Product life cycle visual summary

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Published on March 9, 2014

Author: atenevaj

Source: slideshare.net

BCG matrix & Product Life Cycle visual summary Angelina Teneva

Question Marks Stars  Stars are high-growth, high share units that need heavy investment to finance their rapid growth. A question mark has the potential to gain market share and become a star and eventually when market growth slows, a cash cow.  Reinforce brand image They barely produce enough cash to maintain themselves, let alone increase it.  Eventually their growth will slow down and they will turn into cash cows or dogs. Question marks have high market growth and low market share.    If it does not succeed in becoming the market leader, it will eventually turn into a dog.  Therefore, management must think hard in which question marks to invest and build them into stars and which to phase out. Re-launch Revised design Differentiate the product withdrawal decision BCG Matrix Cash Cows  Cash cows are High-share, low-growth units that generate enough cash not only to maintain themselves but to finance other SBUs.  A corporation would like to have of them as many as possible.  Eventually they will turn into dogs. profits Future cash flow Due to their low-growth, investing in them is pointless and they’re to be milked continuously.  DOGS sales Little business High sales Low promotional costs ? is whether resources used for their production can be used to produce sth more profitable

Profits Product Life Cycle Product Life Cycle May begin to decline as… sales eventu ally Profit growth Rapid market acceptance & repeat purchasing Peak & flatten battle Product improvements Advertising Sales promotions Dealer discounts Price cutting Faster sales GROWTH 2 MATURITY Low Sales growth Sales Incurred losses Technological advances High costs High Develop ment costs High promoti onal costs INTRODUCTION Induce product trial Increased foreign or domestic competition Profits Secure distribution Changes in customer tastes Reasons Inform customers DECLINE Product outlives its value

Strategies to help you sustain market growth Situation in the maturity stage  Enter new segments Expand distribution Improve quality Increase R&D budgets to launch line extensions & brand extensions Shift focus of advertising from brand awareness to brand preference Add new features & flanker products; Engage in frequent mark-downs, cut price Increase level of reminder advertising & sales promotions Sustain growth Lower prices HARVESTING: What does it call for?  The sales growth decline creates overcapacity in the industry, which leads to intensified competition. gradually reducing the business or product costs while maintaining the same level of sales. Maintain highest range of outlets Make deals to supply private brands As sales and profits decline, firms start to withdraw. Those remaining have the following options for reducing the investment: Reduce the number of offered products cuts R&D budgets Product quality Additional services Advertising spend Salesforce size     This should be done without letting customers, competitors & employees know, Withdraw from smaller segments Eliminate unprofitable outlets Cut promotional expenditures & prices

Market modification Increase usage rate Product modification Quality improvement Feature improvement Style improvement Changes in pricing strategy strategy Changes in distribution strategy Marketing program modification Changes in advertising strategy Personal selling strategy Services strategy Market modification Increase brand users Convert nonusers Use MORE on each occasion Increase usage rate Use on more OCCASIONS Develop new uses Feature improvement Quality improvement •Downside: new features can be easily copied by competitors Style improvement Product modification Pricing strategy Enter new segments Win away from competitors Market modification Increases the functional performance of the product Adding new features that build on product’s: •Performance •Safety •Convenience Increases the aesthetic appeal of the product; problem is company can never predict whether the new style will appeal to its existing customers What does marketing program modification involve? Extension Strategies Product modification Extension Strategies Extension strategies in the maturity stage Increase brand users Distribution strategy Changes in Advertising strategy Should we lower the price (price specials, volume purchase discounts, early purchase discounts) or should we raise it in attempt to convey quality 1) 2) 3) Should we obtain more support from existing outlets? Should we penetrate new outlets Should we enter new channels 1) Should we increase adv. budget? 2) Should we change the message/copy /timing/frequency of the ad 3) Should we alter the media mix? Personal selling strategy 1) Should we increase the number of sales force? 2) Can sales call planning be improved? Services 1) Can we speed up delivery? 2) Should we offer more technological assistance or credit?

Introduction product Basic product growth + new features maturity decline Line extension Brand extension Withdraw from certain markets/ phase out weak Very high; charge cost plus Penetration pricing Match competitors Cut price place Restricted; selective Intensive – esp. outlets in areas with strong demand Highest range of outlets promotion strategic objective build growth maturity decline Marketing Objectives Create product awareness and trial Maximize share Maximize profits; Defend share Milk the brand Advertising strategy Create awareness for innovators and early adopters Brand preference in mass market Stress brand differences and benefits Reduce to level needed to retain hardcore loyals Many to induce product trial Reduce to take advantage of growing demand Increase to encourage brand switching Reduce to minimum level Eliminate unprofitable outlets High level of informative advertising and sales promotion to increase awareness and induce product trial Introduction price Aims at brand identification Stress positive differences in advertising; sales promotions to increase brand switching Limited advertising to inform of lower prices build hold harvest Strategic focus Market expansion Market penetration Market share productivity Brand objective Brand awareness Brand preference Brand loyalty Brand exploitation Sales promotions strategy

May flatten or fall Limitations of the PLC Similar in consumer acceptance Not enough Not enough Uses of the PLC From other countries PLC is the result of marketing activities, not the cause Stresses the need to review marketing strategies & objectives as product passes through 4 stages UNPREDICTABILITY Emphasizes the need to terminate old products & develop new ones Misleading objectives & strategy prescriptions Not all products follow the classic S-shaped curve Objective Stage Harvest Growth Build Maturity Build limitations Emphasizes the need for a balanced portfolio Decline 27/02/2014 uses 5 OTHER PLC Shapes Bibliography • Blythe, J. (2005). Marketing Essentials, 3rd edition. Harlow: Pearson Education Limited. • Jobber, D. (2010). Principles and Practice of Marketing, 6th edition. Maidenhead: McGraw-Hill Higher Education. • Kotler, P., & Keller, K. (2006). Marketing Management, 12th edition. New Jersey: Pearson Prentice Hall. 27/02/2014 40

  Question marks have high market growth and low market share.  Enter new segments Expand distribution They barely produce enough cash to maintain themselves, let alone increase it.   If it does not succeed in becoming the market leader, it will eventually turn into a dog.  Therefore, management must think hard in which question marks to invest and build them into stars and which to phase out. Re-launch Revised design withdrawal Market modification Engage in frequent mark-downs, cut price Increase usage rate May begin to decline as… Incurred losses High costs sales eventu ally Profit growth High promoti onal costs Peak & flatten battle Product improvements Advertising Sales promotions Dealer discounts Price cutting Faster sales 2 Market modification Product modification Profits Changes in customer tastes Product outlives its value Reasons 7 Stars Introduction Stars are high-growth, high share units that need heavy investment to finance their rapid growth. growth maturity decline Withdraw from certain markets/ phase out weak product Reinforce brand image Basic product + new features Line extension Brand extension price Eventually their growth will slow down and they will turn into cash cows or dogs. Very high; charge cost plus Penetration pricing Match competitors Restricted; selective Intensive – esp. outlets in areas with strong demand Highest range of outlets Eliminate unprofitable outlets Aims at brand identification strategic objective build build Strategic focus Market expansion Brand objective Cash cows are High-share, low-growth units that generate enough cash not only to maintain themselves but to finance other SBUs. Changes in pricing strategy Changes in distribution strategy Changes in advertising strategy Marketing program modification Personal selling strategy Services strategy 27/02/2014 Feature improvement Increases the functional performance of the product •Downside: new features can be easily copied by competitors Quality improvement Style improvement Product modification 27/02/2014 20 Increases the aesthetic appeal of the product; problem is company can never predict whether the new style will appeal to its existing customers 18 Brand awareness Brand preference hold Market share Brand loyalty Pricing strategy 1) Distribution strategy Changes in 2) 3) Should we obtain more support from existing outlets? Should we penetrate new outlets Should we enter new channels 1) Should we increase adv. budget? 2) Should we change the message/copy /timing/frequency of the ad 3) Should we alter the media mix? Advertising strategy Personal selling strategy Services May flatten or fall 1) Should we increase the number of sales force? 2) Can sales call planning be improved? 1) Can we speed up delivery? 2) Should we offer more technological assistance or credit? Limitations of the PLC Reduce the number of offered products Not enough Withdraw from smaller segments Limited advertising to inform of lower prices Similar in consumer acceptance From other countries PLC is the result of marketing activities, not the cause Stresses the need to review marketing strategies & objectives as product passes through 4 stages UNPREDICTABILITY Eliminate unprofitable outlets harvest Uses of the PLC Not all products follow the classic S-shaped curve Cut promotional expenditures & prices Stage Harvest Growth Maturity Build Brand exploitation Objective Build limitations productivity Emphasizes the need to terminate old products & develop new ones Misleading objectives & strategy prescriptions Emphasizes the need for a balanced portfolio Decline 27/02/2014 uses 5 A corporation would like to have of them as many as possible. Eventually they will turn into dogs. Market penetration Stress positive differences in advertising; sales promotions to increase brand switching Should we lower the price (price specials, volume purchase discounts, early purchase discounts) or should we raise it in attempt to convey quality Not enough Due to their low-growth, investing in them is pointless and they’re to be milked continuously.  High level of informative advertising and sales promotion to increase awareness and induce product trial promotion Cash Cows As sales and profits decline, firms start to withdraw. Those remaining have the following options for reducing the investment: Cut price place Differentiate the product  Style improvement strategy Extension Strategies Increased foreign or domestic competition Technological advances Secure distribution 27/02/2014  Quality improvement Adding new features that build on product’s: •Performance •Safety •Convenience What does marketing program modification involve? Inform customers  Increase usage rate Feature improvement Sales  Product modification Increase brand users Introduction stage: Why are promotional expenditures high?  Use on more OCCASIONS Develop new uses Profits Induce product trial Use MORE on each occasion Maintain highest range of outlets Make deals to supply private brands Low Sales growth Rapid market acceptance & repeat purchasing Enter new segments Win away from competitors Lower prices decision High Develop ment costs Convert nonusers Increase brand users Increase level of reminder advertising & sales promotions Sustain growth Improve quality The sales growth decline creates overcapacity in the industry, which leads to intensified competition. Increase R&D budgets to launch line extensions & brand extensions Shift focus of advertising from brand awareness to brand preference Add new features & flanker products; A question mark has the potential to gain market share and become a star and eventually when market growth slows, a cash cow. Market modification Extension strategies in the maturity stage Question Marks Situation in the maturity stage Extension Strategies Strategies to help you sustain market growth Introduction High sales Marketing Objectives Create product awareness and trial Advertising strategy Create awareness for innovators and early adopters Low promotional costs DOGS profits Future cash flow sales   Dogs are low-growth low-share units. They generate enough cash to maintain themselves but do not promise to be large sources of cash. In other words they usually break even. It could be asserted that they depress a profitable company ROA ratio  Investors use them to see how well a company is managed.  Dogs, is thought, should be sold off. Little business ? is whether resources used for their production can be used to produce sth more profitable growth maturity Maximize share Maximize profits; Defend share Milk the brand Stress brand differences and benefits Reduce to level needed to retain hardcore loyals Brand preference in mass market decline HARVESTING: What does it call for?  Many to induce product trial Reduce to take advantage of growing demand Increase to encourage brand switching Reduce to minimum level OTHER PLC Shapes gradually reducing the business or product costs while maintaining the same level of sales. cuts • Blythe, J. (2005). Marketing Essentials, 3rd edition. Harlow: Pearson Education Limited. R&D budgets Product quality Additional services Sales promotions strategy Bibliography Advertising spend Salesforce size     This should be done without letting customers, competitors & employees know, • Jobber, D. (2010). Principles and Practice of Marketing, 6th edition. Maidenhead: McGraw-Hill Higher Education. • Kotler, P., & Keller, K. (2006). Marketing Management, 12th edition. New Jersey: Pearson Prentice Hall. 27/02/2014 40

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