Understanding Product Life Cycles: Strategies for Success

1. 2.2 Product Life Cycles • Product Life Cycles • describe changes in consumer demand over time • based on the idea that no product will be in demand forever as consumer demands will change • allows marketers to predict when changes might occur

2. 2.2 Product Life Cycles Traditional Product Life Cycle p41 Maturity Decline Sales Growth Decision Point Introduction Time

3. 2.2 Product Life Cycles • 1: Introduction Stage • product launch is the moment when a new product is introduced to the market • can be launched locally, regionally, etc. • launch is expensiveadvertising, design, research, training, etc. • consumers who buy early are called early adopters or trendsetters • during the early stages, marketers target these consumers • galas, trendy publications, ceremonies, etc.

4. 2.2 Product Life Cycles • in this stage celebrities are often used • Like who? • successful example: the DVD player • note that the original price of a DVD player in Canada was $600 (now $40) • unsuccessful example: the Beta video • in pairs, come up with a list of 5 successful and 5 unsuccessful product introductions

5. 2.2 Product Life Cycles • Pull Strategies • ads to create a positive association of the product with the consumer • samples, coupons, sales promotions • Push Strategies • focus is often on product placement in retail stores as the consumer does not know product • may involve consignment sales • may involve shelf allowance

6. 2.2 Product Life Cycles 2: Growth Stage • sales are increasing • other consumers follow the trendsetters • product has become more visible through advertising (crucial in this stage) and word of mouth • if product does not catch on, it may be scrapped • if product is pulled before production costs are recovered it is called a bust

7. 2.2 Product Life Cycles • the faster it can reach this stage the faster it can make a profit • while the first company in the market with a new product has to pay more in advertising, it also has no competition • as other competitors enter the market, the companies split the market share • stated as a percentage of total sales for that market • new features are added and price drops

8. 2.2 Product Life Cycles • many factors reduce the possibility of profit (these are called barriers to entry) • ex: small market size, research & development costs, advertising costs, lack of distribution channels, materials costs • companies using the push strategy do well here (low prices, retail displays, etc.)

9. 2.2 Product Life Cycles 3: Maturity Stage • product sales slowly increasing or steady • marketers promote the name of the product • development costs have been recouped • large profits are often available, that may be used to develop more products • brand reputation is used to promote other products • Ex. CokeCoke Zero; PepsiPepsi Max

10. 2.2 Product Life Cycles 4: Decline Stage • company unable to find new customers • profits decrease • marketers need to determine what is causing the decline • might try and reverse the process by changing price, ads, design, etc. • may remove product from market

11. 2.2 Product Life Cycles 5: Decision-Point Stage • marketers determine the future of the product based on research • may reformulate, repackage, reintroduce • “New and Improved” • new features (or even new uses!) • sell with other products

12. 2.2 Product Life Cycles Nontraditional Product Life Cycles • Fads • product that is popular for a short time only • Rubik’s Cube, Furby, Cabbage Patch Kids • highly unpredictable and risky • may be highly profitable • if you can get involved at the right time, it is great • wrong timing means big losses

13. 2.2 Product Life Cycles • Trends • lasts longer than fads • mass movement of the marketplace toward a particular value (ex: healthy food choices) • by identifying trends, marketers can predict likely market opportunities • this gives time to develop products in time to get them to the market (it takes months or years to develop a product)

14. 2.2 Product Life Cycles • Niche Markets • products with short growth stage and consistent maturity stage • do not take a large market share • ex: The Pet Hotel • Seasonal Markets • markets that change by the season • ex: ice-cream sales, snow blowers, air conditioners • marketers try and create more sales outside of the season

15. 2.2 Product Life Cycles