PRODUCT LIFE CYCLE

STAGES & STRATEGIES

 Popularized by Theodore Levitt, 1965

PLC can be applied to: Product category (Watch) Product style (Digital) A product item/brand (Timex)

 To say that a product has a life cycle is to assert four things: Product has a limited life Product sales pass through distinct stages, each posing different challenges, Opportunities, and problems to the seller Profits rise and fall at different stages of the product life cycle Products require different marketing, financial, manufacturing, purchasing and HR strategies in each stage

Introduction Stage
Its a period of slow growth rate Profit is low or negative Promotional expenditure are high-inform potential customers,induce product trial,secure distribution in retail outlets. Prices tends to be high because costs are high-work out technical problems,fill dealer pipelines,gain consumer acceptance.

 When to enter the market is critical. The first can be rewarding and expensive and risky. Come later if superior technology ,quality and brand strength

IntroductionStage
Strategies that can be pursued:
Rapid skimming-the speed with which the company recovers its development costs on the productthe strategy calls for the new product to be launched at a high price and high promotion level. High prices mean high initial profits (provided the product is purchased at acceptable levels ), and high promotion means high market recognition. This works best when the new product is known Slow skimming-releasing the product at high price but with low promotion level. Again, the high price is designed to recover costs quickly, while the low promotion level keeps new costs down. This works best in a market that is made up of few major players or productsthe small market means everyone already knows about the product when it is released.

 Rapid penetration-involves low price combined with high promotion. This works best in large markets where competition is strong and consumers are price-conscious. Slow penetration-The second is called slow penetration, and involves low price and low promotion. This would work in markets where price was an issue but the market was welldefined.

Growth Stage
The salient features of the growth stage are: 1. Rapid climb in sales. 2. New competitors enter the market and introduce new product thereby expanding distribution. 3. Prices almost remain the same. 4. Promotional expenditures remain the same. 5. Decline in Promotion-sales ratio. 6. Profits increase because of promotion. 7. Unit-manufacturing cost falls.
Strategies used at this stage: Sustain rapid market growth through 1. Improves product quality. 2. Add new features. 3. Enter new segments. 4. Increase distribution coverage. 5. Lower price to attract buyers.

Maturity Stage
The salient features are:
1. Sales growth will slow down. 2. This stage lasts longer. 3. Challenges to marketing management. 4. Overcapacity because of sales slow down. 5. Intense competition 6. Increase advertising and R&D budgets. 7. Weaker competitors withdraw from the market. 8. Basic market drive is to increase market share. 9. Abandon weaker products and concentrate on profitable products.

Maturity Stage
Strategies A) Market modification B) Product modification and C) Marketing mix modification

) Market modification: Now in order to expand the market volume the company follows the strategy formulated as
Volume = number of brand users x usage rate per user
Expand the number of brand users by Trying to convert nonusers. Enter new market segments. Win competitors customers. Expand Volume by Get the new customers to increase the usage. E.g Lays Interest users to use more of the product on each occasion. E.g Coca Cola Try to discover new product uses and then convince people to use them. E.g Monaco

B) Product modification: This can be done through 1.Improving quality This basically aims at increasing the products functional performance through durability, reliability, speed and taste. 2.Feature improvement This aims at adding new features like size, weight, additives, accessories etc., this expands products versatility, safety and convenience. Advantages of the strategy: a) Builds companys image. b) Win loyalty of market segments. Disadvantage: a) Feature improvements are easily imitated. b) Needs first mover advantage. 3.Style improvement. This aims at increasing the products aesthetic appeal.

C) Marketing mix modification This is done through asking question on certain marketing mix elements. a) Prices: Would a cut attract new customers? Is it better to raise price to signal quality? b) Distribution: Can more outlets be penetrated? Can the company obtain more market support? c) Advertising: Should the expenditures be increased? Should the media mix be changed? d) Sales promotion: Should we set up sales promotion? e) Personal selling: Should the number or quality of sales people be increased? Can we improve sales planning? f) Services: Can the company speed up the sales delivery. Can we extend more credit?

Maturity
Defensive strategies consist of special sales, promotions, minor product changes, and other means of shoring up market share. It can also mean quite literally defending the quality and integrity of your product versus your competition Offensive strategies- means looking beyond current markets and attempting to gain brand new buyers. Relaunching the product is one option. Other offensive tactics include changing the price of a product (either higher or lower) to appeal to an entirely new audience or finding new applications for a product.

Maturity
Characteristics Introduction Growth Maturity Decline Sales Low Sales Rising sales Peak sales Declining sales Costs High Average Low Low Profits -ve Rising High Declining Customers Innovators Early Adopters Middle Majority Laggards Competitors Few growing Stable Declining Marketing Objectives Create Product Awareness and trial Maximize market share Maximize market share while defending profit Reduce expenditure and milk brand. Strategies Product Offer a basic product Offer product extensions, service, warranty Diversify brands and items. Phase out weak models Price Charge cost-plus Price to penetrate market Price to match or best competitors Cut price Distribution Build selective distribution Build intensive distribution Build more intensive distribution system Go selective: phase out unprofitable outlets Advertising Build product awareness among early adopters and dealers Build awareness and interest in the mass market. Stress brand differences and benefits Reduce to level needed to retain hard core loyal Sales promotion Use heavy sales promotion Reduce to take advantage of heave consumer demand Increase to encourage brand switchingReduce to minimal levels.

Decline Stage
Profits erode (destroyed) Intense price cutting and many more products are withdrawn from the market Profits can be improved by reducing marketing spend and cost cutting
Example Slow decline- Sewing Machines (Aging product) Rapid decline- 5.25 floppy disks

 Strategies
Harvest cost cutting while maintaining sales

Divest - Liquidate

Limitations
PLC critiques: 1. The life cycle patterns are too variable in their shape and duration. 2. PLC lacks what living organisms havenamely, a fixed sequence of stages and a fixed length of each stage. 3. A product may appear mature when it has only reached a plateau before up-surge.