2. Product Life Cycle:
Implications for Business Strategy
Stage of the product life cycle
Introduction Growth Maturity Decline
Sales revenue
Total industry
sales revenue
or profit
Total industry profit
+
0
–
3. Introduction Stage of the
PLC
Sales
Sales Low sales
Low sales
Costs
Costs High cost per customer
High cost per customer
Profits
Profits Negative
Negative
Marketing Objectives Create product awareness
Create product awareness
Marketing Objectives
and trial
and trial
Product
Product Offer a basic product
Offer a basic product
Price
Price Use cost-plus
Use cost-plus
Distribution
Distribution Build selective distribution
Build selective distribution
Advertising
Advertising Build product awareness among
Build product awareness among
early adopters and dealers
early adopters and dealers
4. Growth Stage of the PLC
Sales
Sales Rapidly rising sales
Rapidly rising sales
Costs
Costs Average cost per customer
Average cost per customer
Profits
Profits Rising profits
Rising profits
Marketing Objectives
Marketing Objectives Maximize market share
Maximize market share
Product
Product Offer product extensions,
Offer product extensions,
service, warranty
service, warranty
Price
Price Price to penetrate market
Price to penetrate market
Distribution
Distribution Build intensive distribution
Build intensive distribution
Advertising
Advertising Build awareness and interest in
Build awareness and interest in
the mass market
the mass market
5. Maturity Stage of the PLC
Sales
Sales Peak sales
Peak sales
Costs
Costs Low cost per customer
Low cost per customer
Profits
Profits High profits
High profits
Marketing Objectives
Marketing Objectives Maximize profit while defending
Maximize profit while defending
market share
market share
Product
Product Diversify brand and models
Diversify brand and models
Price
Price Price to match or best
Price to match or best
competitors
competitors
Distribution
Distribution Build more intensive distribution
Build more intensive distribution
Advertising
Advertising Stress brand differences and
Stress brand differences and
benefits
benefits
6. Decline Stage of the PLC
Sales
Sales Declining sales
Declining sales
Costs
Costs Low cost per customer
Low cost per customer
Profits
Profits Declining profits
Declining profits
Marketing Objectives
Marketing Objectives Reduce expenditure and milk the
Reduce expenditure and milk the
brand
brand
Product
Product Phase out weak items
Phase out weak items
Price
Price Cut price
Cut price
Distribution
Distribution Go selective: phase out
Go selective: phase out
unprofitable outlets
unprofitable outlets
Advertising
Advertising Reduce to level needed to retain
Reduce to level needed to retain
hard-core loyal customers
hard-core loyal customers
7. PLC- Important Observations
Individual brands may not follow this pattern
– Sometimes a product may crash and not get to the maturity stage
Product Life Cycle - length of time at each stage - varies
– depends on the products
– can be a few months in each stage
– or it can be years
Generally speaking, due to the
– Competitive Environment
– Technological Environment
– The PLC is getting shorter
8. Extending Product Life Cycle
Market Modification:
– Increase Frequency of use by Present Customers
– Add New Users
– Find New Users
Product Modification:
– Change Product Quality or Packaging
9. Intro Stage
Competitive Situation
– Monopoly or Monopolistic Competition
- your company has no competition because you originated the
product first and are the first to get customers
Product:
– One or a few number of people selling the product
Place:
– Try to find good channels to get exposure
- maybe offer exclusive distribution rights
Promotion:
– AIDA begins
- informative type ads
Price:
– skimming or
penetration pricing
10. Growth Stage
Competitive Situation
– Monopolistic Competition or Oligopoly
- once the market grows, other vendors will want to get involved so you
will lose your monopoly position
Product:
– There are several companies selling so there is competition to make
the "best" product -many companies at this stage will add variations,
color changes, and new FABs to the product to make it more
competitive
- companies in the lead will also work to develop brand familiarity
Promotion:
– Competitive ads
Price:
– "meet the competition" pricing or price cutting
11. Maturity/ Decline Stage
Competitive Situation
– Monopolistic Competition or Oligolpoly or Pure Competition
- more and more vendors get involved as more
companies learn to make the product and people try to "cash in" on
the original idea
- because there are so many vendors, the supply/demand situation
will cause the price to drop and eventually the price will be so low,
nobody will want to make the product anymore because it will be
unprofitable
Product:
– Several companies make the product
- it will become a battle of the brands
Promotion:
– Discount price oriented ads
Price:
– Some companies drop out if they cannot afford to compete at a
lower price
Hinweis der Redaktion
Introduction. In this stage marketers spend heavily on promotions to inform the target market about the new product's benefits. Low or negative profits may encourage the company to price the product high to help offset expenses. companies can concentrate on skimming strategies to generate high profits now or on penetration strategies to build market share and dominant the market for larger profits once the market stabilizes. Product Life Cycle Strategies Product Life-Cycle Strategies This CTR relates to the material on pp. 289 and 293.
Product Life-Cycle Strategies This CTR relates to the material on pp. 289-290 and 293. Product Life-Cycle Strategies Growth. In this stage the company experiences both increasing sales and competition. Promotion costs are spread over larger volume and strategic decisions focus on growth strategies. Strategies include adding new features, improving quality, increasing distribution, and entering new market segments.
Product Life Cycle Strategies Maturity. In this stage the company must manage slower growth over a longer period of time. Strategic decisions made in the growth stage may limit choices now. Marketing managers must proactively seek advantage by either market modification to increase consumption, product modification to attract new users (quality, feature, and style improvements), or marketing mix modification in an attempt to improve competitive position. Product Life-Cycle Strategies This CTR relates to the material on pp. 290-292 and 293.
Product Life-Cycle Strategies This CTR relates to the material on pp. 292-293. Product Life Cycle Strategies Decline. In this stage the costs of managing the product may eventually exceed profits. Rate of decline is a major factor in setting strategy. Management may maintain the brand as competitors drop out, harvest the brand by reducing costs of support for short term profit increases, or drop the product (divest) altogether.