12.-PRODUCT-LIFE-CYCLE-STRATEGIES(1)

NEWPRODUCTDEVELOPMENTANDPRODUCTLIFE-CYCLESTRATEGIESNEW-PRODUCTDEVELOPMENTSTRATEGYGiventherapidchangesinconsumertastes,technology,andcompetition,companiesmustdevelopasteadystreamofnewproductsandservices.Afirmcanobtainnewproductsintwoways:a.Acquisitionb.new-productdevelopment-originalproducts,-productimprovements,-productmodifications,and-newbrands.Whymanynewproductsfail?1.themarketsizemayhavebeenoverestimated2.productnotwelldesign3.incorrectlypositionedinthemarket4.pricedtoohigh5.advertisedpoorly6.costofdevelopmentarehigherthanexpectedNewproductdevelopmentprocess1.Ideageneration2.Ideascreening3.Conceptdevelopmentandtesting4.Marketstrategydevelopment5.Businessanalysis6.Productdevelopment7.Testmarketing8.CommercializationPRODUCTLIFE-CYCLESTRATEGIESSTYLEFASHIONFADTimeTimeTimeSalesSalesSalesPLCSalesandprofitsProductdevelopmentIntroductionGrowthDeclineMaturityTimeDollarsLosesProfitsSalesFivedistinctstages1.Duringproductdevelopment,salesarezeroandthecompany’sinvestmentcostsmount.2.Introductionisaperiodofslowsalesgrowthastheproductentersinthemarket.Profitsarenonexistentinthisstagebecauseoftheheavyexpensesofproductintroduction.3.Growthisaperiodofrapidmarketacceptanceandincreasingprofits.4.Maturityisaperiodofslowdowninsalesgrowthbecausetheproducthasachievedacceptancebymostpotentialbuyers.Profitsleveloffordeclinebecauseofincreasedmarketingoutlaystodefendtheproductagainstcompetition.5.Declineistheperiodwhensalesfalloffandprofitsdrop.UsingthePLCconceptforforecastingproductperformanceorfordevelopingmarketingstrategiespresentssomepracticalproblems:1.ProblemofidentifyingwhichstageofthePLCtheproductisin2.Pinpointingwhentheproductmovesintothenextstage,anddeterminingthefactorsthataffecttheproduct’smovementthroughthestages.3.DifficultyofforecastingthesaleslevelateachPLCstage,thelengthofeachstage,andtheshapetothePLCcurve.4.StrategyisbothacauseandresultofthePLCIntroductionstageThecharacteristicsofthisstageis:1.Hereprofitsarenegativeorlowbecauseofthelowsalesandhighdistributionandpromotionexpenses.Alotofmoneyisneededtoattractdistributorsandbuildtheirinventories.2.Becausethemarketisnotgenerallyreadyforproductrefinement,thecompanyanditsfewcompetitorsproducebasicversionsoftheproduct.Itfocusesonlyonthosebuyerswhoarethereadiesttobuy.GrowthstageCharacteristicsofthisstageis:1.Theopportunitywillattractnewcompetitors2.Newproductfeaturesintroduced,increaseproductquality3.Salesjumpwillbuildresellerinventories4.Enteringnewmarketsegmentswillincreasethenumberofdistributionoutlets,5.Pricesremainsorfallonlyslightly6.Promotionspendingatsameorslightlyhigherlevel7.Advertisingshiftsfrombuildingproductawarenesstobuildingproductconvictionandpurchase.8.Educatingthemarketremainsagoal,9.Profitincreaseaspromotioncostsarespreadoveralargevolumeandasunit-manufacturingcostsfall.10.Firmsusesseveralstrategiestosustainrapidmarketgrowthaslongaspossible.11.Tradeoffbetweenhighmarketshareandhighcurrentprofit.MaturitystageThecharacteristicsofthisstageis:1.Slowdowninsalesgrowth–manyproducerswithmanyproducttosellthereforeleadstogreatercompetition.2.Pricesaremarkeddown.Promotion&advertisingandR&Dcostsincreasesleadstoreduceinprofits.3.Weakercompetitorsdropoutleavingonlyestablishedcompanies.Marketersshouldconsidermodifyingthemarket,product,andmarketingmix.A.Modifyingthemarket:-Increasetheconsumptionofthecurrentproduct-lookfornewusers-lookfornewmarketsegmentsB.Modifytheproduct-improvetheproduct’squalityandperformanceintermsofdurability,reliability,speedandtaste.-Addnewfeaturesthatexpandtheproduct’susefulness,safety,orconvenience.C.Modifythemarketingmix-cutprice-launchabetteradvertisingcampaignoruseaggressivesalespromotionse.g.tradedeals,cent-offpromotions,premiumsandcontests’-moveintolargermarketchannelsusingmassmerchandisers-improvepresentorprovidenewservicetobuyersDeclinestageThesalesofmostproductformsandbrandseventuallydip.Thedeclinemaybeslowordrasticdueto:1.Technologicaladvances2.Shiftinconsumertastes3.IncreasedcompetitionAssalesandprofitsdecline,somefirmswithdrawfromthemarket.Thoseremainingmayprunetheirproductofferings.Theymaydropsmallermarketsegmentsandmarginaltradechannels,ortheymaycutthepromotionbudgetandreducetheirprocessfurther.Managementmustdecideto:1.Maintain–hopingcompetitorswillleavetheindustry2.Harvest–reducingvariouscosts(plantandequipment,maintenance,R&D,advertising,salesforce)andhopingthesalesholdup.Ifsuccessful,harvestingwillincreasethecompany’sprofitsintheshortrun.3.Dropeachofthesedecliningproducts–sellittoanotherfirmorsimplyliquidateitatsalvagevalue.PhaseIntroductionGrowthMaturityDeclineSalesCostsProfitsCustomersCompetitorsMarketingObjectivesLowsalesHighcostpercustomerNegativeInnovatorsFewRapidlyrisingsalesAv.CostpercustomerRisingprofitsEarlyadoptersGrowingno.PeaksalesLowcostpercustomerHighprofitsMiddlemajorityStableno.startstodeclineDecliningLowcostpercustomerDecliningprofitsLaggardsDecliningno.PLCSUMMARYANDCHARACTERISTICSCreateproductawarenessandtrialMaximizemarketshareMaximizeprofitwhiledefendingmarketshareReduceexpenditureandmilkthebrandIntroduction