M3 Part 2: Product Life Cycle

Question 1

What are the 4 characteristics of a product life cycle?

Answer 1

• Products have limited life
• Product sales pass through various stage with its own challenges, problems and opportunities
• Profits rise and fall throughout the product life cycle
• Products require different management function strategies in each stage of the cycle

Question 2

What are the three Categories of the Product Life Cycle?

Answer 2

• Style: basic and distinctive mode of expression, a manner in which product is presented (touch screen, smart tv, videocassette, EVs)
• Fashion: a currently accepted or popular style in a given field (touch screen, bluetooth, smart tv, streaming service)
• Fad: a temporary period of high sales and popularity for a product (fidget spinner, loom band, slime, etc)

Question 3

What is Selective and Intensive Distribution?

Answer 3

• Selective: select number of outlets to sell products
• Intensive: using all available outlets to provide wide coverage of the market

Question 4

What is Primary Demand vs Selective Demand?

Answer 4

• Primary: showing interest in a product for the first time, a buyer wants to experience having the product due to a need (want to buy shorts for the first time, or want to buy a subscription instead of sticking to cable tv)
• Selective: has a need, identified the need and actively seeking a solution (need for a new smartphone that is battery resilient and hi-tech)

Question 5

What are the two Product Pricing Strategies?

Answer 5

• Market Skimming: setting high price to skim maximum revenues from each segment
• Market-Penetration: setting a low price to attract many buyers and a large market share

Question 6

What are the various stages of the Product Life Cycle?

Answer 6

• Market Introduction
  
  • introduction of new product, innovation to innovators
• Market Growth
  
  • innovation attracts and develops monopolistic competition, profits peak
• Market Maturity
  
  • sales level off, profits begin to decline, more persuasive promotion and price competition, great similarity with competition
• Market Decline
  
  • products begin to be replaced, people who are late to the trend (laggers) are expected to be the majority of buyers

Question 7

What do product life cycles related to specific markets tell us?

Answer 7

• Individual brands may opt not to follow conventional/classic patterns in the market to stand out
• Not all brands are equally strong (weak vs. preferred brand, different results)
• Each market should be carefully defined. (A product in one country can be at the maturity stage while in the introduction stage in another)
• Wider markets = can result in longer product life cycles

Question 8

What does a product cycle tell about its length?

Answer 8

• Greater comparative advantage, more sales
• Easy to use and easy to communicate advantages, results also in more sales
• Little risk with using the product, faster introduction to market
• Compatibility with consumer values and experience, increased sales

Question 9

What are the issues with Product Life Cycle?

Answer 9

• More innovation, more products, lesser life cycle for existing ones
• Early bird makes the profits, because early brands gain a critical foothold in market share (OG brands)
• Nature of the product (style, fashion or fad) affects the length of the life cycle

Question 10

How do we plan for the Introduction and Growth stage of the life cycle?

Answer 10

• Allocate sufficient momey
• Consider 4P’s of the Marketing Mix
• Anticipate speed of the product’s life cycle (ex. distribution channels for fad products are not advisable)
• Competitors help adopt new products into a market
• Flexibility is key, respond early on to changing market dynamics (needs and wants)

Question 11

How do we plan for the Maturity Stage of the Life Cycle?

Answer 11

• Possess a comparative/competitive advantage that is known by the market
• Promotion to build selective demand
• Move distribution channels toward intensive distribution
• Price dealing and price cutting to maintain market share and encourage brand switching in consumers
• Product modifications: products that change while keeping the original product idea as much as possible extends the maturity stage of a product

Question 12

How do we plan for the Decline Stage of the Life Cycle?

Answer 12

• Phase out when a product is no longer able to contribute to organizational objectives
• Don’t pull the plug too quickly, it can incur losses because of distribution and promotion expenses
• Sales decline can be profitable if marketing costs are reduced with accordance to phase out strategy
• Other strategies: extend product life, create new uses, new markets, extend technology, repackage, and reposition