Date post: | 04-Apr-2018 |
Category: |
Documents |
Upload: | harshit-raj-karnani |
View: | 229 times |
Download: | 0 times |
of 12
7/30/2019 Session 14 - MABD
1/12
12/16/2012 1
Product Life Cycle
GrowthIntroduction Maturity Decline
Sales
Profits
Time
7/30/2019 Session 14 - MABD
2/12
12/16/2012 2
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.
7/30/2019 Session 14 - MABD
3/12
12/16/2012 3
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.
7/30/2019 Session 14 - MABD
4/12
12/16/2012 4
Product Life Cycle
Stages of PLC
7/30/2019 Session 14 - MABD
5/12
12/16/2012 5
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.
7/30/2019 Session 14 - MABD
6/12
12/16/2012 6
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.
7/30/2019 Session 14 - MABD
7/12
12/16/2012 7
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.
7/30/2019 Session 14 - MABD
8/12
12/16/2012 8
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.
7/30/2019 Session 14 - MABD
9/12
12/16/2012 9
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.
7/30/2019 Session 14 - MABD
10/12
12/16/2012 10
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
7/30/2019 Session 14 - MABD
11/12
12/16/2012 11
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
7/30/2019 Session 14 - MABD
12/12
12/16/2012 12