Maturity Here product sales peak and settle at a stable level. This is normally the longest phase of the PLC, with organisations experiencing some reduction in profit level. This is due to the intense competition common in mature markets. As no natural growth exists, market share is keenly contested and marketing expenditure is increased. Marketers may try to expand their potential customer base by encouraging more use or finding new market segments. Decline The decline stage can be gradual or rapid. It is possible to turn-around declining products and move them back into the mature phase of the cycle. The alternative is replacement. A residual demand will exist, with current users needing parts, services and on-going support. Often the decline phase offers a choice, re-investing (turn-around/replace) or a ‘harvesting’ strategy that involves maximising financial returns from the product and limiting expenditure. To fully utilise the PLC, managers need a detailed understanding of concept and the following points merit consideration. ● Industry and product line: The PLC concept can also apply to overall industry sales. Clearly, the PLC for individual product lines needs to be considered in relation to this. For example, if industry is entering the decline phase of its PLC, it may be unwise to launch new product lines. Currently, high-technology industries, such as telecommunications, are in the growth phase. However, individual products lines have very short PLC’s as they are rapidly replaced by more advanced technology. Make sure you understand where the industry is in terms of overall PLC and how your portfolio of products fits into this overall pattern. ● Shape of the PLC: While the PLC normally conforms to the classic ‘S-shape’ curve (see Figure 8.14), it is not always the case. PLCs can take different forms. They can display: (i) cyclical/seasonal trends, (ii) constant demand, where a steady level of sales is reached or (iii) rapid growth and fall, common to fashion or fad products (see Figure 8.15). ● Volatility: Any sales person will tell you that sales levels will fluctuate over time. The reality of the PLC is that sales will vary and the smooth graph shown in most text books will in fact display considerable volatility. This makes predicting your exact position in the life cycle difficult. Does a fall in sales mean we have reached the point of decline or is it a temporary blip? Only time will tell. Examine Figure 8.14 and you will see the variation in the curve. ● Duration of stages: Some would argue that the length of each PLC phase is closely related to marketing decisions and not simply a natural cycle. Effective marketing should be able to extend and sustain the growth or maturity of a product offering. Equally, ineffective marketing would hasten its decline. ■ Strategic wear-out The adage – ‘nothing lasts for ever’ – is certainly true of marketing strategy. Care must be taken to avoid strategic wear-out. This occurs when the organisation no longer meets customer needs and the pursued strategy is surpassed by competitors. Davidson (1997) summarises the causes of strategic wear-out (see Table 8.1). Future business requires active steps to ensure that your strategy does not ‘wear-out’ and the role strategy formulation is to develop/maintain a marketing orientation. This is based on the premise of defining customer need and prospering through customer satisfaction and loyalty. Sound general and financial management should underpin this orientation and the entire corporate focus should relate to key asset of any business – customers. ■ Difficult market conditions Marketing strategy is often linked to a premise of favourable market conditions. For example, strategies tend to work well when we are experiencing incremental growth – the market demand grows annually. However, many industries (arguably the majority of industries) are now experiencing static or declining demand. Such markets are hostile in nature and feature factors such as: volatility, over capacity, price discounting, reduced profit margins and ‘downsizing’. Given these conditions Aaker (1995) advocates a number of strategic options for declining and/or hostile markets these include: ● Generate growth: Can we revitalise the industry by finding growth? This could be possible through: (i) encouraging existing users to increase usage, (ii) developing new markets for our products and (iii) finding new applications for existing products or technologies/skills. The ‘Ansoff’ matrix (see Figure 8.10) provides a useful analytical framework for this purpose. ● Survival: Organisation can survive by effectively managing cost and clearly signalling their commitment to the industry and its customers. Clearly, there is a need to manage cost structures, with experience effects and economy-of-scale becoming vital. Organisation may rationalize their product portfolios and focus on larger more profitable customers. Conversely, perhaps correctly, organisations may actually expand their product range, aiming to cover the maximum number of customers by offering a wide range of price points. We may witness takeovers, mergers and acquisitions as organisations aim to reduce cost and generate economies of scale. A portfolio approach can be taken, with ‘cash cows’ supporting operations/products with are currently struggling but are deemed to have long-term potential. A useful strategic option is to reduce industry exit barriers by selectively buying-out elements of competitor’s current business. For example, we could take over their commitment to supplying spare parts and maintain existing products. This ‘shake-out’ inevitable leaves the industry with fewer but larger competitors. ● Exit strategy: If business conditions are particularly unfavourable, prudence may dictate that we withdraw from the industry. Such action will involve overcoming exit barriers such as the costs associated with downsizing (e.g. redundancy, legal costs of breaking contracts, etc.) and handling commitments to existing customers. Exit strategy can be rapid – withdrawing immediately – or a slow phased withdraw with activities being gradually run-down. Remember exiting a market may have repercussions for other actives and products, as it affects ‘goodwill’ and customer confidence.
