Because the PLC (product life cycle) focuses on what is happening to particular product or brand rather than on what is happening to the overall market, it yields a product-oriented picture rather than a market-oriented picture. Firms need to visualize a market’s evolutionary path as it is affected by new needs, competitors, technology, channels, and other developments.
In the course of a product’s or brand’s existence, its positioning must change to keep pace with market developments. Consider the case of Lego.
LEGO Group. Lego Group, the Danish toy company, enjoyed a 72 percent global market share of the construction toy market; but children were spending more of their spare time with video games, computers, and television and less time with traditional toys. So Lego recognized the need to change or expand its market space. It redefined its market space as “family edutainment”, which included toys, education, interactive technology, software, computers, and consumer electronics. All involved exercising the mind and having fun. Part of LEGO Group’s plan is to capture an increasing share of customer spending as children become young adults and then parents.
Stages in Market Evolution
Like products, markets evolve through four stages: emergence, growth, maturity, and decline.
EMERGENCE. Before a market materializes, it exists as a latent market. For example, for centuries people have wanted faster means of calculation. This need was successively satisfied through abacuses, slide rules, and large adding machines. Suppose an entrepreneur recognizes this need and imagines a technological solution in the form of a small, handheld electronic calculator. He now has to determine the product attributes, including physical size and number of mathematical functions. Because he is market-oriented, he interviews potential buyers. He finds that target customers vary greatly in their preferences. Some want a four-function calculator (adding, subtracting, multiplying, and dividing) and others want more functions (calculating percentages, square roots, and logs). Some want a small hand calculator and others want a large one. This type of market, in which buyer preferences scatter evenly, is called a diffused-preference market.
The entrepreneur’s problem is to design an optimal product for this market. He or she has three options:
1. The new product can be design to meet the preferences of one of the corners of the market (a single-niche strategy). 2. Two or more products can be simultaneously launched to capture two or more parts of the market (a multiple-niche strategy). 3. The new product can be design for the middle of the market (a mass-market strategy).
For small firms, a single-niche strategy makes the most sense. A small firm does not have the resources for capturing and holding the mass-market. A large firm might go after the mass-market by designing a product that is medium in size and number of functions. A product in the center minimizes the sum of the distances of existing preferences from the actual product, thereby minimizing total dissatisfaction. Assume that the pioneer firm is large and designs its product for the mass market. On launching the product, the emergence stage begins.
GROWTH. If the new product sells well, new firms will enter the market, ushering in a market-growth stage. Where will a second firm enter the market, assuming that the first firm established itself in the center? The second firm has three options:
1. It can position its brand in one of the corners (single-niche strategy). 2. It can position its brand next to the first competitor (mass-market strategy). 3. It can launch two or more products in different, unoccupied corners (multiple-niche strategy).
If the second firm is small, it is likely to avoid head-on competition with the pioneer and to launch its brand in one of the market corners. If the second firm is...