Product Life Cycle (PLC) I. Why? 5 Causal Reasons 1. Fundamental Market Changes Ex. Health Foods Sneakers Brown Shoes Women’s Professional Wear 2. Technical Developments Ex. Hi Tech Products HD TV Internet 3. Company or Competitor Decisions Ex. MGM Talking Movies Dolby Sound Betamax Netscape & Explorer 4. Complementary Product Changes Software & Hardware Gas Prices & Autos

5. Regulatory Changes II.Long Term Growth 1. Income Elastic 2. Education/Knowledge Elastic III.Fashion Cycle “Seeds of its own destruction” IV.Managing the PLC: 1. Modify the mix A. Why? a. Needs Change b. Competition c. Technology d. Growth goals of company B. How? a. Modify Product b. Modify Market Same Customers -New Uses - Increase Use New Customers -Non Users -Competitor Customers

c. Reposition Product - Reach New Market Ex. Dannon Yop New balance Carnival Cruise Line - Catch a rising trend - Reaction to competitors success 2. Criteria Used for Evaluating Introduction of New Offerings a. 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 First diet cola in 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 Product Features Develop New Product Uses Intensify Segmentation Efforts Aimed at Traditional Customers Seek New Classes of Consumers for Current Products Seek New Classes of Consumers For Modified Products Increase Consumption Rates of Users Change Marketing Strategy

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

THE PRODUCT LIFE CYCLE’S IMPLICATIONS FOR MARKETING STRATEGY

Product Adoption and Diffusion Def. Process by which new products spread through the target market Five 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 innovators 3. Early Majority (34%)- Buyers who tend to avoid risk and who make purchases carefully 4. 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 multiple Information sources Laggards (16%): Fear of debt, neighbors And friends are Information sources Late Majority (34%): Skeptical, below Average social status Early Majority (34%): Deliberate, many Informal social contact Early Adopters (13.5%): Leaders in social Setting, slightly above Average education Innovators Early Adopters Early MajorityLate Majority Laggards