Product Life Cycles
Product Life Cycles
• Product life cycles describe the changes in
consumer demand over time. No product can
be in demand forever. Trends, technology and
lifestyles change, which affects consumer
demand.
2
Unit 2
Product Life Cycles
Sales
maturity
decline
growth
decision
point
introduction
Time
• The traditional product life cycle consists of
five stages.
3
Unit 2
Product Life Cycles
• Introduction Stage
•
When a product is first introduced a
product launch occurs. It may occur regionally,
provincially, or nationally, depending on
predicted demand.
4
Unit 2
Product Life Cycles
• Introduction Stage
•
Launching a new product is very
expensive, so initially the price is high. Costs
involved include: machinery, set-up, training,
promotion, storage, packaging, market
research.
– PS3 during the introduction stage was $900
– Microwaves when they were introduced cost $999
5
Unit 2
Product Life Cycles
• Introduction Stage
• Who buys at this stage?
•
Curious people, those
who always want new
things first:
- early adopters
- trendsetters.
6
Unit 2
Product Life Cycles
• Introduction Stage
•
Main purpose of marketing is to inform the
consumer about new products and to
establish the value equation as early as
possible.
– Communicate the benefits that this
product/service will offer you
7
Unit 2
Product Life Cycle
• Products currently in introduction
Sales
Growth Stage
growth
Time
Product Life Cycles
• Growth Stage
•
After adopters find and use a product,
others will follow. The product is visible,
consumers see/hear others use it. Reputation
spreads through word of mouth and
advertising.
10
Unit 2
Product Life Cycles
• Growth Stage
•
Manufacturers advertise heavily—will the
product profit or fail?
• The product may even be scrapped at this
stage. If it is and it has lost money, it is called a
bust.
11
Unit 2
Product Life Cycles
• Growth Stage
• The faster a product reaches the growth stage,
the sooner it starts making a profit.
• The first company to enter a market will pay
the most for development and advertising,
but it will have a major advantage: no
competition.
12
Unit 2
Growth Stage
Product Life Cycles
• Growth Stage
• As competitors enter the market, companies
strive to maintain their market share: the
company’s sales as a percentage of the total
for the market.
14
Unit 2
Product Life Cycles
• Growth Stage
•
Factors preventing companies from
realizing profit are called barriers to entry.
– These may include:
•
•
•
•
small market size
cost of R&D
ad expenses
equipment costs...
15
Unit 2
Product Life Cycles
• Growth Stage
• Eventually only the most competitive products
remain on the market. Competitors stimulate
market growth through advertising and wide
distribution.
16
Unit 2
Product Life Cycles
• Growth Stage
• A company may produce a low-priced version
of a product to establish a minimum price for
a specific line, called a low-end product.
Usually not sold under a well-known brand
name.
17
Unit 2
Growth Stage
Product Life Cycles
• Maturity Stage
• The period during which
sales start to level off
Sales
maturity
19
Time
Unit 2
Product Life Cycles
• Maturity Stage
•
Marketers keep the brand name in front of
consumers. Often the success and longevity of
the product is highlighted.
20
Unit 2
Product Life Cycles
• Maturity Stage
• Because major costs have been recuperated
and the cost of sales and distribution is low,
products usually make large profits during this
stage.
21
Unit 2
Product Life Cycles
• Maturity Stage
• Often times companies will take this profit to
develop new products and product launches.
• EXAMPLE: Disney took profits from its
amusement parks to launch a cruise ship line.
This also expands their brand name into a new
market.
22
Unit 2
Maturity Stage (LONG TIME)
Maturity Stage (Shorter Time)
Product Life Cycles
• Decline Stage
• Occurs when a company cannot find new
consumers for their product. Profits decrease;
marketers try to find the reason for the
decline.
Sales
decline
25
Time
Unit 2
Product Life Cycles
• Decline Stage
• If it is a temporary decline
– it may be reversed by a small price
– change in the design
– new ad campaign
– Change in the packaging
26
Unit 2
Decline Stage
27
Unit 2
Product Life Cycles
• Decision Point Stage
The final stage of the product life cycle.
Marketers must make important decisions
regarding a product’s future.
Sales
•
decision
point
28
Unit 2
Time
Product Life Cycles
• Decision Point Stage
• A product may be reformulated, repackaged,
and reintroduced.
• Most often maintenance of a product involves
new promotion and new pricing.
29
Unit 2
Product Life Cycles
• Decision Point Stage
• If it looks like there is little hope for significant
profit–due to market saturation, decreased
demand, or otherwise–a suggestion may be
made to abandon the product.
30
Unit 2
Nontraditional Product Life
Cycles
Nontraditional Product Life Cycles
• Fads
32
Unit 2
Nontraditional Product Life Cycles
• Fads
• A product which is extremely popular for a
very brief period of time, and loses popularity
just as quickly.
Robotic Pets, Cabbage Patch Kids,
hummers, Pet rock, “that’s hot”
33
Unit 2
Nontraditional Product Life Cycles
• Fads
• Fads are unpredictable, and high-risk.
Companies try to get out of the market just as
the fad peaks. If they wait too long, they get
stuck with excess inventory.
34
Unit 2
Nontraditional Product Life Cycles
• Trends
35
Unit 2
Nontraditional Product Life Cycles
• Trends
• A trend has a more lasting effect on the
market than a fad. A trend is usually a
movement towards a style of product.
Organic foods, Booster Juice, Social
Networking, cell phones, Online Shopping
36
Unit 2
Nontraditional Product Life Cycles
• Niche Markets
37
Unit 2
Nontraditional Product Life Cycles
• Niche Markets
• A small section of the market dominated by a
small group of products.
• Short growth, level maturity.
The Pet Hotel, The Whistle, sweetener
packets,
38
Unit 2
Nontraditional Product Life Cycles
• Seasonal Markets
39
Unit 2
Nontraditional Product Life Cycles
• Seasonal Markets
• Consumer demand changes and is effected by
the weather. Marketers anticipate periods of
high and low demand, and work to create offseason opportunities.
Ice cream parlours, resorts, lawn mowers,
snow shovels, ice skates
40
Unit 2
ACTIVITY
• Complete the “Product Life-Cycle with musical
artists
– Find an 5 musical artists that are currently in each
stage of the product life cycle
• Introduction – Just being introduced to the public –
almost “underground”
• Growth – is starting to make it big
• Maturity – popularity has been steady
• Decline – getting less and less popular by the year
• Decision Point – either needs to redefine their career
using AutoTune or should star on Celebrity Re-hab
41
Unit 2