MANAGING PRODUCTS THROUGH PRODUCT LIFE CYCLE

Product Life Cycle The product life cycle describes the stages a new product goes through in the marketplace: introduction, growth, maturity, and decline.

Product Life Cycle Sales Growth Stage Maturity Stage Decline Stage Introductory Stage Growth Stage Maturity Stage Decline Stage Sales Profits Dollars Time

Full-Scale Launch of New Products Introductory Stage Full-Scale Launch of New Products High failure rates Little competition Frequent product modification Limited distribution High marketing and production costs Negative profits Promotion focuses on awareness and information Intensive personal selling to channels Notes: During the introductory stage, sales normally increase slowly. Marketing costs are high due to higher dealer margins required to obtain adequate distribution and the cost of consumer incentives to try a product. Production costs are high. Promotion strategy focuses on developing product awareness and informing consumers about the product’s potential benefits. Intensive personal selling is often required. Promotion of convenience products may require heavy consumer sampling and couponing. Shopping and specialty products demand educational advertising and personal selling to the final consumer.

Growth stage Increasing rate of sales Entrance of competitors Offered in more sizes, flavors, options Increasing rate of sales Entrance of competitors Market consolidation Initial healthy profits Promotion emphasizes brand ads Goal is wider distribution Prices normally fall Development costs are recovered Notes: In the growth stage, sales grow at an increasing rate, many competitors enter the market, and larger companies may acquire small pioneering firms. Profits rise rapidly, peak, and begin declining as competition increases. Aggressive brand advertising and communication of the differences between brands is the preferred promotion strategy. Adequate distribution is a major key to establish a strong market position and product success.

Many consumer products are in Maturity Stage Many consumer products are in Maturity Stage Declining sales growth Saturated markets Extending product line Stylistic product changes Heavy promotions to dealers and consumers Marginal competitors drop out Prices and profits fall Niche marketers emerge On Line: McDonald’s What is McDonald’s doing to successfully compete in the maturity stage? Notes: The maturity stage begins when sales increase at a decreasing rate, and the market approaches saturation. This is normally the longest stage of the PLC. Annual models may appear during the maturity stage for shopping and specialty products. Product lines are lengthened to appeal to additional market segments. Service and repair help manufacturers distinguish their products from others. Heavy promotion is required to maintain market share. For example, consider the competitive “wars” between Coke and Pepsi, Budweiser and Miller, and McDonalds against Burger King and Wendy’s. As prices and profits continue to fall, marginal competitors drop out of the market. Niche marketers that target narrow, well-defined segments of a market emerge.

Rate of decline depends on adoption of substitute products Decline Stage Long-run drop in sales Large inventories of unsold items Elimination of all nonessential marketing expenses Notes: The rate of decline depends on how rapidly consumer tastes change or substitute products are adopted. A strategy for declining products includes elimination of nonessential marketing expenses, and the eventual product withdrawal as sales decline. Rate of decline depends on change in tastes or adoption of substitute products

Obsolescence Stage Companies withdraw from product manufacturing. Stragglers eventually switch to an alternative product.

How stages of the product life cycle relate to firm’s marketing objectives & marketing mix actions INTRODUCTION GROWTH MATURITY DECLINE Product Strategy Limited models Frequent changes More models Frequent changes. Large number of models. Eliminate unprofitable models Limited Wholesale/ retail distributors Expanded dealers. Long- term relations Extensive. Margins drop. Shelf space Phase out unprofitable outlets Awareness. Stimulate demand.Sampling Aggressive ads. Stimulate demand Advertise. Promote heavily Phase out promotion Higher/recoup development costs Fall as result of competition & efficient produc- tion. Prices fall (usually). Prices stabilize at low level. Distribution Strategy Promotion Strategy Pricing Strategy

MANAGING THE PRODUCT LIFE CYCLE Modifying the Product Alter product quality Enhance performance Change appearance Modifying the Market Finding New Users Increase use Create new use situations

EXTENDING THE PRODUCT LIFE CYCLE- Repositioning Reacting to a Competitor’s Position-never compete head on Catching a Rising Trend-baby aspirin is now low dose aspirin to reduce heart attacks Changing the Value Offered Trading Up-add bells & whistles to raise price Trading Down- remove bells & whistles to lower price Downsizing-reduce contents but maintain price