PRODUCT LIFE CYCLE STRATEGIES

Product life cycle has five distinct stages Product development : Begins when the company finds and develops a new product idea. At this stage sales are zero, companys investment costs mount Introduction : A period of slow sales growth as product is introduced in the market. Profits are non existent at this stage because product introduction cost are high Growth : A period of rapid market acceptance and increasing profits Maturity : A period of slowdown in sales growth as product gets acceptance by almost all potential buyers. Profits level off or decline because of increased marketing outlay to defend the product against competition Decline : A period when sales fall off and profits drop

PRODUCT LIFE CYCLE STRATEGIES

Exceptions in product life cycle stages

Some products are introduced and die quickly Some products continue to stay in the maturity stage for a long time Some enter the decline stage and are cycled back into the growth stage through strong promotion or repositioning

PRODUCT LIFE CYCLE STRATEGIES

Product Life Cycle (PLC) concept can describe a product class (Laundry Soap), a product form (Powered Detergents) or a brand (Surf Excel) PLC concept applies differently in each case Product classes have the longest life cycles sales of many product classes stay in the mature stage for a long time Product forms in contrast tend to have the standard PLC shape. Product forms such as dial telephones, Videos, Computers pass through a regular history of introduction, rapid growth, maturity and decline. A specific brands life cycle can change quickly because of changing competitive attacks and responses

PRODUCT LIFE CYCLE STRATEGIES

PLC concept can also be applied to What are known as styles,

fashion and fads

Style : basic distinct mode of expression. Styles appear in clothing (formal, casual, religious) ; art (realistic, surrealistic, abstract); homes (bungalows, flats, duplex).
1.

Style once invented lasts for generations, passing in and out of vogue. Style has a cycle showing several periods of renewed interest.

2.

PRODUCT LIFE CYCLE STRATEGIES

Fashion : Currently accepted or popular style in a given field. 1. The more formal business attire look of corporate dress of the 1980sad early 1990s has given way to the business casual look of today. Fashion tends to grow slowly , remain popular for a while and then decline slowly.

2.

PRODUCT LIFE CYCLE STRATEGIES

Fads : they are fashions that enter quickly, are adopted with great zeal, peak early and decline very quickly.

They last only for a short time and tend to attract only a limited following.

Example: Rubiks Cube, Ronaldo hair style,

PRODUCT LIFE CYCLE STRATEGIES

PLC concept is applied by marketers as a useful framework for describing how products and markets work.

Using the PLC concept for forecasting product performance or developing marketing strategies present practical problems.
Managers have trouble identifying which stage which stage of the PLC the product is in, pinpointing when the product moves into the next stage, determining the factors responsible at each stage. Using PLC concept for developing marketing strategies can be difficult because strategy can be both a cause an the result of the products life cycle Yet, when used carefully, the PLC concept an help in developing good marketing strategies for different stages of the PLC.

PRODUCT LIFE CYCLE STRATEGIES

THE INTRODUCTION STAGE Starts when the product is first launched Takes time and the sales growth is slow Profits are negative or low as sales are low and distribution and promotion expenses are high As market is not ready to accept product refinement at this stage the firm produces a basic version of the product Selling is focused on those buyers who are ready to buy The market pioneer must choose a launch strategy consistent with the intended product positioning It should realize that it is the first step in the total marketing plan for the PLC If pioneer uses launch strategy to make a killing it sacrifices long revenue for short term gain As pioneer moves to later stages it will have to continually formulate new pricing , promotion and other marketing strategies.

PRODUCT LIFE CYCLE STRATEGIES

THE GROWTH STAGE If the new product satisfies the market, it will enter he growth stage. Sales will start climbing quickly. Early adopters will continue to buy, later buyers will start following their lead especially if they hear favourable word of mouth New competitors may now make an entry attracted by the profit opportunities by adding new features Market will now expand Increasing competition leads to an increase in number of distribution outlets Prices remain where they are or fall only slightly Promotion spending may be the same or slightly higher Goal is educating the customers and meeting competition Profits increase as promotion costs are over large volumes and unit manufacturing costs fall

PRODUCT LIFE CYCLE STRATEGIES

THE GROWTH STAGE The firm uses several strategies to sustain rapid growth as long as possible It improves product quality and adds new product features and models It enters new market segments and develops new distribution channels Shifts some advertising from building product awareness to product conviction and purchase It lowers product prices to at the right time to attract more buyers At his stage the firm faces a trade off between high market share and high current profit By spending a lot of money on product improvement, promotion, and distribution the firm can capture a dominant position In doing so it gives up maximum current profit which it hopes to make up in the next stage

PRODUCT LIFE CYCLE STRATEGIES

THE MATURITY STAGE At some point of time the products sales growth slows down and the product enters the maturity stage This stage lasts longer than the previous stages The slowdown in sales growth results in many producers with many products to sell The overcapacity in the market leads to greater competition Competitors begin marking down prices, increasing their advertising and sales promotion The R&D budgets are increased to find better versions of the product These steps lead to a drop in profit Weaker competitors start dropping out (decline) The market eventually contains only well established competitors Most successful products are in a stage of continuous evolution to meet changing customer needs and preferences

PRODUCT LIFE CYCLE STRATEGIES

THE MATURITY STAGE At this stage firms may also chose to modify he market , the product or he marketing mix In modifying the market the firm tries to increase the consumption of the current market It looks for new users and market segments. Looks for ways to increase usage among present customers The firm may also try modifying the product by changing the characteristics such as quality, features, or style to attract the new users and inspire more usage It may improve the products quality and performance, its durability, reliability, speed and taste The firm can also try modifying the marketing mix to improve sales by changing one or more marketing mix elements. Can cut prices to attract new users and competitors customers. Better ad campaigns, aggressive sales promotion, trade deals. New and improved services.

PRODUCT LIFE CYCLE STRATEGIES

THE DECLINE STAGE At this stage sales of most product forms and brands eventually dip. Decline may be slow or rapid Sales may plunge to zero or they may drop to a low level where they continue for many years Sales decline may be due to technological advances, shifts in consumer tastes, and increased competition As sales and profits decline some firms withdraw from the market Those remaining prune their product offering, drop smaller market segments and marginal trade channels Some firms cut the promotion budget and reduce the prices further Carrying a weak product is costly for a firm Products failing reputation can cause customer concerns about firm and its other products Keeping a weak product delays the search for replacements, creates a lopsided product mix, hurts current profits, weakens companys foothold on the future.

PRODUCT LIFE CYCLE STRATEGIES

THE DECLINE STAGE At this stage a firm needs to pay more attention to the ageing products . The firms task is to identify those products in the decline stage by regularly reviewing sales, market share, costs and profit trends The firms has to decide whether to maintain, harvest or drop each of these declining products Firm may decide to maintain the brand in the hope that competitors will leave the industry May also decide to reposition or reformulate the brand in the hope of moving it back to the growth stage Firm may decide to harvest the product, which means reducing various costs (plant and equipment, maintenance, R&D, advertising, sales force) and hoping that sales hold up. Harvesting, if successful, increases firms profit in the short run Firm may also decide to drop the product from its line May sell it to another firm or liquidate it at salvage value