Introduction
Background to the study
Marketing involves all activities carried out in the creation and satisfaction of customer needs profitably (Kotler & Keller, 2008, p. 43). The marketer is the liaison function between activities that constitute marketing and the clientele. Marketing activities involve the integration of the four Ps referred to as the marketing mix. Therefore as a marketer, one has to be acquainted with the product in terms of its characteristics, market performance and its ultimate life cycle.
As the basis upon which other marketing activities will be based, the product life cycle refers to, the time period between the products’ debut into and final exit from the market. The product Life Cycle is a set of five sequential stages which start upon the introduction of a new product into the market. The end of the cycle may result in a real product death or spell a return to the initial stage through innovation.
Aim
The product life cycle forms a basis for product management. This means that it is possible for management team to develop appropriate strategies. The report analyzes the various stages of a product and relevant marketing mix. Stages of product development before commercializing the product are also evaluated.
Scope
The report gives an analysis of the various marketing mix strategies that should be considered in product life cycle. The 4 stages of PLC are analyzed. On the other hand, the marketing mix strategies considered relate to pricing, distribution and promotion. A conclusion is given and relevant recommendations outlined. However, the report does not consider how these strategies will be implemented.
Introduction stage
This stage is characterized by a low level of sales since consumers are not aware of the product. A significant cost is incurred in the process of launching the product. These also relate to conduction of research and development and development of distributional system. As a result, a firm receives minimal profits from selling the product. In addition, introduction stage is characterized by minimal level of confidence amongst the suppliers. This arises from the fact that the products performance in the market is unknown (Pride, Hughes, Kapoor, p. 367).
In order to acquire and maintain product relevance and market share, each stage of the product life cycle requires different pricing approach. At the introduction stage, attractive pricing is used to prompt purchases and raise product awareness. Most of the new product sellers use the penetration pricing policy that involves foregoing present benefits for anticipated future benefits by selling at discounts. In addition, skimming pricing strategy can also be integrated in order to recoup investments over the shortest duration.
Skimming price strategy entails setting the price of a product at a relatively high price point. This is mainly considered if the product has a high competitive advantage compared to other competing products resulting from innovation (Nagle & Hogan, n.d. p.4). However, the price is reduced in the future as the demand reduces. The main objective of incorporating skimming pricing strategy is to reap the short-term profits which are relatively high. Skimming pricing strategy can contribute towards a firm attaining ‘high-quality’ image from the price of its product.
Market communication is one of the key considerations that the firm’s management team should consider in launching a new product or service (Bregendahl, Madsen & Haase, 2010, p. 18). Integrated Market Communication (IMC) should be integrated during the introduction phase. This entails incorporation of diverse methods of market communication. Introductory promotion is also aimed at convincing suppliers to include the product.
At this stage, the distribution of the product is selective and is not well developed. This results from the fact that the product is not fully integrated by consumers in their consumption pattern.
Growth phase
At this stage, a firm attains a high revenue growth. In addition, the level of sales increases since market awareness is high and product benefits are well recognized by consumers. A large number of retailers become interested at distributing the product. The product faces intense competition from similar products being developed (Pride, Hughes, Kapoor, 2010, p. 367).Intensity of competition increases a. There are various pricing strategies that the management can consider. For instance, the firm can maintain the high price if the level of demand is high. Alternatively, price can be reduced in order to increase the number of customers.
In order to attain market brand preference, increased advertising is integrated at this stage (Bregendahl, Madsen & Haase, 2010, p. 19). The core objective of increasing advertisement is to build a broad audience through awareness.
Maturity stage
The firm receives the highest profits from selling the product at this stage. Sales level increase but at a slow rate (Pride, Hughes, Kapoor, p. 367). Development of pricing policy at this stage is important since it determines whether the product will survive in the future. Firms should conduct appropriate price reduction. However, it should be ensured that price war does not result.
New channels of distribution are considered in order to reach a wide market. In addition, firms offer incentives to other resellers distributing the product so as to encourage them to continue stocking the product.
Building brand loyalty is paramount at this stage. This is due to the fact that it increases the consumer level of confidence in the product. Considering the intensity of competition at this stage, firms consider conducting intensive promotion of the product can be conducted through integration of product differentiation. In addition, incentives are also used in an effort to entice competitor’s customers to shift from their current brand and conduct repeat purchases of the product.
Decline stage
Sales level start to decline resulting from the market becoming saturated. In addition to the product experiencing technological obsolescence, a shift in customers’ tastes is also experienced. The level of profitability may be maintained if sufficient brand loyalty was attained. The unit cost associated with the product may increase as the value of production is reduced. The firm may decide to reduce the price in an effort to liquidate the inventory. Alternatively, the firm may decide to retain the price in order to supply to its target market.
At this stage, expenditures related to promotion of the product are relatively low. Promotional expenses incurred at this stage are aimed strengthening the firm’s brand image in the market. This enables the product to continue being distributed in the market.
Product Research and Development of PLC
New Product Development (NPD) refers to the entire process undertaken in introducing a new product to the market. For the product to be successfully developed, it is paramount that comprehensive research be conducted (Alexander, 1997, p. 106). The initial stage entails idea generation through various mechanisms such as SWOT analysis, competitors’ analysis, from sales people, employees, trade shows and focus groups. The ideas generated are screened to eliminate concepts which might result to wastage of resources. Idea screening also considers the target market, product cost effectiveness, its benefits, features and possibility of integrating technology in its development.
Business analysis is also conducted to determine the price and product profitability. A prototype is produced to test the product’s usage in real situations. In addition, customer interviews are conducted to enable the firm make necessary adjustments to the product. A technical implementation plan is also developed by considering issues such as supplier collaboration, department scheduling, requirement publication and development of contingency plan. By successfully considering these stages, a firm can be able to determine the idea to commercialize and launch a product.
Conclusion
Product lifecycle consists of four stages whereby each stage has got unique characteristics. Consideration of the entire product lifecycle is important in development of relevant marketing strategies. Some of the important marketing strategies that should be considered in the PLC include the marketing mix strategies. These relate to product, promotion, distribution and promotion. Formulation of appropriate marketing strategies determines the effectiveness with which a firm develops its competitive advantage. The ultimate result is that the product is able to develop in the long run.
Recommendations
In order for a new product to succeed in the future, the management should consider all the stages of PLC. Some of the issues that should be considered include.
- Adjusting the marketing mix strategies appropriately according to the product’s stage.
- Conducting effective research and development in the process of developing a new product. This will prevent possible losses upon commercialization of the developed product.
Reference List
Bregendahl, M., Madsen, J. & Haase, M. 2010. Market communication. Massachusetts: Systime. Web.
Kotler, P. & Keller, K. 2008. Marketing management. New York: Prentice Hall Publisher.
Nagle, T. & Hogan, J. n.d. The strategy and tactics of pricing. Sydney: Mahesh Gupta. Web.
Pride, W., Hughes, R. & Kapoor, J.2010. Business. New York: Cengage Learning. Web.