Chapter 15 Managing maturity

‘It is this idea of planning in advance of the actual launching of a new product to take specific actions later in its life cycle – actions designed to sustain its growth and profitability – which appears to have great potential as an instrument of long-term product strategy.’ (Levitt)

In the rapid growth phase market leaders will seek to stay ahead of the game through further improvements while less innovative firms try to win market share by discounting, offering lower prices for direct sale, and so on. As the market approaches saturation rivalry and competition will intensify and the less efficient firms will be forced out of the market.

Reasons for decline in Profit Margin Increasing number of competitive products Competition from smaller companies Strong increase in R & D for better versions Cost economies used up Decline in product distinctiveness Dealer apathy Innovator loyalty waiver

Surviving firms will seek to prolong the mature phase using one of four basic strategies: 1. An offensive or ‘take-off’ strategy 2. A defensive strategy 3. A recycle strategy 4. A stretching and harvesting strategy.

Offensive strategies include: Remerchandizing New use Reformulation Product improvement Market extension Product line extension

A defensive strategy usually involves incentives to intermediaries and end users (price cuts, promotions etc.) which reinforce customer loyalty and make the market less attractive to new entrants.

Recycling strategies usually involve attempts to reposition the product, usually with a new market segment, so as to initiate a new growth cycle.

Stretching and harvesting strategies usually involve some form of reformulation or product line extension

Extending Product Life Cycle Active product policy Long term plan designed to infuse new life into product Wider view

Managing the relationship Strengthen account management practices. Augment the product. Improve customer service. Lower prices.

Customer Relationship Management - problems Implementing CRM before creating a customer strategy Roll out CRM before changing your organization to match Assuming that CRM technology is better Stalking, not wooing customers