02[1]. product life cycle
TRANSCRIPT
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Product life cycle.
y Concept of product life cycle
The product life cycle is an attempt to recognize
distinct stages in the sales history of the productcorresponding to these stages are distinctopportunities & problems with respect tomarketing strategy & profit potential. By
identifying the stage better marketing plans can beformulated.
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TotalIndustry
Sales
Total IndustryProfit
+
-
$ 0
MarketIntroduction MarketGrowth MarketMaturity SalesDecline
Time
Sales growslowly, at acost
Sales levels,but profitsdecline
Manage it orsay goodbye
Salesgrowth, butprofits level
off
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Product-market, not brand
Markets may have different
cycles
Timing of stages may vary
Strategy must change overtime
Key PointsAbout the
PLC...
Key PointsAbout the
PLC...
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TotalIndustryProfit
+
-
$ 0
MarketIntroduction
MarketGrowth
MarketMaturity
SalesDecline
Time
TotalIndustry
Sales
ProductOne of Few Variety - try tofind best
product
Build brand
familiarity
All the
same
Battle of the
brands
Some drop out
But favorites
may be
profitable for a
long time!
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TotalIndustryProfit
+
-
$ 0
MarketIntroduction
MarketGrowth
MarketMaturity
SalesDecline
Time
TotalIndustry
Sales
PlaceBuildChannels
Maybe
selective
distribution
More of the
same, but
more channel
outlets
available
Move toward
more
intensive
distribution
Find a way to
reach loyal
laggards
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TotalIndustryProfit
+
-
$ 0
MarketIntroduction
MarketGrowth
MarketMaturity
SalesDecline
Time
TotalIndustry
Sales
PromotionBuildprimary
demand
Build selective demand
Informing/Persuading Persuading/reminding
Frantically competitive!
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TotalIndustryProfit
+
-
$ 0
MarketIntroduction
MarketGrowth
MarketMaturity
SalesDecline
Time
TotalIndustry
Sales
PriceSkim thecream at a
high price
or
Low to
penetratefaster
Meet competition (especially in oligopoly)
or
Price dealing and price cutting
or
Value pricing for long-term relationships
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y Introduction Aperiod of sales growth as the product is introduced in the
market. Profits are non existence because of heavyexpenses of introduction.
y Growth Aperiod of rapid market acceptance & substantial profitimprovement.
yMaturity Aperiod of slow down in sales growth because acceptanceby most potential buyers. Profits stabilized or declinedbecause of increased marketing outlets to defend the
product against competitors.yDecline
The period when sales show strong downward drift &profits erode.
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y Product category, product form, brand life cycle.
y Rational for the product life cycle.
o Innovators early adopters middle majority -laggards.
y Stages & strategies -
Introduction stage
a. Sales growth is slow reasons.
o Delay in expansion of production capacity.
o Technical problems.
o Delay in obtaining distribution.
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b. Profits are negative or slow reasons.
o Low sales & heavy distribution, promotion expenses.
c. High level promotion required reasons.o Inform potential customers of new product.
o Induce trial of the product.
o Secure distribution in retail outlets.
d. The prices tend to be higher o Few competitors in the market.
o Produce basic versions since market is not ready forproduct refinement.
o Easy way to attract buyers i.e. high income group.
o Costs are high due to relatively low output rates.
o Technology problems in productions.
o High margins are required to support high promotionexpenditures.
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yMarketingstrategy in introduction
HighHigh LowLow
HighHigh RapidRapidskimmingskimming
strategystrategy
SlowSlowskimmingskimming
strategystrategy
LowLow RapidRapidpenetrationpenetration
strategystrategy
SlowSlowpenetrationpenetration
strategystrategy
Promotion
Price
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I. Rapid skimmingstrategy
y Large part of potential market is unaware
of the product.
y Aware are eager to have the product & ableto pay asking price.
y
Firm faces potential competition & wantsto build up brand preferences.
II. Slow skimmingstrategy
y Market is limited in size.
y Most of the market is aware of theproduct.
y Buyers are willing to pay high prices.
y
Potential competition is not imminent.
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III. Rapid penetration strategy
y The market is large.
y The market is unaware of the product.
y Most buyers are price sensitive.
y There is strong potential competition
y Unit manufacturing cost fall with the scaleof production & accumulatedmanufacturing experience.
IV. Slow penetration strategy
y Market is large.
y Market is highly aware of the product.
y Market is price sensitive.
y There is some potential competition.
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y Growth stage
y Rapid climb in sales.
y New competitors enter the market.
y Prices remain the same or fall slightly.
y Promotion same or slightly higher to meet competition.
y Profit increase as promotion sales ratio declines &experience curve effect.
y Growth initially accelerating then decelerating.
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yMarketingstrategies in growth stage
y The firm improves product quality & adds productfeatures & improved styling.
y The firm adds new models & f lanker products.
y It enters new market segment.
y It increases new distribution coverage.y Shifts from product awareness adds to product
preference advertisement.
y It lowers prices to attract next layer of price sensitive
buyers.
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y Maturitystage
1. Growth maturity
o Sales growth starts to decline.
o No new distribution channels to fill.2. Stable maturity
o Most potential buyers tried the product.
o Future sales govern by population growth &
replacement.
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3. Decaying maturity
o Absolute level of sales now starts to decline.
o Customers starts switching to other products &substitutes.
o Over capacity & intense competition enters niches.
o Increase R&D budget to improve product & flankerproducts.
o Increase advertising, trade & consumer deals.
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y Marketingstrategies in the maturitystage
a. Market modification y
Increase no. of brand users.o Convert non users.
o Enter new market segments.
o Win competitors customers.
y
Increase annual usage of brand by current brandusers -
o More frequent use.
o More usage per occasion.
o New & more varied uses.
b. Product modification y Quality improvement.
y Feature improvement .
y Style improvement.
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c. Marketing mix modification
y
Price.y Distribution.
y Advertising.
y Sales promotion.
y Personal selling.y Services.
Decline stage marketing strategy
y Identifying weak products.
y Determining marketing strategies.
y Drop decisions.
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y Summery
CharacteristCharacterist
--icsics
IntroductionIntroduction GrowthGrowth MaturityMaturity DeclineDecline
SalesSales LowLow RisingRising PeakPeak DeclineDecline
CostCost HighHigh AverageAverage LowLow LowLow
ProfitsProfits NegativeNegative RisingRising HighHigh DeclineDecline
CustomersCustomers InnovatorsInnovators EarlyEarlyadoptersadopters
MiddleMiddlemajoritymajority
LaggardsLaggards
CompetitorsCompetitors FewFew GrowingGrowing StableStable DeclineDecline
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MarketingMarketing
objectivesobjectives
IntroductionIntroduction GrowthGrowth MaturityMaturity DeclineDecline
AwarenessAwareness& trial& trial MaximizeMaximizeMarketMarket
shareshare
MaximizeMaximizeprofitprofit
whilewhile
defendingdefending
marketmarket
shareshare
ReduceReduceexpenditureexpenditure
& milk the& milk the
brand.brand.
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StrategiesStrategies IntroductionIntroduction GrowthGrowth MaturityMaturity DeclineDecline
ProductProduct Basic productBasic product ProductProduct
extension,extension,
warrantywarranty
DiversifyDiversify
brands &brands &
modelsmodels
Phase outPhase out
weak items.weak items.
PricePrice Cost plusCost plus PenetrationPenetration
pricingpricing
MatchMatch
competitorscompetitors
Cut priceCut price
DistributionDistribution SelectiveSelective IntensiveIntensive MoreMore
intensiveintensive
GoGo
selective,selective,
phase outphase out
weak outletsweak outlets
AdvertisingAdvertising AwarenessAwareness BrandBrand
preferencepreference
BrandBrand
differencedifference
ReduceReduce
level tolevel to
retain loyalretain loyal
PromotionPromotion Heavy for trialHeavy for trial ReduceReduce Increase forIncrease for
brandbrand
switchingswitching
ReduceReduce
minimumminimum
levellevel