Product Life Cycle
The product lifecycle (PLC) Products need managing throughout their working lives.
This requires deciding:
What products should be created. The best time to launch them and introduce them to the public. How to capitalise on a products strengths and iron out any weaknesses.
When an older product is past its prime and needs modification or withdrawal from the market.
The product lifecycle (PLC)
Figure 8.1
The introduction phase
Priority is to generate widespread awareness of the product among the target segment and to stimulate trial of the product.
Innovative products need to build primary demand. Where introducing products to an existing market - offer to different segments of other additional benefits and features.
This phase has heavy demands on marketing resources.
Introduction Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales Costs Profits Marketing Objectives Low High cost per customer Negative Create product awareness and trial
Product
Price Distribution Promotion
Offer a basic product
Use cost-plus formula Build selective distribution Heavy to entice product trial
The growth phase
The aim here is for a rapid increase in sales.
Need to build as much brand preference and loyalty as possible.
Profits hopefully will rise rapidly during this phase.
Towards the end of this phase need to consider product modifications or improvements.
Growth Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales Costs
Profits Marketing Objectives Product Price Distribution Promotion
Rapidly rising Average cost per customer
Rising Maximize market share Offer extension, service, warranty Penetration strategy Build intensive distribution Reduce to take advantage of demand
The mature phase
The product achieves as much as it is going to.
Heavy price competition and increased marketing expenditure may be required to retain brand loyalty.
Distribution channels may need careful handling during this phase.
The market may be heavily saturated and largely stable.
Need to consider ways to rejuvenate products to stop them going into decline.
Maturity Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales Costs Profits Marketing Objectives Product Peak Low cost per customer High Maximize profits while defending market share Diversify brand and models
Price
Distribution Promotion
Match or best competitors
Build more intensive distribution Increase to encourage brand switching
The decline phase
Once a product goes into decline for market based reasons, it is almost impossible to stop it.
Decline can be as a result of a number of reasons, e.g. environmental or technological issues or poor management. This phase can absorb a great deal of management time for relatively little reward.
Marketers have to decide whether to slow the decline down or to milk the product.
Decline Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales Costs Profits Marketing Objectives Product Price Distribution Promotion Declining Low cost per customer Declining
Reduce expenditures and milk the brand
Phase out weak items Cut price
Selective: phase out unprofitable outlets
Reduce to minimum level
The shape of the PLC
Figure 8.2
Product Life Cycle Applications
Product class has the longest life cycle (e.g., gaspowered cars) Product form tends to have the standard PLC shape (e.g., dial telephone) Brand can change quickly because of changing competitive attacks and responses (e.g., Tide, Cheer) Style is a basic and distinctive mode of expression (e.g., formal clothing, Danish modern furniture) Fashion is a popular style in a given field (e.g., iPod) Fad is a fashion that enters quickly, is adopted quickly, and declines fast (e.g., Pokemons)
The International Life Cycle
Market for older technology tends to exist in less developed countries Manufacturing of older generation technology-e.g., Pentium I computers Resale of capital equipmente.g., DC 8 aircraft, old three part canning machines Some countries tend to be more receptive to innovation than others Leap frogging Going directly from old technology to the very newest, skipping intermediate step (e.g., wireless rather than wired technology) Shortening of product life cycles
Market evolution
Three components are involved in market evolution:
The way customers adopt new products and react to innovation.
The evolution and acceptance of technology.
The impact of competition.
Types of Innovations
Continuous--same product, just small improvements over time--e.g., typical automobile/stereo system model changes Dynamically continuous--product form changed, but function and usage are roughly similar--e.g., jet aircraft, ball point pen, word processor Discontinuous--entirely new product; usage approach changes (e.g., fax)
Some Diffusion Examples
ATMs
Easy observability Significant relative advantage
Fax machines
Network economies
Rap music
Low barriers to entry Spread to a new consumer group
Credit cards
Chicken-and-egg problem Jump-starting the cycle
Hybrid corn
Trialability Imitation
Faded, torn jeans
Fads Innovations do not have to be high tech
To Adopt or Not to Adopt: How Will Consumers Answer the Question?
Some causes of resistance to adoption
perceived risk--financial and social self image effort to implement and/or learn to use the product incompatibility inertia
Risk to expected benefit ratio (relative advantage) Product pricing Trialability Switching difficulties and learning requirements/ ease of use
Influences on the Speed of Diffusion
Adoption & Diffusion of Innovation Five categories and profiles of product adopters
Early adopters 13.5%
Innovators 2.5%
Early majority 34% Late majority 34%
Laggards 16%
Time Early majority:
Deliberate, many informal social contacts
Innovators:
Venturesome, higher educated, use multiple information sources
Laggards:
Fear of debt, neighbors and friends are information sources
Early adopters:
Leaders in social setting, slightly above average education
Late majority:
Skeptical, below average social status
Technological impact
Technology evolves over time.
Technological innovation can be used to extend the product lifecycle by helping to refresh and update a product. Technological innovation can also shorten a lifecycle by rendering a product obsolete.
Classifying competitors
Competitors can be classified according to their timing in entering a market, e.g.:
Pioneers.
Early imitators.
Early differentiators. Early nichers.
Late entrants.
Competitors and the PLC (1 of 3)
Table 8.1
Competitors and the PLC (2 of 3)
Table 8.1 cont.
Competitors and the PLC (3 of 3)
Table 8.1 cont.
Practical Problems of PLC
Hard to identify which stage of the PLC the product is in Hard to identify factors that affect products movement through stages Hard to pinpoint when the product moves to next stage
Hard to forecast sales level, length of each stage, and shape of PLC
Strategy is both a cause and result of the PLC
