Product Strategies

1. Product Strategies

2. Managing Life Cycle Strategies • Product Life Cycles • Marketing Strategies throughout the PLC • Market Evolution Stages

3. The Product Life Cycle • Demand/Technology Life Cycle • describes changing need levels as well as the level of technology available to satisfy these changing needs • Product Life Cycle presumes: • products have limited life • products pass through distinct phases • profits rise and fall at different stages • different strategies are required at dif. stages

4. The Product Life Cycle • Stages • Introduction • product is introduced • slow sales growth • profits non-existent • heavy expenses • Growth • rapid market acceptance • substantial profit improvement

5. The Product Life Cycle • Stages (cont) • Maturity • slowdown in sales growth • profit stabilization/decline • expenses rise to defend against competition • Decline • sales show downward drift • profits erode

6. Figure 11.8 Stages in the Product Life Cycle Introduction Growth Maturity Decline Food Processors Cassette Tapes Cellular Phones Network Computers Sales and Profits Industry Sales Industry Profits Time

7. The Product Life Cycle • PLC can be applied to: • product categories • have longest life cycles;indefinite maturity stage • examples: cigars, newspapers, cell phones, bottled water • product forms • example: manual, electric, electronic typewriter • products • branded products

8. The Product Life Cycle • PLC Shapes • Growth-slump-maturity pattern • Cycle-recycle pattern • Scalloped pattern • Style-Fashion-Fad Life Cycles • Style - distinctive mode of expression • Fashion - currently accepted or popular style • Fad - quick-peak, quick-decline fashions

9. The Product Life Cycle • Fashion Stages • distinctiveness • emulation • mass-fashion • decline

10. The Introduction Stage • Slow growth of new products caused by: • delays in production capacity expansion • technical problems • distribution channel delays • customer reluctance to change behaviors • small number of buyers who can afford product

11. The Introduction Stage • Negative or low profits caused by: • low sales • heavy distribution/promotion expense • High levels of promotion required to: • inform potential customers about product • induce trial • secure the readiest to buy

12. Introduction Stage Strategies • Rapid-skimming • high price • high promotion • Slow-skimming • high price • low promotion

13. Introduction Stage Strategies • Rapid-penetration • low price • high promotion • Slow-penetration • low price • low promotion

14. Market Pioneers • Research shows “first to market” gain greatest advantages, both consumer and producer-oriented • Over 40% market share = 38.5% ROI • At 11% market share = 10 % ROI

15. Market Pioneers • Source of Pioneer’s Advantage • consumers may prefer pioneering brands • pioneer’s brand establishes attributes of product class • economies of scale • technological leadership • ownership of scarce assets • barriers to entry

16. Stages of Competitive Cycle for the Pioneer • Pioneer understands competition will eventually enter and cause prices and market share to fall • Pioneer must anticipate stages of competitive cycle • sole supplier • competitive penetration • share stability • commodity competition withdrawal

17. Growth Stage • Characteristics • new competitors enter market • competitors introduce new product features • competitors expand distribution chain • prices remain constant or fall slightly (depends on demand) • sales rise much faster than promotional expenditures • profits increase (mfg/promo. costs spread) • rate of grown eventually decelerates

18. Marketing Strategies in the Growth Stage • improve product quality • add new product features • add new models and “flanker” products • different sizes, flavors to protect main product • enter new market segments • increase distribution channels/coverage • shift to product-preference advertising • lower prices

19. Maturity Stage • Characteristics • growth rate starts to decline; (growth maturity) • then declines per capita; (stable maturity) • then declines absolutely (decaying maturity) • overcapacity occurs • leads to intensified competition • profits erode • industry shakeout occurs /remainder stabilization

20. Marketing Strategies in Maturity Stage • Market Modification • where volume = number of brand users x usage rate per user • increase users • convert nonusers • enter new market segments • win competitors’ customers • increase uses • more frequent use; more usage per occasion • new and more varied uses

21. Marketing Strategies in Maturity Stage • Product Modification • quality improvement • feature improvement • style improvement • Marketing Mix Modifications • prices distribution advertising • sales promotion personal selling • services

22. Decline Stage • Characteristics • technological advance • shifts in consumer tastes • increased domestic and foreign competition • some firms withdraw • remainder reduce number of products

23. Marketing Strategies in Decline Stage • Increase investment to dominate • “dowager” brands • Maintain investment to reduce risk • Decrease investment selectively - niching • Harvest - milk - investment to produce cash • Divest

24. Market Evolution • Emergence Stage • one company enters to satisfy need/want of “latent” market ( product does not exist) • Growth Stage • new firms enter attractive market • Maturity Stage • heavy compet.; market fragment./consolidation • Decline Stage • total need declines; new technology arrives

25. Figure 11.10 Overlapping Life Cycles for Two Products Introduction Growth Maturity Decline Product A Industry Sales Product B Time