Chapter 7 Flashcards
Product Life Cycle
Product life cycle is defined as a planning tool that describes the stages a product will pass through from its introduction until its declin
Key Consideratians
Products have limited lives Products move through various stages of growth. Profits vary according to the stage in the PLC Products require different manufacturing, purchasing and human resource strategies along each stage of the PLC. Not all products follow the PLC exactly. PLC can be used as an aid to understanding the lifecycle of a product category, product form, a product or a brand.
Stages of the PLC
Gestation Stage Introduction Stage Growth Stage Mature Stage Saturation Stage Decline Stage Elimination Stage
Gestation Stage - `product development process
This process identifies a number of tasks that need to be dealt with before a product comes to life. needs analysis planning idea generation and screening research and development product design and prototyping production line instillation raw materials and components procurement actual production
Gestation Stage
Organisation spend a considerable amount of money before sales have been generated. With zero sales, profits are in fact negative. There is no way for a company to by pass this step, unless they resell and even then there is costs involve. This stage should be as short as possible. Th sooner a product can be manufactured the sooner selling can begin. This will reduce the amount needed for pre sales investment.
Introduction Stage
- Product is launched and introduced in the market place.
- Sales grow slowly as customers are not yet aware or informed about the product.
- Customers tend to resist new products.
- High marketing costs are involved in making consumers aware of a new product.
- The costs are incurred in paying for marketing vehicles used to communicate a new product.
- Marketers use different types of media to make consumers aware of the product, including the amount spent per medium.
- Few distribution channels carry the manufacturer’s new product.
- Since the product was new, production problems were possible because the product was dependent on the technology used by the manufacturer.
- The technology used to manufacture a product should be compatible with the features of the product – if it does not, the product will have manufacturer defects. In this phase, few competitors in the marketplace carried it and few retailers and wholesalers had it on offer.
Growth phase.
There is an increase in the number of competitors.
Product improvements occur to meet consumer needs. The number of intermediaries increases as the product proves to be profitable. -
The prices of the GPS were then lowered because they were introduced at a higher price (skimming price strategy).
Sales volume increases and there is an increase in profits because of the high demand for the GPS navigator.
Maturity phase.
Owing to the introduction of new products, sales growth levels off for products in this phase.
The sales volumes of the GPS Tom Tom and Garmin navigator are now being threatened by the motor industry which offers built-in navigators.
Competition level increases and is intense since the motor and cell phone industries have entered the market and are offering the product features on their products.
Reduction in profit margins for intermediaries.
Lastly, there is also reduction in the overall level of profits.
Decline phase.
This phase is characterised by a permanent decline in sales the withdrawal of the product cuts in advertising a decline in the size of the market a decline in the number of competitors and reduction in profits.
Introductory phase strategies.
Rapid skimming Slow skimming Rapid penetration A slow penetration strategy
Rapid skimming strategy
Rapid skimming involves introducing a product at a high price and promoting it intensively (eg the LG touch screen refrigerator).
Slow skimming strategy
Slow skimming, however, entails introducing products at a high price and not investing in intensive promotion (eg Rolex and Raymond Weil watches and Rolls-Royce cars.
Rapid penetration strategy
Rapid penetration involves introducing a product at a low price and promoting it intensively (eg deodorants, beauty soaps and bread, which are basic convenience products).
A slow penetration strategy
A slow penetration strategy is implemented by introducing products at a low price and using promotion (eg cleaning, food and nondurable products).
Growth phase strategies
The objective of these strategies is to maximise market share.
- The first strategy is to add new features.
- The second strategy is quality improvement of the product.
- The third strategy, adding distribution channels, basically means covering the market by adding more retailers and wholesalers.
- The last strategy added, namely new segments, means that Clinique and Revlon started offering their products at the above-mentioned retailers, which means y that the products could be bought on the credit purchase system.
