Management strategies

Strategies adopted with respect to the 4Ps depend on the product life cycle. Like human beings, products also have their own life-cycle. From birth to death human beings pass through various stages e.g. birth, growth, maturity, decline and death. A similar life-cycle is seen in the case of products. The product life cycle goes through multiple phases, involves many professional disciplines, and requires many skills, tools and processes. Product life cycle (PLC) has to do with the life of a product in the market with respect to business/commercial costs and sales measures. To say that a product has a life cycle is to assert four things:
  • that products have a limited life,
  • product sales pass through distinct stages, each posing different challenges, opportunities, and problems to the seller,
  • profits rise and fall at different stages of product life cycle, andProducts require different marketing, financial, manufacturing, purchasing, and human resource strategies in each life cycle stage.

The four main stages of a product's life cycle and the accompanying characteristics are:
  1. Market introduction stage: costs are high, low sales volumes, little or no competition, demand has to be created, customers have to be prompted to try the product, makes low profits at this stage.
  2. Growth stage: costs reduced due to economies of scale, sales volume increase significantly, profitability begins to rise, public awareness increases, competition begins to increase with a few new players in establishing market, and increased competition leads to price decreases.
  3. Maturity stage: costs are lowered as a result of production volumes increasing and experience curve effects, sales volume peaks and market saturation is reached, increase in competitors entering the market, prices tend to drop due to the proliferation of competing products, brand differentiation and feature diversification is emphasized to maintain or increase market share, and Industrial profits go down.
  4. Saturation and decline stage: costs become counter-optimal, sales volume decline or stabilize, prices and profitability diminish, and profit becomes more a challenge of production/distribution efficiency than increased sales.
The progression of a product through these stages is by no means certain. Some products seem to stay in the mature stage forever e.g. milk. Marketing managers have various techniques designed to prevent the process of falling into the decline stage. In most cases however, the life expectancy of a product category can be estimated.

A marketing manager’s strategy will change as their product goes through its life cycle (Figure 3) is described below.

Figure: Phases in the product life cycle


Introduction Stage
In the introduction stage, the firm seeks to build product awareness and develop a market for the product. The impact on the marketing mix is as follows:
  • Product branding and quality level is established and intellectual property protection such as patents and trademarks are obtained.
  • Pricing may be low penetration pricing to build market share rapidly, or high skim pricing to recover development costs.
  • Distribution is selective until consumers show acceptance of the product.
  • Promotion is aimed at innovators and early adopters. Marketing communications seeks to build product awareness and to educate potential consumers about the product.
Growth Stage

In the growth stage, the firm seeks to build brand preference and increase market share.
  • Product quality is maintained and additional features and support services may be added.
  • Pricing is maintained as the firm enjoys increasing demand with little competition.
  • Distribution channels are added as demand increases and customers accept the product.
  • Promotion is aimed at a broader audience.
 
Maturity Stage

At maturity, the strong growth in sales diminishes. Competition may appear with similar products. The primary objective at this point is to defend market share while maximizing profit.
  • Product features may be enhanced to differentiate the product from that of competitors.
  • Pricing may be lower because of the new competition.
  • Distribution becomes more intensive and incentives may be offered to encourage preference over competing products.
  • Promotion emphasizes product differentiation.
Decline Stage

As sales decline, the firm has several options:
 
  • Maintain the product, possibly rejuvenating it by adding new features and finding new uses.
  • Harvest the product - reduce costs and continue to offer it, possibly to a loyal niche segment.
  • Discontinue the product, liquidating remaining inventory or selling it to another firm that is willing to continue the product.
The marketing mix decisions in the decline phase will depend on the selected strategy. For example, the product may be changed if it is being rejuvenated, or left unchanged if it is being harvested or liquidated. The price may be maintained if the product is harvested, or reduced drastically if liquidated.

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This module was developed by Moi University, Department of Economics and Agricultural Resource Management with support from OER Africa and Bill & Mellinda Gates Foundation