Product Life CycleProduct Life Cycle

Product ConceptsPart 3 0f 3

“All products, no matter how successful, are mortal”

NFCU, 3rd quarter 2000,Homeport

How long do things last?How long do things last?

Dishwasher 10Dishwasher 10 Freezer 16Freezer 16 Microwave 11Microwave 11 Dryer/washer 13Dryer/washer 13 Gas water heater 12Gas water heater 12 Furnace(gas or oil) 18Furnace(gas or oil) 18 Carpeting 11Carpeting 11 Paint,interior 5-10Paint,interior 5-10

Product Years

Product Item vs Product Category

Product Life CycleProduct Life Cycle

Introduction Growth Maturity DeclinePostMortem

Loss/profit

Time

$ SalesSales

ProfitProfit

Progression of product “life” stages (sales & time)

Source: WSJ 30 Sept 03, B1

You’re on Candid You’re on Candid Cellphone!Cellphone!

World wide National Economies

Applied Marketing

Growth stage

Traditional–Digital Camera Traditional–Digital Camera PLCPLC

• • Digital cameraDigital camerasales have sales have increased since increased since their beginnings their beginnings in the mid-in the mid-

1990’s1990’s

• • Estimated Estimated salessales

projections areprojections areshown to likelyshown to likelysurpass surpass

traditionaltraditionalcamerascameras

Decline stage

Growth Stage

Product Life Cycles & Product Life Cycles & R & D R & D timetime))

Stages have varied Time

Do

llar

s

R & DR & D Introduction Growth Maturity Decline Introduction Growth Maturity Decline

IndustryIndustry SalesSales

IndustryIndustry ProfitsProfits

Be Proactive in planning not reactive

Negative cash flow (12 yrs for medicines) WSJ,2001

Product Life CycleProduct Life Cycle

Introduction StageIntroduction Stage– Primary DemandPrimary Demand– Slow sales/Low revenueSlow sales/Low revenue– Promotion: Gain awareness, Promotion: Gain awareness,

Push or Pull StrategyPush or Pull Strategy– Develop distribution channelDevelop distribution channel

Growth StageGrowth Stage– Increasing sales & Increasing sales &

profitsprofits– Market expansion Market expansion

brings increasing brings increasing competitioncompetition

– Product refinementProduct refinement– Profits peakProfits peak– Promote to create Promote to create

brand preferencebrand preference

0

5

10

15

20

25

30

35

40

SA

LES

Introduction

PrimaryPrimarydemandemand:d:InformInform

Growth

ExtensiveExtensiveadvertisingadvertisingspending:spending:PersuadePersuade

Maturity

Reminder Reminder & & emotional emotional ads :ads :

RemindRemind

Decline

MinimalMinimalif anyif any

Ad Objectives & the Product life Ad Objectives & the Product life CycleCycle

Stimulate Primary demandStimulate Primary demand for a for a Product classProduct class via via informational Adsinformational Ads

Stimulate selective demand Stimulate selective demand for a brand via for a brand via psychological dimensionspsychological dimensions

The Decline StageThe Decline Stage

Maturity -Decline

Obsolescence New Technology Changing

Consumer Tastes Low promotion Price discounting

130,000

394,000

Flat Panel TV Units

Sept.2003Sept.2002

What’s In this Holiday SeasonWhat’s In this Holiday Season

Source: WSJ,Nov13, 2003Source: WSJ,Nov13, 2003

Product Life Cycle, reality competition

New technology

1st Nine Months 20031st Nine Months 2003

Big screen & home theater systems Profit Margins: High end TV’s 30%

Stereo speakers 50 %

Sales of high end stereos & PC’s

Plasma and LCD TV’s are in the early stages of PLC

Panasonic 42 in. Plasma HDTV Monitor/PC Monitor, Widescreen

Stereo Amplifiers 18%

PCs 28%

CD Players 22%

Product Life ExtensionsProduct Life Extensions((Maturity/Decline Stages)Maturity/Decline Stages)

Cost ReductionsCost Reductions: retool product with less : retool product with less expensive material, production, location, etc.expensive material, production, location, etc.

Product QualityProduct Quality: refocus on quality level : refocus on quality level based on target audience satisfaction.based on target audience satisfaction.

RepositionReposition: change product design, image: change product design, image

Product Modifications

Domestic & International product life cycle Domestic & International product life cycle sewing machines/washing machines sewing machines/washing machines to So. Am. (Brazil)to So. Am. (Brazil)

Styles, Fashions, and Fads

Style, Fashion cycle , Fads (Hula Hoop-6 mos.)

Feature ModificationFeature ModificationQuality ModificationQuality Modification

Style ModificationStyle Modification Image ModificationImage Modification

Product Modifications (Differentiation) in a mature overcrowded & declining market.

Life Cycles and Marketing Life Cycles and Marketing StrategyStrategy

IntroductionIntroduction

GrowthGrowth

MaturityMaturity

Maximize distributionMaximize distributionBuild awareness & obtain trialBuild awareness & obtain trial

DeclineDecline

Extend distribution Extend distribution Advertise & promote heavilyAdvertise & promote heavily

Advertise product imageAdvertise product imagePersuade customers to switchPersuade customers to switch

Milk the product for profitsMilk the product for profitsDetermine if to terminate productDetermine if to terminate product

PostmortemPostmortem Plan for postmortem expensesPlan for postmortem expensesDevelop phase-out planDevelop phase-out plan

Want to Add a Little Excitement to Your Food?

Hellmann’s Plan:

Mayonnaise Isn’t So Mayonnaise Mayonnaise Isn’t So Mayonnaise AnymoreAnymore

Applied Example

French’s plan: “Gourmayo”French’s plan: “Gourmayo” Italian Pesto, Sun-Dried TomatoItalian Pesto, Sun-Dried Tomato Wasabi HorseradishWasabi Horseradish Chipotle Chili Chipotle Chili

Just Not the Same Old MayonnaiseJust Not the Same Old Mayonnaise

Kraft’s Plan:Create a new Stimulating line called,

“MAYO WITH HEAT”

A clean, visually attractive cabin.

Spacious and comfortable seats.

An environment that promotes safety.

Adequate temperature & quietness

On-time flights.

Entertainment.

Case Example: Airlines Assess Case Example: Airlines Assess Customer Customer NeedsNeeds

THE SOLUTION: A product redesign

Smaller/bigger gyms/bars

Reality: airport nightmares, lost luggage, cramped seating, arrival departure lateness, no food , service

The Re Positioning StrategyThe Re Positioning Strategy

– Physical or psychological DifferentiationPhysical or psychological Differentiation

ProductProduct

Focus on Brand Name

Focus on product Benefits and/or The people who use the product and/or The way people classify the products

Pricey TVs are siphoning sales from Pricey TVs are siphoning sales from electronic gadgets with higher price marginselectronic gadgets with higher price margins

A proliferation of outlets now sell fancy TVsA proliferation of outlets now sell fancy TVs– online merchants & Wal-Mart Stores, Inc..online merchants & Wal-Mart Stores, Inc..– computer retailers-i.e., Gateway Inc.computer retailers-i.e., Gateway Inc.

Prices and profit margins are plummetingPrices and profit margins are plummeting

Consumer-electronic Retailers Consumer-electronic Retailers are entering a squeezeare entering a squeeze------Some Early Some Early

signssigns

Dell Inc.– Dell Inc.– sells PCs at 18% gross marginsells PCs at 18% gross margin

– compared to electronic retailer 30% gross compared to electronic retailer 30% gross

marginmargin

Apple looks to Sell Videos…and Apple looks to Sell Videos…and iPods to Play ThemiPods to Play Them

Music videos make sense because of the Music videos make sense because of the iPod's ready-made audience of music lovers. iPod's ready-made audience of music lovers.

For Example, when a user pays $9.99 for the For Example, when a user pays $9.99 for the latest album by the White Stripes, they get a latest album by the White Stripes, they get a video for a song by the rock duo called Blue video for a song by the rock duo called Blue Orchid that can be downloaded to a Orchid that can be downloaded to a computer.computer.

Apple has a joint venture with SONY to Apple has a joint venture with SONY to license music videos to sell on I podslicense music videos to sell on I pods

iPod RevenueiPod Revenue