To have a better understanding of the idea of what sort of impact does a Product Life Cycle have on the Marketing Management process we should firstly take a closer look on Marketing Management itself. First and foremost marketing is the management process responsible for identifying, anticipating and satisfying customers’ requirements profitability. As Peter Drucker has defined in his works “there is only one valid definition of business purpose: to create a customer.”(Greenstein and Wade 1998) At its simplest, if you do not have any customers for the product or service your organization offers, then there is no reason for continuing existence. Consumption is the sole end and purpose of all production and the interests of the product ought to be attended to only so far as it may be necessary for promoting those of the customer. The operational functions of marketing management: sales promotion, advertising, public relations, selling, financing, buying, forecasting, pricing, standardization, publicity, merchandising, market research, transporting, risk-taking, servicing and stockholding. Elements over which organizations have control and which are used to try to influence customers to choose one particular organization in preference to another are generally termed the marketing mix.
Professionals in any career need to sell their product or service, they need to know how to introduce it to the merchandise. Marketing managers know how to do it. They develop strategies to sell products and services analyzing the merchandise, which brings us to the definition of a Product Life Cycle (PLC). PLC- is the course of a product’s sales and profits over its lifetime. It involves five distinct stages: 1) Product Development begins when the company finds and develops a new-product idea. During product development, sales are zero and the company’s investment costs mount. 2) Introduction is a period of slow sales growth as the product is introduced in the market. Profits are nonexistent in this stage because of the heavy expenses of product introduction. 3) Growth is a period of rapid market acceptance and increasing profits. 4) Maturity is a period of slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profits level off or decline because of increased marketing outlays to defend the product against competition. 5) Decline is the period when sales fall off and profits drop. In the case with Crayola products we can see a perfect instance of a merchandise consistency, which in its turn could tell us a lot about product’s class. From its earliest days, Binney & Smith, the founding company of Crayola trade mark, has been a color company. During the last 100-plus years, Binney & Smith has grown beyond our founders’ wildest dreams. By applying technical innovation, unparalleled quality, consumer satisfaction and product value, Binney & Smith has become the preeminent producer of hands-on products for creative personal development and fun.
Another typical example of a product class and consistency is gasoline powered automobiles that have the longest life cycles- the sales of many product classes stay in the mature stage for a long time. Product forms (minivans) pass through a regular history of introduction, rapid growth, maturity, and decline. “Brand (Ford Taurus) External factors that influence pricing decisions include the nature of the market and demand; competitors’ prices and offers; and factors such as the economy, reseller needs, and government actions.”(Pollock and Greco 2001) The seller’s pricing freedom varies with different types of markets. Ultimately, the consumer decides whether the company has the right price. The consumer weighs the price against the perceived values of using the product; if the price exceeds the sum of the values, consumers will not buy. Therefore, demand and consumer value perceptions set the ceiling for prices. Consumers also compare a product’s price to the prices of competitors’ products. As a result, a company must learn the price and quality of competitors’ offers. Many internal factors influence the company’s pricing decisions, including the firm’s marketing objectives, marketing mix strategy, costs, and organization for pricing. Common marketing management objectives include survival, internal factors when setting prices: Marketing objectives, Marketing Mix Strategy, Costs, Organizational considerations, External factors when setting prices: Nature of the market and demand, competition, other environmental factors (economy, resellers, government.)One of the main marketing management tasks in relation to the Product Life Cycle is a customer database. It’s an organized collection of comprehensive data about individual customers or prospects, including geographic, demographic, psychographic, and behavioral data. Company’s marketing management teams use databases to identify prospects, decide which customers should receive a particular offer, deepen customer loyalty, and reactivate customer purchases.
So what is another instance of the product’s life cycle relevance to the firm’s marketing management? Well, when a company launches a new product, it knows the product won’t last forever. Well in Crayola’s case this statement might be just a bit unconvincing. The Crayola brand turns 100 this year and is heading into the next century by adding unusual
and unexpected twists on its creativity tools to wow children and let them create in new and different ways. However, the company does expect to earn a satisfactory profit to cover all the effort and risk that went into launching it. A firm can never accurately predict the lifetime of a new product so while contemplating a re-design of one of their most popular products, Binney & Smith desired not only to work with the five key segments of their consumer base, but also to test the full range of their designers’ ideas. And, for Crayola, it’s all about creativity. To gain customer input, the Binney & Smith marketing management team considered using traditional market research methods such as focus groups and conjoint-based approaches. The team was looking to identify the most preferred designs, but also dig deeper to understand consumers’ preferences for each individual feature and feature combinations contributed to their overall preferences. The Binney & Smith team also required an understanding of the distinct preferences of their five key market segments.
“Traditional market research methods could not achieve these objectives. Although focus groups enable an in-depth exploration of consumers’ feelings about a product, they would have been too cost-prohibitive to conduct on a large scale and would only have allowed the exploration of a handful of design concepts.”(Oily, 2000) Even advanced methods such as conjoint analysis would not allow the Binney & Smith team to address these issues.
But as we have already mentioned the lifetime involves four distinct stages. The first stage is the introduction stage, when the product is first launched. Sales growth tends to be low as consumers are ‘introduced’ to the existence of the product. At this stage therefore, profits are negative or low because of the low sales and high distribution and promotion expenses. Much money is needed to attract distributors and build their inventories. Promotion spending is especially high to inform customers of the new product and get them to try it. One of the biggest launches in recent history is that of the DVD player. Not only is this a new product, it’s a whole new market. Industry executives have named DVD-Video the "Medium of the Millennium" and boast that DVD-Video is the fastest growing new packaged media format launch in history with close to 5.4 million DVD-Video players shipped to retail since the format launched nationally in the U.S. in autumn 1997 (Consumer Electronics Association). “The outlook for next year is equally promising. The DVD Entertainment Group estimates that hardware shipments will double to eight million DVD-Video players in 2000.” (Portney 1997) The group also estimates that the installed base will more than exceed 10 percent of US households, a benchmark of success for a consumer electronics product. The surge in hardware sales is a positive boost for retailers. In 1999, DVD-Video hardware represented more than $1 billion in retail sales. This includes stand-alone players only and does not include DVD-ROM drives or other home theater products. There are now nearly 70 DVD Video player models marketed under 30 different consumer electronics brands. In only its third year in the marketplace, DVD-Video player prices have declined significantly.
Company’s main objective is to increase profits during the growth stage, as the promotion costs are spread over a large volume and as unit-manufacturing costs fall. There are several strategic ways a firm uses to sustain rapid market growth as long as possible. It improves product quality and adds new product features and models. Since change is so an important aspect of business continuity, many models don’t necessarily provide assiduous suggestions for what type of change should be considered. “An example of modeling one such model in use by Boston Consulting Group (BCG) subdivides their profit centers into four main subdivisions.”(Agarwal 1997) This breakdown does help in planning for strategic investment matters but it does not assist the planner in identifying a single product development proposal to investigate further from a number of alternatives. The matrix system comprises the following: 1) Stars, which are products generally with negative cash flow 2) Question marks, which are products with generally negative cash flows but with low relative market share in growing markets 3) Dogs, which are products unlikely to be generating substantial positive cash flows due to the fact that they are in slowly growing markets with low relative market shares 4) Cash cows, that are products that generating cash which have high relative market shares and are established in slowly growing markets. BCG model like the previous statement in the above paragraph does not define the product enough and does not create opportunities to explore alternatives in which to improve profitability or market share. The growth concept is divided into five separate levels one being dominant, strong, favorable, tenable and weak and relates this to the stages of market development. “The stages are embryonic, growing, mature, and aging, which produce a series of strategic guidelines for company development.”(McCalley and Goldberg 1999) The market growth concept provides valuable guidance about broad policies, replacing the concept of market attractiveness in the GE matrix with stages of market growth.
Basically we come to the conclusion that a Product Life Cycle could be viewed as a framework for planning in a one particular Marketing Management merchandise development strategy. It suggests that specific changes in product policy should be followed after the initial product introduction. A major problem is that few products follow “typical” PLC curves. This implies that the organization evaluates the likely progress of each facet of the product’s performance over the ensuing time scale to identify particular areas where investment should be concentrated without a clear indication as to whether that product will follow the predicated path of the PLC. There are several other types of commonly used models and analysis (Product viability, Market newness, technology position, opportunity cost risk, and the Ansoff matrix) that can be employed each having strengths and weaknesses and should be applied to achieve a specific outcome.
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