How marketing strategies change during the Product’s life cycle Essay
How marketing strategies change during the product’s life cycle.
A product’s life cycle (PLC) can be divided into several stages characterized by the revenue generated by the product - How marketing strategies change during the Product’s life cycle Essay introduction. If a curve is drawn showing the product revenue over time, it may take one of many different shapes, an example is shown below.
More Essay Examples on Marketing Rubric
The product life cycle concept normally applies to a brand or to a category of products. The duration of the product’s life cycle concept may be short as a few months for a fad item or longer (a century or more) for product categories such as the gasoline-powered automobile.
There is normally an incubation stage of the product’s life cycle known as product development. No sales are realized in this stage and the firm prepares to introduce the product into the market. With the progress of the product through its life cycle, changes in the marketing mix are usually required in order to adjust to the evolving challenges and opportunities in the market. This is normally achieved through changes in the marketing strategies so as to enhance the maintenance of highest business standards throughout the firm’s operation. The changes in the marketing strategies are carried out at different stages of the product’s life cycle namely; the introduction stage, the growth stage, the maturity stage and the decline stage.
When a product is introduced into the market, sales are normally low until consumers become aware of the product and its benefits. Announcement of the product before it is introduced into the market is always done by some firms, but such announcements also alert competitors and remove the element of surprise. Advertising
Costs typically are high during this introductory stage and this is because the firm wants to rapidly increase consumer awareness of its product and to target the early adopters. It is during this stage that the firm normally incurs additional costs associated with initial distribution of the product. These higher costs coupled with a low sales volume will make the introduction stage a period of negative profits.
During the introduction stage, the firm’s primary goal is to establish a market and demand for the product class. The following are some of the marketing strategies that the firm will apply to maintain its relevance to its primary goal;
Product- The firm should produce one or a few products, relatively differentiated.
Price- Generally prices are high at this stage. The firm should assume a skim pricing strategy for a high profit margin as the early adopters by the product and the firm seeks to recoup the development costs quickly. Penetration pricing strategy may be used and introductory prices are set low to gain market share rapidly.
Distribution- Distribution is selective and scattered as the firm commences implementation of the distribution plan.
Promotion- Promotion is aimed at building brand awareness. Samples or trial incentives are always directed towards early adopters. The introductory promotion is normally intended to convince potential resellers to carry the product.
A rapid revenue growth is realized by the firm at this stage of the product’s life cycle. More consumers also become aware of the product and its benefits hence the
Increase in sales and the firm will then target additional market segments. Once the product has been proven a success and consumers begin asking for it, sale will increase further as more retailers become interested in carrying the product. The marketing team of the firm may then expand the distribution at this point. The entry of the competitors into the market, often during the later part of the growth stage will consequently leads to the price competition and/or increased promotional costs in order to convince customers that the firm’s product is better than that of the competitor.
The goal of the firm at the growth stage is to gain consumer preference and sales. The marketing strategy may be modified as follows;
Product- The firm should come up with new product features and packaging options. Moreover, it should improve the quality of the product.
Price- The firm should maintain the price of the product at a high level if demand is high, or reduce the price to capture additional customers.
Distribution- Distribution becomes more intensive at this stage. The firm should also maintain a minimal trade discount if resellers show a strong interest in the product.
Promotion- The firm should increase advertising to help build brand preference.
The maturity stage is the most profitable. Sales continue to increase into this stage but at a slower pace. The firm will realize reduced advertising expenditures because the brand awareness is strong. Competition may result in the reduction of the market share and/or prices. At this point the competing products may be very similar thereby increasing the difficulty of differentiating the product. The firm then places efforts into
Encouraging competitor’s customers to switch hence the increase in usage per customer and the firm also converts the non-users into customers. The firm will also offer sales promotion to encourage retailers to give the product more shelf space over competing products.
The primary goal of the firm at the maturity stage is to maintain the market share and to extend the product’s life cycle. Marketing strategies at this stage may include;
Product- The firm should modify the product and add some features in order to differentiate the product from the competing products that may have been introduced.
Price- The firm should reduce the price of the product in response to competition to avoid a price war.
Distribution- The firm should use new distribution channels and incentives to resellers in order to avoid loosing shelf space.
Promotion- The firm should put more emphasis on differentiation and building of brand loyalty. It should also come up with incentives to get competitor’s customers to switch.
Eventually sales begin to decline as the market becomes saturated, the product becomes technologically obsolete, or customer’s tastes change. However, the profitability may be maintained longer if the product has developed brand loyalty. Unit costs may increase4 the declining production volume and eventually no more profit can be made.
During the decline phase, the firm generally has three options;
Maintain the product in hopes that competitors will exit. Reduce costs and find new uses for the product.
Harvest it, reducing marketing support and costing along until no more profits can be made.
Discontinue the product when no more profit can be made or there is a successor product.
Generally the marketing strategies may be modified as follows;
Product- The number of products in the product line may be reduced. The firm may also rejuvenate surviving products to make them look new.
Price- Prices may either be lowered to liquidate inventory of discontinued products or maintained for continued products serving a niche market.
Distribution- Distribution becomes more selective. Channels that no longer are profitable are phased out.
Promotion- Expenditures are lower and aimed at reinforcing the brand image for continued products.
In conclusion, the product’s life cycle is self-fulfilling. For example, if sales peak and then decline, managers may conclude that the product is in the decline phase and therefore cut the advertising budget, thus precipitating a further decline. Nonetheless, the product’s life cycle concept helps marketing managers to plan alternate marketing strategies to address the challenges that their products are likely to face. It also is useful for monitoring sales results over time and compares them to those of products having similar life cycles.
Chester R. Wasson.1972.Product life cycle and competitive marketing strategies. Retrieved from;
http://www.amazon.com/Product-International-Harvard-Business-Publications/dp/0875840957/ref=sr_1_9/102-7224929-4674504?ie=UTF8&s=books&qid=1194438657&sr=1-9 on 07/11/2007
Tony Hakola and Michael Horning. 2004.Managing the Product Life Cycle.p26. Retrieved from;
http://www.amazon.com/Managing-product-lifecycle-productivity-management/dp/B0009GSVT2/ref=sr_1_2/102-7224929-4674504?ie=UTF8&s=books&qid=1194438657&sr=1-2, on 07/11/2007
Sak Onkvisit and John J. Shaw.1989.Product Life cycle. Retrieved from;
http://www.amazon.com/Product-Life-Cycles-Management/dp/0899303196/ref=sr_1_1/102-7224929-4674504?ie=UTF8&s=books&qid=1194438657&sr=1-1 on 07/11/2007