Unit #2: Product Life Cycles

Transcription

1 Unit #2: Product Life Cycles

2 The Traditional Product Life Cycle (PLC) A product life cycle is also called a market life cycle. It describes changes in the consumer demand over time. The PLC is based on knowledge that no product can be in demand forever, so it serves as an alarm system to alert marketers as to when changes in consumer demand may occur.

3 The Traditional Product Life Cycle (PLC) Five stages: introduction, growth, maturity, decline, and decision point. Will vary for different brands, products, and companies.

4 1. Introduction Stage Product launch: when a new product is introduced in marketplace. Launches can be regionally, provincially, nationally, or internationally. New product launches are expensive and include cost of: research, machinery purchase, product design, employees training, promotional activities, packaging design, etc. As a result, the initial price of the product is high.

5 1. Introduction Stage Marketers focus efforts on early adopters who are people who like to be the first to own new products, called early adopters. A pull strategy is necessary at this stage because marketers need to make consumers aware of their product and establish a favourable value equation/product positioning in consumers minds. A shelf allowance is money paid by manufacturers to a retailer in order to get shelf space to stock a new product. Controversial: bribery or necessary?

6 2. Growth Stage Product is now visible, more people are using it, and its reputation spreads through word-of-mouth. Most crucial stage for advertising, so manufacturers will do so heavily. This is when a product will catch on or fail. If the product is removed it is called a bust. The first company to reach this stage will spend the most in development costs and advertising, but it will have the advantage of no competitors for a time.

7 2. Growth Stage As more competitors enter the marketplace, businesses must monitor their market share, which is the company s own sales as a percentage of the total sales for that market. Competitive products have a shorter introduction stage because the pioneer work was done by the first product that broke into the market. Barriers to entry are factors that might prevent new competitors from entering the marketplace: o Small market size o Cost of research and development o Equipment costs o Government regulations, etc.

8 2. Growth Stage Push strategies work well at this stage since having the product available in a well-known retailer can lead to sales. Retailers may introduce a low-end product, which is the product with the lowest price point in a category, so as to establish a minimum price for a specific line.

9 3. Maturity Stage Period during which sales of a product increase more slowly, if at all. Marketers highlight brand name and market that the product has been around for a long time. By this time the manufacturer has paid off production, development and research costs, and because of low cost of sales and low cost of distribution, profits are high. Companies use this income to generate new products or fund product launches.

10 4. Decline Stage When a company is unable to find new customers for a given product or service. Can result in: company removing product altogether, change in price, new advertising campaign, product design or repackaging.

11 5. Decision Point Stage Final stage where brand managers make decisions regarding the product s future. Involves new promotion, new pricing, new and improved updates to product. E.g.: Arm & Hammer Baking Soda Saw a decline in sales, which researched showed was due to a decline in the amount of baking done in stores. Repositioned product to focus on its ability to deodorize freezers, litter boxes, etc.

12 Non-Traditional Product Life Cycles Fads: A fad is a product, service, or idea that is extremely popular for a brief period of time and then becomes unpopular just as quickly, soon vanishing from the marketplace. Fads are unpredictable and high-risk. Marketers can make or lose a great deal of money on fads and must enter the market at the right time. When a fad dies too quickly a business may be caught with a large product inventory no one wants. Examples: Tamagotchi, Furby, clogs

13 Non-Traditional Product Life Cycles Trends: Unlike a fad, a trend has a lasting effect. A trend is a mass movement toward a particular style or value and can result in a number of products that take on the traditional product life cycle. Example: organic food, skinny jeans

14 Non-Traditional Product Life Cycles Niche Markets: Products find a niche, a small section of the market that they dominate. They have a very short growth stage that leads to a solid but not financially spectacular maturity stage. Because the market is so small there is little competition. Example: Pet hotels

15 Non-Traditional Product Life Cycles Seasonal Markets: Products sold during particular times of the year. Marketers must anticipate demand and create opportunities outside of the peak season. E.g.: Christmas, New Years, Mother s Day, Summer

16 Assignment Find a product example of the following and explain how that product fits into the category A fad A trend Niche market Seasonal Explain how the Pumpkin Spice Latte follows the traditional product life cycle. Provide three suggestions for reviving a product you think is currently in decline.