DESCRIBE THE PRODUCT LIFE CYCLE AND THE IDEAL STRATEGIES WHICH CAN BE ADOPTED AT EACH STAGE
The Product life cycle is an important concept in marketing. It describes the stages a product goes through from when it was first thought of until it is finally removed from the market. Not all products reach this final stage as some fail during the development stage. Some products continue to grow while others rise and fall in between the life cycle. According to Kotler & Armstrong (2001 : 354) there are 5 distinct stages in the life cycle of a product. These stages are product development, introduction, growth, maturity and decline. Each of these stages are have distinct characteristics and the marketing strategies to be adopted vary except for product development stage as there are no significant market activities. The strategies basically involves four marketing elements which are product, price, promotion, and distribution which is sometimes referred to as place. Each of these stages gives varying importance to these elements of marketing mix.
The introduction stage is the stage in which a new product is first distributed and made available for purchase, after having been developed in the product development stage. According Philip Kotler & Armstrong (2001: 356 ) introduction stage is marked with slow growth in sales and a very little or no profit. As the product is newly introduced, sales volume are limited. The introduction can take a lot of time, and sales growth tends to be rather slow. Furthermore, profits in the introduction stage are negative or low due to the low sales on one hand and high-distribution and promotion expenses on the other hand. Obviously, much money is needed to attract distributors and build their stocks. Also, promotion spending is quite high to inform consumers of the new product and get them to try it. In the introduction stage, the focus is on selling to those buyers who are the most ready to buy the product. At this stage the company produce basic version of the product.
According to Kotler & Armstrong (2001: 361) the strategies a company can adopt during the introduction stage include offering a basic product, selective distribution, heavy sales promotion among other. Since competition will be less at this stage the product should be basic so as to minimize on cost. Advertising during this stage should be high so as to inform the consumers about the product and have the trying it. The main objective during this stage should be to create product awareness and trial. The cost-plus pricing strategies should be used to recover the costs incurred during production of the product. Kotler (1980) stated that the pricing strategies should be either rapid skimming, slow skimming, rapid penetration or slow penetration depending upon market situations and management’s approach. However, the company should price the product or service as high as it believe it can sell it, and to reflect the quality level it is providing. Also the company will emphasis on selective distribution in the introduction stage as this helps to focus efforts on the most important distributors. This will enable the company to connect with the right partners to promote the product. To entice trial, heavy sales promotion is another strategy that is to be adopted at this stage.
According to Kotler ; Armstrong (2001: 356) the growth stage is the stage in which the product’s sales start climbing quickly. The reason is that early adopters will continue to buy, and later buyers will start following their lead, in particular if they hear favourable word of mouth. The rise in sales will also attracts more competitors that enter the market introducing new product features. Competition usually become fierce and the market will expand. As competitions increase, there is also an increase in the number of distribution outlets and sales are augmented due to the fact that resellers build inventories. Prices may remain where they are or fall slightly. Since promotion costs are now spread over a larger volume and because of the decrease in unit manufacturing costs, profits increase during the growth stage.
According to Kotler & Armstrong (2001: 361) the strategies a company can adopt during the growth stage include adding new product features, building intensive distribution, entering new market segments among others. . Product qualities and features improvement, adding new models and improving styling is done so that the product or service becomes superior to those of competitors. Entering new market segments, designing, improving and widening distribution network are other strategies that assist to maximise the market share. Shifting advertising and other promotional efforts from increasing product awareness to product conviction so that consumers become loyal to the company’s brands is important during this stage. The other strategy that can be adopted is of reducing price at the right time. This strategy aim to attract price-sensitive consumers and preventing competitors to enter the market.
The maturity stage is the stage in which the product’s sales growth slows down or levels off after reaching a peak. Generally, the maturity stage lasts longer than the introduction and growth stages and it poses strong challenges to marketing management. Most products on the market are, indeed, in the maturity stage. According to Kotler & Armstrong (2001: 357) the slowdown in sales growth is due to many producers with many products to sell. Likewise, this overcapacity results in greater competition forcing companies to reduce prices, increase their advertising and sales promotions and increase their product development budgets to find better versions of the product, leading to a drop in profit. Also, some of the weaker competitors drop out, leaving only well-established competitors in the industry. During this stage the company’s main objective should be to maximise profit while defending the market share.
According to Kotler ; Armstrong (2001: 357) a number of strategies can be adopted by a company during the maturity stage of product ranging from doing nothing, market modification, product modification and marketing mix modification. Advertising should aim to stress brand differences and benefits to customers while increase sales promotion encourage brand switching by customers. To do nothing can be an effective marketing strategy in the maturity stage. The company maintains the current product, markets and promotion efforts. New strategies are not formulated as the Company believes earlier or later, the decline in the sales is certain. By doing nothing the company tries to conserve money, which can be later on invested in new profitable products.
According to Kotler ; Armstrong (2001: 357) Market Modification another strategy that can be adopted by a company. This strategy is aimed at increasing the consumption of the current product. This can be achieved by increasing the number of brand users or the usage rate per user or by both. Number of users can be increased by convert non-users into users by convincing them regarding uses of products, entering new market segments and winning competitors’ consumers.
According to Kotler & Armstrong (2001: 357) product modification involves improving product qualities and modifying product characteristics to attract new users or more usage rate per user. Quality improvement may be in the form of improving safety, efficiency, reliability, durability, speed, taste, and other qualities. This will result in more satisfaction of the consumer. The strategy for feature improvement may include improving features such as size, colour, weight, accessories, form, materials, and so forth. Feature improvement leads to convenience, versatility, and attractiveness and the company product will outwit competitors’ products on market.
Product improvement is beneficial in several ways as it builds company’s image as progressiveness, dynamic, and leadership, can win loyalty of certain segments of the market and is usually done at very little expenses.
According to Kotler & Armstrong (2001: 357) marketing mix modification is another strategy that can be adopted during the maturity stage. It involves changing one or more elements of marketing mix such as cutting prices of the product or service to attract new users and competitors’ customers. Company should reasonably modify one or more elements of marketing mix (4P’s) to attract buyers and to fight with competitors. Marketing mix modification should be made carefully as it is easily imitated. This strategy may stimulate sales.
According to Kotler & Armstrong (2001: 360) the decline stage is the stage in which the product’s sales decline and profits also decline. This can either be slow or rapid. Sales may quickly plunge to zero, or they may gradually drop to low level where they continue for many years. Reasons for the decline in sales can be attributed to such issues as technological advances, shifts in consumer tastes and increased competition can play a key role. As sales and profits decline, some competitors will withdraw from the market. During this stage the company should aim to reduce expenditures.
According to Kotler ; Armstrong (2001: 360) strategies for the decline stage include cutting prices, choosing a selective distribution by phasing out unprofitable outlets and reduce advertising as well as sales promotion to the level needed to retain only the most loyal customers. When it is not possible to continue with the products either in its original form or with improvement, the company may decide to drop the products. This can be achieved through selling the production to other companies, stopping production gradually to divert resources to other products and dropping the product immediately. If management decides to maintain the product or brand, repositioning or reinvigorating it may be an option. The purpose behind these options is to move the product back into the growth stage of the PLC.
The Product life cycle describes the stages a product goes through from when it was first thought of until it is finally removed from the market. According to Kotler ; Armstrong (2001 : 354) there are 5 distinct stages in the life cycle of a product which are product development, introduction, growth, maturity and decline. Each of the stages from the introduction to the decline require specific strategies in terms of the elements of marketing mix (4P’s) for the company to achieve its goals.