A new product progresses through a sequence of changes from introduction to growth, maturity & decline. This sequence is known as the “Product Life-Cycle” & is associated with changes in the marketing situation, thus impacting the marketing strategy & the marketing mix.
In the introduction stage, the firm seeks to build product awareness & develop a market for a product. The impact on the marketing mix is as follows:
•Product :- Branding & quality level is established & intellectual property protection such as patents & trademarks are obtained.
•Pricing :- The pricing strategy maybe one of ‘low penetration pricing’ to build market share rapidly, or ‘high skim pricing’ to recover development costs.
•Distribution :- It is selective until consumers show acceptance of the product.
•Promotion :- It is primarily aimed at innovators & early adopters. Marketers seek to build product awareness & to educate potential consumers about the product.
In the growth stage, the firm seeks to build brand preference & increase market share. The impact on the marketing mix is as follows:
•Product :- The product quality is maintained and additional features & support services maybe added.
•Pricing :- The price is maintained because the firm enjoys increasing demand with little or no competition.
•Distribution :- Sales channels are diversified & increased as demand increases & consumers start accepting the product more & more.
•Promotion :- It is aimed at a broader audience.
At maturity, the strong growth in sales diminishes. Competitors may appear with similar products. The primary aim at this stage is to defend market share while maximizing profits.
•Product :- Features maybe enhanced to differentiate the product from that of competitors.
•Pricing :- It maybe a bit lower than previous stages because of increased competition.
•Distribution :- It becomes more extensive. Distributors maybe offered with incentives to encourage preference over competing products.
•Promotion :- Greater emphasis on product differentiation & retaining existing consumer base.
As sales decline, the firm has several options:-
•Maintain the product, possibly rejuvenating it by adding new features & finding new uses.
•Harvest the product; reduce costs & continue to offer it, possibly to a loyal niche segment.
•Discontinue the product; liquidating the remaining inventory or by selling it to another firm that is willing to continue the product.
The marketing mix decisions in the decline phase will depend on the selected strategy. E.g. the product maybe unchanged if it is being harvested or liquidated. The price maybe maintained if the product is harvested, or drastically reduced if liquidated.
Some more extension strategies that extend the life of the product can be enumerated as follows:
•Advertising: Try to gain a new audience or remind the current audience about your product.
•Price Reduction: Reducing the price of your product to make it more attractive to consumers.
•Adding value to current product. E.g. video messaging on mobile phones.
•Add new products to same product line. E.g. new products with same brand name (“Line Extension”) or new product with a different brand name (“Flanker Brand”).
•Exploring new markets: Try to sell your product in new markets. E.g. abroad.
•New packaging: Brightening up or changing the packaging of then product partially or entirely.
•Introduction Stage: Monopoly or Monopolistic Competition
- your company has no competition because you originated the product first and are the first to get customers.
•Growth Stage: Monopolistic Competition or Oligopoly
- once the market grows, other vendors will want to get involved so you will lose your monopoly position.