Rémi LALLEMAND “La courbe de vie du produit, le management des entreprises”
Product Life Cycle
The aim of the study
The product life Cycle is a central concept in marketing theory and practice.
It teaches how to run business because predicts the disagreements the future manager will have to manage. It
teaches to pilot because it checks risks.
Disagreements don't depend of products. Though you sell ; PC computer, furniture, drugs even run an estate
agency or a counselor office, disagreements are same for everyone, according with the phase of the Product life
cycle.
Maybe, Joel DEAN (1950)- Ray VERNOM (1966) have too much insisted on a descriptive theory based on a
biological analogy. Many articles highlight descriptive values and rather limited or nonexistent predictive values of
the theory. Others link determinism error that can result.
P.L.C. theory isn’t a predictive model for anticipating when changes will occur and one stage will succeed another
or a normative model which attempts to prescribe what alternative strategies should be considered at each stage.
The PLC theory describes, step by step, usual practice, managers decide the strategy taking into account all the
requirements that they know. Strategy is not unique because the environments are different. Manager choice.
4 - 5 or 6 Phases of the PLC
Research and development
Idea validation is When a company studies a market, looks for areas where needs are not being met by
current products and tries to think of new products that could meet that need. The company’s
marketing department is responsible for identifying market opportunities and defining who will buy the
product what the primary benefits of the product will be used.
When an idea has been approved and begins to take shape
Once that is done
Marketing is responsible for minimum and maximum sales estimates, competition review and market
share estimates.
The product is nearing release, prototype can be created and packaging is developed
Marketing department conducts the consumer tests through focus groups and other feedback methods,
and tracking customer responses to the product. Final checks are made on product reliability and price
acceptation.
Some firms may announce their product before it is introduced, such announcements also alert
competitors and remove the element of surprise
Introduction stage,
The product is put on the market; sales will be low until customers become aware of the product and its
benefits. The competitors are wait-and-see but attentive.
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Rémi LALLEMAND “La courbe de vie du produit, le management des entreprises”
The product can be introduced and does not find a market, or there is no market or no benefit for
customers. The former product is not replaced. The introduction move decline: it’s a marketing failure.
Growth stage
Sales increase as more customers become aware of the product and its benefits and additional market
segments are targeted.
Sales volumes start to rise rapidly or slowly, for sure they increase. 3% of the target audience is greatly
exceeded.
Maturity-saturation stage
In maturity stage, because of the declining number of potential customers, sales slow.
In saturation stage, sales reach and remain on a plateau marked by the level of replacement demand
there is little additional demand to be stimulated
The maturity stage can be the longest of the life cycle stages
Decline
Sales diminish as the customers begin to tire of the product and it is gradually edged out by substitutes.
the decline in sales of a product may be three reasons.
-
The obsolescence faced with a substitute,
The law,
The fashion
Management depends on the reasons for the decline
Duration and shape of the PLC
There is no standard,
It can be a short duration, a day (news paper) a season (fruits or drama) a year (PC) five years (a car) a
decade (CD ROM drive) or more (travel agencies)
Some products are marketing failures, the curve is only launch and decline (BMW C3), others have slow
introductions (plastic packaging for beer), or fast launche (mobile phones).
Some products have been stopped early maturity (be bop moved to mobile phone). Many products have
an eternal maturity (corkscrew), there is no interesting invented substitute, then suddenly we thought
the product was eternal, an invention, often indirect competition, kills the product (paper books and
ebooks).
Many products have a residual market after the decline, becoming a market niche marketing (e.g. coffee
beans).
Inconveniences and management
Introduction stage
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During the introduction stage the primary goal is to establish a market. The firm seeks to build the
demand and the product awareness due to the simple fact that few people are aware of the product.
Advertising costs typically are high.
If the product is intended to reach a mass audience, than an advertising campaign built around one
theme (product benefits) may be in order. If the product is specialized or if the company’s finance is
limited, then smaller advertising campaigns target specific customers.
The fixed costs cannot be spread out very well, that leads to a high cost per customer. These higher
costs coupled with a low sales volume usually make the introduction stage a period of negative results.
Firm creates a marketing mix.
Techniques used to exploit early stage make use of penetration pricing, (low pricing for rapid
establishment and discouraged the competitors) as well as skimming pricing (high initially and then
lowering price after the innovators have been lured in
Competitors are wait and see but attentive, they often manages a harm strategy
Summarized board
Product
Price
Research
Prototype
Tests of acceptation
Introduction
One or few, undifferentiated
Skim pricing strategy for a high profit margin as the
early adopters buy the product and the firm seeks
to recup development costs quickly
Distribution
They are not concerned or conduct tests and
surveys that can be dangerous because
competitors will certainly be informed
Promotion
This step must be secret. It should also stop the
rival deals
Customers
Sales
Costs
Profits
Competitors
Tests and survey
No
Investments
Investments
This stage must be secret
Penetration pricing strategy is used to gain market
share rapidly and Discourage competitors
Distribution is selective.
The distributors are unbelieving, septic and
reluctant.
If it’s mass market, facing is minimal.
Built the awareness
Convince innovators to buy
Convince resellers to carry the product
Innovators
Low sales
High cost per customer
Negative
Few or harmful strategy
Growth stage
Once the product has been proven a success and customers begin asking for its, resellers show a strong
interest to carry the product in. The marketing team and the sales forces may expand the distribution
which becomes more intensive.
Competition grows as awareness of the product sets up.
The product begins to make rapid sales gains because of the cumulative effects of advertising,
distribution and word-of-mouth influence. It’s a boom time.
Competitors propose me-too, similar, products.
The marketing mix should be adjusted to address the concern about competition. More feedback is
gathered as new markets are discovered.
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At this point company can decide if it wants to go for increased market share or increased profitability,
by USP (Unique Selling proposition or positioning).
Questions are
-
What have we learned about market segmentation?
Which competitors present a threat to our operating?
Is there a substantial profit motive for us to move forward with the product?
How much market share do we think we could have as we move ahead?
Whatever is the answer, the goal is the preference of the target customer. The aim is to build brand
loyalty by adding first time buyers and new buyers and retaining repeat buyers
For setting up the USP, strategies used to be are:
additional features, packaging options, range, and support services may be added..
Advertising can also target specific customer (USP by target)
According sales increase, the overall cost per customer decreases. Profits may be witnessed
Product
Price
Distribution
Promotion
Customers
Sales
Costs
Profits
Competitors
Summarized board
Growth
Range - additional features- packaging options, support services ...USP
According with the introduction strategy and USP
Strong interest - intensive
Brand preference
Early Buyers – Early majority – Late majority –
Increase
decrease
High
Competitors are active and offer similar products
Maturity-saturation stage
Sales volume should start to level out. The primary goal is to maintain market share and as long as
possible maintain the profitability
may be, some unsuccessful competitors withdraw from the market. Sales continue to rise for survivors
companies because they mop the customers from the withdraw brands.
There is no improvement in the product but changes in selling effort. Profit margins slip down. Sales
discounts and advertising all play an important role in that process
Some of competitors may offer a higher-quality version of the product at a lower price
Sales promotion may offered to encourage retailers to give the product more shelf space over
competing products. Distribution calls for price cuts. Lower prices mean lower profits which will cause
some companies to drop out of the market.
The strongest competitors stifle the weakest, buy them, and seize their market share
The maturity-saturation stage is a time of fierce competition. Operations should be streamlined, cost
efficiencies sought and hard decisions made
Research and development has to find ideas of new products to replace mature products, while waiting
for the company can have two strategies
- a defensive strategy, lower prices and preservations market share,
- an offensive strategy of recruiting customers, increase frequency of purchase or development of new
markets.
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Your questions can be :
-
Is there a profit motive to continue to pump money into marketing this product?
Is there still market share to be captured?
How much would it cost to capture that market share?
Summarized board
Maturity
sales growth has started to slow
Sales
Product
Price
Distribution
Promotion
Customers
Costs
Profits
Competitors
Saturation
No new customers, Sales volumes stagnate. It is a
market of renewal. Good years, bad years follow
one another
Last adaptation
No changes
No changes
Price war Distribution calls for price cuts
Convince the last non-users
It’s a repeat purchase two tactics: brand loyalty or
recruit
Laggards and Objectors
Replacement market
costs decrease
low
Profits decrease
low
The weaker competitors exit the market – starting to decline
Decline
As it was said, reasons of the decline are three, the Obsolescence, the law, the fashion.
Only for fashion, management can wait and restart later consumption of the product (example Hair Gel
or Ray-Ban). New market and new uses could be looked into (the coats of mail become curtains or
placemats). It's a question of opportunities.
When the reason is the obsolescence, the only question is : will exist an interesting residual market? (for
example : turntable or clothes pin (clothes peg)).
When the reason is the Law, lobbying tries to delay the application.(such as lead in gasoline) The
management also has to find a new positioning (eg MIDAS and SPEEDY)
Product
Price
Distribution
Promotion
Customers
Sales
Costs
Profits
Competitors
Summarized board
Decline
Best sellers
Because the competition is weak, because the consumer wants to buy it’s a niche market: the price
maybe high or expensive.
To liquidate inventory, prices can be promotional
Selective
No one or targeting to the experts
Experts
Decay and stability or stopped at the breakeven point
Depend on a residual manufacturing, often low
May be high to the breakeven point
few
Joël DEAN’S conclusions
1-
Do not define the purpose of the company by the product but by the need
2-
Always possess a novelty in portfolio
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3 examples of strategy
DUPONT DE NEMOURS
Several decades ago, the company DN invented nylon.. the first application was the parachute.
When the parachute was decline, they launched stockings, then shirts, ropes, wheels and even road
surfaces, just waiting for the decline of the previous application.
DN is protected by patents, them has no competitors, and it manages the P.L.C. It does not at the same
time its novelties; it waits for the decline of the previous application.
PAMPERS
PAMPERS invented diaper. As it was learnt the competitors wait during the launch to see if the novelty
will be a success. In growth stage, they offer their product "me too". Market became mature.
Then proposed a new Pampers diapers for baby girl and diapers for baby boys. As it was learnt the
competitors wait during the launch to see if the novelty will be a success. In growth stage, they offer
their product "me too". Market became mature.
Pampers proposed again unisex diaper, because of more powerful sensors. Etc.
We believe that Pampers still has a novelty, but waits the maturity of the current product to launch the
new product. So Pampers does not have inconveniences of the mature market.
Jacques vabre
The coffee market was mature. All competitors claim to have the best mix Arabica and Robusta, the best
taste.
Jacques Vabre proposed at the same time two novelties.
The first line according to the origin of the coffee is an analogy with the oenology.
The second line is a reference to the tastes of others, Italian coffee, Viennese coffee, Turkish
coffee etc.
The idea was easily copied. J.V. has preferred to launch both lines at the same time, not knowing the
one which would be a success.
PLC does not teach strategy. PLC prevents disagreements. The informed manager decide of his or her strategy
Exercise as a consultant
You are consultant, the following picture presents the evolution of the quantities sold according to the trade association,
the turnover of the company customer during the same period
Y1
Y2
Y3
Y4
Y5
Y6
Y7
Y8
Y9
TA
156 KU
187 KU
155 KU
166 KU
175 KU
149 KU
155VKU
165 KU
164 KU
Cie
28 k$
32 k$
54 k$
57 K$
59 K$
62 K$
58 K$
60k$
59$
Benefits
0,5 K$
0,4 K$
0,3 K$
0,4 K$
0,6 K$
1,9 K$
2,2k$
2,1 K$
2,4k$
What is your analysis?
Bibliography
Characteristics of the product life cycle by Kristi Holland *
NetMBA.com ***
quickMBA.com *
GRANTHAM. Lisa Michelle “the validity of the product life cycle in the high tech industry
HEDDEN Carole “from launch to relaunch: the secret to product longevity lies in using the right strategy for each
stage of the life cycle” Marketing tools
KUMAR, SAMEER AND WILLIAM A. KROB “managing product life cycle in a supply chair” Springer science and
business Media
Rémi LALLEMAND “La courbe de vie du produit, le management des entreprises”
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