The Prod

duct Life Cycle (PLC)

Many prooducts generrally have a characteristiic known as perishable distinctiveneess. This
means thhat a productts, which is distinct
d whenn new, degennerates over the year intoo a
common commodityy; the processs by which thhe distinctivveness graduually disappeears as
the produuct merge wiith other com mpetitive deggeneration. The
T cycle beegins with thhe
inventionn of a new prroduct and iss often followed by pateent projectionn and furtherr
developmment to makee it salable. This
T is usuallly followed by a rapid expansion
e inn its sales
as the prooducts gainss market acceeptance. Theen competitoors enter the field with im mitation
and rival product and d the distincttiveness of thhe new prodducts gets maarginalized over
o time.
Excerptsfro uni.edu.in/
omwww.pondiu

The classsic product life cycle hass four stagess: introductioon; growth; maturity
m andd decline

Introducttion Stage

At the Inntroduction (or developm ment) Stage market

m size and
a growth is i slight. Duee to start up costs
(researchh, marketing g, overheads etc.) it is highly
h unlikeely that com
mpanies will make profiits on
products at the Introd duction Stagge. Products at this stage have to be carefully
c moonitored to ennsure
that they start to grow
w. Otherwisee, the best opption may bee to withdraw w or end thee product.
Growth Stage

The Growth Stage is characterized by rapid growth in sales and profits. Profits arise due to an
increase in output (economies of scale) and possibly better prices. At this stage, the businesses
should invest in increasing their market share as well as enjoying the overall growth of the
market.

Maturity Stage

The Maturity Stage is the stage where competition is most intense as companies fight to maintain
their market share. Marketing spend has to be monitored carefully, since any significant moves
are likely to be copied by competitors. The Maturity Stage is the time when most profit is earned
by the market as a whole. Any expenditure on research and development is likely to be restricted
to product modification and improvement and perhaps to improve production efficiency and
quality.

Decline Stage

In the Decline Stage, the market is shrinking, reducing the overall amount of profit that can be
shared amongst the remaining competitors. At this stage, great care has to be taken to manage the
product carefully. Care should be taken to control the amount of stocks of the product.
Ultimately, depending on whether the product remains profitable, a company may decide to end
the product.

Element Introduction Growth Maturity Decline

Sales Low Fast growth Slow growth Declining
Profits Negligible Peak level Declining Low
Cash inflow Negative Moderate High Low
Competitors Few Growing Many Declining
Customers Innovators Mass market Mass market Laggards

Source: Peter Dayle, The Realities of the product life cycle

And correspondingly the impact to the Marketing Mix would be as follows:

Element Introduction Growth Maturity Decline

Product One Many versions Full product Best sellers
line
Price Skimming/ Gain market Defend market Stay profitable
Penetration share / deal share / profits
Promotion Inform / Stress Reminder Minimal
educate competitive oriented promotion
difference
Place Limited More outlets Maximum Fewer outlets
outlets
Examples of Products/ Services at various stages of the PLC

INTRODUCTION GROWTH MATURITY DECLINE

4G mobile phones Viral marketing Personal Computers Typewriters

E-conferencing 3G mobile phones Faxes Handwritten letters

Doorstep personal banking

E Banking Credit cards Cassettes
services

Diffusion of innovation
Theories of innovation in business stemmed mainly from the work of Joseph Schumpeter, an
economist who isolated innovation from invention, which he held occurred in isolation of
innovation and which cannot be coupled with innovation.

H.G. Barnett, an anthropologist views innovation and the basis of cultural change, and defines it
as; any thought, behavior or thing that is new because it is qualitatively different from existing
forms.

Everett Rogers, a professor of communication studies, popularized the theory in his

book Diffusion of Innovations; he argues that diffusion is the process by which an innovation is
communicated over time among the participants in a social system.

Rogers proposes that four main elements influence the spread of a new idea: the innovation
itself, communication channels, time, and a social system. This process relies heavily on human
capital. The innovation must be widely adopted in order to self-sustain. Within the rate of
adoption, there is a point at which an innovation reaches critical mass.

The categories of adopters are innovators, early adopters, early majority, late majority, and
laggards. Diffusion manifests itself in different ways and is highly subject to the type of adopters
and innovation-decision process. The criterion for the adopter categorization is innovativeness,
defined as the degree to which an individual adopts a new idea (wikipedia.org).
Roger's Diffusion of Innovations

Innovator Stage

Innovators are the first to purchase a product and make up 2.5% of all purchases of the product.
Innovators purchase the product at the beginning of the life cycle. They are not afraid of trying new
products that suit their lifestyle and will also pay a premium for that benefit. Sales to innovators are not
usually an indication of future sales as innovators simply buy because the product is new.

Early Adopters Stage

The next group of purchasers are called Early Adopters and they make up 13.5% of purchases. This group
of purchasers adopt early but unlike innovators, adoption is after careful thought. Early Adopters are
usually opinion leaders in their circle (of friends, family and colleagues) so adoption by this group is
crucial for the success of the product. Early adopters help the product's journey in becoming "socially
acceptable".

Early Majority Stage

The Early Majority are a cautious group of purchasers, making up 34% of purchases. The Diffusion of
Innovations theory states that this group will not buy a product until it has become "socially acceptable".
Early majority purchases are needed for the product to achieve wide spread acceptance.

Late Majority Stage

Late Majority make up another 34% of sales and they usually purchase the product during the late stages
of the product's life cycle. They are more cautious than the early majority and will only buy after the
majority of people have purchased the product.

Laggard Stage

According to the Diffusion of Innovations theory the final group of people to purchase a product are
called Laggards. Laggards make up 16% of total sales and purchase the product near the end of its life.
Some laggards will never purchase a product, whilst others will buy it because their existing product is
broken and it can not be repaired or replaced with an identical product. Laggards may wait to see if the
product will get cheaper and by the time they purchase the product a new version of the product is often
on the market (Learnmarketing.net).
 Marketing Management

Tutorial No. 4

Gathering information on the

Marketing Environment
Marketing Research
In order to develop strategic plans, marketers must understand its business environment which
includes its consumer, and society at large. Marketers gather information through various
sources. This Marketing Information System or MIS consists of procedures, people, and
equipment. An MIS relies on Internal Company Records, Marketing Intelligence Activities, and
Marketing Research.

Internal Company Records

Order-to-payment cycle: This is the cycle where sales staff issues an order, it is invoiced,
goods are delivered to the customer, and customer is billed for the order.

Sales Information System: Marketing managers rely on sales information to identify trends
for its products and take corrective action when necessary.

Databases: These constitute the databases of customers, products, sales person etc; which are
useful for categorizing each group into segments that can be analyzed easily.

Marketing Intelligence Activities

This constitutes information about the market and what is happening in the market which can
be obtained from various sources such as the sales staff, publications, news etc.

Marketing Research

Marketing Research is the Systematic gathering, recording, and analyzing of data about
problems relating to the marketing of goods and services (American Marketing
Association). Marketing research involves the gathering of information about the market for
a particular product or service. This information includes; consumer attitudes, market
conditions, competition etc.

Marketing Research should provide a regular information system which can be used by
management to plan and make decisions. Some of the areas that can be researched are: the
impact of the Marketing Mix (product, price, place, and promotion), customer, competition,
the trade segment, customer demand, analysis of market potential, analysis of market shares
etc.
The Marketing Research Process

Step 1 Defineproblem

Step 2 Designoftheresearch

Step 3 Collectionofdata

Step 4 Analysisofdata

Step 5 Presentationofreport

Managementdecision

Define problem: The research team and the companys senior management team will try to define the
objectives of conducting the research bearing in mind that it is very important to be very clear about what
these research objectives should be.

Design of the research: Make decisions about the Data Source (primary or secondary data), Research
Approaches (the manner in which primary data is to be collected such as through observation, focus
groups, surveys, behavioural data etc), Research Instruments (questionnaires, qualitative measures etc.),
Sampling Plan (deciding the Sample Segment, Size, Procedure etc.), and Contact Method (Mail,
Telephone, Online etc.).

Collection of data: Generally this constitutes the most expensive part of the process, as well as being the
area where many errors can occur.
Analysis of data: Extracting the findings and tabulating the data using (whenever necessary) statistical
tools.

Presentation of report: The report should be prepared so that it is relevant to the major marketing
decisions facing the management.

Primary and Secondary Data

Primary data constitute data that is collected for a particular purpose, directly from the relevant
source. This is generally known as field research.

Secondary data are data which has been already gathered and assembled for other purposes or
general reference. This is a form of desk research involving collection of data from internal and
external sources.

Quantitative and Qualitative Research

This is another method of gathering data. While Quantitative research gathers statistically valid,
numerically measureable data, Qualitative research focuses on beliefs, values, attitudes and
motivation.

Methods of Conducting Marketing Research

Observation: Researchers simply observe the behaviour of the target sample segment and record
it.

Questionnaire: Researchers can use; telephone interviews, personal interviews, replies by e mail
etc to obtain information

Consumer Panels: By obtaining a cross section of the target consumer segment researchers can
carry out their research activities.

Trade and Retail Audits: This is when the research company obtains information from the trade
and retail segment.
 Marketing Management

Tutorial No. 5

Segmenting and Targeting

 Market Segmentation
Identify basis for segmentation
Determine important characteristics of each market segment

Market Targeting
Select one or more segments

Product Positioning
Develop detailed product positioning for selected segments
Develop a marketing mix for each selected segment

Market Segmentation

Market Segment
A market segment consists of a group of customers who share a similar set of needs and wants.
Therefore, the marketers task is to identify them and decide which one/ s to target.
Market segmentation involves: the subdividing of a market into distinct and increasingly
homogenous subgroups of customers, where any subgroup can conceivably be selected as a
target to be met with a distinct marketing mix (Tom Cannon, Basic Marketing: Principles and
Practice, 1980). Occasionally, a total market may be 100% homogenous (all customers share the
same characteristics), but this is very rare. What is more likely are identifiable groups or
clusters of consumer wants which can then be met with marketing activities.
While Mass Marketing calls for the seller to engage in mass production, mass distribution, and
mass promotion of one product for all buyers, Niche Marketing will focus on a narrowly
defined customer group seeking a distinctive mix of benefits. Niches are normally identified by
dividing a segment into sub segments.
Bases for Segmenting Consumer Markets
Among the many means of segmenting markets, we will discuss the most prominent ones which
are: Geographic, Demographic, and Psychographic segmentation.

Geographic Segmentation: Refers to segmenting markets according to geographical units such

as nations, states, regions, etc. Hence, the needs and behavior patterns of customers in different
geographic locations may vary from one another (e.g. large shampoo bottle in Colombo vs small
shampoo sachets in rural societies)

Demographic Segmentation: Refers to segmenting markets according to age (e.g. shoes),

family size (e.g. large vs small pack sizes), family life cycle (e.g. unmarried/ sole survivor),
gender, occupation, income, education, religion, race, generation, nationality, social class etc.
Example of segmenting by Social Group/ Class:

Social Grade Description of Occupation Example

A Higher managerial and professional Company Director
B Lower managerial and supervisory Middle Manager
C1 Non-Manual Bank Clerk
C2 Skilled Manual Electrician
D Semi skilled and unskilled manual Labourer
E Those receiving no income Unemployed
from employment/ casual workers

Psychographic Segmentation: Refers to segmenting markets according to Psychological/

personality traits, lifestyles, values, etc.
Example of possible lifestyle categories:
Upwardly mobile, ambitious: Seeking a better and more affluent lifestyle, with higher
income, and higher material standard of living. A customer in this segment will be more likely to
try new expensive products e.g. MP5 players.
Traditional and sociable: Conforms to group norm, behavior is consistent with what is
acceptable to the group e.g. Choice of footwear
 Security and status seeking: This segment stresses on safety and ego-defensive needs.
Those in this segment are likely to purchase strong brands and well know products, along with
what confer status and give security to life such as insurance, and membership in a particular
society.

Bases for Segmenting Business Markets

Business markets can be segmented in a similar manner to consumer markets, but there are also
other variables which are used, which are:

Demographic: Marketers can decide the type of industry, the size of the company, and the
geographic areas that they want to serve.

Purchasing Approaches: Deciding whether to serve companies;

-with highly centralized or decentralized purchasing
-which are engineering dominated or financially dominated etc.
-where a strong relationship exists at present or a new relationship needs to be built up

Situational factors: Deciding to serve companies who require quick delivery or phased down
delivery etc.

Personal Characteristics: Deciding to serve companies which have similar values and staff to
ones own organization, whether customers are risk takers or risk avoiders etc.
 Market Targeting
Once the firm has identified its market segment opportunities, it must decide how many and
which segments to target. The following criteria can be used:

Criteria for Effective Market Segmentation

Markets must be Measureable (Measurability): Is it possible to obtain information on the
buyer and his personality traits in a cost effective manner?
Markets must be Accessible (Accessibility): Can you effectively carry out marketing
programmes on the chosen segment?
Markets must be Substantial (Substantiality): Does the segment constitute a viable market
which will be profitable for the marketer?
Markets must be Differentiable: The segments are distinct from each other and respond
differently to different marketing mix programmes and activities. E.g. if married and unmarried
women respond similarly to the same advertising campaign for perfume; they do not constitute
separate segments.
Markets must be Actionable: Effective programmes can be formulated for attracting and
serving the segments.

Evaluating and Selecting the Market Segments

When evaluating the different market segments that the company wants to target it must first
look at two factors: the segments overall attractiveness, and the companys objectives and
resources.

When selecting the target markets the company can consider the following:

Single Segment Concentration: by focusing on a specific segment the firm is able to offer best
value for money while maintaining a market leadership position. The risk here is that
competitors may invade the segment or the customers in the segment may reject the product. E.g.
specific medication.
Selective Specialization: focus upon a number of segments, each of which is attractive. E.g.
Hameedia Suites catering to very affluent men as well as Hameedia sarees catering to
sophisticated needs of very affluent women.

Product Specialization: The firm makes a certain product which it sells to several different
market segments. E.g. Anti dandruff shampoo caters to users of any gender, and age.

Market Specialization: Firm concentrates on serving many needs of a particular customer

group. E.g. The Uniform Shop catering at providing school uniforms and accessories for students
of leading international schools. The risk is that the market may shrink in size and spending
power.

Full Market Coverage: Firm attempts to serve all customer groups with all the products they
might need. Only large firms can attempt a full market coverage strategy, and this can be done in
two broad ways: through Differentiated Marketing, and Undifferentiated Marketing.

-In Differentiated Marketing, the firm operates in several market segments and design
different products for each.

-In Undifferentiated Marketing, the firm ignores the different segments and goes after the
whole market with one offer.