Product life cycle

Product Life Cycle (PLC):The Product Life Cycle (PLC) is based upon the biological life cycle. For example, a seed is planted (introduction); it begins to sprout (growth); it shoots out leaves and puts down roots as it becomes an adult (maturity); after a long period as an adult the plant begins to shrink and die out (decline). Each product may have a different life cycle PLC determines revenue earned Contributes to strategic marketing planning May help the firm to identify when a product needs support, redesign, reinvigorating, withdrawal, etc. May help in new product development planning May help in forecasting and managing cash flow

Product Life Cycle: Implications for Business Strategy Stage of the product life cycle Sales revenue or profit Introduction Growth Maturity Decline Total industry sales revenue Total industry profit + –

Introduction Stage of the PLC Product Life-Cycle Strategies This CTR relates to the material on pp. 289 and 293. Introduction Stage of the PLC Sales Low sales Product Life Cycle Strategies Costs High cost per customer Introduction. In this stage marketers spend heavily on promotions to inform the target market about the new product's benefits. Low or negative profits may encourage the company to price the product high to help offset expenses. companies can concentrate on skimming strategies to generate high profits now or on penetration strategies to build market share and dominant the market for larger profits once the market stabilizes. Profits Negative Marketing Objectives Create product awareness and trial Product Offer a basic product Price Use cost-plus Distribution Build selective distribution Advertising Build product awareness among early adopters and dealers

Growth Stage of the PLC Sales Costs Profits Product Price Distribution Product Life-Cycle Strategies This CTR relates to the material on pp. 289-290 and 293. Growth Stage of the PLC Sales Rapidly rising sales Product Life-Cycle Strategies Growth. In this stage the company experiences both increasing sales and competition. Promotion costs are spread over larger volume and strategic decisions focus on growth strategies. Strategies include adding new features, improving quality, increasing distribution, and entering new market segments. Costs Average cost per customer Profits Rising profits Marketing Objectives Maximize market share Product Offer product extensions, service, warranty Price Price to penetrate market Distribution Build intensive distribution Advertising Build awareness and interest in the mass market

Maturity Stage of the PLC Product Life-Cycle Strategies This CTR relates to the material on pp. 290-292 and 293. Maturity Stage of the PLC Sales Peak sales Costs Low cost per customer Product Life Cycle Strategies Maturity. In this stage the company must manage slower growth over a longer period of time. Strategic decisions made in the growth stage may limit choices now. Marketing managers must proactively seek advantage by either market modification to increase consumption, product modification to attract new users (quality, feature, and style improvements), or marketing mix modification in an attempt to improve competitive position. Profits High profits Marketing Objectives Maximize profit while defending market share Product Diversify brand and models Price Price to match or best competitors Distribution Build more intensive distribution Advertising Stress brand differences and benefits

Decline Stage of the PLC Product Life-Cycle Strategies This CTR relates to the material on pp. 292-293. Decline Stage of the PLC Sales Declining sales Costs Low cost per customer Product Life Cycle Strategies Decline. In this stage the costs of managing the product may eventually exceed profits. Rate of decline is a major factor in setting strategy. Management may maintain the brand as competitors drop out, harvest the brand by reducing costs of support for short term profit increases, or drop the product (divest) altogether. Profits Declining profits Marketing Objectives Reduce expenditure and milk the brand Product Phase out weak items Price Cut price Distribution Go selective: phase out unprofitable outlets Advertising Reduce to level needed to retain hard-core loyal customers

PLC- Important Observations Individual brands may not follow this pattern Sometimes a product may crash and not get to the maturity stage Product Life Cycle - length of time at each stage  - varies depends on the products can be a few months in each stage or it can be years Generally speaking, due to the  Competitive Environment Technological Environment The PLC is getting shorter

Extending Product Life Cycle Market Modification: Increase Frequency of use by Present Customers Add New Users Find New Users Product Modification: Change Product Quality or Packaging

Example: New Flavor of Pepsi Stage 1: Market Introduction Pepsi bottles the new flavored product and places it on the market for consumers. Pepsi also spends a lot of money advertising the new flavor creating awareness. Stage 2: Market Growth Customers like the flavor and begin to make routine purchases. Coke introduces their competing flavor.

Stage 3: Market Maturity More competitors enter the market taking some of Pepsi’s profits. Stage 4: Sales Decline Customers have moved on to the next new flavor. Some loyal fans stay behind.

THANK YOU -PHARMA STREET