PRODUCT LIFE CYCLE

Dr. Sanjeev Prashar

Product Life Cycles and
Marketing Strategies
OProduct Life Cycle
OThe progression of a product
through four stages: introduction,
growth, maturity, and decline.
iP3s
DVDs
CDs
Cassettes
LP records
Coverage
O Evolution of products and markets
O The stages of market development, and
technological evolution
O The managerial implications of PLC
O SO THAT: you can be proactive while
planning for new and existing products
PLC
O Four phases
O Confusion arises as there are three different PLCs
O At the highest level of aggregation is the product
class, industry or category
O Second is the combined life cycle for number of
closely competing brands in a product category
O At the lowest level will be brand or model life
cycle
 PRODUCT LIFE CYCLE
O The Product Life Cycle ( PLC ) is an
important concept in marketing that
provides insights into a product¶s
competitive dynamics.
O To fully understand the concepts of PLC ,
one should first understand its parent
concept, the demand and technology life
cycles.
DEi
D / TECH
OLOGY LIFE CYCLE
O iarketing thinking should not begin with a
product or even a product class, but rather
with a need.
O The product exists as one solution among
many to meet a need.
O need is satisfied by some technology.
O Each new technology normally satisfies the
need in a superior way and it shows a
demand-technology life cycle.
O The PLC portrays distinct stages in the sales
history of a product.
DEi
D-TECH
OLOGY-PRODUCT
LIFE CYCLES

Sales

Time
The Four Stages of the Product Life
Cycle
ST GES I
THE PRODUCT LIFE
CYCLE
O By identifying the stage that a product is in, or may
be headed toward, companies can formulate better
marketing plans.
O Products require different marketing, financial,
manufacturing, purchasing and personnel strategies in
each stage of their life cycle.
O iarketers must pursue appropriate marketing
strategies in each stage of PLC.
O Today, in order to succeed, it is absolutely essential to
constantly improve products to increase the value
offered to customers, ( V = B/P ).
O The success of competitors is based on creating value
for the customer by differentiating their product,
( Competitive Differential ).
Product Life Cycle Variations
ianaging the Life Cycle
O successful life-cycle management requires
predicting the shape of the curve and then
successfully adapting strategies at each stage
O when to consider entering the market
O how to manage to capitalize on growth
O it is possible to develop strategies that will extend
the maturity stage; modify the product, devise
new uses, or design new appeals
O greatest challenge comes at the decline stage
 EXTE
DI
G THE PRODUCT LIFE
CYCLE

Sales

Time
Ñ( When the sales of a product starts declining
marketers may choose suitable strategy for
further growth of product /business/enterprise.)
 PRODUCT LIFE CYCLE
Reasons for change in behavior of PLC :
O --Changes in the consumer needs and
preferences
O -- dvancing Technology
O --Competition, Government Policies etc.
O --Changes in number of potential buyers
Stages in PLC :
Introduction, Growth, iaturity, nd Decline.
Êntroduction Stage of the PLC
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 i RKETI
G STR TEGIES I
THE
I
TRODUCTIO
ST GE
Promotion
High Low
Rapid Slow
High Skimming Skimming
Strategy Strategy
Price
Rapid Slow
Low Penetration Penetration
Strategy Strategy
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 i RKETI
G STR TEGIES I
THE
GROWTH ST GE
O It improves product quality and adds new
product features and improved styling.
O It adds new models and flanker products (i.e.,
products of different sizes, flavors, and so forth
that protect the main product ).
O It enters new market segments.
O It increases its distribution coverage and enters
new distribution channels.
O It lowers prices to attract the next layer of
price-sensitive buyers.
O It shifts from product-awareness advertising to
product-preference advertising.
GROWTH OPPORTU
ITIES
( winning markets through market-
oriented strategic planning )

Desired Sales
 Strategic

Planning
Gap
Sales Current Portfolio
1²Intensive Growth
2²Integrative Growth
3²Diversification

- Time (Years) -
 GROWTH OPPORTU
ITIES
( winning markets through market-
oriented strategic planning )
O Often, projected sales and profits are less than
what corporate management wants them to be.
O The graph illustrated , shows the strategic
planning gap.
O The lowest curve projects the expected sales
over the next 10 years.
O The highest curve describes the corporation¶s
desired sales over the next 10 years.
O How can the company fill the strategic
planning gap ?
HOW C
THE COiP
Y FILL THE STR TEGIC PL

I
G
G P?
(GROWTH OPPORTU
ITIES)

Three options are available :

O Intensive Growth Opportunities

O Integrative Growth Opportunities

O Diversification Growth Opportunity

(GROWTH OPPORTU
ITIES)
I
TE
SIVE GROWTH
O Identify opportunities to achieve further
growth within the company¶s current
business.
O nsoff has proposed a useful framework
for detecting new intensive growth
opportunities called a product / market
expansion grid.
(GROWTH OPPORTU
ITIES)
I
TE
SIVE GROWTH
O (product / market expansion grid)
Current Products
ew Products

(1) iarket (3) Product

Current Penetration Development
iarkets
Strategy Strategy

ew (2) iarket (Diversification

iarkets Development
Strategy)
Strategy
 (GROWTH OPPORTU
ITIES)
I
TEGR TIVE GROWTH
Often a business¶s sales and profits can
be increased through :
O Backward Integration ( may acquire
one or more of its suppliers to gain
more control or generate more profit )
O Forward Integration ( may acquire
some wholesalers or retailers, especially
if they are highly profitable )
(GROWTH OPPORTU
ITIES)
I
TEGR TIVE GROWTH
O Horizontal Integration (may acquire
one or more competitors, provided that
the government does not bar this move )
(Through investigating possible integration moves, the
company may discover additional sources of Sales-
volume increases over the next stipulated years. These
new sources may still not deliver the desired sales
volume, however. In that case, the company must
consider diversification.)
 (GROWTH OPPORTU
ITIES)
DIVERSIFIC TIO

GROWTH
O Diversification growth makes sense when good
opportunities can be found outside the present
businesses.
Three types of diversification are possible :
O Concentric Diversification : (The co. may seek
new products that have technological and/or
marketing synergies with existing product lines,
even though the new products themselves may
appeal to a different group of customers.)
 (GROWTH OPPORTU
ITIES)
DIVERSIFIC TIO

GROWTH
O Horizontal Diversification : (The co. may
search for new products that could appeal
to its current customers even though the
new products are technologically
unrelated to its current product line. )
O Conglomerate Diversification : (The co.
may seek new businesses that have no
relationship to the company¶s current
technology, products or markets.)
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 i TURITY ST GE
O Sales are increasing but at a decreasing
rate.
O Profits are beginning to decline.
O Price competition increases.
O The manufacturer assume a greater
share of the total promotional effort in
the fight to retain dealers and shelf space
in their stores.
i TURITY ST GE
To understand better, we can devide
iaturity Stage into three stages :
O Growth iaturity : When the rate of sales growth
starts to decline because of distribution saturation.
O Stable iaturity : When the rate of sales growth starts
declining due to market saturation.
O Decaying iaturity : The sales level starts to decline as
some of the customers move towards other competitive
and substitute products.
i RKETI
G STR TEGIES I
THE
i TURITY ST GE
O iarket iodification

O Product iodification

O iarketing iix iodification

i RKETI
G STR TEGIES I
THE
i TURITY ST GE
iarket iodification
O Expand number of users :
- Convert non-users
- Enter new market segments
- Win competitors¶ customers
O Increase annual usage :
- iore frequent use
- iore usage per occasion
-
ew and more varied uses
 i RKETI
G STR TEGIES I
THE
i TURITY ST GE
Product iodification
O strategy of quality improvement aims at
increasing the product¶s functional
performance - its durability, reliability, speed,
taste.
O strategy of feature improvement aims at
adding new features ( for example - size,
weight, materials, additives, accessories ) that
expand the product¶s versatility, safety, or
convenience.
i RKETI
G STR TEGIES I
THE
i TURITY ST GE
Product iodification (contd.)
O strategy of style improvement aims at
increasing the product¶s aesthetic
appeal. The periodic introduction of new
car models amounts to style competition
rather than quality or feature
competition.
i RKETI
G STR TEGIES I
THE
i TURITY ST GE
iarketing iix iodification
O Prices
O Distribution
O dvertising
O Sales Promotion
O Personal Selling
O Services
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i RKETI
G STR TEGIES I
THE
DECLI
E ST GE

O Identifying the Weak Products

To do this, many companies appoint a product-
review committee with representatives from
marketing, R&D, manufacturing and finance.
The product review committee makes a
recommendation for each dubious product--leave
it alone, modify its marketing strategy, or drop
it.
i RKETI
G STR TEGIES I
THE
DECLI
E ST GE (Contd.)
O Determining iarketing Strategies :
(Go Strategy )
Continuation Strategy :
-Increasing the firm¶s investment (to
dominate the market or strengthen the
competitive position)
- iaintaining the firm¶s investment level
until the uncertainties about the industry
are resolved.
i RKETI
G STR TEGIES I
THE
DECLI
E ST GE (Contd)
O Determining iarketing Strategies :
( Go Strategy )
Concentration Strategy :
- Decreasing the firm¶s investment level
selectively, by dropping unprofitable customer
groups, while simultaneously strengthening
the firm¶s investment in lucrative niches.
Harvesting Strategy :
- Divesting the business quickly by disposing of
its assets as advantageously as possible.
 i RKETI
G STR TEGIES I
THE
DECLI
E ST GE (Contd)
O The Drop Strategy
- When a company decides to drop a product, it
faces further decisions. If the product has
strong distribution and residual goodwill, the
company can probably sell it to another firm.
- If the company can¶t find any buyers, it must
decide whether to liquidate the brand quickly
or slowly. It must also decide on how much
parts inventory and service to maintain for
past customers.
Managerial Response to Product
& Market Evolution
Criticisms
O The shape of PLC is not universal
O Reducing support to a brand at the first sign of
sales decrease can result in a self fulfilling
prophecy
O Lack of clear definitions of product class and
product
O No agreement on point at which one phase ends
and other phase begins
O Êt is too simple; further the product class is a
function of market, technological, and
competitive factors
O Ên Short
The Product Life Cycle
O Êntroduction
O The initial stage of a product¶s life cycle²its
first appearance in the marketplace²when
sales start at zero and profits are negative
O Why new products fail
O Lack of resources, knowledge, and marketing
skills to successfully launch the product
O High pricing to recoup research and development
costs
The Product Life Cycle
O Growth
O The stage of a product¶s life cycle when sales
rise rapidly and profits reach a peak and then
start to decline
O More competitors enter the market
O Product pricing is aggressive

O Brand loyalty becomes important

O Gaps in market coverage are filled

O Promotion expenditures moderate

O Production efficiencies lower costs

O Maturity
O The stage of a product¶s life cycle when the
sales curve peaks and starts to decline and
profits continue to fall
O Êntense competition
O Emphasis on improvements and differences in
competitors¶ products
O Weaker competitors lose interest and exit the
market
O Advertising and dealer-oriented promotions
predominate
O Distribution sometimes expands to the global
market
O Strategic objectives for maturity stage
O Generate cash flow
O Maintain market share
Product Life Cycle (cont¶d)
O Decline
O The stage of a product¶s life cycle when sales
fall rapidly
O Pruning items from the product line
O Cutting promotion expenditures

O Eliminating marginal distributors

O Planning to phase out the product

O Strategic choices
O Harvesting the product¶s remaining value
O Divesting the product when losses are
sustained and a return to profitability
Product Life Cycle
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