PLC APPROACH IN DECISION MAKING

Product Life Cycles

Product Life Cycle shows the stages that products go through from development to withdrawal from the market

Product Life Cycle (PLC):

Each product may have a different life cycle PLC determines revenue earned Contributes to strategic marketing planning May help the firm to identify when a product needs support, redesign, withdrawal, etc. May help in new product development planning May help in forecasting and managing cash flow

The Stages of the Product Life Cycle

Development Introduction/Launch Growth Maturity Saturation Decline Withdrawal

Product Life Cycles

Sales
Development Introduction Growth Maturity Saturation Decline

Time

The Development Stage

Initial Ideas possibly large number May come from any of the following
Market research identifies gaps in the market Monitoring competitors Planned research and development (R&D)

Introduction/Launch
Advertising and promotion campaigns Target campaign at specific audience? Monitor initial sales Maximise publicity High cost/low sales Length of time type of product

Growth
Increased consumer awareness Sales rise Revenues increase Costs - fixed costs/variable costs, profits may be made Monitor market competitors reaction?

Maturity
Sales reach peak Cost of supporting the product declines Ratio of revenue to cost high Sales growth likely to be low Market share may be high Competition likely to be greater Price elasticity of demand? Monitor market changes/amendments/new strategies?

Saturation
New entrants likely to mean market is flooded Necessity to develop new strategies becomes : Searching out new markets:
Linking to changing fashions Seeking new or exploiting market segments Linking to joint ventures media/music, etc.

Developing new uses Focus on adapting the product Re-packaging or format Improving the standard or quality Developing the product range

Decline and Withdrawal:

Product outlives/outgrows its usefulness/value Fashions change Technology changes Sales decline Cost of supporting starts to rise too far Decision to withdraw may be dependent on availability of new products and whether fashions/trends will come around again?

Product Life Cycles

Sales
Development Introduction Growth Maturity Saturation Decline

Time

Product Life Cycles

Sales

Effects of Extension Strategies

Time

Product Life Cycles

Sales/Profits PLC and Profits

PLC
Profits Losses Break Even Time

 Product Development: Stages

New ideas/possible inventions Market analysis is it wanted? Can it be produced at a profit? Who is it likely to be aimed at? Product Development and refinement Test Marketing possibly local/regional Analysis of test marketing results and amendment of product/production process Preparations for launch publicity, marketing campaign

Product Life Cycle

Sales and Profits ($) Sales

Profits Time Product Development Losses/ Investments ($) Introduction Growth Maturity Decline

Introduction Stage of the PLC

Sales
Costs Profits
Marketing Objectives

Low sales High cost per customer Negative Create product awareness and trial Offer a basic product Use cost-plus Build selective distribution Build product awareness among early adopters and dealers

Product Price Distribution Advertising

Growth Stage of the PLC

Sales Costs Profits

Marketing Objectives

Rapidly rising sales Average cost per customer Rising profits Maximize market share Offer product extensions, service, warranty Price to penetrate market Build intensive distribution Build awareness and interest in the mass market

Product Price Distribution Advertising

Maturity Stage of the PLC

Sales Costs Profits

Marketing Objectives

Peak sales Low cost per customer High profits Maximize profit while defending market share Diversify brand and models Price to match or best competitors Build more intensive distribution Stress brand differences and benefits

Product Price Distribution Advertising

Maturity Stage of the PLC

Modifying the Market: Increase the consumption of the current product. How?
Look for new users and market segments Reposition the brand to appeal to larger or faster-growing segment Look for ways to increase usage among present customers

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Maturity Stage of the PLC

Modifying the Product: Changing characteristics such as quality, features, or style to attract new users and to inspire more usage. How?
Improve durability, reliability, speed, taste Improve styling and attractiveness Add new features Expand usefulness, safety, convenience

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Maturity Stage of the PLC

Modifying the Marketing Mix: Improving sales by changing one or more marketing mix elements. How?
Cut prices Launch a better ad campaign Move into larger market channels Offer new or improved services to buyers

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Decline Stage of the PLC

Sales Costs Profits

Marketing Objectives

Declining sales Low cost per customer Declining profits Reduce expenditure and milk the brand Phase out weak items

Product Price Distribution Advertising

Cut price Go selective: phase out unprofitable outlets Reduce to level needed to retain hard-core loyal customers

Rest Stop: Reviewing the Concepts

Explain how companies find and develop new-product ideas. List and define the steps in the new-product development process. Describe the stages of the product life cycle. Explain how marketing strategies change during the products life cycle

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Major Stages in New-Product Development

Idea generation Idea screening Concept development and testing Marketing strategy development Business analysis Product development Test marketing
Commercialization

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