MKT 3A) Product Life Cycle Marketing Strategies (EXTRA) The Product Life…
MKT 3A) Product Life Cycle Marketing Strategies
1) Marketing Strategies: Introduction Stage and Pioneer Advantage
Characteristics of Introduction State
Low sales, Profits are negative or low
High cost / customer
Customers are innovators
Promotional Expenditures are at highest ration to sales due to
Inform Potential Customers
Induce Product Trial
Secure Distribution in retail outlets
Sources of the pioneer's advantage:
Early users will recall the pioneers brand name if satisfied
Pioneers brand also establishes the attributes the product class should possess
Pioneers brand normally aims at the middle of the market and so captures more users
There are producer advantages: Economies of scale, Technological leadership, patents, ownership of scarce assets and barriers to entry.
Failing Pioneers weaknesses included:
New Products were too crude
Appeared before there was a strong demand
Product - Development costs too high
Lack of resources to complete
Managerial Incompetence or unhealthy complacency.
Marketing Strategies in the introductory stage of the product cycle:
Offer a basic product
Charge cost plus pricing strategy
Build Selective distribution
Build product awareness among early adopters and dealers
Use heavy sales promotion to entice trial
2) Marketing Strategies: Growth Stage
Characteristics of growth stage
Rapid Climb in Sales
Early adopters liked product, additional consumers start buying (early majority)
New competitors enter
Prices remain where they are or fall slightly
Companies maintain their promotional expenditure or increase slightly to meet demand
Sales rise quicker than promotional expenditures
Manufacturing cost falls faster than price declines - owing to the producer learning effect
Marketing Strategy in Growth Phase
Strategies sustain rapid market growth & maximize market share
It improve product quality and adds new product features and improving style
Adds new models and flanker products
Enters new market segments
Increases distribution coverage and enters new distribution channels
Shifts from product-awareness advertising to product preference advertising
Lowers prices to attract the next later of price sensitive buyers
3) Marketing Strategies: Maturity Stage
Maturity stage divides into three phases
Growth - where sales growth starts to decline
Stable - Sales flatten on a per capita basis (due to market saturation)
Decaying maturity - Absolute level of sales starts to decline and customers begin switching to other products.
Characteristics of the maturity stage of the product life cycle
Sales slow down - leads to intensified competition
Industry eventually consists of well-entrenched competitors whose basic drive is to gain or maintain market share
Dominating the industry are a few giant firms that serve the whole market
Surrounding their dominant firms is multitude of market nichers
Issue facing a firm in a mature market is whether to become one of the "big three" or pursue niching strategy.
Firms abandon weaker products, concentrate on profitable products .
Volume = Number of brand users x usage rate per users
Expand number of brands by converting nonusers
Expand NOU by entering new market segments
Expand NOU by winning competitors customers
Volume can also be increased by increasing curreny DAU .
Use product more frequently
Use more of the product on each occasion
Use product in new ways
Stimulate sales by modifying products characteristics through quality improvement, feature improvement or style improvement.
Build the company's image as innovators
Wins the loyalty of the market segments that value new features
Generate sales force and distribution enthusiasm
4) Marketing Strategy: Decline Phase
Characteristics of decline phase:
Low cost per customer
Laggards purchase the product
Declining number of customers
Strategies in declining phase
Increase firms investment
Maintain investment level until uncertainties about industry are resolved
Decrease investment levels by dropping unprofitable customer groups while strengthening the firms investment in lucrative niches
Harvest the investment into cash
Divesting the business quickly by disposing of its assets as advantageously as possible
EXTRA) The Product Life cycle concept: Critique
**helps marketers interpret product and market dynamics, it can be used for planning and control as well as forecasting.
PLC focuses on whats happening to a particular product or brand thus yields a product orientated picture rather than a market orientated picture. .
- A market where buyer preferences evenly scattered - "Diffused preference market". Business has three options: Single Niche strategy, Multiple Niche Strategy, Mass Strategy.
If the new product sells well, new firms will enter the market, ushering in a Market-growth stage
Competitors cover and serve all the major market segments and the market enters the maturity stage. As the market growth slows, market splits into finer segments and high market fragmentation occurs
Eventually the demand for a new product will decrease and it enters the decline stage.