PRODUCT LIFE CYCLE

PRODUCT LIFECYCLE

https://hbr.org/1965/11/exploit-the-product-life-cycle
STAGE 1. MARKET DEVELOPMENT

Generally, demand has to be “created” during the product’s initial market

development stage.
How long this takes depends on the product’s complexity, its degree of
newness, its fit into consumer needs, and the presence of competitive
substitutes of one form or another.
While it has been demonstrated time after time that properly customer-
oriented new product development is one of the primary conditions of
sales and profit growth, what have been demonstrated even more
conclusively are the ravaging costs and frequent fatalities associated with
launching new products.
“used apple policy”
STAGE 2: MARKET GROWTH

At some point in this rise a marked increase in consumer demand occurs and
sales take off. This is the beginning of Stage 2—the market growth stage.
At this point potential competitors who have been watching developments
during Stage I jump into the fray. And at this point product and brand
differentiation begin to develop.
Instead of seeking ways of getting consumers to try the product, the originator
now faces the more compelling problem of getting them to prefer his brand.
As the rate of consumer acceptance accelerates, it generally becomes
increasingly easy to open new distribution channels and retail outlets. The
consequent filling of distribution pipelines generally causes the entire industry’s
factory sales to rise more rapidly than store sales. This creates an
exaggerated impression of profit opportunity which, in turn, attracts more
competitors.
STAGE 3: MARKET MATURITY

The first sign of its advent is evidence of market saturation.

This means that most consumer companies or households that are sales
prospects will be owning or using the product.
Price competition now becomes intense. Competitive attempts to achieve
and hold brand preference now involve making finer and finer
differentiations in the product, in customer services, and in the promotional
practices and claims made for the product.
Whereas during the market development stage the originator depended
heavily on the positive efforts of his retailers and distributors to help sell
his product, retailers and distributors will now frequently have been
reduced largely to being merchandise-displayers and order-takers.
STAGE 4: MARKET DECLINE
As demand declines, the overcapacity that was already apparent during the period
of maturity now becomes endemic.
To hasten their competitors’ eclipse directly, or to frighten them into early voluntary
withdrawal from the industry, they initiate a variety of aggressively depressive
tactics, propose mergers or buy-outs, and generally engage in activities that make
life thanklessly burdensome for all firms, and make death the inevitable consequence
for most of them.
IMPORTANCE OF UNDERSTANDING PLC
Time spent in attempting this kind of foresight helps assure that a more rational
approach is brought to product planning and merchandising.
it can help create valuable lead time for important strategic and tactical moves after
the product is brought to market.
it can be a great help in developing an orderly series of competitive moves, in
expanding or stretching out the life of a product, in maintaining a clean product line,
and in purposely phasing out dying and costly old products.
RISK OF PRODUCT FAILURE

What factors tend to prolong the market development stage and therefore
raise the risk of failure?
The more complex the product,
the more distinctive its newness,
the less influenced by fashion,
the greater the number of persons influencing a single buying decision,
the more costly,
and the greater the required shift in the customer’s usual way of doing
things—
these are the conditions most likely to slow things up and create problems.
“LIFE EXTENSION” OR “MARKET STRETCHING”
It is the idea of planning in advance of the actual launching of a new product to take
specific actions later in its life cycle—actions designed to sustain its growth and
profitability—which appears to have great potential as an instrument of long-term
product strategy.
How this might work for a product can be illustrated by looking at the history of
nylon. The way in which nylon’s booming sales life has been repeatedly and
systematically extended and stretched can serve as a model for other products.
NYLON’S LIFE
The first nylon end-uses were primarily military—parachutes,
thread, rope. This was followed by nylon’s entry into the circular knit
market and its consequent domination of the women’s hosiery
business.
strategies that expand sales :
1. Promoting more frequent usage of the product among current users.
2. Developing more varied usage of the product among current users.
3. Creating new users for the product by expanding the market.
4. Finding new uses for the basic material.
MARKETING STRATEGIES TO USE IN
VARIOUS STAGES OF LIFECYCLE
1. INTRODUCTION STRATEGIES
rapid skimming - launching the product at a high price and high promotional level
slow skimming - launching the product at a high price and low promotional level
rapid penetration - launching the product at a low price with significant promotion
slow penetration - launching the product at a low price and minimal promotion
2. GROWTH STRATEGIES
improving product quality
adding new product features or support services to grow your market share
enter new markets segments
keep pricing as high as is reasonable to keep demand and profits high
increase distribution channels to cope with growing demand
shifting marketing messages from product awareness to product preference
3. MATURITY STRATEGIES
market modification - this includes entering new market segments, redefining target
markets, winning over competitor’s customers, converting non-users
product modification - for example, adjusting or improving your product’s features,
quality, pricing and differentiating it from other products in the marking
4. DECLINE STRATEGIES
reduce your promotional expenditure on the products
reduce the number of distribution outlets that sell them
implement price cuts to get the customers to buy the product
find another use for the product
maintain the product and wait for competitors to withdraw from the market first
harvest the product or service before discontinuing it
PRODUCT LIFE CYCLE OF PEPSI
1) Pre-launch – the 1890s
In 1898, pharmacist Caleb Bradham developed ‘Brads Drink’, a formula designed to
aid digestion. After strong interest from consumers in his pharmacy, Brad renames the
drink ‘Pepsi-Cola’ and purchases the trademark ‘Pep Cola’ for $100.
1) INTRODUCTION – 1902

Brad began selling Pepsi-Cola and achieved sales of 7,968 gallons of syrup in the first
year.
Objectives: Brad aimed to generate initial awareness and trial of his product, and far
exceeded his targets!
Product: Only a basic product was launched – Pepsi-Cola was initially sold even
without bottles. Instead the product was sold through soda fountains located in Brad’s
pharmacies.
Price: Initially a simple cost-plus pricing strategy was used. It is likely that Pepsi-Cola
started with a skimming strategy, to quickly recuperate start-up costs.
Place: A highly selective distribution is initially recommended, and this is evident with
Pepsi-Cola only launching in Brad’s pharmacies.
Advertising: To generate awareness, a celebrity endorsement with race-car driver
Barney Oldfield was utilised.
2) GROWTH – 1930S-1970S

After bankruptcy and then becoming acquired by Loft Inc., Pepsi-Cola’s sales sky-
rocketed in the great depression. Consumers were attracted by the value-for-money
competitive positioning: 5 cents would buy consumers 12 ounces of Pepsi-Cola, but only
6 ounces of Coca-Cola.
Objectives: During growth, gaining market share is critical. Hence, Pepsi-Cola was
marketed aggressively against Coca-Cola to encourage consumers to defect.
Product: As the market becomes increasingly competitive it is important to continually
improve the product. Hence, Pepsi-Cola now came in bottles, rather than just soda
fountains.
Price: To support the aim of gaining market share, the low price penetration strategy
was one of the key reasons why the brand grew massively in this time period.
Place: An extensive distribution network is needed to support rapid sales growth;
therefore exclusivity to pharmacies ended and the product became a mainstream
consumer good.
Advertising: It is vital to capture the early majority stage, requiring that advertising
was designed to effectively reach a mass audience. For example, Radio was
selected as a medium because of its low cost-per reach. During this time, the name
was changed to just ‘Pepsi’ to help differentiate the brand from Coca-Cola. Lastly,
the 1975 Pepsi Challenge marketing campaign was so effective it almost destroyed
the Coca-Cola brand!

Sales-promotion: Due to the overwhelming success of the drink, no sales promotion

was used given that the price was already highly competitive and the company
struggled to keep-up with demand.
3) MATURITY – 1980S

Since the 1980s Pepsi has been in the maturity stage of the product life cycle, helping
the parent company earn almost $20 billion in annual revenue.
Objectives: At this stage products are most profitable, which is why PepsiCo are likely
to consider Pepsi as a Cash Cow and aim to make as much profit as possible from the
brand.
Product: Now that the product is well established, entire ranges can be introduced that
act as extension strategiec to prolong the most profitable stage of the product’s
life. These include the highly successful Pepsi Max, to the disastrous Pepsi Raw.
Price: PepsiCo and Coca-Cola clearly do not want to enter price-wars, which is a high
risk during this very competitive stage. As a result, the price rarely fluctuates away
from the market average.
Place: The product now has a global distribution to penetrate emerging economies.
Advertising: The main focus of Pepsi’s advertising during maturity to is to
differentiate the brand. This has been mainly achieved through the use of celebrity
endorsements – like Beyonce and Michael Jackson – to position the product as a
younger and edgier alternative to Coca-Cola

Sales-promotion: To keep consistent with the brand’s value-for-money positioning,

Pepsi frequently have both value increasing and value adding offers. An example of
the former is offering larger bottle sizes – still to this day – than Coca-Cola; and the
latter can be seen in the competitions advertised on Pepsi’s bottles.
4) DECLINE – SOMETIME IN THE FUTURE
Despite growing consumer interest in healthier lifestyles, sales of Pepsi show no
signs of slowing down in the immediate future. Regardless of this, it is
recommended that Pepsico have the following strategies ready to be be
implemented in the event of the product entering decline.
Objectives: Cost-reduction is key at this stage to help the brand remain
profitable despite generating fewer sales.
Product: The range should become rationalized, and may be reduced to just
Pepsi to leverage economies of scale and minimize costs.
Price: The price could be reduced further to increase sales among price-
sensitive consumers and be an effective advertising cue for this low
involvement product.
Place: The product now returns back to selective distribution to focus efforts on
just the few remaining outlets that generate profits on Pepsi.
Advertising and Sales Promotion: It can be recommended that PepsiCo could
go as far as completely cutting advertising and sales promotion to further
reduce overheads.