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The Product Life Cycle Dr. Dorothy Paun, [email protected] Product Life Cycle (PLC) After launching a new product, marketers hope the product has a long, profitable life The Product Life Cycle (PLC) is a theoretical model of what can happen to a product’s sales and profits over time. The PLC has four stages: introduction, growth, maturity, and decline Marketers use the PLC framework because it describes how a product’s sales and profits might unfold over time AND suggests marketing mix strategies for each PLC stage Sales & Profits Over the PLC PLC Sales, Profits & Competitors Sales Over the Product Life Cycle Introduction: the product is being introduced to consumers, so sales are low Growth: consumers have learned about and like the product, and rapidly increasing sales Maturity: the market becomes saturated. Sales mature, meaning sales increase but at a slowing rate, then sales reach a maximum, and then sales begin decreasing for the first time Decline: changing consumer needs or the product is no longer relevant or useful leads to decreasing sales Profits Over the Product Life Cycle Introduction: losses may occur due to low sales and high research and development and various product introduction expenses Growth: very high profits, profits dramatically increase due to recouping new product expense, then profits reach a maximum Maturity: decreasing profits because of competition Decline: profits continue decreasing and may become losses due to low consumer demand Competitors Over the PLC Introduction: no competitors (due to a patent which gives the inventor the exclusive right to their invention) or very few competitors due to high barriers to entry Growth: rapidly growing number of competitors Maturity: the number of competitors stabilizes and then begins decreasing Decline: further decreasing number of competitors Consumer Adoption of Products Everett Rogers (1962) created the Diffusion of Innovation (DOI) theory to describe stages in the consumer adoption of new products over time There are five consumer stages: innovators, early adopters, early majority, late majority, and laggards What type of an adopter are you? Does it depend on the type of product? Over Time > Reflect on Your Muddiest Point Reflect on what we have discussed Write down what you find unclear or confusing — your “muddiest point” Identify one or two things that you can do or questions you can ask to improve your understanding of this muddy area PLC Marketing Mix Strategies Introduction Stage • • • • • • • • • Sales: Low Profits: Losses may occur Competitors: None to few Marketing objective: Create product awareness and trial Customers: Innovators Product: Offer a basic product Price: Target innovators with a skimming price Place: Use selective distribution Promotion: Use heavy promotion to build primary demand (product awareness) and to get stores / distributors to carry the product Growth Stage Sales: Rapidly increasing • Profits: Very high, reach a maximum • Competitors: Growing number • Marketing objective: Maximize market share • Customers: Early adopters • Product: Improve product, offer several product versions • Price: Adjust price to meet competition • Place: Increase distribution • Promotion: Heavy competitive advertising • Maturity Stage Sales: Mature, reach a maximum • Profits: Decreasing • Competitors: Stable number, then decreasing • Marketing objective: Maximize profits while defending market share • Customers: Early and late majority • Product: Differentiate product (more product versions) to satisfy different consumer segments • Price: Further reduce price • Place: Intensify distribution • Promotion: Emphasize brand name and benefits to encourage brand switching • Decline Stage Sales: Decreasing • Profits: Further decreasing profits that may become losses • Competition: Further decreasing, few in number • Marketing objective: Reduce expenditures • Customers: Laggards • Product: Reduce product versions • Price: Consider price increase if most competitors are gone • Place: Decrease distribution, drop unprofitable outlets • Promotion: Reduce to only loyal customers • Reflect on Your Muddiest Point Reflect on what we have discussed Write down what you find unclear or confusing — your “muddiest point” Identify one or two things that you can do or questions you can ask to improve your understanding of this muddy area PLC Example: Camera History of the camera: A camera obscura is a box with a pinhole and lens that projects an image. Ancient Chinese and Greeks used them to project images on paper, which they then traced. In 1544 Reiners Frisius of Leuven University in Belgium used a camera obscura to watch a solar eclipse and published his method. Frisius’ article led to a wide spread adoption of the camera obscura George Eastman pioneered photographic film, and sold his first camera, the “Kodak” camera in 1888. The Kodak was pre-loaded with film for 100 photos, and the camera needed to be sent to the Kodak factory for processing the photographs History of the Camera (Con’t) Digital cameras do not use film, they store images and sound digitally, which are displayed immediately. The first commercial digital camera was launched by Kodak in 1991 Today digital cameras are bundled with many devices, such your phone In your opinion, in what stage in the PLC is the camera today? GoPro Video Case Study The GoPro is a lightweight, compact, mountable, shockproof, and waterproof to 130 feet camera/camcorder I suggest that you pause this Panopto recorded lecture and 1) watch this module’s video case study called GoPro Ad (this is a five minute advertisement) and the 2) 60 Minutes Interview with Nick Woodman (GoPro founder) video case study In your opinion, in what stage in the PLC is the camera today? Sustainability & Product Obsolescence Planned product obsolescence refers to causing products to become break down or become obsolete prematurely Using materials and components that will break, wear, rust, or rot sooner than they should Holding back functional features, and introducing them later to make older models obsolete Perceived obsolescence: continually changing consumer concepts of acceptable styles to encourage more and earlier buying The Story of Stuff video case study provides extensive information and insights about planned product obsolescence GRI Product Responsibility PR1 product health and safety impacts are assessed for improvement PR2 non-compliance with regulations and voluntary codes concerning product health and safety impacts during their life cycle PR3 product and service information and labeling PR4 non-compliance with regulations and voluntary codes concerning product information and labeling PR5 surveys measuring customer satisfaction with products PR6 sale of banned or disputed products PR7 number of incidents of non-compliance concerning marketing communications, including product advertising, promotion, and sponsorships PR8 number of complaints regarding breaches of customer privacy and losses of customer data PR9 fines for non-compliance with laws and regulations concerning the provision and use of products Environmental Sustainability Portfolio EXPANDED PRODUCT LIFE CYCLE 1) Introduction 2) Growth 3) Maturity 4) Decline 5) Sustainable Product Withdrawal and Disposal, to avoid negative environmental externalities Reflect on Your Muddiest Point Reflect on what we have discussed Write down what you find unclear or confusing — your “muddiest point” Identify one or two things that you can do or questions you can ask to improve your understanding of this muddy area