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