Kotler on Marketing

Watch the product life cycle;

but more important, watch
the market life cycle.
 Product Life Cycle
Introduction Stage
Causes for the slow growth:

 Delay in the expansion of production capacity.

 Technical problems.

 Delays in obtaining adequate distribution through

retail outlets.

 Customer reluctance to change established

behaviour.

 Product complexity (for some products).

 Profits are negative or low in this stage because of low
sales and heavy distribution and promotional
expenses.

 Prices are high because of high cost due to relatively

low output rates, technological problems in production

 New product launch may be set high or low level for

each marketing variable (4Ps). Considering only price
and promotion, management can pursue one of four
strategies.
 Rapid skimming – high price and high promotion logic
is – potential market is unaware of the product and are
eager to have it and will pay – asking price.

 Slow skimming – high price and low promotion-- market

is limited in size, market is aware of the product – buyers
are willing to pay a high price.

 Rapid penetration – low price and heavy promotion--

when market is large – the market is unaware, most buyers
are price sensitive, strong potential competition, unit cost
will fall with company’s scale of production and
experience.
 Slow penetration – low price and low promotion-- when
market is large, highly aware of product, is price
sensitive and there is some potential competition.

Pioneer Advantage

 To be first can be highly rewarding. To enter later

makes sense if the firm brings superior technology, quality.

 Speeding up innovation time is essential in an age of

shortening product life cycle. Companies that first reach
practical solutions will enjoy “first - mover” advantages
in the market.
 Growth Stage

 This stage is marked by rapid climb in sales. Early

adopters & other consumers start buying it. 

 New Competitors enter attracted by the opportunities. They

introduce new product features and expand distribution. 

 Prices remain where they are or fall slightly -depending on

how fast demand increases.

 Companies maintain their promotional expenditures at the

same or at a slightly increased level to meet competition
& to educate the market.
 Profits increase during this stage as promotion costs are
spread over a larger sales and manufacturing cost falls
faster owing to learning / experience effect.

During this stage the strategies the firm uses to sustain rapid
market growth are :
 
 Improves product quality, adds new features and improve
styling.
 
 Adds new models & flanker (products of different sizes,
flavours to protect the main product).
 Enters new segments.
 
 Increases & enters new distribution channels.
 
 Shifts product awareness advertising to product
preference advertising.
 
 Lower prices to attract the next layer of price -
sensitive buyers.
 Maturity Stage :

 The rate of sales growth will be slow, and the product

will enter a stage of relative maturity. This stage lasts
longer than the previous stages & poses challenges to
marketing management.

 This stage divides into three phases : growth, stable

and decaying maturity. First phase, the sales growth
rate starts to decline. In the second phase, sales
flatten.
 Most consumers have tried the product, sales are
governed by population growth and replacement
demand.

  In the third phase, decaying maturity, the absolute

level of sales starts to decline & customers begin
switching to other products & substitutes.

  Sales slow down creates over capacity in the industry

leading to intensified competition. Competitors engage
in frequent markdown.
 They increase advertising & trade and consumer promotion.

 They increase R & D budgets to develop product

improvements and the extensions.

 Shake out begins & weaker competitors withdraw.

 Dominating the industry are a few giants firms - perhaps a

quality leader, a service leader & a cost leader - that serve
the whole market & make their profits mainly through high
volume & lower costs. Surrounding them are market
nichers, including market specialists, product specialists and
customising firms.
 Market Modifications :

The Company can try to expand the number of brand

users in three ways:

 Convert non users.

 Enter new market segments.

 Win competitors customers.

 Product Modification : Managers also stimulate sales by
modifying the product characteristics through quality
improvements, feature improvements or style
improvement.

 Quality Improvement : Aims at increasing products’

functional performance - its durability, reliability, speed,
taste etc.

  This strategy is effective when buyers accept the claim of

improved quality and are willing to pay higher quality.
  Feature Improvements : Aims at adding new features
(eg. size, weight, additions, accessories) that expand
the products’ versatility, safety or convenience. New
features build company image but can be easily
imitated ; unless there is a permanent gain from being
first.

 Style Improvement : Aims at increasing the products’

aesthetic appeal (introduce new colours, texture, restyle
package etc.)
 Marketing - Mix Modifications :

 Price.

 Distribution.

 Advertising.

 Sales Promotion.

 Personal Selling.

 Services.
 Decline Stage

 The decline may be slow, may plunge to zero, they

may petrify at a low level.

 Sales decline for a number of reasons, including

technological advances, shifts in consumer tastes,
increase domestic & foreign competition. All lead to
over capacity, increased price cutting, profit erosion.
 Those firms in market place may withdraw from
smaller segment, weak trade channels, cut their
promotional budget and further reduce prices.

 Failing to eliminate weak products delay the

aggressive search for replacement products.

 The lower the exit barriers, the easier it is for firms to

stay and attract the withdrawal firms’ customers.
Company Strategies in declining industries

1. Harvesting (milking) the firm’s investment to

recover cash quickly,

2. Diversify the business quickly by disposing of its

assets.