others try to refine their offerings to do abetter job of appealing to some target markets. The newentries result in much product variety. The impact on themarketing mix is as follows:

Product quality is maintained & additional features & supportservices may be added.

Price is reduced a little as new competitors have entered.

Promotion is focused on building the brand. Advertising ischanged to persuasive advertising to encourage brandloyalty.

Distribution channels are added as demand increases &customers accept the product.


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Product Life Cycle

Stage III: Maturity

In the Maturity stage, the competition gets tougher as aggressivecompetitors have entered the race for profits. Industry profits continue

to go down during maturity because promotion costs rise and

competitors continue to cut prices to attract more business. During the

maturity phase, less efficient firms can't compete with the increasing

pressure on prices and drop out of the market. The maturity phase of

the life cycle is the longest phase for most products. Sales grow at a

decreasing rate and then stabilize. Price wars and intense competitionoccur. At this point the market reaches saturation. Producers begin to

leave the market due to poor margins. The impact on the marketing

mix is as follows:

Product- features may be enhanced to differentiate the product from

that of competitors.

Price- competitive pricing or promotional pricing is used & there are alot of price wars.

Place- distribution becomes more intensive & incentives may be

offered to encourage preference over competing products.

Promotion- emphasizes product differentiation. A lot of persuasive

advertising is done. Many different approaches are used as

appropriate to the product. Sales promotion tools like premiums,

discounts, coupons, cash rebates, "free" goods, specialty advertising,and demonstrations are used.


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Product Life Cycle

Stage IV: Decline

In the Decline stage, new products replace the old. Pricecompetition from dying products becomes more vigorous, butfirms with strong brands may make profits until the endbecause they successfully differentiated their products. Theymay also keep some sales by appealing to the most loyalcustomers or those who are slow to try new ideas. Costs,because competition is still intense, continue to rise. Profits,as expected, continue to erode during this stage with littlehope of recovery. As sales decline, the firm has the followingoptions:

Maintain the product- possibly rejuvenating it by adding newfeatures & finding new uses.

Harvest the product- reduce costs & continue to offer it,probably to a loyal niche segment.

Discontinue the product- liquidating remaining inventory orselling to another firm that is willing to continue the product.


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Product Life Cycle

Extension Strategies

When the product reaches the end of maturity stage (i.e. thesaturation stage) of its product life cycle, the firm may stopsales from falling further by adopting extension strategies.

These are ways by which sales may be given a boost. Somepossible ways in which businesses might extend the life cycle

of their product are as follows:

Introduce new variations of the original product, e.g. achildrens version

Use a new advertising campaign

Sell into new markets, e.g. export the product to another

country Introduce a new, improved version of the product

Sell through additional, different retail outlets

Modify the 'augmented product'. Services can be addedwhere none existed before -- adding free set-up and deliveryare good examples.


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Product Life Cycle

Critical Analysis - PLCIn reality very few products follow such a prescriptive cycle.The length of each stage varies enormously. The decisions ofmarketers can change the stage, for example from maturity todecline by price-cutting. Not all products go through eachstage. Some go from introduction to decline. It is not easy totell which stage the product is in.

Strengths The product life cycle is considered as bothstraightforward and powerful model. By using the model asguidance, effective and timely marketing will take the productthrough each stage and can be planned in advance. Theproduct life cycle can also be use to alert the marketer, whenthe product is in the stages of growth and maturity, to

integrate extension strategies during this period to maintainthe high profit level.

Weaknesses It is hard to tell which stage the product is in,as there are constant short-term fluctuations due to externalfactors, consequently marketing actions could be taken tooearly or too late. By failing


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Product Life Cycle

Third generation mobile phonesE-conferencing

Iris-based personal identity cards

GPS DevicesSocial Networking

Smart cards

Desktop ComputersMosquito Coils

Cheque books

GrowthIntroduction Maturity Decline

LaptopsFax Machines

Credit Cards

Maturity


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session 14 - mabd

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