Everything you need to know about the product life cycle marketing strategies. A marketing manager has to use different strategies at different stages of the PLC to promote the product and achieve the set objectives.
The product strategies are designed and implemented on the basis of product categories, the external marketing environment and market share of the product.
The product life cycle marketing strategies can be studied under the following heads:- 1. Marketing Strategies in the Introduction Stage 2. Marketing Strategies in the Growth Stage 3. Marketing Strategies in the Maturity Stage 4. Marketing Strategies in the Decline Stage.
Some of the marketing strategies adopted during the introduction stage are:-
1. Inform Customers about Product Availability 2. Arrange Product Availability in Maximum Possible Areas 3. Inform Customers about Features and Benefits of the Product 4. Induce Customer Trails to the Maximum Extent
5. Attract Customers for Repeat Purchases 6. Arrange Promotions that will Remind Customers about the Product Continuously 7. Rapid-Skimming Strategy 8. Slow Skimming Strategy 9. Rapid Penetration Strategy 10. Slow-Penetration Strategy.
Some of the marketing strategies adopted during the growth stage are:- 1. To Counter the Competitor’s Promotions 2. To Gain Additional Share of the Market.
Some of the marketing strategies adopted during the maturity stages are:- 1. Flanking Strategy 2. Loyalty Promotions 3. Assurance Promotions 4. Image Renewal Promotions 5. Market Modification 6. Product Modification 7. Marketing Mix Modification.
Some of the marketing strategies adopted during the decline stage are:- 1. Renewal of the Product through Re-Launch (Re-Introduction) 2. Survival of the Product for a Longer Duration.
Product Life Cycle Marketing Strategies: From the Introduction Stage to the Decline Stage
Product Life Cycle Marketing Strategies – With Examples
A marketing manager has to use different strategies at different stages of the PLC to promote the product and achieve the set objectives. The product strategies are designed and implemented on the basis of product categories, the external marketing environment and market share of the product.
Boston Consulting Group has come out with a matrix called BCG Matrix that helps marketing managers decide strategies that suit a particular product. Let us understand the BCG matrix to understand the various strategies that can be used.
Researchers in General Electricals came out with a different matrix with nine cells. This nine cell matrix is little more specific and explains strategies based on the market conditions and product strengths in detail.
Marketing Strategies during the Introduction Stage:
The marketing manager has the following objectives during the introductory stage:
i. Inform Customers about Product Availability:
Informing customers about the product availability is a major challenge. Very few customers are inquisitive in nature and are willing to try new products due to the fear of the new product not being value for money and monetary loss if the product is not liked and is required to be discarded. To inform customers about the availability of the product, various methods are used.
Some of them are as follows:
a. Give advertisements in print media (newspapers/periodicals).
b. Give advertisements in electronic media (TV, Radio, Internet etc.).
c. Put up hoardings (outdoor advertisements).
d. Arrange displays of products at various locations including retail stores.
e. Door to door promotional campaign.
Depending upon the product category and available budgetary expenditure, the marketing manager will choose suitable media for informing the customers about the product.
ii. Arrange Product Availability in Maximum Possible Areas:
It is very important to ensure that the product is made available to customers at the nearest point after its availability is declared. The customers will try and purchase the product when it is declared to be available and if they do not find it, then they will not ask for it again and the opportunity to sell is lost. So, it is very important that the product is made available before it is declared to be available.
In consumer products, it becomes very difficult to make the products available before they are advertised and declared to be available as the retailers are not willing to keep a product that has not been demanded by the consumers.
The marketing managers are required to think of promotions that will make the retailers keep the products on their shelves before the consumers start asking for the new product. A reputed organization is able to do so very easily as it has many successful products in its kitty that are being sold by the retailers.
Following are some of the methods for making the retailers keep the products:
a. Give promotions like Ten plus one free’, where the retailers get ten percent extra margin to keep the product even before consumers start demanding it.
b. Hire display space in a shop and display the products. When the retailer sells the product out of the display, the products are replaced by making the retailer pay for the sold products. Retailers get convinced that the product has the potential to get sold and they start purchasing the product.
c. Ask the retailer to allow a promoter to stand along with a table. The promoter stands with the products displayed on the table and promotes the products to the consumers coming to the shop. The profit margin of the product sold is also given to the shopkeeper along with the rental for the table space. Retailers get convinced that the product has the potential to get sold and they start purchasing the product.
d. Do house to house promotions of the product where a sample pack is sold and discount coupons are distributed to the consumers to purchase the products from the retailers nearby. The activity is explained to the retailers nearby and they are persuaded to keep the product available for the consumers coming to purchase the same. Retailers are reimbursed the discount amount along with handling charges for the coupons.
e. Maggie when launched was a completely new concept so they did school promotions where noodles were cooked and served in schools. All the students were given papers with pictures and were asked to colour and return them with their contact details and a slogan explaining why they liked the noodles. Students were given gifts and hampers of noodles for use at home.
f. For Boost and Chocolate Horlicks, school sampling along with discount coupons was done. This induced a lot of trials.
Many times the product features are complicated and benefits cannot be explained easily in advertisements that are directed towards informing the customers about the availability of the product. So the advertisements for declaring the availability only show the main important features and benefits and the detailed advertisements are started later.
iv. Induce Customer Trails to the Maximum Extent:
Inducing consumer trials is a big task especially when there is strong competitor in the market with near monopoly. In such conditions some of the methods like appointing promoters in the shops and doing house to house promotions help but a marketing manager needs to do innovative promotions that help him generate trials.
Some of the methods can be described as follows:
a. Advertising the unique features that are absent in the competition. E.g. When Boost was introduced, Bournvita and Maltova were available in 500 gms tin packing and Boost was launched in a 500 gms Wide Mouthed reusable glass jar. This uniqueness was a major selling point (USP – unique selling proposition).
b. One of the Atta manufacturers, while introducing their product advertised the product as ‘Untouched by hands’ and so more hygienic. They also advertised that the wheat is selected for best quality before it is sent for grinding.
c. Dandi Namak, a table salt was advertised to be uniquely vegetarian as it was cleaned thrice and crystallized to remove all the organisms from the sea water.
d. Give Pull promotions that are so attractive that consumers are induced to try out and take benefit of the high value promotion.
v. Attract Customers for Repeat Purchases:
Unless the customers purchase the product repeatedly, it cannot get established and customers can become loyal only when they purchase the product repeatedly and get satisfied with it. The marketing manager is required to come out with loyalty promotions that induce the customer to purchase the product repeatedly.
Some of the loyalty inducing promotions can be listed as follows:
a. Give a discount coupon on the next purchase within a given time period along with the product.
b. Taking contact details while the customer is purchasing the product and then giving him attractive gifts or discounts when he/she purchases next time.
c. Give attractive ‘on pack’ gifts that have collection value. E.g. An attractive mug. Consumers can purchase more number of packs at a time or purchase them repeatedly to make a set of mugs at their home.
d. Sending birthday hampers on the basis of details collected from the customers.
e. Maggie Noodles kept on giving sketch pens free along with their pack for many years to induce repeat purchases.
f. PIZZA HUT came out with promotions that gave customers the opportunity to eat any number of pizzas in one sitting on a particular day for only Rs.90/-. This had good effect and they gained many customers on repeat basis.
vi. Arrange Promotions that will Remind Customers about the Product Continuously:
It is important that the consumer does not forget the product over a period of time. So the marketing manager must arrange periodic promotions that keep reminding the customers about the unique benefits the product offers.
Some of these promotions can be as follows:
a. Displays at the shop shelves.
b. Outdoor publicity through hoardings/shop display boards.
c. Advertisements on electronic media.
d. Push/Pull promotions during high selling seasons/off seasons if the product is seasonal in nature.
e. Most of the fast food chains insert leaflets that have discount coupons in newspapers. This helps remind customers about the products and induce purchasers to take benefit of the discount coupons.
Marketing strategies in the growth stage are similar to the strategies used in the introductory stage.
The only difference here is that the competition becomes more aggressive towards the product that is growing and so the promotions need to be of two types:
i. To Counter the Competitor’s Promotions:
To counter competitor’s promotions, the marketing manager needs to be alert constantly and should try and get intelligence reports about the competitive activity continuously. Most of the professionally managed organizations have a specific report generated by their sales force that is either called ‘Eyes and Ears’ report or simply ‘Competitors activity’ report.
This report helps the marketing manager counter the competitors’ promotions by offering ‘Me Too’ (same as competition) promotions or ‘Better than’ competition promotions immediately. These reports also help the marketing manager with information about any new products being launched in competition and can help him think about promotions to block the impending launch/introduction of a new product.
Following examples will explain the importance of countering competition after getting competitor’s activity reports:
In 1982, Nestle was expected to launch its product ‘Milo’ (milk substitute white powder) in South Indian markets. Milo being a strong product and also being from Nestle, it was a threat to the Horlicks market share. Mr. Anup Chib, then Group Product Manager of Horlicks had a plan ready to counter the launch of Milo.
At that time, Horlicks was being sold in 450 gm and 800 gm glass jars and the company was planning to change the packing to 500 gms and 1 kg jars. Mr. Anup Chib had all the new packing materials ready with him but did not affect the change till the date of launch of Milo was known.
The Smith kline Beecham sales staff was all eyes and ears for finding out the launch date. The date was found by a sales officer in Bihar where he heard Nestl6 persons talking with the common distributor about it. Horlicks launched the new packing at the old pack rate (500 gms at the rate of 450gms and 1 kg at the rate of 800gms) with a trade discount of 4.17% (two dozen, one free) which was unheard of in the South Indian market.
Retailers and semi wholesalers purchased 4 to 8 times their regular requirement of Horlicks and even consumers purchased stock for 3-4 months. When Milo was launched, retailers were reluctant to buy it and consumers did riot touch it for the next three months.
It was withdrawn and never launched again in India (Chocolate Milo was launched afterwards but it was a low key launch). Nestl6 came out with a policy decision then,’ Not to have common distributors with Horlicks.’
LG which is known to be a consumer product giant in South Korea planned to launch their household products in India that were in direct competition with HUL products. They gave full page advertisements in all leading dailies and invited applications from interested parties to become CFA/ distributors for various areas in India. While they finalized appointments of
CFAs and distributors, the products were never launched. At this same moment HUL and P&G reduced prices of all their products substantially making the market unattractive for the new product launch. The LG products were successfully blocked.
c. Lakme /Revlon:
When Modi-Revlon was about to launch their colour cosmetics in the Indian market at the beginning of the season (the season of colour cosmetics starts from Shravan Panchami/Nagpanchami and ends in May before the rain starts which is basically the festival and marriage season), Lakme launched a display contest for all their retailers along with the shelf hiring scheme.
Any retailer purchasing Rs.30000/- worth of cosmetics (1998) was given Rs.2000/- per month as shelf hiring rent for a period of three months and a chance to win bumper prizes.
A retailer was allowed to take multiple entries. Most of the retailers participated in the scheme and were carrying enough stock of colour cosmetics so when the new product was launched, all of them but main dealers refused to purchase it. The main dealers also purchased sample quantity and not their regular order size. The product is yet to find a true foothold in the market.
ii. To Gain Additional Share of the Market:
To gain additional share of the market, the marketing manager can adapt various strategies. Here the marketing manager has to think in terms of growing horizontally and vertically and also think of cutting the market share of competition.
Following are some of the strategies a marketing manager can adapt:
a. Horizontal Growth:
Horizontal growth can be achieved in two ways:
i. By introducing the product in other geographical areas.
ii. By introducing variations of the product that will give more choice to customers and pull customers of the competition because of the additional choice. E.g. Horlicks is available in Plain, Elaichi, Chocolate, Junior (for children), Mother’s (for women) etc. Lux is available in many variations. Potato chips are available in many variations etc. This strategy is called flanking strategy when it is being used to protect the product from competition’s attack during the maturity stage.
b. Vertical Growth:
Vertical growth can be achieved by introducing the product in bigger and smaller packing that makes the product attractive/affordable to customers in nearby economic segments (bigger packs for customers looking for economy and smaller packs for customers looking for afford ability).
Marketing strategies in the maturity stage are directed towards safeguarding the market share from attacks of competition and newer products that are being introduced.
Some of the strategies that are commonly used can be listed as follows:
i. Flanking Strategy:
The flanking strategy involves introducing products that are variations of the original product with one or two ingredients changing. Since the name of the product and the major features remain the same, these products with variations are accepted readily by consumers. This safeguards the main product from competition’s attack and gives the opportunity to promote the variable that is most acceptable to the customer.
Colgate has launched the following toothpastes to flank itself for protection from competition:
a. Colgate Total
b. Colgate Sensitive
c. Colgate Visible White
d. Colgate Max Fresh
e. Colgate Herbal
f. Colgate Active Salt
g. Colgate Max White
h. Colgate Luminous
In absence of flanking, the competition can attract customers by giving them an alternative choice first and then attracting them to the main product that has maximum preference by the customer. E.g. Frito Lays, the brand of Pepsi in potato chips came out with flavors like tangy tomato and pudina flavours that were not available with Uncle Chips, the market leader.
Consumers started buying Lays for the change and it was established in the market. Today the Uncle Chips brand is owned by Lays.
ii. Loyalty Promotions:
Consumers who are loyal to the product need to be benefited by offering them loyalty promotions on pack gift items. Coffee mugs, glass tumblers and kitchen containers are some of the products that have collection value and are offered to enhance loyalty of the customers.
iii. Assurance Promotions:
These promotions are directed towards assuring the consumer that he/she is doing the right thing by continuing usage of the same product. These are basically print and electronic media advertisements where celebrities endorse the product usage and sometimes advertisements showing testimonials are used. E.g.
The Woodward Gripe Water advertisement showing three generations endorsing the usage of the product, the Boost advertisement showing Kapil, Sachin and now Virat endorsing the product.
iv. Image Renewal Promotions:
New generations want newer products as there are chances/fears of monotony setting in. To avoid this, most of the marketing managers keep doing image renewal exercises for their products. Image renewal should not be confused with re-launch of the product as there are no changes in the features of the product. In image renewal, the outer packaging is the only change that gives a tremendous image change to the product.
Marketing strategies in the decline stage are of two types:
i. Renewal of the Product through Re-Launch (Re-Introduction):
Decline of the product is generally attributed to consumer’s change in taste and expectations. If the marketing manager is alert to the changing tastes of the consumers and keeps renewing the image of the product during the maturity stage; marketing manager can opt for marketing research for understanding the reasons for consumers not accepting the product any more.
Normally speaking, decline means stoppage of new enrolment of customers since the old loyal customers keep buying the product but their base keeps reducing through normal mortality and new enrolments are not happening so the product shows decline in sales.
To change this situation, the marketing manager needs to add/remove certain features to make the product attractive to the newer generation and re-launch/re-introduce the product with a new image without disturbing the image cherished by old, loyal customers. These changes if done gradually are more acceptable than a drastic change through re-launch.
E.g. When Lifebuoy was re-launched, it was not accepted by consumers and the company had to re-launch it as Lifebuoy Personal and Lifebuoy Total Protection etc., for the totally new customers.
ii. Survival of the Product for a Longer Duration:
This is another strategy used by many marketing managers when the product has lost its utility and is not in position to get revived (either acceptability cannot be revived or the commercial viability of the revived product is doubtful).
This decision is taken to let the product perish and earn money while it is getting sold. This is done by reducing or stopping the marketing expenditure and promotions on the product and earning higher profits while the product is giving breakeven plus earnings.
Product Life Cycle Marketing Strategies – Marketing Strategies in the Introduction Stage, Growth Stage, Mature Stage and Decline Stage of Product Life Cycle
Marketing Strategies in the Introduction Stage:
The management can pursue one of the four strategies in launching a new product.
The strategies are:
(a) Rapid skimming strategy
(b) Slow skimming strategy
(c) Rapid penetration strategy, and
(d) Slow penetration strategy.
On the consideration of price and promotion only, the above strategies are resorted to:
(a) Rapid-Skimming Strategy:
This strategy pursues the policy of launching a new product at a high price and a high promotion level. High price brings in more gross profit and high promotion accelerates the rate of market penetration. The appropriate situations for this strategy are — the potential market is mostly unaware of the new product and ready to play the asking price and the firm has potential competitors for which it wants to build up brand preference.
(b) Slow Skimming Strategy:
High price and low promotion at the launching stage result in the recovery of maximum gross profit per unit and lowering down of the marketing expenses. This combination is likely to skim a lot of profit from the market. To make the strategy effective, the market should be limited in size and in the know of the new product, willing to pay a high price and there is no apprehension immediately of any competition.
(c) Rapid Penetration Strategy:
Low price and high promotion expenses lead to the fastest market penetration and the largest market share. In a large market, unaware of the product and the buyers being price sensitive, this strategy holds good. In the market, of course, it is assumed there is strong potential competition. This strategy makes sense when the manufacturing costs permit fall with the scale of production and accumulated manufacturing experience.
(d) Slow-Penetration Strategy:
Low price and low level of promotion as a result of which the product-acceptance is encouraged and the promotion expenses come down bringing more net profit. Such strategy is resorted to when the firm finds that the market demand is highly price-elastic but minimally promotion-elastic.
To make the strategy effective, the market should be large and highly aware of the product; the market price has to be sensitive and potential competition is the feature of the market.
To conclude, we can say that at the introduction stage, no firm should adopt any marketing strategy arbitrarily. The launching strategy demands utmost caution and tact since this acts as the first step in the plan for life cycle marketing.
Marketing Strategies in the Growth Stage:
When a firm is rapidly climbing in sales i.e., is in the growth stage, the following strategies are usually adopted:
(a) To accelerate sales further, quality of the product is improved and new features and improved styling are added.
(b) New models and flanker products are introduced.
(c) New distribution channels and new market segments are experimented.
(d) Advertising technique is changed — from building product awareness to product conviction and purchase.
(e) Prices are lowered at the right time with a view to attracting the next layer of price- sensitive buyers.
The growth-stage strategies are actually market-expanding techniques and these strategies strengthen the firm’s competitive position. From the critical point of view, the market-expansion is secured at additional cost. In the growth-stage, there is a trade-off between high market share and high current profit. A considerable amount is spent today for tomorrow’s larger profit expectation.
Marketing Strategies in the Mature Stage:
Maturity stage is very critical in the life cycle of a product. At this stage, the sales come down and it continues for a longer period. The management, actually speaking, faces a challenge. The maturity stage is more or less a must for every product in its life cycle and, therefore, most of marketing management deals with the mature product.
The maturity stage has different phases — growth maturity, stable maturity and decaying maturity. The maturity phases bringing down the rate of sales, create over capacity in the industry as a consequence of which intensified competition ensues.
The strategy in the mature stage is to abandon the weaker products and spend money on newer products. “Marketing managers should not ignore or passively defend aging products. A good offence is the best defence. Marketers should systematically consider strategies of market, product and marketing-mix modification”. (P. Kotler).
Marketing Strategies during the Decline Stage:
The advent of decline stage is more or less a certainty for most of the product forms and brands. The decline may be due to technological advances, consumer shifts in tastes and increased domestic and foreign competition. Whatever might be the reasons for decline, the consequences that a firm faces are overcapacity, increased price cutting and project erosion.
Firms may resort to devices such as cutting down the promotion budget, further reduction of price, withdrawal from smaller market segments and weaker trade channels. This is the problem of aging of the product and it should be tackled accordingly. Only sentiment will not help. As observed by Alexander R.S. in his “The Death and Burial of ‘sick products'” (as article in the Journal of Marketing) , “But putting products to death or letting them die — is a drab business and often engenders much of the sadness of a final parting with old and tried friends.”
Management feels that unless economy improves or marketing strategy is changed or the product is proved there is no possibility for the sales to pick up. Unless strong reasons for retention exist, it is no good carrying a weak product.
The marketing strategies that are usually adopted to tackle aging problems are – (a) Identifying the weak products, (b) Determining marketing strategies, and (c) Taking the dropping decision.
Through a product-review committee, the system for identifying weak products is developed. The data for each product are collected and analysed by a computer programme that identifies dubious products. The number of years of sales decline, market-share trends, gross profit margin and return on investment — all these are taken into consideration.
“The product-review committee examines this information and makes a recommendation for each dubious product — leave it alone, modify its marketing strategy or drop it.” (P. Kotler).
In determining marketing strategies, much depends on the level of the exit barriers (Harrigan). “The lower the exit barriers, the easier it is for firms to leave the industry and the more tempting it is for the remaining firms to remain” (Kotler).
According to Harrigan, there are five decline strategies – (a) Increasing the firm’s investment, (b) Maintaining the firm’s investment level until the uncertainties about the industry are resolved, (c) Decreasing the firm’s investment level selectively by sloughing off unprofitable customer groups, while simultaneously strengthening the firm’s investment in lucrative niches, (d) Harvesting (or milking) the firm’s investment to recover cash quickly, and (e) Divesting the business quickly by disposing of its assets as advantageously as possible.
A company’s relative attractiveness and competitive strength finally determine what should be the appropriate decline strategy.
While deciding to drop a product, a company has to take further decisions. With a strong distribution and residual goodwill of the product, the company can sell it to a smaller firm. If no buyer is available, it is to be decided whether to liquidate the brand quickly or slowly.
Product Life Cycle Marketing Strategies – Marketing Strategies Adopted During Introduction Stage, Growth Stage, Maturity Stage and Decline Stage of Product Life Cycle
A. Marketing Strategies – Introduction Stage:
In introduction stage, sales growth tends to be slow. According to Robert Buzz et. al., there are several factors for slow sales and growth such as it leads to delays in the expansion of production capacity; technical problems, delays in obtaining adequate distribution through retail outlets; and customer reluctance. Sales of expensive new product are delayed due to product complexity and fewer buyers.
In introduction stage, profits are negative or low. Promotional expenditure is at their highest ratio to sales because of the need- (1) to make people aware about new product (2) to induce product trial, and (3) to secure distribution in retail outlets. Generally, most of the firms focus on those buyers who are ready to buy their product, usually people from high income groups. A price tends to be high as the costs of production are high.
Those companies that first reach practical solutions will enjoy “first-mover” advantages, in the market. Most studies indicate that the market pioneer gains the most advantage. Companies like Coca- Cola, Xerox, and Google.com developed and sustained market dominance.
What are the sources of advantage for the enterprise, which came first with a product (pioneer) in a market? Early users will recall the pioneers brand name if the product satisfies them. The pioneer’s brand also establishes the attribute the product class should possess.
The pioneer’s brand normally aims at middle of the market and so captures more users. Customer inertia also plays a role; and there are producer advantages- economies of scale, technological leadership, patent, ownership of scarce assets, and other barriers to entry. The pioneer should have a strong vision about various product markets it could initially enter; as such it is difficult to enter all at once.
Market segmentation analysis reveals the product market segments. The pioneer should analyze the potential of profit in each product market as separate and in combination and decide on a market expansion path.
The Competitive Cycle:
The company which enters the market first is aware that competitors would enter the market, which would lead to fall in market share and price of product. When will this happen? What should the pioneer do at each stage? Frey describes five stages of the competitive cycle that the pioneer has to anticipate.
1. In the beginning pioneer is the only supplier, with full production, capacity and sales.
2. Competitive penetration starts when a new competitor has built production capacity and starts commercial sales. The leader’s share of production capacity and share of sales falls. As more and more competitors enter the market and provide offers at different price, the perceived relative value of the leader’s offer declines, forcing a reduction in the leaders price premium.
3. Capacity tends to be overbuilt during rapid growth. When a cyclical slow down occurs, industry overcapacity drives down margins to lower levels. New competitors decide not to enter, and existing competitors try to solidify their positions. This leads to share stability.
4. Stability is followed by commodity competition. The product is viewed as commodity, buyers no longer pay a price premium, and the suppliers earn only an average rate of return.
5. At this point, withdrawal begins. The pioneer might decide to build share further as other firms withdraw.
The strategies usually at this stage are they have one or few products relatively undifferentiated. Mostly, cost plus pricing should be used to set a price. Distribution is selective and scattered as the firm commences implementation of the distribution plan.
Promotion is aimed at building brand awareness; sample or trial incentive may be directed towards the customers. Advertising is aimed to be high to build brand awareness. The companies in the introduction stage are Pepsi Tropicana, Clear shampoo.
B. Marketing Strategies – Growth Stage:
In growth stage there is a rapid climb in sales. Early adopters like the product and additional consumers start buying it. New competitors enter the market; they are attracted by the opportunities. They introduce new product features and expand distribution. There is no change or slight change in price of the product, it may remain same or fall slightly, depending on how fast demand increases.
The promotional expenditures of the company remain same or increase slightly to meet competition and to continue to educate the market. Sales increases at a much faster rate than promotional expenditures, causing a decline in promotion sales ratio. Profits increase during this stage as promotion costs are spread over a larger volume and unit manufacturing costs fall faster than price declines owing to the producer learning effect.
Firms have to watch for a change from an accelerating to a decelerating rate of growth in order to prepare new strategies.
The firm uses several strategies in growth stage to sustain rapid market growth:
i. It increases its distribution coverage and enters new distribution channels.
ii. It shifts from product-awareness advertising to product-preference advertising.
iii. It lowers prices to attract the next layer of price-sensitive buyers.
iv. It improves product quality and adds new product features and improved styling.
v. It enters new market segments.
vi. These market expansion strategies strengthen the firm’s competitive position.
vii. It adds new models and flanker products i.e., products of different sizes, flavours, and so forth that protect the main product.
In the growth stage the firm faces a trade-off between high market share and high current profit. The firm spends money on product improvement, promotion, and distribution; so that it can capture a top position. It forgoes maximum current profit in the hope of making even greater profits in the next stage. The products in this stage may be Mountain Dew and Lays.
C. Marketing Strategies – Maturity Stage:
This is the stage at which the rate of sales growth will be slow, and the product will enter a stage of relative maturity. This stage lasts longer as compared to the previous stages, and poses a challenge to marketing management. The problem that marketing manager face at maturity stage is the problem of marketing the mature product.
The maturity stage divides into three phases- growth, stable, and decaying maturity. In the growth phase, the sales growth rate starts to decline. There are no new distribution channels to fill. In the stable phase, sales flatten on a per capita basis because of market saturation. The most potential consumers have tried the product, and future sales are governed by population growth and replacement demand. In the decaying maturity phase, the absolute level of sales starts to decline, and customers begin switching to other product.
The sales in the maturity stage slow down and create overcapacity in the industry, which leads to intensified competition. Competitors try to find niches for their product. Increase in advertising and trade and consumer promotion takes place in this stage. Companies increase their budgets to improve their product and line extensions.
If a company is not successful then the weaker firm withdraws from the market. The industry eventually consists of well-entrenched competitors, their main aim is to gain or maintain market share.
Few giant firms dominate the industry through quality, service and cost leadership, by making profit through high volume and lower costs. Surrounding these dominant firms is a multitude of market nichers, including market specialists, product specialists, and customizing firms.
The challenge before a firm in a mature market is whether to become of the “big three” and achieve profits through high volume and low cost or to pursue a niching strategy and achieve profits through low volume and a high margin.
There are few companies who leave weaker products and concentrate on more profitable products and on new products. Industries widely thought to be mature like autos, motorcycles, television, watches, and cameras — were proved otherwise by the Japanese, who found ways to offer new values to customers.
The strategies that a company may adopt in this stage are:
1. Market modification
2. Product modification
3. Marketing mix modification
1. Market Modification:
The company would try to expand the new horizon of market for its mature brand by working with the two factors that make-up sales volume which can be calculated as- volume = number of brand users x usage rate per user.
The company can expand the number of brand users by:
i. Converting nonuser’s into users- It means all those customers into users who have never tried our product.
ii. Entering new market segments- Johnson & Johnson successfully promoted its baby shampoo to adult users.
iii. Winning competitors’ customers- PepsiCo is constantly tempting-Coca-Cola users to switch.
iv. Volume can also be increased by convincing current users to increase their brand usage- (a) Use the product on more occasions. Kellogg’s cornflakes for breakfast, dinner, lunch, (b) Use more of the product on each occasion. Drink a larger glass of orange juice, (c) Use the product in new ways. Use washing machine for making lassi.
2. Product Modification:
The companies in this stage are trying to improve their existing product through quality improvement, feature improvement or style improvement.
(a) Quality Improvement:
It aims at increasing the product’s functional performance. A company may win over competition by launching a “new and improved” product. This strategy is effective to the extent that the quality is improved, buyers accept the claim of improved quality, and a sufficient of buyers will pay for higher quality.
However, customers are not always willing to accept an “improved” product. As such when Pepsi came with a blue transparent Pepsi it was not accepted in the market.
(b) Feature Improvement:
It aims at adding new features to an existing product. The improvement in product could be in the form of size, weight, materials additives, accessories that expand the product’s versatility, safety, or convenience.
This strategy has several advantages it could create an image of company as an innovator and win the loyalty of market segments that value these features. It also provides an opportunity for free publicity and generates sales force and distributor enthusiasm. The major disadvantage is that feature improvements are easy to be copied unless there is a permanent gain from being first, the feature improvement might not pay-off in the long run.
A strategy of style improvement aims at increasing the product’s aesthetic appeal. The periodic introduction of new car models is largely about style competition, as is the introduction of new packaging for consumer products. A style strategy might give the product a unique market identity.
Yet style competition has problems. First, it is difficult to predict whether people and which people will like a new style. Second, a style change usually requires discontinuing the old style, and the company risk losing customers.
iii. Marketing Mix Modification:
The market mix modification may take place if following questions are answered:
a. Prices- Would a price cut attract new buyers? If so, should the list price be lowered, should prices be lowered through price specials, volume or early purchase discounts, freight cost absorption, or easier credit terms? Or would it be better to raise the price to signal higher quality?
b. Distribution- Can more outlets be penetrated? Can the company obtain more product support and display in existing outlets? Can the company introduce the product into distribution channels?
c. Advertising- Should the media mix be changed? Should the timing, frequencies; or size of ads be changed? Should advertising expenditures be increased? Should the message or copy be changed?
d. Sales Promotion- Should the company step up sales promotion — trade deals, cents off coupons, rebates, warranties, gifts, and contests?
e. Personal Selling- Should sales territories be revised? Should the number or quality of salespeople be increased? Should sales force incentives be revised? Can sales-call planning be improved? Should the basis for sales force specialization be changed?
f. Services- Can the company speed up delivery? Can it extend more technical assistance to customers? Can it extend more credit?
Marketers often debate which tools are most effective in the mature stage. For example, would the company gain more by increasing its advertising or its sales promotion budget? Sales promotion has more impact at this stage because consumers have reached an equilibrium in their buying habits and preferences, and psychological persuasion (advertising) is not as effective as financial persuasion (sales-promotion deals).
Many consumer-packaged-goods companies now spend over 60 per cent of their promotion budget on sales promotion to support mature products. Others argue that brands should be managed as capital assets and supported by advertising. Advertising expenditures should be treated as a capital investment.
Brand managers however, use sales promotion because its effects are quicker and more visible to their superiors. But excessive sales promotion activity can hurt the brand’s image in long run profit performance.
D. Marketing Strategies – Decline Stage:
This is a stage where sales decline for many reasons such as; shift in consumer tastes, increased price cutting, technological advancement, and increased domestic and foreign competition and this would lead to overcapacity, and profit erosion. The decline might be slow or rapid, as in the case of automobile industry.
Sales may come down to zero or they may petrify at a low level. Due to decline in sales and profits, some may leave the market. The firm which remains in the market may reduce the number of products they offer. They may withdraw from smaller market segments and weaker trade channels, and they may cut their promotion budgets and reduce prices further.
Most companies have not tried the policy for handling aging products. If a strong reason does not exist, carrying a weak product is very costly to the firm — not just by the amount of uncovered overhead but also in terms of profit also, as there are many hidden costs.
Weak products often consume a lot of time; require frequent price and inventory adjustments; generally involve short production runs in spite of expensive set-up times; require both advertising and sales force attention that might be better used to make the healthy products more profitable; and can cast a shadow on the company’s image. The biggest cost might well lie in the future. Failing to eliminate weak products delays the aggressive search for replacement products.
In handling aging products, a company faces a number of tasks and decisions. The first task is to identify weaker products of the company. Many companies appoint a product-review committee with representatives from marketing, R&D manufacturing, and finance.
The controller’s office supplies data for each product showing trends in market size, market share, prices, costs, and profits. A computer program then analyzes this information. The product-review committee makes a recommendation for each product leave it alone, modify its marketing-strategy, or drop it.
The strategies for declining industries, by Kathryn Harrigan are as follows:
1. Increasing the firm’s investment to dominate the market or strengthen its competitive position.
2. Maintaining the firm’s investment level until the uncertainties about the industry are resolved.
3. Decreasing the firm’s investment level selectively, by dropping unprofitable customers while simultaneously strengthening the firm’s investment in lucrative niches.
4. Harvesting (“milking”) the firm’s investment to recover cash quickly.
5. Divesting the business quickly by disposing its assets as advantageously as possible?
The appropriate strategy depends on the industry’s relative attractiveness and the company’s competitive strength in that industry. A company that is in an unattractive industry but possesses competitive strength should consider shrinking selectively. A company that is in an attractive industry and has competitive strength should consider strengthening its investment.
If the company were choosing between harvesting and divesting, its strategies would be quite different. Harvesting calls for gradually reducing a product or business while trying to maintain its sales. The first step is to cut R&D costs and plant and equipment investment. The company might also reduce product quality, sales force size, marginal services, and advertising expenditures.
It would try to cut these costs without letting customers, competitors, and employees know what is happening. Harvesting is an ethically ambivalent strategy, and it is also difficult to execute. Harvesting can substantially increase the company’s current cash flow. When a company decides to drop a product, it faces further decisions.
If the product, has strong distribution and residual goodwill, the company can probably sell it to another firm. If the company can’t find any buyers, it must decide whether to liquidate the brand quickly or slowly. It must also decide on how much inventory and service to maintain for past customers.
Product Life Cycle Marketing Strategies – Strategies Adopted by the Marketer to Ensure Success in Each Stage of Product Life Cycle
Each of the stages of the product life cycle poses an opportunity and a challenge to the marketer. Let us now take a look at the various strategies that can be adopted by the marketer to ensure success in each stage of the Product Life Cycle. While discussing this, we shall first take a look at the characteristics of the stage and then understand the strategies that are needed.
Marketing Strategies Adopted During the Introduction Stage or Pioneering Stage:
In the introductory stage the marketer faces the challenge of launching the new product, ensuring a proper dealer network and creating consumer awareness and gaining their acceptance. Hence the pace at which sales moves is rather slow while promotional expenditures are peaking. As such it then becomes essential for the marketer to make a decision as to whether the organisation wants to be the first one to launch the product or be a follower in the market.
Generally in a market where the rate of obsolescence is rather high, being an early bird is a good move. Most studies indicate that market leaders have the first advantage. However, there is a lot of risk involved and a lot of expenditure too.
a. Product Strategy – While deciding strategies, the organisation needs to introduce the product in its basic or core avatar leaving room for further improvements or addition of features. (So that when the competition steps in with a product similar to the basic product, the pioneering organisation can introduce an improvised version).
b. Price Strategy – With regards to price, the marketer can adopt a cost plus pricing approach to ensure that it achieves its breakeven in the stipulated time.
c. Physical Distribution Strategy – The distribution has to be done in select areas through a network that is reliable. In the initial stages, it is essential that the marketer goes for selective distribution.
d. Promotional Strategy – With a lot of advertising to create awareness it is also necessary to use heavy sales promotion to lure the customer into trying the product for the first time.
Marketing Strategies Adopted During the Growth Stage:
In this stage, consumers who have already purchased the product will typically go in for repeat purchases and those who have not will now begin to purchase the product. This leads to a rapid increase in the sales. Attracted by the opportunities presented by the market, the competition enters at this stage.
a. Product Strategy – To strengthen the product by introducing additional features or newer extensions.
b. Price Strategy – Prices may remain the same or can be reduced slightly to create entry barriers for the competition.
c. Promotional Strategy – It is advisable for marketers to maintain the promotional expenditures and continue to dominate the consumers mind with advertisements.
d. Physical Distribution – In order to increase the profits, the organisation must expand its distribution and other untapped areas.
Marketing Strategies Adopted During the Maturity Stage:
In this stage the rate of sales starts to reduce. The maturity stage is generally divided into three phases and lasts for a while. The three phases are growth, stable and decay.
In the first phase, the sales growth rate reduces newer areas to expand the distribution and competition intensifies. In the second phase sales flatten because of the market saturation. In the third phase the absolute level of sales begins to drop and customers begin switching to other products.
a. Product Strategy – Increasing R&D budgets to develop product improvements and line extensions.
b. Pricing Strategy – As competition intensifies, frequent mark downs become necessary to sell the product.
c. Promotion – Increasing advertising works to a certain extent.
d. Distribution – The organisation now needs to look at intensifying the distribution to unknown areas and untapped markets.
Generally in this stage it is seen that weaker competitors leave the market and eventually a few dominant players are left in the market. These would typically be the cost leader, the quality leader and the service leader. Also some firms catering to the niche market and providing customisation are able to co-exist in this market.
Marketing Strategies Adopted During the Decline Stage:
The reasons for decline of a product in the market are many. The sales may decline due to technological advancement and the earlier technology becoming obsolete, or because of change in the consumer likes and tastes, also because of increased competition.
a. Product Strategy – As sales start to decline some firms feel it wiser to withdraw from the market and drop the products from their product line.
b. Price Strategy – A price cut serves to do away with the remaining stocks.
c. Distribution – In this stage the distribution is curtailed and unprofitable. Outlets are shut down or distribution to areas where sales is low is stopped.
d. Promotion – Some amount of advertising is continued, but all sales promotion activities are stopped.