Product Life Cycle (PLC)I. Why? 5 Causal Reasons

1. Fundamental Market ChangesEx. Health Foods Sneakers Brown Shoes Women’s Professional Wear

2. Technical DevelopmentsEx. Hi Tech Products HD TV Internet

3. Company or Competitor DecisionsEx. MGM Talking Movies Dolby Sound Betamax

Netscape & Explorer4. Complementary Product Changes

Software & HardwareGas Prices & Autos

5. Regulatory Changes

II. Long Term Growth1. Income Elastic2. Education/Knowledge Elastic

III. Fashion Cycle“Seeds of its own destruction”

IV. Managing the PLC:1. Modify the mix

A. Why?a. Needs Changeb. Competitionc. Technologyd. Growth goals of company

B. How?a. Modify Productb. Modify Market

Same Customers-New Uses- Increase Use

New Customers-Non Users-Competitor Customers

c. Reposition Product

- Reach New MarketEx. Dannon Yop New balance Carnival Cruise Line- Catch a rising trend- Reaction to competitors success

2. Criteria Used for Evaluating Introduction of New Offeringsa. Consistent with existent products

- Substitute or complement- Cannibalism- Same sales-force channels

b. Does firm have resources to introduce and sustain?Ex. 1. Gillette $200 million on R&D for Sensor Razor 2. R.C. Cola

-First can in 1954- First diet cola in 1962- First caffeine cola in 1980

c. Does a new market niche exist?d. How profitable?

Extending the New Product Life Cycle

Marketers Can

Develop New ProductFeatures

Develop NewProduct Uses

Intensify Segmentation Efforts Aimed at Traditional Customers

Seek New Classes ofConsumers for Current Products

Seek New Classes of ConsumersFor Modified Products

Increase ConsumptionRates of Users

Change MarketingStrategy

How stages of the product life cycle relate to a firm’s marketing objectives and marketing mix actions

Marketing Objective

Gain Awareness

Stress Differentiator

Maintain Brand

LoyaltyHarvesting Deletion

Competition None Growing Many Reduced

Product One More VersionsFull Product Line Best Sellers

PriceSkimming or Penetration

Gain Share, deal

Defend Share, Profit

Stay Profitable

PromotionInform, Educate

Stress Competitive Differences

Reminder Oriented

Minimal Promotion

Place (distribution) Limited More OutletsMaximum Outlets Fewer Outlets

Introduction Total Sales

Revenue Growth Maturity Decline

Stage of Product Life Cycle

Sale

s R

evenue o

r

Pro

fit Total Industry Profit

Strategy Dimension Introduction Growth Maturity Decline

Basic Objectives

Est. a market for product type; persuade early adopters to buy

Build sales and market share; develop preference to brand

Defend brands share of market; seek growth by luring customers from competitors

Limit costs or seek ways to revive sales and profits

Product

Provide high quality; select a good brand; get patent and/or trademark protection

Provide high quality; add services to enhance value

Improve quality; add features to distinquish brand from competitors

Continue providing high quality to maintain brand's reputation; seek ways to make the product new again

Price

Often high to recover development costs; sometimes low to build demand rapidly

Somewhat high because of heavy demand

Low, reflecting heavy competition

Low to sell off remaining inventory or high to serve a niche market

Placement or Distribution Limited number of channels

Greater number of channels to meet demand

Greater number of channels and more incentives to resellers

Limited number of channels

Promotion

Aimed at early adopters; messages designed to educate about product type; incentives such as samples and coupons to induce trial

Aimed at wider audience; messages focus on brand benefits; for consumer products, emphasis on advertising

Messages focus on differentiating brand from its competitors; heavy use of incentives such as coupons to induce buyers to switch brands

Minimal, to keep costs down

THE PRODUCT LIFE CYCLE’S IMPLICATIONS FOR MARKETING STRATEGY

Product Adoption and DiffusionDef. Process by which new products spread through the

target marketFive Adopter Categories:

1. Innovators (2.5%) -Venturesome and risk taking customers (buyers)

- Cutting edge firms- Commitment to modernization

2. Early Adopters (13.5%) - Buyers who emulate innovators3. Early Majority (34%) - Buyers who tend to avoid risk and

who make purchases carefully4. Late Majority (34%) - Buyers who avoid risk but are

cautious and skeptical about new ideas

5. Laggards (16%) - Comfortable with traditional products when they become well- established alternatives

Five categories and profiles of product adopters

Innovators (2.5%):Venturesome, higher

Educated, use multipleInformation sources

Laggards (16%):Fear of debt, neighbors

And friends areInformation sources

Late Majority (34%):Skeptical, below Average social

status

Early Majority (34%):Deliberate, manyInformal social

contact

Early Adopters (13.5%):Leaders in social

Setting, slightly aboveAverage education

Innovators

Early Adopters

Early Majority Late Majority

Laggards