The stages of the product life cycle and the marketing strategies - Essay Example

? The stages of the product life cycle and the marketing strategies Table of Contents Table of Contents 2 Introduction 3 Discussion 5 Conclusion 13 References 14 Introduction Product life cycle is an important marketing and business analytical tool that helps to measure the demand of the customers within a market place. Product life cycle is the period or design that generally starts with initial stage of product design. Moreover, product life cycle ends with the removal of that product from the specific market place. Product life cycle can be characterized by several stages, such as research, development, introduction, growth, maturity, decline and obsolescence (Moore, Palich and Petty, 2006, p.312). Each and every stage is generally linked with the changes in the streams of parts, raw materials and distribution of the products. Generally product life cycle includes four traditional stages, such as introduction, growth, maturity and decline. These four stages of product life cycle are described below. Low sales growth rate of the products is the major characteristic of the introduction stage. In introduction stage the organizations launch or introduce new products in the market. Monopoly can be developed by the organizations depending upon the need and efficiency of the products to the customers (Saaksvuori and Immonen, 2011, p.103). During this stage the organizations generally accrue losses rather than business profit. It is true that if the organizations introduce products of new product class, the target customers may not be aware of true effectiveness and potential of these products. It is important for the organization to transfer information about the product among the target customers through several Medias in order to achieve potential competitive edge within the market place (Kumar and Korb, 2005, p.21). Introduction stage has two major characteristics namely low market competition and incurring loss rather than profit. Major characteristics of the growth stage are customers become responsive towards new products and growth of sales. This growth comes through the innovation’s acceptance by the target customers. Organizations generally enjoy significant business profit through their new products in this growth stage (Stark, 2011, p.32). If the organization can maintain the monopoly, they can experiment with innovation and several new effective ideas to maintain the sales growth. Growth stage is the appropriate time to introduce other new effective products in the competitive market place (Soenen and Olling, 2003, p.54). It creates an effective product image among the target customers and its competitors. During maturity stage, the sales and growth rate of the products gradually slowdown as the products have already achieved huge acceptance in the competitive market place (Wang and Gupta, 2011, p.239). New organizations start to experiment by innovative product models and strategies in order to compete in the saturated market place. Competition for the target customers get fierce due to existence of many organizations, despite the increase of sales and growth rate at the initial phase of this maturity stage (Roebuck, 2011, p.76). At the beginning of this maturity stage, the business profit decreases due to aggressive competition within the market place. In addition, maturity stage of the product development is very much essential for the organizations to avoid decline stage of the products. Several products die and get wiped out from the market place in this decline stage due to the low sales’ growth rate of the products. Several organizations share the same competition. It makes difficult for all the entrants to control and maintain the sustainability of the sales levels (Frenken, 2006, p.133). Product category and efficiency of the organization become important factors in this decline stage as the target customers and market may perceive the specific product as the old product may lack potentiality and effectiveness. Lower demand of the products is the major characteristic of the decline stage (Cant, Strydom and Jooste, 2009, p.241). It is not true that all the products can go through this decline stage. It majorly depends upon the scopes and competitors of those products. Discussion A new product line can be passed through set of several product life cycle stages. Product life cycle can be applied to both category of products and brands. Time period of product life cycle generally varies between products. Modern product life cycle tool is becoming shorter as several products in the mature stage are being redeveloped and renewed by the product differentiation and market segmentation strategy. Organizations always try to maximize their business revenues and profits over the entire product life cycle. It is important for the organization to introduce the products at appropriate and crucial time in order to achieve desired level of revenue and profit (Henry, 2008, p.207). If the new product is effective and appealing to the customers, organization can implement premium pricing strategy and achieve significant level of profit. The organization should avoid the stiff market competition in order to achieve success. Effective product differentiation strategy can help the organizations to avoid huge competition within the market place. Following marketing strategies can be implemented at each stage of product life cycle. At introduction stage of product life cycle, the organizations generally focus on the market establishment and increasing demand of the products. Branding, intellectual property, quality level and protections are attained to stimulate the target customers for the specific product category (Singh, 2009, p.19). At introduction stage, products are under valuable consideration as it is known to all that first impression is the last impression. Organizations generally implement two types of pricing strategies namely premium pricing strategy and competitive pricing strategy. Organizations implement premium pricing strategy to make high profit (Baker, 2008, p.143). This strategy helps the organization to cover initial product development cost in a short time period. On the other hand, competitive pricing strategy helps the organizations to penetrate into the competitive market and achieve impressive market share. Choice of pricing strategy of the organizations depends upon the organizational goal. At introduction stage, the organizations select scattered and selective distribution strategy due to the lack of tapped and potential target market. The organizations always try to build and increase brand awareness among the target customers through promotional strategy at the introduction stage. Trials or samples of products are provided by the marketing department of the organizations in order to attract potential customers and early adaptors (Keyes, 2009, p.319). Several promotional programmes and campaigning are more essential in this stage. Promotion is an important tool similar to the manufacturing of the products as effective promotional strategy helps to position the products among the target customers. At the growth stage the organizations try to maintain their existing quality and attributes of the products. Apart from this, the organizations try to add new features into those products in order to improve the quality of the products. For an example, Kinley is a successful product of Coca Cola. This strategy helped the organization to target the health conscious customers. The organizations experiment these strategies with their products in order to maintain their market share within the competitive market place. Pricing of the products depends upon the customer’s demand and market competition of the products. The organizations can maintain or increase the price of products depending upon the high customer demand, effective product acceptance and low market competition (Masterson and Pickton, 2010, p.415). On the other hand, the organizations can implement competitive pricing strategy by reducing the price of products in a competitive market place to grasp significant group of target customers. Distribution process becomes highly significant due to acceptability of the products and increasing customer demand. At growth stage, the organizations try to add more distribution channels for intensive distribution (Simeon, 2012, p.275). This distribution strategy will help the organization to meet the increasing customer demand and current market trend. On the other hand, during growth stage trade discounts are seemed to be quite minimal as the resellers start to take interest in these specific products. The organizations increase the number of promotional activities at growth stage. At this stage, the demand and acceptance of product significantly increase (Gunn, 2009, p.89). Therefore, the organizations try to provide more promotional efforts in order to create superior brand loyalty and brand preference among the target customers. The organizations generally modify their products at maturity stage in order to maintain the market share. Most importantly, the organizations try to differentiate their product lines at this stage (Strauss, 2010, p.347). Effective product differentiation strategy is the best way to achieve dominance over other market competitors. At maturity stage, the products have to face huge market competition. Therefore, the organizations try to implement competitive pricing strategy by reducing the price of products. This strategy helps the organizations to attract and retain the price conscious customers. At maturity stage, the organizations offer healthy incentives to the retailers in order to get effective self preference over other competitors. At this stage, the organizations try to increase the distribution channel to minimize the threat of intense market competition. At maturity stage, the organizations execute several promotional strategies in order to develop loyalty of the differentiated products. At this stage of product life cycle, the organizations offer products with discounted price in order to increase more customer base. At decline stage, the organization has only three options. These are highlighted below: Reducing the cost, maintaining the quality of product and identifying new utilization of products. Organization can harvest the products through marketing cost reduction. In addition, they can offer the products to the loyal niche target market. Organizations can withdraw products when there is no success or profit is available. At decline stage of the product life cycle, the marketing mix decisions depend upon the strategy of the organizations (Mellor, 2008, p.13). On the other hand, supply can be reduced dramatically in case of liquidation. BCG matrix is an effective analytical marketing tool that helps to analyze the product portfolios. This matrix or analytical tool links market share, cash flow and growth rate. Moreover, this strategic marketing tool helps to make informing decisions about possible and appropriate marketing strategies. BCG matrix classifies the products into four categories, such as Stars, Cash Cows, Sleeping Dogs and Problem Child or Question Mark (Leeman, 2010, p.55). An example of BCG matrix has provided below. Star products can be considered under the Growth stage of product life cycle. Star products generally experience high growth rate in sales. These products have potentiality for the effective revenue growth (Chitale and Gupta, 2011, p.129). These star products always enjoy high market share. According to the above figure, it can be stated that Kinley is the star product due to high growth rate in sales. These products can be considered under the maturity stage of product life cycle. During maturity stage, the sales and growth rate of the products gradually slowdown as the products have already achieved huge acceptance in the competitive market place (Marinel, 2005, p.67). Cash cows enjoy high market share. Major characteristics of Cash Cows are low growth market, low cost support, positive cash flow, high cash revenue and high market share. According to the above figure, it can be stated that, Coca Cola is a cash cow due to high market share. Sleeping Dogs can be considered under the decline stage of product life cycle. Several products get wiped out from the market place in this decline stage due to the low growth rate of the products and negative cash flow. These products seriously require effective support of capital in order to survive in the competitive market place (Orcullo, 2008, p.162). Major characteristics of these products are low growth market, declining market share and negative cash flow. For an example, Diet Coke can be considered as sleeping dog declining market share and low growth market. These products also can be considered under the decline stage of product life cycle. For an example, Fanta can be referred as the question mark product as it posses low market share within potential market place (Wright, Watkins and Ennew, 2012, p.74). These products may produce negative cash flow. Finally, the organizations need to provide capital support to these products for the purpose of redevelopment in market place. Organizations generally integrate the BCG matrix with the stages of product life cycle in order to judge the effectiveness and potentiality of the products in a competitive market place. Managers in the organizations always try to implement predictive tools to navigate a chaotic market. Conventional product life cycle tool helps the managers to forecast the direction of the products on a macro level. Moreover, this marketing tool helps the managers to execute several competitive moves in appropriate time (Pride and Ferrell, 2006, p.97). The usefulness of conventional product life cycle can be identified through the market performance of a product. There are four stages in conventional product life cycle, such as introduction, growth, maturity and decline. Several organizations are using effective marketing strategy in every product life cycle stage so that the products can enjoy continuous growth. For an example, Microsoft is enjoying continuous growth as these products are being constantly promoted and improved. These strategies help Microsoft to develop a strong brand loyalty. In conventional product life cycle, the organizations are implementing extension strategy in order to increase the period of life cycle of specific products. The managers are implementing several marketing techniques in conventional product life cycle in order to improve the sales of products. Price reduction, advertising, value addition, new packaging and exploring new markets are several key extension strategies in conventional product life cycle model. It is true that the growth rate of every products start to decline from maturity stage. Therefore, through conventional product life cycle model the organizations are trying to redevelop their products at the maturity stage through redevelopment process. This strategy helps the products to survive in the competitive market place. Maruti Suzuki is one of the leading automobile manufacturers and distributers across India. Maruti Suzuki “Alto” is one of the most selling cars Indian markets. It is true that day-by-day; the car was losing its market share and customer base due to intensive competition within Indian automobile market. The organization tried to save their product from this serious market competition through effective product differentiation strategy. During the maturity stage, the organization stopped the production of “Alto”. They added some features and values into the car and launched it by the name of “Alto 800”. Change of get-up and style helped them to retain the potential target customer base. Horlicks is one of the leading health drink manufacturers. The brand established a potential customer base around the globe. Horlicks also implemented product differentiation strategy at the maturity stage of product life cycle due to intensive market competition and market saturation. Competitors like Bournvita and Complan were affecting the market share of Horlicks. Therefore, the organization implemented umbrella branding strategy by introducing several differentiated products like Junior Horlicks, Chocolate Horlicks, Women’s Horlicks and many more. Conclusion After the formulation of product line strategy, product life cycle tool can be implemented. This tool will help to identify current market trends, technological advancements and several customer issues. Product life cycle tool helps the managers to plan and implement long term offensive marketing strategies (McDonald, 2007, p.620). Moreover, this model helps to eliminate the dead or non-profitable products from the market when it is reasonable. Therefore, it is important for the managers to understand the current market trend and customers’ demand. It will help the managers to implement appropriate marketing strategy based on demand and trend. References Moore, C., Palich, L., and Petty, W., 2006. Small Business Management with Infotrac. Stamford: Cengage Learning. Saaksvuori, A., and Immonen, A., 2011. Product Life Cycle Management. London: Routledge. Kumar, S., and Korb, W., 2005. Managing product Life Cycle in Supply Chain. New York: Springer. Stark, J., 2011. Decision Engineering: Product Life Cycle Management. New York: Springer. Soenen, R., and Olling, G., 2003. 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