At this stage, the company usually has competitors.
The sales growth stage is characterized by rapid growth in sales volume driven by consumer acceptance of the product, profitability increases, the relative share of marketing costs typically falls, and prices are constant or slightly falling.
If the new product satisfies the interests of the market, sales begin to grow significantly. Early adopters will continue to buy the product. Ordinary consumers will begin to follow their example, especially if they have heard favorable reviews about the product. New competitors appear in the market, attracted by the opportunity. They will offer products with new properties, which will expand the market. The increase in the number of competitors will lead to a sharp increase in sales from factories to saturate distribution channels with goods.
Prices remain the same or decrease slightly as demand increases. Firms' sales promotion costs remain the same or increase slightly to counteract competitors and continue to educate the public about the product. Profits at this stage increase, since sales promotion costs fall on a larger volume of sales while simultaneously reducing production costs. In order to maximize the period of rapid market growth, a company can use several strategic approaches:
- 1. Improve the quality of the new product, give it additional properties, and release new models.
- 2. Penetrate new market segments.
- 3. Use new distribution channels.
- 4. Reorient some of the advertising from spreading awareness about the product to stimulating its purchase.
- 5. Reduce prices in a timely manner to attract additional consumers.
A company that resorts to the use of the mentioned strategic techniques to expand the market will certainly strengthen its competitive position.
Characterized by rapid development of sales.
If the product turns out to be successful and moves into the growth phase, the manufacturer begins to reduce the cost of producing the product due to an increase in output volume and sales price.
Prices may be lowered, which may allow the enterprise to gradually cover the entire potential market.
Marketing costs continue to be high.
If a new product is in demand, it moves to the growth stage, in which sales growth is sustainable and the product begins to make a profit. Early buyers continue to buy, and new buyers begin to follow suit, especially if they hear good reviews. If a significant number of first-time buyers do not repurchase, the product will fail. At this time, the product begins to interest competitors. They appear on the market attracted by the opportunity to make a profit. They give the product new properties and the market expands. An increase in the number of competitors leads to an increase in the number of distributors, and sales increase, simply due to the replenishment of resellers' inventories. At this stage, an attempt is made to maintain prices, but sometimes they have to be reduced due to pressure from competitors. The growth stage produces higher profits as the ratio of sales to promotional expenses increases and the cost of production per unit decreases.
The main task of the growth stage is to strengthen the brand position. Strategies at this stage are aimed at preserving and using competitive advantages, obtained at the previous stage. The goal for a product is to maintain its quality, but as competition intensifies, it may be necessary to add new features, improve packaging, or improve service. The purpose of the distribution strategy is to strengthen relationships with traders by providing trade discounts, compensation for advertising, etc. At the same time, the company is trying to find additional distribution channels in areas where sales are insufficient. In advertising, the emphasis from familiarization with the product shifts towards persuasion to make a purchase, and at the right moment the company reduces the price to attract new customers. Informing the market about a new product remains relevant, but now the company must also take into account competition. While the goal in the entry stage is to introduce consumers to the product and try to get them to try it, the goal in the growth stage is to educate consumers about the product's characteristics.
During the growth phase, a company faces a trade-off between significant market share and high current profits. By spending heavily on product development, sales promotion, and distribution, a company can achieve a dominant position. In doing so, however, she gives up the maximum current profit in hopes of regaining it in the next stage.
Introduction
A product, once on the market, lives its own special product life, called in marketing the product life cycle.
The concept of the product life cycle was first introduced by Theodore Levitt in 1965. The meaning of this concept comes down to the fact that each product is produced and lives on the market for a certain time, that is, it has its own life cycle. Depending on the level of demand for products, their quality, and market characteristics, the life cycle of a particular type of product may vary in length over time. It can last from several days to several decades.
Marketing task: to lengthen the life cycle of a product on the market. An accurate determination of the “age” of a product and appropriate marketing behavior can help an enterprise solve this problem.
The life cycle of a product is one of the key concepts that characterize a product in the dynamics of its life on the market. This is the period of time from the conception of a product until the end of its demand in the market and discontinuation of production.
The relevance of this course work is due to the growing role of marketing in human life, namely:
real orientation of the development of the Russian economy along the path of regulated market relations;
growing interest in marketing as a means of livelihood and development of market entities;
a massive change in the course of the reforms carried out in the country in the mentality of consumers and the formation in their minds of a new market lifestyle, an integral component of which is marketing.
The purpose of the course work is to identify the main stages of the product life cycle and determine marketing policies at these stages.
Setting this goal led to the need to solve the following problems:
determination of the essence of the product, its life cycle;
characteristics of the stages of the product life cycle;
characteristics of marketing activities at various stages;
This test consists of an introduction, three chapters, a conclusion, and a list of references.
1. Concept and stages of the product life cycle
Levitt marketing life
A product is the initial link in marketing, which is created according to an emerging need.
The product life cycle (PLC) is a sequence of stages in the existence of goods on the market, starting from the inception of an idea and ending with discontinuation of production.
The product life cycle consists of the following stages:
) development;
) implementation;
) maturity;
Product development stage.
At this stage, the product concept is transformed into a real product; fundamental research works are being developed; applied and development work is carried out; pilot serial production is underway. A significant factor is planning the operation and maintenance of the product, as well as its subsequent disposal.
At the product development stage, the enterprise incurs large material, physical and financial costs and, as a result, lack of profit.
Implementation stage.
The company supplies only a limited number of assortment items, since the market is not ready to accept various modifications of goods. Potential buyers are not yet sufficiently familiar with the new product, its properties and advantages, compared to similar competitors' products.
At this stage, the enterprise attaches great importance to the policy of promoting goods to the market, pays Special attention those groups of buyers who are ready to make purchases.
A pattern emerges: if a product really satisfies the needs of customers, then there is a need for it and its sale is ensured.
To ensure growth in product sales, the company improves its quality and expands the number of product assortment items and improves the distribution system. At the same time, the price of the goods, as a rule, remains quite high.
At the implementation stage, the enterprise incurs losses or receives insignificant profits, this is due to the small volume of sales and high costs of implementing the distribution policy.
Growth stage.
If a product meets the requirements of buyers, then it gradually gains their acceptance. Many buyers make repeat purchases.
At this stage, sales volumes grow significantly, and the number of competitors increases, which leads to increased competition. Therefore, the company must continue to spend significant funds on promoting the product and at the same time reduce its price. But, unfortunately, such measures can only be taken financially. independent enterprises. Other enterprises go bankrupt and their market positions are taken over by the remaining enterprises, as a result of which competition decreases and prices stabilize. As a result, sales volume increases and the company's profit increases.
Every company wants this situation to continue as long as possible. To do this, it can make one or simultaneously several decisions from the following possible ones:
enter new market segments;
increase the level of product quality;
increase the number of product assortment positions;
reduce the price of a product;
provide more high level policies for promoting goods on the market;
improve the product distribution system.
Maturity stage.
Sales volume at this level increases slightly for some time, then stabilizes at approximately the same level and finally decreases.
The maturity stage is usually longer than the others. This is due to the fact that the demand for goods is becoming massive; Many buyers purchase goods multiple times.
Over time, new developments of new products from competing companies appear on the market. Some buyers test new products, as a result of which the demand for the previous product decreases. The enterprise is forced to look for ways to maintain its position in the market. To do this, she can choose one of three options:
)modify the market - enter new markets or segments, identify new ways to use the product.
)modify the product, that is, improve its quality, modernize it, improve the design of the product.
)modify the marketing mix, that is, improve product policy, pricing policy, and distribution policy.
Decline stage.
At this stage, sales volumes are significantly reduced and profits from the sale of this product decrease. An enterprise can make a variety of decisions regarding a product, for example:
gradually reduce production of goods without reducing marketing costs;
stop production of goods and sell off existing stocks at low prices;
organize the production of a new product instead of an obsolete one.
When making a final decision, the company must take into account the needs of consumers of the product and do everything possible to ensure that they are satisfied and the company’s image is preserved.
2. Marketing at individual stages of the product life cycle
Based on the concept of the product life cycle, it is possible to develop a marketing strategy for the corresponding stage of its life.
The introduction stage is characterized by slow growth in sales volume. The following marketing tasks can be distinguished:
)improving product quality;
)increased costs for communication policy;
)reduction in the price of goods;
)increased costs of distribution policies.
During the growth stage, new products from competing enterprises enter the market, attracted by the advantages of a large market with its opportunities for large-scale production and high profits. At this stage, the company seeks to maintain rapid growth in sales volumes over a long period. To do this, it can carry out the following activities:
)entering new segments;
)increasing the level of product quality;
)increase in assortment positions;
)reduction in the price of goods;
)strengthening communication policy;
)improvement of the goods distribution system.
At a certain point in a product's life cycle, sales growth slows down. A stage of relative maturity begins, which usually lasts longer than all previous ones.
The maturity stage can be divided into three phases. The first phase is called growing maturity: sales volume slowly increases as buyers enter the market who made a purchase decision with some delay, although most of the demand is provided by regular buyers. The second phase is stable maturity, or the saturation phase: sales volume is at a constant level and is provided mainly by repeat purchases to replace used goods. The third phase is declining maturity: sales begin to decline as some regular buyers of the product begin to purchase products from other businesses.
A slowdown in sales growth leads to excess production capacity and, consequently, increased competition. The enterprise is increasingly resorting to price discounts and direct price reductions, increasing expenses for sales promotion and advertising. Some are increasing costs for research and development of new product varieties. These measures, if they do not stimulate a corresponding increase in sales, lead to a decrease in profits. Enterprises with weak positions in the market drop out of the competition. However, leading competitors remain in the industry.
At this stage of the product life cycle, one of the following three strategies can be used:
)market modification;
)product modification;
)modification of the marketing mix.
For most products, sooner or later there comes a time for a noticeable decrease in sales volume. It may drop to zero, then the product will be withdrawn from circulation, or sales may stabilize at a low level and remain at this level for many years.
Unfortunately, most businesses do not develop effective obsolete product policies. Their attention is drawn to new products and those that are at the maturity stage. As soon as the sales volume of a product decreases noticeably, many firms leave the market in order to invest in more profitable areas. Those who remain in the market tend to reduce the supply of goods. They stop selling goods in small market segments, eliminate limited sales channels, reduce spending on stimulating demand, and reduce prices.
The enterprise remaining on the market can implement the following marketing strategy:
) reducing the production of goods while maintaining marketing costs;
) reduction in production of goods and reduction in marketing costs;
) cessation of production of goods and sale of inventories at low prices;
) organization of production of a new product.
3. Types of product life cycle
The product life cycle curve shown in Figure 1 can be called ideal or average. In reality, the life cycle curve may have a different shape, since in market practice the life cycle of a product differs significantly from the traditional one both in shape and in duration. Most researchers identify the following main types of life cycle (Figure 2):
)The traditional curve includes distinct periods: introduction, growth, maturity, decline.
)The classic curve (“Boom”) describes an extremely popular product with stable sales over a long period of time.
)A craze curve describes a product that has a rapid rise and fall in popularity.
)Continued entrainment manifests itself similarly to the entrainment curve, except that “residual” sales continue in amounts that are a small fraction of the previous sales volume.
)A seasonal curve (fashion curve) occurs when a product sells well over periods spaced apart in time.
)The renewal curve (nostalgia) describes a product that was seemingly outdated but has regained popularity.
)A failure curve describes a product that was not successful at all.
The classic curve (“Boom”) describes a popular product with stable sales over a long period of time. An example here is the products of the Coca-Cola company, which long years occupies a leading position in the market different countries among producers of soft drinks, and thereby allows producers to receive the greatest profits.
A craze curve describes a product that has a rapid rise and fall in popularity. During one season, such a product goes through all stages of its life cycle, from sales growth to its rapid decline. Significant profits are made by sellers who leave the market in a timely manner, as sales volume drops sharply. An example of such a life cycle is Tamagotchi toys, which almost instantly gained popularity not only among children, but even among the adult population of the country, and just a few months later almost completely disappeared from the market. A variation of such a cycle is the “Continued Passion,” which is characterized by an increase in sales of a product, and then its rapid decline to an average sales level.
A seasonal curve or repeat life cycle occurs when a product sells well over periods of time. This applies to seasonal goods. For example, the demand for warm clothes and shoes increases several times in autumn and winter, and drops to a minimum in the spring and summer.
A renewal curve is a curve that describes a product that was considered obsolete but has become popular again. An example is the renewed demand for old models of cars and furniture.
The failure curve describes a product that does not succeed at all in the market and expresses the unsuccessful entry of the product into the market. To illustrate such a life cycle, we can cite the MotorolaRazer 2 cell phone, which could not repeat the success of its predecessor.
Conclusion
In the process of writing the course work, the following conclusions were made:
)Life path product development has various stages, each of which requires the enterprise to have appropriate strategies and tactics of market behavior. It can last from several days to tens of years.
)Researchers have discovered that the demand for a product does not change chaotically, but in a certain way, which can be graphically represented by a curve. This curve is called the “Product Life Cycle Curve”. Most researchers distinguish such phases of the product life cycle as: development, implementation, growth, maturity, decline. Most researchers identify 6 main types of life cycle: “Boom”, “Fascination”, “Continuous increase”, “Failure”, “Renewal”, “Seasonality”.
) The decisions that manufacturers make in their product policies largely depend on the stage of the product's life cycle. Therefore, product life cycle analysis is carried out continuously throughout the company’s activities; it is the most important task marketing research, a source of information for decision-making on all issues of product policy.
) By optimizing the product range, an enterprise can flexibly respond to the transition of a product from one stage of the life cycle to another. At the first and second stages - development and introduction to the market - they usually produce the most popular, basic models that are in high demand among customers. At the growth stage, the range of manufactured products is expanded and, by the maturity stage, a full range of products from the entire product line is introduced to the market. During a recession, only one or two of the most popular models are left on the market.
List of sources used
1Belousova S.N., Belousov A.G. Marketing: Tutorial. - Rostov-on-Don: “Phoenix”, 2006
2Kotler F. Marketing, management. St. Petersburg: Peter, 2006.
Lukina A.V. Marketing: Textbook. - M.: FORUM: INFRA-M, 2006.
Marketing: Textbook / ed. V.A. Zaitseva. - M., 2006
Proshkina T.P. Marketing: Textbook. - Rostov-on-Don: “Phoenix”, 2008.
Solovyov B.A. Marketing: Textbook. - M., 2005
Marketing Theory / ed. M. Baker. - St. Petersburg: Peter, 2002
Volkov O.I. Enterprise economy. M.: INFRA M, 2007.
Raizberg B.A., Lozovsky L.Sh., Starodubtseva E.B. Product life cycle (Russian). Modern economic dictionary. 5th ed., revised. and additional - M.: INFRA-M, 2007.
Romanov A.A., Basenko V.P., Zhukov B.M. Product development and life cycle // Marketing in structural and logical diagrams. - M.: “Academy of Natural Sciences”, 2009.
Shchegortsov V.A., Taran V.A. Marketing, Textbook for universities / Ed. V.A. Shchegortsova. - M.: UNITY-DANA, 2005.
Maslova T.D., Bozhuk S.G., Kovalik L.N.M.31 Marketing. - Sat.: Peter, 2002.
Zavlin P.N., Ipatov A.A., Kulagin A.S. Innovation activity in market conditions. St. Petersburg: Nauka, 2007.
Kretov N.N. Marketing at the enterprise. M.: Finstatinform, 2006.
Bogachev V.F., Kabakov V.S., Khodachek A.M. Small business strategy. St. Petersburg: Corvus, 2007.
Bagiev G.L., Solovyova Yu.N. Search for effective technologies for marketing, entrepreneurship and business. Philosophy, organization, efficiency. St. Petersburg: Publishing house. SPbGUEF, 2008.
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The life cycle of a product is the time a product exists on the market, that is, the time period from the beginning to the end of its release and sale in its original form.
Product life cycle
Introduction
In marketing, a PRODUCT is understood as a complex of tangible and intangible properties, including technical parameters, dimensions, weight, structure, color, packaging, price, prestige of the manufacturer and seller, and other properties that customers need to satisfy their needs and requirements. There are several product classifications:
1. As intended
stock exchange (energy, food, metals);
consumer demand (consumer goods);
industrial purposes (buildings, structures, equipment, tools).
2. By terms of use
short-term use (consumed immediately or a small number of times, for example, food, perfumes, cosmetics, small haberdashery);
durable (furniture, Appliances, cars, machines, etc.).
3. By nature of consumption and degree of processing
semi-finished products;
intermediate products (components);
finished goods.
4. By purpose and purpose
everyday needs (newspapers, cigarettes, groceries
selective demand (cars, video cameras, furs, etc.);
prestigious (Mercedes car, Parker pen, Roller watch);
luxury goods (crystal, carpets, jewelry, paintings).
5. According to the manufacturing method
standard (serial production, high degree of unification);
unique.
6.According to purchasing habit
goods purchased frequently and without much thought (food, perfumes, detergents);
impulse purchase goods (sweets, flowers);
emergency goods (medicines, umbrellas, bags);
pre-selected goods (furniture, clothing, audio and video equipment);
goods of passive demand (insurance, textbooks, funeral supplies).
household (food, housing, services, recreation);
business (technical, intellectual, financial);
social (education, healthcare, security, development).
There are 3 product levels:
Product quality There are 4 groups of product qualities:
Physical (technical parameters, taste, weight, strength, shape, color, smell);
Aesthetic (style, class, beauty, grace);
Symbolic (status, prestige);
Additional (installation, commissioning, repair, right to exchange, liquidity).
In the process of developing a new product, a manufacturer needs to answer the following questions:
Who will be the main consumer of this product?
What is the capacity of this market?
Through what distribution channels will the product be sold?
Will seasonality affect sales?
Will the new product strengthen the company's reputation?
How will competitors react?
What will be the life cycle of this product (forecast)?
The process of consumer perception of a new product consists of 5 stages:
Awareness (general surface knowledge)
Interest (consumer search for additional information)
Evaluation (deciding whether to try a product or not)
Sample (minimum possible purchase volume)
Verdict (the final decision regarding further consumption of the product).
Product life cycle
The life cycle of a product is the time a product exists on the market, that is, the time period from the beginning to the end of its release and sale in its original form.
Product life cycle theory is a concept that describes product sales, profits and marketing strategy from the moment a product is developed until it is withdrawn from the market.
As a rule, the product life cycle includes 4 stages (stages):
Introduction (marketing)
Maturity
1. Development stage
Characteristics of the stage
The birth of an idea for a new product (service), marketing research (forecasting demand for a product), applied research (testing the concept of a new product for technical feasibility), design, market testing (test marketing). The company's goal is to test the concept of a new product for commercial feasibility.
Marketing tasks at the stage
Comprehensive marketing market research
Potential demand analysis
Sales volume planning
Assessment of the company's production and technological capabilities
Predicting consumer reaction to a product
Priority of marketing concept elements at the stage
Quality
Preferred types of consumers
The consumer capabilities are being determined using marketing research, the target market segment is being selected, segmented, and the base segment is being determined.
2. Implementation stage
2.1. Characteristics of the stage:
The stage is characterized by the arrival of the product on sale, the buyer becoming familiar with the product, and the buyer becoming accustomed to it. It is characterized by low sales volume and high costs, and little competition. A monopoly position of a product on the market is possible, but the product is not technically developed and technologically polished. The pricing policy is not stable and depends on the type of product. A skimming strategy and a gradual market introduction strategy can be used. In some cases, when introducing a new product to the market, it is possible to sell a new product at a price below its cost. The company's goal is to create a market for a new product. 2.2. Marketing tasks at this stage:
maximum attraction of buyers' attention to the new product,
use of monopolistic advantage,
collecting information about customers' assessment of a new product.
At this stage, it is necessary to inform potential consumers about a new product unknown to them, encourage them to try the product, and ensure distribution of this product through a trade and intermediary network. 2.3. Priority of elements of the marketing concept at the stage: - 1) Advertising
2) Quality
2.4. Preferred types of consumers:
The main consumers are “innovators”. As a rule, these are young people who are the first to try a new product at risk, if not for their lives, then for their reputation (originals, dudes, dudes). They account for about 2-3% of final consumers.
3. Growth stage
3.1.Characteristics of the stage:
The stage is characterized by a significant increase in demand for a product and a corresponding increase in the production of this product. At this stage, there may be an excess of demand over supply, an increase in profits and stabilization of prices and advertising costs. The market is growing rapidly, however, there is an unstable and volatile nature of demand. Possible response from competitors. The company's goal is to develop the market, seize leading positions, and maximize sales growth. 3.2.Marketing tasks at the stage:
gaining market positions,
development of basic solutions,
strengthening customer loyalty through advertising,
increasing the duration of the sustainable growth stage.
To maximize the period of intensive sales growth and rapid market growth, the following approaches are usually used:
improve the quality of the new product by giving it additional properties,
penetrate new market segments,
use new distribution channels,
reduce prices in a timely manner to attract additional consumers.
3.3.Priority of elements of the marketing concept at the stage:
3) Quality
3.4. Preferred types of consumers:
The main consumers are “adepts” - trendsetters, opinion leaders in their social sphere. Their recognition makes the product famous and fashionable. They make up 10-15% of the number of end consumers. In addition, consumers include the "progressives" or "early majority" (eg, students) who provide mass sales during the growth stage. They make up from 25 to 35% of the number of end consumers
4. Maturity stage
4.1. Characteristics of the stage:
The stage is characterized by market stabilization. There is a slowdown in sales growth rates. Per capita consumption is falling. Groups of regular customers are being formed, flexible prices are being observed, and warranty and service are being expanded. The company's goal is to consolidate its gained market share. 4.2.Marketing tasks at the stage:
search for new markets,
optimization of distribution channels,
introduction of a set of measures to stimulate sales (discounts, competitions among consumers, sales on a premium basis),
improvement of sales and service conditions,
development of product modifications.
The following are used as marketing tools at this stage: Market modification is aimed at increasing the consumption of an existing product. It includes:
search for new users and new market segments,
finding ways to stimulate more intensive consumption of goods by existing customers,
it is possible to reposition a product so that it is attractive to a larger or faster growing market segment.
Product modification consists of modifying product characteristics such as quality level, properties or appearance in order to attract new users and intensify consumption. The following strategies are used:
A quality improvement strategy aims to improve the functional characteristics of a product, including durability, reliability, speed, and taste. This strategy is effective if
a) quality can be improved,
b) buyers believe the claim about quality improvement,
c) a sufficiently large number of buyers want improved quality.
A feature enhancement strategy aims to give a product new properties that make it more versatile, safer, and more convenient.
the strategy of improving the external design is aimed at increasing the attractiveness of the product.
4.3.Priority of elements of the marketing concept at the stage:
4.4. Preferred types of consumers:
The main consumers are the “skeptics” or the “late majority”. They provide mass sales at the saturation stage (accounting for about 30-40% of the number of final consumers).
Decline stage
5.1.Characteristics of the stage:
The stage is characterized by a steady decrease in demand, a shrinking market, and buyers lose interest in the product. There is excess production capacity, and substitute goods appear. There is a decrease in prices and a reduction in production of goods.
The company's goal is to regain lost positions in the market and restore sales.
5.2.Marketing tasks at the stage:
At this stage, the effectiveness of marketing activities sharply decreases, the expenditure of funds is not appropriate and does not provide a return. Possible reasons for the decline:
new advances in technology (obsolescence),
changing consumer tastes,
increased competition.
Exit routes:
price reduction,
giving the product market novelty,
searching for new areas of product use and new markets,
removal of old goods from production (an abrupt exit from the market is possible),
reduction of the marketing program,
transition to the release and promotion of a new promising product.
5.3. Priority of elements of the marketing concept at the stage:
4) Quality
5.4. Preferred types of consumers:
The main consumers are “conservatives” - staunch opponents of the new (accounting for 15 to 20% of the number of final consumers), as well as older people and people with low incomes.
Main characteristics of the product life cycle
|
Characteristics |
Life cycle stages |
|||
|
Implementation |
Maturity |
|||
|
Marketing Goals |
Attracting customers to a new product, maximum customer awareness |
Expanding sales and product ranges, building brand loyalty |
Maintaining the distinctive advantages of the product, defending its market share |
Preventing a drop in demand, restoring sales volumes |
|
Volume of sales |
Fast growth |
Stability, slowing growth |
Reduction |
|
|
Competition |
Absent or insignificant |
Moderate |
Minor |
|
|
Negative |
Increasing |
Contracting |
Rapidly declining, no profit, losses |
|
|
Consumers |
Innovators (lovers of new things) |
Mass market of wealthy individuals |
Mass market |
Conservatives (Laggards) |
|
Product range |
Basic model |
Growing number of varieties (improvement) |
Differentiated – full assortment group |
Selected products |
|
Individual retail outlets, uneven distribution |
The number of retail outlets is growing, intensive distribution |
Retail outlets are being reduced, selective distribution |
||
|
Pricing |
Depends on the product |
Growing price range |
Full price line, price reductions, introduction of discounts |
|
|
Promotion |
Informational |
Persuasive |
Competitive (reminding) |
Informational (sale) |
|
Marketing costs |
Extremely tall, growing |
High, stable |
Contracting |
Classification of types of product life cycle 1. Traditional life cycle
2. “Boom” is a very popular product, stable sales for a large number of years (for example, Coca-Cola)
3. “Passion” – quick rise, quick sales (fashionable seasonal goods).
4. “Long-term hobby” – quick rise, quick decline, but there is a stable residual sale
5. “Seasonal goods” – sales dynamics have a pronounced seasonal nature
7. “Product improvement” – periodic improvement of a product aimed at increasing its performance characteristics, which contributes to the resumption of a period of growth after some stabilization of sales.
8. “Failure” – lack of success in the market, the product is a loser
A marketer needs to choose the optimal moment to enter the market with a new product or to introduce an existing product to a new market. At the same time, one product can be in different markets at different stages of its life cycle. The duration of the stages may also vary in different markets. All this must be taken into account when compiling a company’s product portfolio. It is desirable that a company with a wide range of products simultaneously have products that are in the stages of introduction, growth and maturity. In this case, income from the sale of goods at the maturity stage contributes to the effective introduction of new products, and goods at the growth stage can provide additional funds for updating, developing modifications, and introducing discounts on the price of goods at the maturity stage. It is necessary to formulate a product portfolio in such a way as to constantly introduce new products and at the same time maintain a balance of products at different stages of the life cycle.
Boston Consulting Group Matrix
This matrix is an important tool for conducting assortment analysis, assessing the market prospects of goods, developing an effective sales policy, and forming an optimal product portfolio for the company.
“Stars” are the most promising, developing type of product, strive to increase their share in the company’s product portfolio, and are at the growth stage. The expansion of production of this product is due to profits from its sales. (Growth stage.)
"Cash cows" are goods at the maturity stage; sales growth is insignificant; the product has the maximum share in the company's product portfolio. It is the main source of income (of the company). Proceeds from the sale of this product can be used to finance the production and development of other products. (Maturity stage.)
“Problem children” (“Wild cats”, “Question marks”) are products that have a very low market share with a relatively high rate of sales growth. May be at the introduction stage or at the beginning of the growth stage, require material costs; It is difficult to determine their market prospects (they may become “stars” or “dogs”). Requires additional research and funding.
“Dogs” - unsuccessful products - have a relatively small market share (with a tendency to decline) and are characterized by a low rate of sales growth or lack of growth as such. Such a product has no prospects and must be withdrawn from the market. (The decline stage or type of life cycle is failure.)
With a successful life cycle, products turn from “problem children” into “stars”, and subsequently into “cash cows”. If unsuccessful, “difficult children” turn into “dogs.”
“stars” should be protected and developed;
"cash cows" require strict control of capital investments and the transfer of excess financial revenue to the control of senior management;
“difficult children” are subject to special study in order to establish their prospects for becoming “stars” and the financial, technological and time resources required for this;
It is necessary to get rid of “dogs” whenever possible, unless there are compelling reasons for keeping them in the company’s assortment.
When conducting research aimed at improving the efficiency of the product life cycle, it is necessary to clarify the following questions:
1. At the implementation stage:
How informed are buyers about the product?
What are the pros and cons of purchasing this product from the buyer's point of view?
What determines the further distribution of this product?
How to encourage consumers to make repeat purchases?
2. During the growth stage:
Where is the limit of market saturation?
What are the characteristics of product consumption (seasonality, cost)?
What factors promote and what hinder expansion?
What consumer groups can be further attracted?
3. At the maturity stage:
What is the percentage of customers who make repeat purchases?
How can you expand your product range?
What incentive system should be used (sales promotion methods)?
What is the competitiveness of the product?
What factors facilitate and what hinder the purchase of a product?
What modifications of the product are the most promising and can attract the buyer?
4. During the recession stage:
What types of consumers and when do they refuse to consume a product?
Where possible level stabilization of demand for goods?
What are the incentives for additional purchases?
Are there opportunities to improve the product?
Current trends in changing product life cycles (innovative aspect)
Practice shows that changing the life cycles of goods is subject to the requirements of the following laws:
The law of increasing needs according to which each satisfied need forms the basis for the emergence of new, higher needs and at the same time creates the prerequisites for their satisfaction. Thus, the law of increasing needs leads to the need to develop goods with higher consumer properties (speed, comfort, safety, etc.). In addition, sales volumes of these goods in physical and monetary terms are increasing.
The law of accelerating the pace of social development In accordance with this law, all processes occurring in society and leading to the final result tend to accelerate.
Sequence of product life cycles
Based on these laws, it follows that:
sales volumes and their maximums will be higher in physical and value terms for truly new products (genuine innovation);
the life cycles of goods and their individual stages (stages) will be steadily shortening, which necessitates more dynamic and capital-intensive efforts by the company when new products enter the market, stabilize production and remove obsolete products from production and sales.
These circumstances complicate the forecasting activities of marketing services. The continuous sequence of changes in the life cycles of goods determines a number of fundamentally important circumstances
Firstly, the development of new goods (new generations of goods) to replace old goods must take place in the depths of the still relative prosperity of old goods. Therefore, the development of new products for the future, to replace existing products, should have the nature of a law for any company
Secondly, the new product must not only have higher consumer properties, but also must be designed for a more mass buyer. To do this, it is necessary to think through issues related to the creation of product modifications intended for buyers with various incomes, needs, tastes, etc. In addition, you should make sure that the costs of the new product are not too high.
Bibliography
To prepare this work, materials were used from the site http://www.marketing.spb.ru/
Introduction
Currently meaning entrepreneurial activity in Russia is extremely significant, so the correctness and efficiency of its organization are quite important.
One of the most important aspects Organization of business activity is a choice of field of activity. But when choosing a field of activity, it is necessary to take into account the stage of development of a particular product or service. The efficiency of the enterprise, the amount of costs (in particular for marketing research) and the prospects for business development depend on this stage.
Considering all of the above, the topic of writing the work: “Life cycle of products, goods and services” can be considered quite relevant.
The purpose of writing the work is to study the life cycle of products, goods and services.
To achieve this goal, it is necessary to solve the following tasks:
1. Study the concept and essence of the product life cycle
2. Study the stages of the product life cycle
3. Study the company’s strategies at individual stages of the product life cycle
1. Concept and definition of the product life cycle
The life cycle of a product is the time a product exists on the market, that is, the time period from the beginning to the end of its release and sale in its original form.
As a rule, the product life cycle includes 4 stages (stages):
1. Introduction (marketing)
2. Height
3. Maturity
4. Recession (decline)
The life cycle of a product on the market is shorter economic cycle, which includes the phases of creating a product prototype, its experimental production and a short initial period of mass production, when the product has not yet “reached” the consumer.
The traditional curve includes distinct periods of introduction, growth, maturity, saturation and decline.
The classic curve describes an extremely popular product with stable sales over time. A craze curve describes a product with a rapid rise and fall in popularity. Continued infatuation manifests itself in the same way, except that the "residual" sales continue in amounts that are only a small part of the previous sales volume. A seasonal curve, or fashion curve, occurs when a product sells well over periods spaced apart in time. The renewal or nostalgia curve characterizes a product for which demand resumes after a certain period of time. A failure curve usually reveals the behavior of a product that has no market success at all.
The transition from one phase of the cycle to another usually occurs smoothly, without jumps.
In addition to what has been stated regarding the product life cycle, we also note the following important points.
1. The duration of the life cycle as a whole and its individual phases depends both on the product itself and on the specific market. As a general rule, raw materials have a longer life cycle, finished goods have a shorter life cycle, and the most technically advanced goods have a very short life cycle (2-3 years).
2. The life cycle of the same product, but in different markets, is not the same. In the Russian undemanding market it is much longer than, for example, in the USA, Japan, Germany with their developed competitive market.
The product life cycle was first studied using the example of branded goods. The life cycle of a product reflects changes in fashion, taste, style, technical progress, technical and obsolescence. The cycle can be found not only in brands and products, but also in materials (natural materials, synthetics). Shapes, colors, technologies also go through a life cycle.
Using the concept of a product life cycle when developing a company's strategy for a given product is associated with certain difficulties, since strategy is both a cause and a consequence of the product life cycle. current position product in the product life cycle forces the development marketing strategies, the most acceptable at a given moment in the cycle, and they, in turn, affect the effectiveness of the product at subsequent stages of the life cycle. However, when used carefully, the product life cycle concept can help in developing good marketing strategies at different stages of the product life cycle.
The choice of a company's strategy when working with a product is limited by external and internal conditions. To describe strategy, you can use different strategic determinants:
Spatial allocation of the market (local, regional, national),
Introduction to the market (old market, related market, new market),
Market processing volume (one segment, several segments, entire market),
Processing method
Primary goal (sales, profitability),
Attitude towards competitors (aggressive, neutral), etc.
Based on the chosen general strategic direction of development of the company, taking into account the specific situation in the market and the level of competition, a strategy is selected in relation to the product. In the area of working with the product, the following strategies can be distinguished:
1. Differentiation is a competitive strategy, following which the organization concentrates its efforts on creating products and developing a marketing program that differ in their characteristics better side from competitors. What gives an organization the opportunity to become a leader in the industry for a certain group of products (giving the product special qualities, achieving high quality indicators, etc.).
2. Full cost leadership is a competitive strategy that ensures the organization achieves the lowest production costs and brings the product to the consumer (through the use of the “cheapest” solutions). Thanks to this, it establishes more than its competitors low prices and gains greater market share.
3. Specialization or focus - a competitive strategy, following which an organization concentrates its efforts on producing products aimed at a narrow circle of consumers.
4. Diversification is a type of strategy aimed at releasing new products that are not related to the production of the company's main types of products and entering non-traditional markets. This strategy reduces the likelihood of major failures.
5. Expansion of areas of product use.
2 Stages of the product life cycle and the company’s strategy for them
2.1. New product development stage
Before moving on to the essence of new product development, we must answer the question: “What is a new product?” This issue is strategically important because a product that is considered new is likely to be subject to a more rigorous development and testing process than a product that is considered a simple modification of an existing product.
An innovation is a product that is new to both consumers and the company. Innovations usually cause certain changes in consumer behavior and consumption patterns.
A new duplicate product is a product that is known in the market, but new to the company.
Product modifications are products that are known to the company but are new to consumers. The goal is for the firm to be able to offer consumers a seemingly new or improved product without undergoing the costly process of developing a new product. There are three types of modifications: improvement, product range expansion, and product repositioning.
A product is the subject of many entrepreneurial decisions: it is created, introduced into the market with the support of various marketing activities, modified if necessary and, if economically feasible, discontinued. Creating new products at a time of saturated markets and increased competition is a central challenge in product development.
The activities required to develop a new product before it enters the market are divided into planning activities and activities for implementing the innovation process. In general, the following phases are distinguished:
Selecting search directions,
Search for ideas,
Selection of ideas,
Analysis,
Development of product concepts and prototypes,
Testing,
Access to the market.
The search for ideas is followed by their selection, in which a preliminary selection is carried out. Ideas found to be suitable are subject to further analysis, primarily for cost-effectiveness. In this interval, various product concepts may already be proposed. Testing checks how consumers perceive a new product. A product that has passed all tests is released to the market. Table 1 attempts to assign different activities to specific phases of the innovation planning and implementation process.
Activities and methods at various phases of product development
The presented scheme is characterized by the fact that in each phase it is necessary to make decisions that create the starting point for the next phase and thus determine the course of development of the product. Let us consider individual problems of rational development of new products.
The success of created products depends on the correct choice of search directions. The choice of directions serves four main purposes: it determines the general direction in which developments should be carried out; helps direct the search efforts of all company structures in this direction; concentrates the attention of developers on the assigned tasks.
The generation of ideas for new products should be a systematically organized, rather than random, process. Random ideas, even if numerous, as a rule, cannot ensure success on the path of innovation, leading the company away from the intended goal. The flow of ideas should be large enough to allow you to select several promising proposals. The main sources of ideas: internal sources of the company (company personnel), customers, competitors, distributors and suppliers.
The goal of the generation phase is to generate as many ideas as possible. The goal of subsequent stages is to reduce this number by selecting from the mass of projects a few feasible ones, on which attention will be focused in the future. The cost of development grows rapidly from stage to stage, so the goal of screening is to reject unsuitable proposals as early as possible and identify promising ones.
In the West, they prefer to first develop a product, make a prototype, and then calculate the costs of its production. The firm then calculates whether the product can be sold for a price that includes these costs plus the desired profit margin. If the answer is negative, then the design of the product is changed or it ceases to exist altogether.
The approach used by Japanese firms is much simpler. At an early stage, a target price for a new product is determined, which is based on consumer understanding and quality analysis, as a result of which the price range for which this product will be sold is determined. Based on the financial needs of the company, the target profitability of the project is determined. So, in reverse order, target costs are set for a new product. And only after this, production and distribution are planned, which should be within the target costs. This process is accompanied by a significant number of negotiations between various divisions of the company and its suppliers. As a result, the output is usually a product that not only meets consumer needs, but is also a cost leader. Another difference between the Western and Japanese approaches is the adoption of go-no-go decisions, which are based on expected profitability. Western firms usually reject products that are valued based on planning the profitability of an individual product. It often turns out that calculations of expected profitability are nothing more than fiction, based on inaccurate forecasts of costs and income. Japanese firms prefer to consider the situation as a whole, seeing the possible contribution of the product to strengthening the overall strategic position of the company. And as a consequence of this, many more new products are being introduced in Japan, because... these products are considered in terms of the specific role they play among other products or in the overall range of the firm's offerings.
The direction and nature of new product development, as outlined by the firm's senior management, shapes the path that the firm will follow in exploring new product opportunities. In this area, a firm can pursue two general strategic directions. The first involves the continuous introduction of new products that enjoy relatively modest success in the market. The introduction of such goods is based on knowledge of their consumers and the technology necessary for production; the firm never strays far from its core capabilities and capabilities. Taken in isolation, these new products do not bring any changes to the market or to the organization itself. However, collectively they make a significant contribution to the stabilization of the successful performance of the entire company.
The second strategic direction is to search for a fundamentally new product that changes the market and the company itself. This approach - a major success approach - often requires a significant mobilization of all resources and a relatively long development period. As a result, there may be an interruption in the main activities of the company. This may be accompanied by a change in market structure or even the creation of a new market. In addition, you can also use a combined, so-called “hybrid” approach, in which the company from time to time tries to introduce innovations that do not interrupt its core business, while simultaneously using a number of measures to increase existing production. This approach will require even more resources than the big success approach.
If the market is not well defined or the technology is in its early stages of development, then the foundations from which even an incremental approach begins may not yet be sufficiently developed. In this case, the cross-functional group can choose an alternative path - called testing (see Table 2), which allows a firm with limited resources to support innovation in a newly emerging market. This approach, a variation of the incremental approach, involves the use of significant customer contact during the initial development stage, the rapid introduction of the first version of the product into a relatively small initial market, the receipt of significant and rapid customer feedback, the improvement of the product, the introduction of a modified version into the market in that the form that the consumer believes is most valuable to him. Compared to the traditional approach to product development, in which significant effort is devoted to market analysis, product testing and subsequent design changes (all before introducing the product to market), this approach provides the following advantages:
Faster appearance on the market, allowing you to quickly create
positive cash flow.
Possibility of lower resource costs for releasing the first version.
Possibility of more effective use resources for modifications
in the design.
More effective and accurate study of consumer desires, because feedback based
Tab. 2Approaches to developing a strategy in the field of creating new products.
|
1. Test |
The company quickly introduces the product to the market to obtain feedback from the consumer; If necessary, it quickly revises its strategy and develops a new version of it, usually for a slightly different and larger market. A firm may go through several cycles in product and strategy development. This approach involves informal contact with the consumer as the strategy is developed, as well as after the product is offered to the market. |
|
2. Experimental |
Before introducing a product to the market, all elements of a marketing strategy are developed and implemented using both formal and informal market analysis. The company does not intend to make significant adjustments to its strategy after introducing the product. |
|
3. Progressive |
Often used in markets where the firm has well-developed technology and strong relationships with an existing customer group. The approach is based on offering a group of consumers increasing value of their product. New products are developed based on extensive contact with consumers. Once the product is introduced to the market, only minor adjustments to the strategy are required. |
|
4. Speculative |
It is the direct opposite of the experimental method. A firm develops a new product with little or no information from the consumer. Nevertheless, she is firmly convinced that the market needs this product. However, the validity of such a belief can only be determined after the product has been accepted or rejected by the market. |
2.2. Stage of product introduction to the market
It begins with the first appearance of a product on the market. Conquering the market takes time, so sales volumes usually grow at a low speed. Profits at this stage are negative or low due to negligible sales and high distribution and promotion costs. A lot of funds are needed to attract distributors and create warehouse stocks. Promotion costs are relatively high because it is necessary to inform customers about the new product and let them try it. Since the market at this stage is usually not ready for product improvements, the company and few of its competitors release basic models of the product. These companies focus their sales on those customers who are most ready to buy. These are innovative buyers.
When a company enters the market with a product, its main task is to achieve recognition of the product not only by consumers, but also by wholesalers and retailers. Product acceptance involves establishing a distribution network to make the product available to consumers and attempting to persuade consumers to try the product when it is introduced to the market. To attract consumers, a product must have some kind of competitive advantage regarding quality or cost. The purpose of advertising is to inform consumers about such benefits.
When introducing a product to the market, an enterprise must focus on:
1. involving the first consumers in the discussion of the design,
2. distinguishing between early and early adopters,
3. transfer of prototypes and first models of goods into the hands of the first consumers,
4. providing feedback to the first consumers,
5. accelerated development of further product models.
When introducing a product to the market, a company may adopt one of several marketing strategies.
It can set a ceiling or floor for each of the marketing variables—price, promotion, distribution, and product quality. Taking into account only price and incentives, the market penetration strategy can be specified using the matrix “product price - promotion costs” (Fig. 1):
A quick profit strategy (also called a “quick skimming” strategy) is advisable to use when the bulk of buyers in a small market have a poor understanding of the product and measures are required to alert and convince buyers. The high price combined with intense incentives ensures a quick skimming of the wealthy portion of the market.
A slow profit strategy (“slow skimming”) helps extract the highest possible gross profit from each unit, and low sales promotion costs reduce overall marketing costs. This strategy makes sense when the market size is small, most potential buyers are aware of the product and are willing to pay a high price for it, and there are few potential competitors ready to immediately fight.
The rapid penetration strategy is used in the following cases to ensure the fastest and most complete conquest of the market and capture of its highest share. Applicable in the following cases:
Large market capacity,
Buyers are poorly informed about the product,
Potential buyers are price sensitive
Competition in the market is high,
Increasing the scale of production reduces the cost per unit of production.
The slow penetration strategy (passive strategy) is used in the following cases:
Large market capacity,
Good product knowledge
For most buyers, the high price is unacceptable,
Competition in the market is low.
If a new product is in demand, it moves to the growth stage, in which sales growth is sustainable and the product begins to make a profit. Early buyers continue to buy, and new buyers begin to follow suit, especially if they hear good reviews. If a significant number of first-time buyers do not repurchase, the product will fail. At this time, the product begins to interest competitors. They appear on the market attracted by the opportunity to make a profit. They give the product new properties and the market expands. An increase in the number of competitors leads to an increase in the number of distributors, and sales grow, simply due to the replenishment of inventories of resellers. At this stage, an attempt is made to maintain prices, but sometimes they have to be reduced due to pressure from competitors. The growth stage produces higher profits as the ratio of sales to promotional expenses increases and the cost of production per unit decreases.
The main task of the growth stage is to strengthen the brand position. Strategies at this stage are aimed at maintaining and using the competitive advantages obtained at the previous stage. The goal for a product is to maintain its quality, but as competition intensifies, it may be necessary to add new features, improve packaging, or improve service. The purpose of the distribution strategy is to strengthen relationships with traders by providing trade discounts, compensation for advertising, etc. At the same time, the company is trying to find additional distribution channels in areas where sales are insufficient.
In advertising, the emphasis from familiarization with the product shifts towards persuasion to make a purchase, and at the right time the company reduces the price to attract new customers. Informing the market about a new product remains relevant, but now the company must also take into account competition. While the goal in the entry stage is to introduce consumers to the product and try to get them to try it, the goal in the growth stage is to educate consumers about the product's characteristics.
During the growth phase, a company faces a trade-off between significant market share and high current profits. By spending heavily on product development, sales promotion, and distribution, a company can achieve a dominant position. In doing so, however, she gives up the maximum current profit in hopes of regaining it in the next stage.
At the maturity stage, due to increased competition, sales growth begins to stop. The product attracts fewer and fewer new customers; Maintaining a product's position on the market depends on repeat purchases. More active behavior of competitors leads to aggravation of price competition, lower prices and operating inventories. As a result, profits are reduced. The maturity stage typically lasts longer than other stages and presents marketing managers with significant challenges. Most products are in the maturity stage of their life cycle, so most marketing managers have to deal with products in the maturity stage.
The slowdown in sales growth is due to the emergence of many manufacturers and a large number of goods. This glut, in turn, leads to stiffer competition. Competitors begin to lower prices, increase advertising and promotional spending, and increase research and development expenditures to find best models goods. These actions lead to a drop in profits. Weaker competitors drop out of the game, and in the end only the strongest remain in the industry. Although many products in the maturity stage appear to remain the same over time, the most successful products actually evolve to meet changing customer needs.
At the maturity stage of the life cycle, there may be, for example, the following strategy options:
Market expansion,
Product modification,
Product repositioning.
Market expansion may mean finding new customers or new uses for the product.
A company using a product modification strategy attempts to change product attributes such as quality, specifications, or style to attract new consumers. It can improve the quality and performance of a product - the duration of its use, reliability, or, for example, speed, taste. Or it may add some additional features that affect the product's usefulness, safety, or convenience.
Repositioning a brand involves the possibility of attracting new market segments to it, which may require modification of the brand, but this is not necessary
Product management at the maturity stage comes down to continuous improvement of product properties. Wide contact with the consumer throughout the life of the product and up to the present day should provide the company with a detailed understanding of the needs of customers in the field of product operation. Based on this information, the manager will now have a detailed analysis of the quality deployment function. This analysis can subsequently be used by the company to improve those product characteristics that provide the most important benefits they are looking for.
In addition, the company must find ways to increase the intangible value of the product. In most mature product markets, competitors have reached a technological limit - they can no longer add value to consumers without facing unacceptable costs. Often it is not only the leading competitor that reaches this level; All major competitors have identical technical capabilities and offer similar quality features. And if none of the competitors has a clear cost advantage, then in such a market their profits will decline to such a level that profits will barely cover costs. When the market reaches this point, the firm must find another way to differentiate its product, or it will be forced to continue to compete on the basis of cost and price. In addition to making efforts to improve the quality of the product, the company can also improve the intangible qualities of the product, such as its appearance, guarantees and types of services. It is service that becomes the main means of competing firms to differentiate their material goods.
Mature markets also require competitors to rationalize their product mix. Market segments are defined more clearly and become more stable. Changing buyer needs create several clearly defined market segments that require a specific offer that meets these needs, and which will be further implemented by specialists. Larger firms may also include specific products to meet the needs of these market segments.
Characterized by a reduction in sales and profits, and then the occurrence of losses. Decline can be due to various reasons: product obsolescence due to technological advances, lower costs sought by competitors, changing consumer preferences, ineffective attempts to revive sales.
The decline stage is usually preceded by some type of technological innovation, causing most consumers to stop using the product or opt for an alternative product. In this regard, market segments are shrinking, because consumers switch to another product.
Decisions made at this stage are usually aimed at reducing the product range and identifying ways to switch to other types of goods. As it disappears market segments the flow of goods directed towards them must be stopped. The company cannot maintain a brand in decline for long. Supporting a weak product can be too costly for a company, and not just in terms of profits. There are many hidden costs. A weak product may take up too much of management's time. It often requires frequent price adjustments and inventory recounting. It requires advertising and sales force attention that could be better used to increase the profitability of healthy products. A product's deteriorating reputation may cause buyers to doubt the company as a whole and its other products. The biggest costs may lie ahead. Supporting weak products causes a delay in finding replacements, creates a lopsided product mix, hurts ongoing profits, and weakens the company's sustainability.
For these reasons, companies need to pay more attention to their aging products. The company's first task is to identify declining products through regular analysis of sales trends, market share, costs and profits. Management then has to decide for each declining product whether to support it, harvest it, or give it up.
In this regard, the choice of strategy using the Boston Consulting Group method is very clear - Fig. 2, which classifies all products according to the growth/market share matrix. The vertical axis, market pace, determines the measure of market attractiveness. The horizontal axis, relative market share, determines the strength of a product's position in the market. When dividing the growth/market share matrix into sectors, four product types can be identified.
"Stars". Rapidly developing areas of activity (products in the growth phase of their life cycle) with a large market share. They usually require heavy investment to support their rapid growth. Over time, their growth slows down and they turn into “cash cows”.
"Cash cows" Business lines or products with low growth rates and large market shares (products that have reached the maturity phase). These stable and successful products require less investment to maintain their market share. At the same time, they generate high income, which the company can use to support other areas that require investment.
“Dark horses” are products that are in the initial phase of their life cycle. They promise high growth rates but have a small market share. Therefore, managers try to achieve an increase in market share through offensive strategies and large investments. Support for these products is necessary because in the future we need products that bring more profit. It must be borne in mind that these areas of activity often require much more financial costs than they bring in profit. They demand large quantities funds even to maintain its market share, not to mention increasing it. Management should carefully consider what " dark horses“It’s worth trying to turn them into “stars,” and which ones should be phased out.
"Dogs" refers to the phase of saturation and degeneration. They do not have a large market share or high growth rates. They may generate enough income to support themselves, but do not promise to become more serious sources of income. As long as they make a profit, it is recommended to invest it in “dark horses” or “stars”. If there is a danger that these goods will fall into the loss zone, they should be removed from production.
After classifying its products, the company must determine the role of each element in the future. For each product, one of four strategies can be applied. A company may increase investment in a product to gain market share for it. Or it can invest just enough to maintain its current market share. It can pump resources out of a product, withdrawing its short-term monetary resources for a certain period of time, without regard to long-term consequences. Finally, it can divest from a business by selling it or phasing it out, and use the resources elsewhere.
The advantages of this model: the ability to mentally structure and visually represent the strategic problems of an enterprise; suitability for generating strategies, and management, mainly occupied with current affairs, is forced to pay attention to the future of the enterprise; ease of use; Market share and growth rates are usually determined at low cost. Disadvantages: the significance of elements is determined only by two criteria. Other factors, such as quality, marketing costs and investment intensity, are left unaddressed. Using a matrix of four fields, it is impossible to accurately evaluate products in the middle position, and in practice this is precisely what is needed most often.
There are two main strategies available for dealing with a declining product.
The “harvest” strategy involves cutting marketing costs to almost zero and continuing to sell the brand by inertia, relying on purchases from loyal customers.
The risk with a harvest strategy is that a company may cut marketing costs too early, accelerating the demise of the brand.
Revival of the brand. The brand revival strategy means bringing back to life a popular brand that was “harvested” or ceased to be produced. According to managers, it is much cheaper to revive a brand than to create a new one. Although the revived brand has no competitive advantage other than its name, this single advantage can be important in a mature market in which few brands have unique positions.
Management may also decide to maintain its brand without changing it in the hope that competitors will leave the industry.
If the production of a product ceases, the company can sell it to another company or simply get rid of it by selling the property at the price of possible sale. If a company is going to find a buyer, then it should not squeeze the last juice out of the product.
When a given product range loses all practicality, the company should not forget that most products, especially industrial products, require long-term maintenance, which must be carried out even after the product is removed from sale. To maintain strong ties with existing customers, the company must find a way to organize long-term service for the previously produced product. It can sell the service contract to a third party or keep the service department in-house. The company can also make a similar decision to provide the consumer with spare parts, i.e. may sell a license to manufacture spare parts to a third party or produce such parts itself
3. Briefly the main characteristics of the product life cycle
|
Characteristics |
Life cycle stages |
|||
|
Implementation |
Height |
Maturity |
Recession |
|
|
Marketing Goals |
Attracting customers to a new product, maximum customer awareness |
Expanding sales and product ranges, building brand loyalty |
Maintaining the distinctive advantages of the product, defending its market share |
Preventing a drop in demand, restoring sales volumes |
|
Volume of sales |
Height |
Fast growth |
Stability, slowing growth |
Reduction |
|
Competition |
Absent or insignificant |
Moderate |
Strong |
Minor |
|
Profit |
Negative |
Increasing |
Contracting |
Rapidly declining, no profit, losses |
|
Consumers |
Innovators (lovers of new things) |
Mass market of wealthy individuals |
Mass market |
Conservatives (Laggards) |
|
Product range |
Basic model |
Growing number of varieties (improvement) |
Differentiated – full assortment group |
Selected products |
|
Sales |
Individual retail outlets, uneven distribution |
The number of retail outlets is growing, intensive distribution |
Retail outlets are being reduced, selective distribution |
|
|
Pricing |
Depends on the product |
Growing price range |
Full price line, price reductions, introduction of discounts |
Individual prices |
|
Promotion |
Informational |
Persuasive |
Competitive (reminding) |
Informational (sale) |
|
Marketing costs |
Extremely tall, growing |
High, stable |
Contracting |
Low |
During the writing of the work, the following results were obtained:
1. The life cycle of a product is the time of existence of a product on the market, that is, the time period from the beginning to the end of its release and sale in its original form.
2. The traditional curve includes distinct periods of introduction, growth, maturity, saturation and decline.
3. The stage of introducing a product to the market begins with the first appearance of the product on the market. Conquering the market takes time, so sales volumes usually grow at a low speed. Profits at this stage are negative or low due to negligible sales and high distribution and promotion costs.
4. If a new product is in demand, it moves to the growth stage, at which sales growth is sustainable and the product begins to make a profit. Early buyers continue to buy, and new buyers begin to follow suit, especially if they hear good reviews. If a significant number of first-time buyers do not repurchase, the product will fail.
5. At the maturity stage, due to increased competition, sales growth begins to stop. The product attracts fewer and fewer new customers; Maintaining a product's position on the market depends on repeat purchases. More active behavior of competitors leads to increased price competition, lower prices and operating inventories. As a result, profits are reduced. The maturity stage typically lasts longer than other stages and presents marketing managers with significant challenges.
6. At different stages of the product life cycle, a company needs to apply different strategies to increase demand and extend the product life cycle.
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However, the general modern trend consists in reducing its continuation, accelerating it due to the products being manufactured.
The life cycle of goods can be divided into several main stages:
Stage of bringing a product to market- Characterized by very high degree uncertainty of results, since it is difficult to determine in advance whether a new product will be successful.
- The marketing efforts of the enterprise are aimed at informing consumers and intermediaries about.
- At this stage, the enterprise has high costs for, and are also high due to the low volume of output.
- at this stage no.
- Characterized by rapid development of sales.
- If the product turns out to be successful and moves into the growth phase, the manufacturer begins to decline in goods due to an increase in output volume and sales price.
- Prices may be lowered, which may allow the enterprise to gradually cover the entire potential market.
- Marketing costs continue to be high.
- At this stage, the company usually has competitors.
- The volume of demand reaches its maximum.
- The market at this stage is highly segmented, enterprises are trying to satisfy all possible needs. It is at this stage that the likelihood of repeated technological improvement or modification of the product is most effective.
- The main task of the enterprise at this stage is to maintain and, if possible, expand its market share and achieve sustainability over direct competitors.
- Manifests itself in a decrease in demand.
- As sales and profit prospects decline, some firms reduce their investments and exit the market. Other firms, on the contrary, try to specialize in the residual market if it is of economic interest or the decline occurs gradually. However, with the exception of occasionally observed cases of market revival, the cessation of production of a technologically obsolete product becomes inevitable.
Product life cycle
Each product lives on the market for a certain time. Sooner or later it is replaced by another, more perfect one. In this regard, the concept of a product life cycle is introduced (Fig. 9.3).
Product life cycle— the time from the initial appearance of a product on the market until the cessation of its sale in this market. (This should not be confused with the production life cycle, which includes R&D, development in production, production itself, operation and discontinuation.) The life cycle is described by changes in sales and profit indicators over time and consists of the following stages: start of sales (market introduction) , growth, maturity (saturation) and decline.
Market introduction stage is characterized by a slight increase in sales volume and may be unprofitable due to high initial marketing costs, small volumes of product output and the lack of development of its production.
Sales growth stage characterized by rapid growth in sales volume driven by consumer acceptance of the product, profitability increases, the relative share of marketing costs typically falls, prices are constant or fall slightly.
On maturity stages sales growth slows down and even begins to fall, since the product has already been purchased by the majority of potential consumers, competition intensifies, marketing costs usually increase, prices may decrease, profits stabilize or decrease. When upgrading the product and/or market segments, it is possible to extend this stage.
Recession manifests itself in a sharp decline in sales and profits. Product upgrades, price reductions, and increased marketing costs can only prolong this stage. It is necessary to note that the maximum profit, as a rule, in comparison with the maximum sales volume, shifts towards the initial stages of the life cycle. This is due to increased costs of maintaining sales at late stages product life cycle.
The concept of life cycle is applicable to a class of product (telephone), type of product (cordless telephone), to a specific brand of product (radio telephone of a specific company). Of greatest practical interest is the study of the life cycle of a specific brand of product. This concept is also applicable to such phenomena as style (clothing, furniture, art, etc.) and fashion. Different marketing strategies are used at different stages of the life cycle.
Life cycle curve shape, as a rule, remains more or less the same for most products. This means that once a product appears on the market, if consumers like it, then its sales volume grows and then falls. However, the duration and intensity of the transition from one stage to another vary greatly depending on the specifics of the product and market. The transition from stage to stage occurs quite smoothly, so the marketing function must closely monitor changes in sales and profits in order to grasp the boundaries of the stages and make changes to the marketing program accordingly.
It is especially important to catch the stage of saturation, and even more so - recession, since keeping a product that has exhausted itself on the market is unprofitable, and in terms of prestige, it is simply harmful. Obviously, you also need to choose the right moment to enter the market with some new product.
If a similar product is already falling on you, it’s hardly worth starting commercial activities On the market. Obviously, when it is determined that a product is at the stage of maturity or saturation, then efforts must be made to develop a new product to replace the product that has exhausted itself.
Other options for life cycle curves are also possible (Fig. 9.4).
Despite the popularity of product life cycle theory, there is no evidence that most products go through a typical 4-phase cycle and have standard life cycle curves. There is also no evidence that the turning points of the various phases of the life cycle are to any degree predictable. In addition, depending on the level of aggregation at which a product is considered, different types of life cycle curves can be considered.
The first thing to remember is that market research does not start with the product, but with the needs of consumers. For example, consumers have a need for transport (Figure 9.5). Such needs may remain constant, grow from century to century, and may never reach a decline phase.
The need for transport is concretized into the demand for certain technological methods of satisfying it (from primitive vehicles, from horse-drawn carriages to cars and other modern vehicles).
The life cycle of technological methods, although shorter than the needs, can be extremely long.
Technological methods can be implemented using various specific technical and technological solutions. For example, cars can use steam, piston, turbine, and electric engines, which also have their own life cycle. Radio transmitting devices consistently used vacuum tubes, semiconductors, and integrated circuits. Hidden under each such curve is a series of life cycle curves for individual technical and technological innovations. These life cycle curves can be very short and they certainly tend to shorten.
The nature of the life cycle curve is often the result of management actions and is not due to external causes. Many managers believe that every product inevitably follows its own life cycle curve. When sales volume stabilizes, instead of updating the technology and looking for new market opportunities, managers classify the product as a “cash cow” and begin to look for other business.
In addition, the main thing is to focus on consumer needs, rather than focusing on selling products. The life cycle concept has a product rather than a marketing orientation. The product of a particular organization will “die” if needs change, if a competitor makes a better offer, if new technologies allow us to offer something new to consumers. Therefore, it is better to focus your efforts on identifying the causes of change rather than studying their consequences using a life cycle curve.
Identifying the reasons for changes will allow us to anticipate future changes and develop a product policy that is maximally adapted to them.
When developing and implementing, it is necessary to take into account that the same product in different markets may be located in various stages life cycle.
In practice, most companies sell multiple products in different markets. In this case, the concept " product portfolio", which refers to the totality of products produced by the company. The product portfolio must be balanced and include products at different stages of the life cycle, which ensures the continuity of the organization's production and sales activities, constant profit generation, and reduces the risk of not receiving the expected amount of profit from the sale of products, at the initial stages of their life cycle.