Introduction:
Product passes through four stages of its life cycle. Every stage poses different opportunities and challenges to the marketer. Each of stages demands the unique or distinguished set of marketing strategies. A marketer should watch on its sales and market situations to identify the stage in which the product is passing through, and accordingly, he should design appropriate marketing strategies. Here, strategy basically involves four elements – product, price, promotion, and distribution.
By appropriate combination of these four elements, the strategy can be formulated for each stage of the PLC. Every stage gives varying importance to these elements of marketing mix. Let us analyze basic strategies used in each of the stages of the PLC, as described by Philip Kotler.
Marketing Strategies for Introduction Stage:
Introduction stage is marked with slow growth in sales and a very little or no profit. Note that product has been newly introduced, and a sales volume is limited; product and distribution are not given more emphasis. Basic constituents of marketing strategies for the stage include price and promotion. Price, promotion or both may be kept high or low depending upon market situation and management approach. Observe Figure 3.
Following are the possible strategies during the first stage:
1. Rapid Skimming Strategy:
This strategy consists of introducing a new product at high price and high promotional expenses. The purpose of high price is to recover profit per unit as much as possible. The high promotional expenses are aimed at convincing the market the product merits even at a high price. High promotion accelerates the rate of market penetration, in all; the strategy is preferred to skim the cream (high profits) from market.
This strategy makes a sense in following assumptions:
(a) Major part of market is not aware of the product.
(b) Customers are ready to pay the asking price.
(c) There possibility of competition and the firm wants to build up the brand preference.
(d) Market is limited in size.
2. Slow Skimming Strategy:
This strategy involves launching a product at a high price and low promotion. The purpose of high price is to recover as much as gross profit as possible. And, low promotion keeps marketing expenses low. This combination enables to skim the maximum profit from the market.
This strategy can be used under following assumptions:
(a) Market is limited in size.
(b) Most of consumers are aware of product.
(c) Consumers are ready to pay high price.
(d) There is less possibility of competition.
3. Rapid Penetration:
The strategy consists of launching the product at a low price and high promotion. The purpose is the faster market penetration to get larger market share. Marketer tries to expand market by increasing the number of buyers.
It is based on following assumptions:
(a) Market is large.
(b) Most buyers are price-sensitive. They prefer the low-priced products.
(c) There is strong potential for competition.
(d) Market is not much aware of the product. They need to be informed and convinced.
(e) Per unit cost can be reduced due to more production, and possibly more profits at low price.
4. Slow Penetration:
The strategy consists of introducing a product with low price and low-level promotion. Low price will encourage product acceptance, and low promotion can help realization of more profits, even at a low price.
Assumptions of this strategy:
(a) Market is large.
(b) Market is aware of product.
(c) Possibility of competition is low.
(d) Buyers are price-sensitive or price-elastic, and not promotion-elastic.
Marketing Strategies for Growth Stage:
This is the stage of rapid market acceptance. The strategies are aimed at sustaining market growth as long as possible. Here, the aim is not to increases awareness, but to get trial of the product. Company tries to enter the new segments. Competitors have entered the market. The company tries to strengthen competitive position in the market. It may forgo maximum current profits to earn still greater profits in the future.
Several possible strategies for the stage are as under:
1. Product qualities and features improvement
2. Adding new models and improving styling
3. Entering new market segments
4. Designing, improving and widening distribution network
5. Shifting advertising and other promotional efforts from increasing product awareness to product conviction
6. Reducing price at the right time to attract price-sensitive consumers
7. Preventing competitors to enter the market by low price and high promotional efforts
Marketing Strategies for Maturity Stage:
In this stage, competitors have entered the market. There is severe fight among them for more market share. The company adopts offensive/aggressive marketing strategies to defeat the competitors.
Following possible strategies are followed:
1. To Do Nothing:
To do nothing can be an effective marketing strategy in the maturity stage. New strategies are not formulated. Company believes it is advisable to do nothing. Earlier or later, the decline in the sales is certain. Marketer tries to conserve money, which can be later on invested in new profitable products. It continues only routine efforts, and starts planning for new products.
2. Market Modification:
This strategy is aimed at increasing sales by raising the number of brand users and the usage rate per user. Sales volume is the product (or outcome) of number of users and usage rate per users. So, sales can be increased either by increasing the number of users or by increasing the usage rate per user or by both. Number of users can be increased by variety of ways.
There are three ways to expand the number of users:
i. Convert non-users into users by convincing them regarding uses of products
ii. Entering new market segments
iii. Winning competitors’ consumers
Sales volume can also be increased by increasing the usage rate per user.
This is possible by following ways:
i. More frequent use of product
ii. More usage per occasion
iii. New and more varied uses of product
3. Product Modification:
Product modification involves improving product qualities and modifying product characteristics to attract new users and/or more usage rate per user.
Product modification can take several forms:
i. Strategy for Quality Improvement:
Quality improvement includes improving safety, efficiency, reliability, durability, speed, taste, and other qualities. Quality improvement can offer more satisfaction.
ii. Strategy for Feature Improvement:
This includes improving features, such as size, colour, weight, accessories, form, get-up, materials, and so forth. Feature improvement leads to convenience, versatility, and attractiveness. Many firms opt for product improvement to sustain maturity stage.
Product improvement is beneficial in several ways like:
(1) It builds company’s image as progressiveness, dynamic, and leadership,
(2) Product modification can be made at very little expense,
(3) It can win loyalty of certain segments of the market,
(4) It is also a source of free publicity, and
(5) It encourages sales force and distributors.
4. Marketing Mix Modification:
This is the last optional strategy for the maturity stage. Modification of marketing mix involves changing the elements of marketing mix. This may stimulate sales. Company should reasonably modify one or more elements of marketing mix (4P’s) to attract buyers and to fight with competitors. Marketing mix modification should be made carefully as it is easily imitated.
Marketing Strategies for Decline Stage:
Company formulates various strategies to manage the decline stage. The first important task is to detect the poor products. After detecting the poor products, a company should decide whether poor products should be dropped. Some companies formulate a special committee for the task known as Product Review Committee. The committee collects data from internal and external sources and evaluates products. On the basis the report submitted by the committee, suitable decisions are taken.
Company may follow any of the following strategies:
1. Continue with the Original Products:
This strategy is followed with the expectations that competitors will leave the market. Selling and promotional costs are reduced. Many times, a company continues its products only in effective segments and from remaining segments they are dropped. Such products are continued as long as they are profitable.
2. Continue Products with Improvements:
Qualities and features are improved to accelerate sales. Products undergo minor changes to attract buyers.
3. Drop the Product:
When it is not possible to continue the products either in original form or with improvement, the company finally decides to drop the products.
Product may be dropped in following ways:
i. Sell the production and sales to other companies
ii. Stop production gradually to divert resources to other products
iii. Drop product immediately.