Marketing – Product Life Cycle

product life cycle
introduction, growth, maturity, decline
introduction stage
very risky, very pricey, often unprofitable. only highly innovative customers. need to have deep pockets.
growth stage
early adaptors. gain in profits. strategically trying to acquire new customers -> marketing approach. increasing product differentiation. initial repeat buying from innovators is a key indicator of success.
maturity stage
intense competition, slow down in customer acquisition, cost-cutting. niche branding. market share is valuable and it is all about squeezing out CLV. price wars occr
decline stage
sales & profits both decline. virtually no new customers. often due to a dominant replacement technology. product management becomes key as you want to have products in all stages of PLC
decline strategy: withdraw
get out of the market
decline strategy: harvest
invest minimally to reap whatever profit possible
decline strategy: niche
find remaining pockets of segments in the market
decline strategy: market leadership
strategy to move market into growth strategy again
skim
start slow then grow. follow the “diffusion of innovation” framework. firm can extract maximum value from most interested customers. can be profitable from the start, but big money comes later. innovators will pay for extra technology. they will then spread the WOM for the company. therefore minimal marketing cost.
penetration
big bang! mass market from the beginning. number of new adopters peaks early. requires significant resources for advertising & distribution channels, but can yield high ROI
factors driving launch decision
perceived relatived Advantage by consumers, Compatibility, Complexity, Ability to try the innovation, Observability (ACCAO)
benefits of PLC
sales forecasting, anticipating changes in customer mix (and needs), resource allocation, choice of strategy
problems with PLC
-sales patterns often aren’t very smooth (noisy data, sometimes can’t sort out trial vs. repeat, hard to know which stage of PLC is in effect)
-conflicting factors made it hard to judge skim vs. penetration
-questions about cause-and-effect
-level of analysis