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IMT-N-II-12-MM2Marketing Management 2

Session 4

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Learning Objectives

1. Product Life Cycle1. PLC- Applications

2. Product Life Cycle Stages

3. PLC- Aberrations

2

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4.1 Product Life Cycle : Concept & Application

Product Life Cycle shows the stages that products gothrough from development to withdrawal from the market

Product Life Cycle (PLC)

Each product may have a different life cyclePLC determines revenue earnedHelps the firm in being proactiveContributes to strategic marketing planningMay help the firm to identify when a productneeds support, redesign, revitalization, withdrawal, etc.May help in new product development planningMay help in forecasting and managing cash flow

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PLC Applications

Levels of PLCProduct Level Samsung Tablet PC

Category Level PC- Desktop, Laptop, Palmtop, Tablet PCBrand Level Sony, Samsung, Toshiba, Lenovo, Dell, HP

Products pass through certain stages during its lifespanWhat happens to product in each stage depends on market behavior By manipulating the market behavior, marketer can manipulate stagesof PLC

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4.2 Product Life Cycle Stages

Sales

Time

Development Introduction Growth Maturity Saturation Decline

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Product Life Cycle & Profits

Sales/Profits

Time

PLC and Profits

PLC

Losses

Break Even

Profits

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Product Life Cycle

Stages of the Product Life CycleDevelopmentIntroduction/LaunchGrowthMaturity/ SaturationDecline/ Withdrawal

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Product Life Cycle

The Development StageInitial Ideas possibly large number May come from any of the following

Market research

identifies gaps in the marketMonitoring competitorsPlanned research and development (R&D)Luck or intuition stumble across ideas?Creative thinking inventions, hunches?

Futures thinking what will people be using/wanting/needing5,10,20 years hence?

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PLC : Introduction Stage

Characteristics Advertising & promotion Campaigns to maximize publicityHigh costs- Low Sales- No ProfitsHighly priced product- Monitor initial sales

Innovators as few buyers, less competitionFirst mover, second mover & imitator Length of Time- Type of product

Strategies

Product- offer a basic productPrice- cost plus pricing/ skimming pricingPlace- selective distributionPromotion- heavy advertising & sales promotion

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PLC : Growth Stage

CharacteristicsRapidly rising sales due to increased consumer awarenessProfits appear due to scaled production & shared promotion costRevenue increases but prices may change

Early adopters & growing buyersCompetitors rising; getting fierce on product- promotion-place

StrategiesProduct- bring product extensions, warranty, service

Price- penetration pricingPlace- intensive distributionPromotion- reduce, invoke interest & sell through heavy consumer demand

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PLC: Maturity/ Saturation Stage

CharacteristicsPeak sales; rising & declining salesLow costs- High profits; with highest revenue to cost ratioMajority buyers make repeat purchase, Laggards join them

Decaying maturity- overcapacity, markdowns- flooded marketNew Competition/ innovation emergingMonitor- P. modifications, new growth strategies

Strategies

Product- diversify & improve productsPrice- competitive pricingPlace- intensive distributionPromotion- encourage brand switching by stressing benefits

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PLC : Decline/Withdrawal Stage

CharacteristicsDeclining sales- Laggards & Repeat purchases drivenCompetition giving way to innovation- foreign competitionProduct outlived its utility, Taste-fashion & Prf change

Withdrawals from segments & channels beginsHarvesting or divesting call for different strategies

StrategiesProduct- contraction of product extensions

Price- reduced pricesPlace- selective distribution by shutting loss making outletsPromotion- reducing to just necessary

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4.3 PLC Aberrations

Do all Product Life Cycles look alike??

Product Life Cycle

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Product Life Cycle& Product Modification

Sales

Time

Effects of ExtensionStrategies

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PLC & Diffusion of Innovation

Laggards

Late Majority

Early Majority

Early Adopters

Innovators

What dowe knowabout theprocess bywhichconsumers

adopt newproducts?

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Product Life Cycle & Diffusion of Innovations

Innovators

Early adopters

Early majorityLate majority

Laggards

Productlife cyclecurve

DiffusionCurve

Time-

Introduction Growth Maturity Decline

S a

l e s