1 Chapter 6 (§3.16) Product Life Cycle (PLC)

§3.16 Product Life Cycle 2 Product innovation  Product innovation is becoming increasingly important owing to rapid advancements in technology and successful product copying by competitors.

§3.16 Product Life Cycle 3 The importance of product innovation  Need for growth — products, like people, go through life cycles.  Increased consumer selectivity  Resources and environmental considerations — environmental factors will influence product decisions.

§3.16 Product Life Cycle 4 Development of new products  It has been said that nothing happens in business until somebody sells something. First there must be something to sell!

§3.16 Product Life Cycle 5 What is a ‘ new ’ product?  Products that are truly innovative. e.g. cure for cancer products that have no existing substitutes.  Innovative replacements for existing products. Product is significantly different from existing products, e.g. electronic books-school bag- library.  Imitative products that are new to a particular company. Imitation products are new to that company, not to the market.

§3.16 Product Life Cycle 6 New product strategy  defending market share position  maintaining the company ’ s position as a product innovator  establishing a position in a new market.

§3.16 Product Life Cycle 7 Adding a new product!  Do enough people really want this product? Assess the demand for the new product.  Is there a financial fit for the firm?  Will it create environmental issues?  What is the present marketing structure?

§3.16 Product Life Cycle 8 New product adoption and diffusion  Adoption process — a set of successive decisions an individual or organisation makes before accepting an innovation.  Stages in the adoption process: awareness  interest  evaluation  trial  adoption  post-adoption confirmation.  Diffusion — the process by which an innovation is spread through a social system over time.

§3.16 Product Life Cycle 9 Adopter categories  Researchers have identified five categories of individual adopters for new products: 1. Innovators — 3% of the market 2. Early adopter — 13% of the market 3. Early majority — 34% of the market 4. Late majority — 34% of the market 5. Laggards — 16% the of market.  Non-adopters never accept the innovation.

§3.16 Product Life Cycle 10 The product life cycle (PLC)…1  Definition PLC is the stages that a product moves through from its introduction to the market to its disappearance from the market.  PLC is used for product planning.  PLC is reflected in profits and sales.  There are 4 stages of the PLC. Introduction Growth Maturity Decline

§3.16 Product Life Cycle 11 The product life cycle (PLC) … 2 Sales Profits Sales and profits($) DevelopmentIntroductionGrowthMaturityDecline

§3.16 Product Life Cycle 12  Products have a limited life  Products sales pass through distinct stages  Profits rise and fall at different stages  Products require different marketing, financial, manufacturing, purchasing, and human resource strategies in each stage The product life cycle (PLC) … 3

§3.16 Product Life Cycle 13 Product life cycle stages…1  Introduction stage profits are negative or low prices are high no awareness high cost—large amounts of advertising the most critical stage.

§3.16 Product Life Cycle 14 Case ：  Starbucks Coffee Flank defenses strategy 1. Trying to push out innovative non-coffee-related products, such as ice cream 2. Selling its premium beans in supermarket 3. Getting into the restaurant business

§3.16 Product Life Cycle 15 PLC stages…2  Growth stage trial of the product increase in distribution competitors enter the market profits increase.

§3.16 Product Life Cycle 16 PLC stages…3  Maturity stage lower prices owing to competition persuasive promotion takes place product modification  Quality improvement  Feature improvement

§3.16 Product Life Cycle 17 PLC stages…4  Decline stage new products replace old ones sales and profits decline products are withdrawn from the market.

§3.16 Product Life Cycle 18 Planned obsolescence  The objective is to make an existing product out of date, thus increasing the market for replacement products.  Some firms plan obsolescence as part of their strategic marketing plan.  Eg. McDonald hamburgers

§3.16 Product Life Cycle 19 PLC Useful or Useless?  Useless Many external/uncontrollable factors influence life cycle Not empirically supported

§3.16 Product Life Cycle 20 PLC Useful or Useless?  Useful Describes what may happen; doesn ’ t prescribe what will happen Allows strategic planning for products Intuitively all products go through life cycle stages Allows for managing the mix over time/life cycle stages

§3.16 Product Life Cycle 21 Exercise ( PLC ) Which stage are they in?  Cell phone  Internet Telephones  Palmtop computers  Fax machines  LC (liquid crystal) TV  Color TV

§3.16 Product Life Cycle 22 KEYS: Exercise ( PLC )  Cell phone –– Growth  Internet Telephones –– Introduction  Palmtop computers –– Growth  Fax machines –– Maturity  LC (liquid crystal) TV –– Growth  Color TV –– Decline