Product Levels
• Core Product – basic form of the product
• Peripheral Services – expand core offering
– Facilitating products – enable customer to
consume core product
– Supporting products – additional services
bundled with core product to increase value
• Augmented Product – core product and
peripheral services
Product Life Cycle
• Introduction Stage
• Growth Stage
• Maturity Stage
• Decline Stage
Product Life Cycle
Sales and
Profits ($)
Sales
Profits
Time
Introduction Growth Maturity Decline
Developing Strategies for the
Product Life Cycle
1. Compiling historical data
2. Identifying competitive trends
3. Determining changes in the product-service mix
4. Studying the product life cycles of similar
products
5. Projecting sales
6. Locating current position on the life cycle
7. Developing strategies
Table 8.1 Characteristics and Strategies for Stages of the Product Life Cycle
Stage I Stage II Growth Stage III Maturity Stage IV Decline
Introduction
Characteristics
Sales Low Rapidly rising Peak Declining
Profits Negative Positive and increasing High, starting to decline Declining
Cash flow Negligible Moderate High Low
Customers Innovators and some Remaining early adopters Remaining early majority Laggards
early adopters and some early majority and late majority
Competitors Few Increasing in Many Declining in number
number and strength
Strategies
Marketing Create trial and Increase sales and Increase profits and Decrease market
awareness maximize market share maintain market share expenditures and maximize
objective short-term profits
Product Core product with Minor product changes Add attributes with positive Core product and key
some basic peripheral and extensions differentiation attributes
services
Distribution Selective Becoming intensive Intensive Selective
Price Set initial price Price to penetrate market Lower price to Increase Reduce price to maintain
based on costs and based on actual demand market share volume
estimated demand
Promotion Create trial and Build awareness and Use to differentiate among Reduce expenditures and
awareness through Interest and reduce sales major competitors focus on loyal customers
sales promotions promotions
Extending the Product Life Cycle
• Increasing sales to existing customers
• Increasing the number of users
• Finding new uses
Pros and Cons of the PLC
• Pros • Cons
– Use stage to improve – Doesn’t apply to many
marketing planning products and services
and strategy – May become a self-
development fulfilling prophecy
– Encourages firms to be – Hard to determine
more proactive stage/predict changes
– Helps firms recognize – May place too much
potential threats and faith in it; ignore other
opportunities factors
Wheel of Retailing
High End
Low End
Boston Consulting Group Matrix
High Star Question Mark
Market
Growth
Rate
Cash Cow Dog
Low
High Low
Relative Market Share
Menu Sales Mix Analysis
High Average number sold
Question
Item Stars Marks
Contribution
Average contribution
Margin margin
($) Cash
Cows Dogs
Low
High Low
Number Sold
Conflict between Operations and
Marketing
• Marketing • Operations
– Revenue driven – Cost driven
– Like variety and – Like standardization
options – Evaluated on lowering
– Evaluated on quotas costs and quality
and revenue control
Avoiding Conflict between
Operations and Marketing
• Transfer managers across functional areas
• Create cross-functional teams
• Cross-train associates to perform a wider
variety of tasks
• Delegate authority to individual units
• Institute gain-sharing programs
Strategies for Managing Supply
and Demand
• Modify price
• Develop programs to boost volume during
non-peak demand periods
• Shift demand through reservations
• Increase personnel efficiency
• Increase customer involvement in self-
service aspects of service delivery
© 2010 John Wiley & Sons, Inc.
