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University of Washington EMBA Program Regional 20

University of Washington EMBA Program Regional 20. “Product Life Cycle & Diffusion of Innovation” Instructor: Elizabeth Stearns. Product Life Cycle. Product Class. Product Form. Sales Volume. Product Form. Competitive Turbulence. Rapid Growth. Maturity. Decline. Entry. Time.

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University of Washington EMBA Program Regional 20

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  1. University of Washington EMBA ProgramRegional 20 “Product Life Cycle & Diffusion of Innovation” Instructor: Elizabeth Stearns

  2. Product Life Cycle Product Class Product Form Sales Volume Product Form Competitive Turbulence Rapid Growth Maturity Decline Entry Time Product Class: Evolution in demand for a general class of products Product Form: Evolution in demand for products and services that serve the same function

  3. Sales &profits($) Introduction Growth Maturity Decline Time Sales & Profit Life Cycles ©2000 Prentice Hall

  4. Market Evolution Product and profit life cycles Introduction Growth Maturity Decline Sales $’s Profit Time Time

  5. Market Characteristics Uncertainty & turbulence Initially monopolistic followed by competitive entry Little “meaningful” differentiation Big marketing investment Consumer education Market Evolution: Introduction Product and profit life cycles Entry $’s Time Time

  6. Strategies at Introduction • Pioneer • Skimming Focus on price inelastic customers Extract all value • Expansion/Penetration • Stimulate demand • Price less than value

  7. Market Characteristics Revenue growth Competitive entry Standardized design Prices drive profitability Well defined segments Sophisticated buyers Marketing aimed at differentiation Competitive consolidation Market Evolution: Growth Product and profit life cycles Growth $’s Time

  8. Market Leader Market domination or expansion Attack Flank the competition Strategic withdrawal Followers Direct confrontation Leapfrog strategy Flanker strategy Encirclement strategy Guerrilla attack Avoidance Growth Strategies

  9. Market Characteristics Slow/negative growth Declining profits Excess capacity Price competition Market Evolution: Maturity Product and profit life cycles Maturity $’s Profit Time Time

  10. Market Leader Increase market dominance Maintain leadership Harvest Followers Build share, disadvantage leader Maintain current position Divest Strategies in Mature Markets

  11. Market Evolution: Decline • Market Characteristics • Technological change • Differentiated products • Shifting demographics • Shifting tastes • Intense rivalry • Strategies • Seek maximum share • Niche • Divest quickly • Harvest slowly Product and profit life cycles Decline $’s Time

  12. Strategies in Declining Markets • Seek maximum share • Niche • Divest quickly • Harvest slowly

  13. Market Evolution What else drives the PLC phenomena?

  14. Customers & Innovation LateMajority34% Early Adopters13.5% EarlyMajority34% Innovators2.5% Laggards16%

  15. PLC Strategy Summary • PLC can provide strategic insights but is not a rulebook. • Well-managed pioneers are hard to overtake. • Winners win by changing the rules of the game! • RECOMMENDED BOOK: • Eating the Big Fish, Adam Morgan

  16. First-time repeat buyer Regular customer Declining Stage First time buyer Customer Life Cycle • The ability of the firm to manage the Customer Life Cycle is critical because the needs of the customer changes at various stages Customers go through Lifecycles, too! CustomerValue Time Prospect/ lead

  17. CLC and Customer Value • Prospect / lead: Low • High percentage will not become customers • First time buyers: Moderately low • High attrition rates • Second time buyers: High • Lower attrition rates and long-life cycle

  18. CLC and Customer Value • Regular customers: High • Low marketing costs and high retention rates • Declining: Low but better than prospects • Have already signaled interest in buying from firm

  19. CLC and Marketing Strategy Prospect/Lead • Advertising: Awareness generation • Pricing: Depends upon characteristics of offer • Promotion: Generate interest and trial • Product: Concentrate on “lead-product” • Customer service: Rapid follow-up

  20. CLC and Marketing Strategy • Advertising: Reinforce purchase decision • Pricing: Normal (Value) • Promotion: Induce repeat purchase • Product: Focus on second lead product • Customer service: Follow up on initial purchase to insure satisfaction First time Customer

  21. CLC and Marketing Strategy • Advertising: Reinforce purchase decision • Pricing: Normal (Value) • Promotion: Provide on-going rewards • Product: Acquire or develop add-on products • Customer service: Rapid follow-up First repeat purchase

  22. CLC and Marketing Strategy • Advertising: Communicate based on purchase patterns • Pricing: Normal • Promotion: Provide rewards for being preferred customer (higher than new customers) • Product: Focus on add-on products • Customer service: Rapid follow-up and special contacts to overcome any product/service problems Regular Customers

  23. CLC and Marketing Strategy • Advertising: Use one-on-one contacts to reinvigorate/stimulate interest • Pricing: Normal • Promotion: Provide incentive to become regular customer • Product: Focus on base product • Customer service: Contact customer to learn cause of attrition/defection Declining

  24. Thank you!

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