Product Item Vs Product Category
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Product Life CycleProduct Life Cycle
Product ConceptsPart 3 0f 3
“All products, no matter how successful, are mortal”
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NFCU, 3rd quarter 2000,Homeport
How long do things last?How long do things last?
Dishwasher 10Dishwasher 10 Freezer 16Freezer 16 Microwave 11Microwave 11 Dryer/washer 13Dryer/washer 13 Gas water heater 12Gas water heater 12 Furnace(gas or oil) 18Furnace(gas or oil) 18 Carpeting 11Carpeting 11 Paint,interior 5-10Paint,interior 5-10
Product Years
Product Item vs Product Category
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Product Life CycleProduct Life Cycle
Introduction Growth Maturity DeclinePostMortem
Loss/profit
Time
$ SalesSales
ProfitProfit
Progression of product “life” stages (sales & time)
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Source: WSJ 30 Sept 03, B1
You’re on Candid You’re on Candid Cellphone!Cellphone!
World wide National Economies
Applied Marketing
Growth stage
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Traditional–Digital Camera Traditional–Digital Camera PLCPLC
• • Digital cameraDigital camerasales have sales have increased since increased since their beginnings their beginnings in the mid-in the mid-
1990’s1990’s
• • Estimated Estimated salessales
projections areprojections areshown to likelyshown to likelysurpass surpass
traditionaltraditionalcamerascameras
Decline stage
Growth Stage
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Product Life Cycles & Product Life Cycles & R & D R & D timetime))
Stages have varied Time
Do
llar
s
R & DR & D Introduction Growth Maturity Decline Introduction Growth Maturity Decline
IndustryIndustry SalesSales
IndustryIndustry ProfitsProfits
Be Proactive in planning not reactive
Negative cash flow (12 yrs for medicines) WSJ,2001
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Product Life CycleProduct Life Cycle
Introduction StageIntroduction Stage– Primary DemandPrimary Demand– Slow sales/Low revenueSlow sales/Low revenue– Promotion: Gain awareness, Promotion: Gain awareness,
Push or Pull StrategyPush or Pull Strategy– Develop distribution channelDevelop distribution channel
Growth StageGrowth Stage– Increasing sales & Increasing sales &
profitsprofits– Market expansion Market expansion
brings increasing brings increasing competitioncompetition
– Product refinementProduct refinement– Profits peakProfits peak– Promote to create Promote to create
brand preferencebrand preference
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0
5
10
15
20
25
30
35
40
SA
LES
Introduction
PrimaryPrimarydemandemand:d:InformInform
Growth
ExtensiveExtensiveadvertisingadvertisingspending:spending:PersuadePersuade
Maturity
Reminder Reminder & & emotional emotional ads :ads :
RemindRemind
Decline
MinimalMinimalif anyif any
Ad Objectives & the Product life Ad Objectives & the Product life CycleCycle
Stimulate Primary demandStimulate Primary demand for a for a Product classProduct class via via informational Adsinformational Ads
Stimulate selective demand Stimulate selective demand for a brand via for a brand via psychological dimensionspsychological dimensions
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The Decline StageThe Decline Stage
Maturity -Decline
Obsolescence New Technology Changing
Consumer Tastes Low promotion Price discounting
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130,000
394,000
Flat Panel TV Units
Sept.2003Sept.2002
What’s In this Holiday SeasonWhat’s In this Holiday Season
Source: WSJ,Nov13, 2003Source: WSJ,Nov13, 2003
Product Life Cycle, reality competition
New technology
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1st Nine Months 20031st Nine Months 2003
Big screen & home theater systems Profit Margins: High end TV’s 30%
Stereo speakers 50 %
Sales of high end stereos & PC’s
Plasma and LCD TV’s are in the early stages of PLC
Panasonic 42 in. Plasma HDTV Monitor/PC Monitor, Widescreen
Stereo Amplifiers 18%
PCs 28%
CD Players 22%
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Product Life ExtensionsProduct Life Extensions((Maturity/Decline Stages)Maturity/Decline Stages)
Cost ReductionsCost Reductions: retool product with less : retool product with less expensive material, production, location, etc.expensive material, production, location, etc.
Product QualityProduct Quality: refocus on quality level : refocus on quality level based on target audience satisfaction.based on target audience satisfaction.
RepositionReposition: change product design, image: change product design, image
Product Modifications
Domestic & International product life cycle Domestic & International product life cycle sewing machines/washing machines sewing machines/washing machines to So. Am. (Brazil)to So. Am. (Brazil)
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Styles, Fashions, and Fads
Style, Fashion cycle , Fads (Hula Hoop-6 mos.)
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Feature ModificationFeature ModificationQuality ModificationQuality Modification
Style ModificationStyle Modification Image ModificationImage Modification
Product Modifications (Differentiation) in a mature overcrowded & declining market.
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Life Cycles and Marketing Life Cycles and Marketing StrategyStrategy
IntroductionIntroduction
GrowthGrowth
MaturityMaturity
Maximize distributionMaximize distributionBuild awareness & obtain trialBuild awareness & obtain trial
DeclineDecline
Extend distribution Extend distribution Advertise & promote heavilyAdvertise & promote heavily
Advertise product imageAdvertise product imagePersuade customers to switchPersuade customers to switch
Milk the product for profitsMilk the product for profitsDetermine if to terminate productDetermine if to terminate product
PostmortemPostmortem Plan for postmortem expensesPlan for postmortem expensesDevelop phase-out planDevelop phase-out plan
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Want to Add a Little Excitement to Your Food?
Hellmann’s Plan:
Mayonnaise Isn’t So Mayonnaise Mayonnaise Isn’t So Mayonnaise AnymoreAnymore
Applied Example
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French’s plan: “Gourmayo”French’s plan: “Gourmayo” Italian Pesto, Sun-Dried TomatoItalian Pesto, Sun-Dried Tomato Wasabi HorseradishWasabi Horseradish Chipotle Chili Chipotle Chili
Just Not the Same Old MayonnaiseJust Not the Same Old Mayonnaise
Kraft’s Plan:Create a new Stimulating line called,
“MAYO WITH HEAT”
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A clean, visually attractive cabin.
Spacious and comfortable seats.
An environment that promotes safety.
Adequate temperature & quietness
On-time flights.
Entertainment.
Case Example: Airlines Assess Case Example: Airlines Assess Customer Customer NeedsNeeds
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THE SOLUTION: A product redesign
Smaller/bigger gyms/bars
Reality: airport nightmares, lost luggage, cramped seating, arrival departure lateness, no food , service
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The Re Positioning StrategyThe Re Positioning Strategy
– Physical or psychological DifferentiationPhysical or psychological Differentiation
ProductProduct
Focus on Brand Name
Focus on product Benefits and/or The people who use the product and/or The way people classify the products
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Pricey TVs are siphoning sales from Pricey TVs are siphoning sales from electronic gadgets with higher price marginselectronic gadgets with higher price margins
A proliferation of outlets now sell fancy TVsA proliferation of outlets now sell fancy TVs– online merchants & Wal-Mart Stores, Inc..online merchants & Wal-Mart Stores, Inc..– computer retailers-i.e., Gateway Inc.computer retailers-i.e., Gateway Inc.
Prices and profit margins are plummetingPrices and profit margins are plummeting
Consumer-electronic Retailers Consumer-electronic Retailers are entering a squeezeare entering a squeeze------Some Early Some Early
signssigns
Dell Inc.– Dell Inc.– sells PCs at 18% gross marginsells PCs at 18% gross margin
– compared to electronic retailer 30% gross compared to electronic retailer 30% gross
marginmargin
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Apple looks to Sell Videos…and Apple looks to Sell Videos…and iPods to Play ThemiPods to Play Them
Music videos make sense because of the Music videos make sense because of the iPod's ready-made audience of music lovers. iPod's ready-made audience of music lovers.
For Example, when a user pays $9.99 for the For Example, when a user pays $9.99 for the latest album by the White Stripes, they get a latest album by the White Stripes, they get a video for a song by the rock duo called Blue video for a song by the rock duo called Blue Orchid that can be downloaded to a Orchid that can be downloaded to a computer.computer.
Apple has a joint venture with SONY to Apple has a joint venture with SONY to license music videos to sell on I podslicense music videos to sell on I pods
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iPod RevenueiPod Revenue