Product Life Cycle (PLC)

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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
II.
III.
IV.
5. Regulatory Changes
Long Term Growth
1. Income Elastic
2. Education/Knowledge Elastic
Fashion Cycle
“Seeds of its own destruction”
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 1954
- First diet cola in 1962
- First caffeine cola in 1980
c. Does a new market niche exist?
d. How profitable?
Extending the New Product Life Cycle
Develop New
Product Uses
Develop New Product
Features
Intensify Segmentation Efforts
Aimed at Traditional Customers
Marketers Can
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
Sales Revenue or
Profit
Stage of Product Life Cycle
Marketing
Objective
Competition
Introduction
Total Sales
Revenue
Growth
Maturity
Decline
Total Industry Profit
Gain
Awareness
None
Stress
Differentiator
Maintain
Brand
Loyalty
Harvesting
Deletion
Growing
Many
Reduced
Best Sellers
Product
One
More Versions
Full Product
Line
Price
Skimming or
Penetration
Gain Share,
deal
Stress
Defend Share, Stay
Profit
Profitable
Promotion
Inform,
Educate
Competitive
Differences
Place (distribution)
Limited
More Outlets
Reminder
Oriented
Maximum
Outlets
Minimal
Promotion
Fewer Outlets
THE PRODUCT LIFE CYCLE’S IMPLICATIONS FOR MARKETING
STRATEGY
Strategy
Dimension
Basic Objectives
Product
Price
Placement or
Distribution
Promotion
Introduction
Est. a market for product
type; persuade early
adopters to buy
Provide high quality; select a
good brand; get patent
and/or trademark protection
Often high to recover
development costs;
sometimes low to build
demand rapidly
Growth
Maturity
Defend brands share of
Build sales and market market; seek growth by
share; develop preference luring customers from
to brand
competitors
Improve quality; add
Provide high quality; add features to distinquish
services to enhance value brand from competitors
Somewhat high because
of heavy demand
Greater number of
channels to meet
Limited number of channels demand
Low, reflecting heavy
competition
Greater number of
channels and more
incentives to resellers
Messages focus on
Aimed at early adopters;
Aimed at wider audience; differentiating brand from
messages designed to
messages focus on
its competitors; heavy
educate about product type; brand benefits; for
use of incentives such as
incentives such as samples consumer products,
coupons to induce buyers
and coupons to induce trial emphasis on advertising to switch brands
Decline
Limit costs or seek
ways to revive sales and
profits
Continue providing high
quality to maintain
brand's reputation; seek
ways to make the
product new again
Low to sell off remaining
inventory or high to serve
a niche market
Limited number of
channels
Minimal, to keep costs
down
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 wellestablished alternatives
Five categories and profiles of product adopters
Early Adopters
Laggards
Innovators
Early Majority
Innovators (2.5%):
Venturesome, higher
Educated, use multiple
Information sources
Late Majority
Early Majority (34%):
Deliberate, many
Informal social
contact
Early Adopters (13.5%):
Leaders in social
Setting, slightly above
Average education
Laggards (16%):
Fear of debt, neighbors
And friends are
Information sources
Late Majority (34%):
Skeptical, below
Average social
status
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