Product Life-Cycle Strategies
After launching the new product, management wants that product to enjoy a long and happy life. Although it does not expect the product to sell forever, the company wants to earn a decent profit to cover all the effort and risk that went into launching it. Management is aware that each product will have a life cycle, although its exact shape and length is not known in advance.
Figure 9.2 shows a typical product life cycle (PLC), the course that a product’s sales and profits take over its lifetime. The PLC has five distinct stages:
Figure 9.2
Sales and Profits over the Product’s Life from Inception to Decline
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.
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.
Growth is a period of rapid market acceptance and increasing profits.
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.
Decline is the period when sales fall off and profits drop.
Not all products follow all five stages of the PLC. Some products are introduced and die quickly; others stay in the mature stage for a long, long time. Some enter the decline stage and are then cycled back into the growth stage through strong promotion or repositioning. It seems that a well-managed brand could live forever. Venerable brands like Coca-Cola, Gillette, Budweiser, Guinness, American Express, Wells Fargo, Heinz, Kikkoman, and TABASCO sauce, for instance, are still going strong after more than 100 years. Guinness beer has been around for more than 250 years, Life Savers Mints recently celebrated “100 years of keeping mouths feeling fresh,”
and 147-year-old TABASCO sauce brags that it’s “over 140 years old and still able to totally whup your butt!”
Product life cycle: Some products die quickly; others stay in the mature stage for a long, long time. Life Savers Mints recently celebrated “100 years of keeping mouths feeling fresh.”
The Wrigley Company
The PLC concept can describe a product class (gasoline-powered automobiles), a product form (SUVs), or a brand (the Ford Escape). The PLC concept applies differently in each case. Product classes have the longest life cycles; the sales of many product classes stay in the mature stage for a long time. Product forms, in contrast, tend to have the standard PLC shape. Product forms such as dial telephones, VHS tapes, and film cameras passed through a regular history of introduction, rapid growth, maturity, and decline.
A specific brand’s life cycle can change quickly because of changing competitive attacks and responses. For example, although laundry soaps (product class) and powdered detergents (product form) have enjoyed fairly long life cycles, the life cycles of specific brands have tended to be much shorter. Today’s leading U.S. brands of powdered laundry soap are Tide and Gain; the leading brands 100 years ago were Fels-Naptha and Octagon.
The PLC concept also can be applied to what are known as styles, fashions, and fads. Their special life cycles are shown in
Figure 9.3. A style is a basic and distinctive mode of expression. For example, styles appear in homes (colonial, ranch, transitional), clothing (formal, casual), and art (realist, surrealist, abstract). Once a style is invented, it may last for generations, passing in and out of vogue. A style has a cycle showing several periods of renewed interest.
Figure 9.3
Styles, Fashions, and Fads
A fashion is a currently accepted or popular style in a given field. For example, the more formal “business attire” look of corporate dress of the 1980s and 1990s gave way to the “business casual” look of the 2000s and 2010s. Fashions tend to grow slowly, remain popular for a while, and then decline slowly.
Fads are temporary periods of unusually high sales driven by consumer enthusiasm and immediate product or brand popularity.19 A fad may be part of an otherwise normal life cycle, as in the case of recent surges in the sales of poker chips and accessories. Or the fad may comprise a brand’s or product’s entire life cycle. Pet Rocks are a classic example. Upon hearing his friends complain about how expensive it was to care for their dogs, advertising copywriter Gary Dahl joked about his pet rock. He soon wrote a spoof of a dog-training manual for it, titled The Care and Training of Your Pet Rock. Soon Dahl was selling some 1.5 million ordinary beach pebbles at $4 a pop. Yet the fad, which broke one October, had sunk like a stone by the next February. Dahl’s advice to those who want to succeed with a fad: “Enjoy it while it lasts.” Other examples of fads include Silly Bandz, Furbies, and selfie sticks.20
Marketers can apply the product life-cycle concept as a useful framework for describing how products and markets work. And when used carefully, the PLC concept can help in developing good marketing strategies for the different life-cycle stages. However, using the PLC concept for forecasting product performance or developing marketing strategies presents some practical problems. For example, in practice, it is difficult to forecast the sales level at each PLC stage, the length of each stage, and the shape of the PLC curve. Using the PLC concept to develop marketing strategy also can be difficult because strategy is both a cause and a result of the PLC. The product’s current PLC position suggests the best marketing strategies, and the resulting marketing strategies affect product performance in later stages.
Moreover, marketers should not blindly push products through the traditional product life-cycle stages. Instead, marketers often defy the “rules” of the life cycle and position or reposition their products in unexpected ways. By doing this, they can rescue mature or declining products and return them to the growth phase of the life cycle. Or they can leapfrog obstacles that slow consumer acceptance and propel new products forward into the growth phase.
The moral of the product life cycle is that companies must continually innovate; otherwise, they risk extinction. No matter how successful its current product lineup, a company must skillfully manage the life cycles of existing products for future success. And to grow, the company must develop a steady stream of new products that bring new value to customers. Toy maker Mattel is learning this lesson the hard way. It has long dominated the world toy industry with classic brands such as Barbie, Hot Wheels, Fisher-Price, and American Girl. In recent years, however, as its core brands have matured, Mattel’s sales have stagnated at the hands of nimbler, more innovative competitors (see Real Marketing 9.2).
We looked at the product development stage of the PLC in the first part of this chapter. We now look at strategies for each of the other life-cycle stages.
Introduction Stage
The introduction stage starts when a new product is first launched. Introduction takes time, and sales growth is apt to be slow. Well-known products such as frozen foods and HDTVs lingered for many years before they entered a stage of more rapid growth.
In this stage, as compared to other stages, 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 relatively high to inform consumers of the new product and get them to try it. Because the market is not generally ready for product refinements at this stage, the company and its few competitors produce basic versions of the product. These firms focus their selling on those buyers who are the most ready to buy.
A company, especially the market pioneer, must choose a launch strategy that is consistent with the intended product positioning. It should realize that the initial strategy is just the first step in a grander marketing plan for the product’s entire life cycle. If the pioneer chooses its launch strategy to make a “killing,” it may be sacrificing long-run revenue for the sake of short-run gain. The pioneer has the best chance of building and retaining market leadership if it plays its cards correctly from the start.
Growth Stage
If the new product satisfies the market, it will enter a growth stage in which sales will start climbing quickly. The early adopters will continue to buy, and later buyers will start following their lead, especially if they hear favorable word of mouth. Attracted by the opportunities for profit, new competitors will enter the market. They will introduce new product features, and the market will expand. The increase in competitors leads to an increase in the number of distribution outlets, and sales jump just to build reseller inventories. Prices remain where they are or decrease only slightly. Companies keep their promotion spending at the same or a slightly higher level. Educating the market remains a goal, but now the company must also meet the competition.
Profits increase during the growth stage as promotion costs are spread over a large volume and as unit manufacturing costs decrease. The firm uses several strategies to sustain rapid market growth as long as possible. It improves product quality and adds new product features and models. It enters new market segments and new distribution channels. It shifts some advertising from building product awareness to building product conviction and purchase, and it lowers prices at the right time to attract more buyers.
In the growth stage, the firm faces a trade-off between high market share and high current profit. By spending a lot of money on product improvement, promotion, and distribution, the company can capture a dominant position. In doing so, however, it gives up maximum current profit, which it hopes to make up in the next stage.
Maturity Stage
At some point, a product’s sales growth will slow down, and it will enter the maturity stage. This maturity stage normally lasts longer than the previous stages, and it poses strong challenges to marketing management. Most products are in the maturity stage of the life cycle, and therefore most of marketing management deals with the mature product.
The slowdown in sales growth results in many producers with many products to sell. In turn, this overcapacity leads to greater competition. Competitors begin marking down prices, increasing their advertising and sales promotions, and upping their product development budgets to find better versions of the product. These steps lead to a drop in profit. Some of the weaker competitors start dropping out, and the industry eventually contains only well-established competitors.
Although many products in the mature stage appear to remain unchanged for long periods, most successful ones are actually evolving to meet changing consumer needs. Product managers should do more than simply ride along with or defend their mature products—a good offense is the best defense. They should consider modifying the market, product offering, and marketing mix.
In modifying the market, the company tries to increase consumption by finding new users and new market segments for its brands. For example, brands such as Harley-Davidson and Axe fragrances, which have typically targeted male buyers, have created products and marketing programs aimed at women. Conversely, Weight Watchers and Bath & Body Works, which have typically targeted women, have created products and programs aimed at men.
The company may also look for ways to increase usage among present customers. For example, 3M recently ran a marketing campaign to inspire more usage of its Post-it products.21 The Post-it “Go Ahead” campaign aimed to convince customers that the sticky pieces of paper are good for much more than just scribbling temporary notes and reminders. An initial ad showed people on a college campus blanketing a wall outside a building with Post-it Notes answering the question “What inspires you?” “Share on a real wall,” the announcer explained. Other scenes showed a young man filling a wall with mosaic artwork created from multiple colors of Post-it Notes, teachers using Post-it Notes to enliven their classrooms, and a man posting a “Morning, beautiful” note on the bathroom mirror as his wife is brushing her teeth. “Go ahead,” said the announcer, “keep the honeymoon going.” The ad ended with a hand peeling Post-it Notes off a pad one by one to reveal new, unexpected uses: “Go ahead, Connect,” “Go ahead, Inspire,” and “Go ahead, Explore.”
The company might also try modifying the product—changing characteristics such as quality, features, style, packaging, or technology platforms to retain current users or attract new ones. Thus, to freshen up their products for today’s technology-obsessed children, many classic toy and game makers are creating new digital versions or add-ons for old favorites. For example, the venerable Crayola brand has souped up its product line to meet the technology tastes of the new generation. With the Crayola My Virtual Fashion Show drawing kit and app, for instance, children first design fashions using the provided color pencils and sketchpad. They then take photos of the designs with their smartphones or tablets and watch their original creations magically come to life inside the app on 3D models who walk virtual runways in Milan, New York, and Paris.22
Finally, the company can try modifying the marketing mix—improving sales by changing one or more marketing mix elements. The company can offer new or improved services to buyers. It can cut prices to attract new users and competitors’ customers. It can launch a better advertising campaign or use aggressive sales promotions—trade deals, cents-off, premiums, and contests. In addition to pricing and promotion, the company can also move into new marketing channels to help serve new users.
PepsiCo used all of these market, product, and marketing mix modification approaches to reinvigorate its 137-year-old Quaker brand and keep it from sinking into decline. To reawaken the brand, Quaker launched a major new “Quaker Up” marketing campaign, supported by an estimated $100 million budget:23
Managing the product life cycle: Thanks to the “Quaker Up” campaign, 137-year-old Quaker now has a more contemporary appeal as a lifestyle brand that helps give young families the fuel and energy needed to get through the day.
Provided courtesy of The Quaker Oat Company.
The “Quaker Up” campaign targets a new market of young mothers under 35, positioning Quaker’s lines of hot and cold cereals, snack bars, cookies, and other products as healthy lifestyle choices that help give a young family the fuel and energy needed to get through the day. The campaign advises families to “Quaker Up—with Quaker’s good energy for the moments that matter.” As part of the retargeting and repositioning effort, Quaker has modernized every element of the brand, from products and packaging to in-store displays and ad platforms. To start, it slimmed down the iconic Quaker man by 20 pounds and gave him a facelift to make him look healthier, stronger, and more contemporary. The brand added new energy-packed products, such as Quaker Medleys—a hearty blend of oats and grains with real fruit and nuts; Quaker Soft Baked Bars—high in fiber, protein, and B vitamins; and Quaker Protein—protein-packed instant oatmeal and baked energy bars. Befitting the more mobile and connected lifestyles of today’s young parents, the “Quaker Up” campaign also incorporates and healthy dose of digital media, including banner ads, YouTube videos, a Facebook app, a Quaker Up community website, and a full slate of other digital content. In all, despite its age, the reenergized Quaker brand now has a much younger appeal. “People know the brand, people love the brand, but we needed to forge a stronger connection with contemporary moms,” says Quaker’s chief marketing officer.
Decline Stage
The sales of most product forms and brands eventually dip. The decline may be slow, as in the cases of stamps and oatmeal cereal, or rapid, as in the cases of VHS tapes. Sales may plunge to zero, or they may drop to a low level where they continue for many years. This is the decline stage.
Sales decline for many reasons, including technological advances, shifts in consumer tastes, and increased competition. As sales and profits decline, some firms withdraw from the market. Those remaining may prune their product offerings. In addition, they may drop smaller market segments and marginal trade channels, or they may cut the promotion budget and reduce their prices further.
Carrying a weak product can be very costly to a firm, and not just in profit terms. There are many hidden costs. A weak product may take up too much of management’s time. It often requires frequent price and inventory adjustments. It requires advertising and sales-force attention that might be better used to make “healthy” products more profitable. A product’s failing reputation can cause customer concerns about the company and its other products. The biggest cost may well lie in the future. Keeping weak products delays the search for replacements, creates a lopsided product mix, hurts current profits, and weakens the company’s foothold on the future.
For these reasons, companies must identify products in the decline stage and decide whether to maintain, harvest, or drop them. Management may decide to maintain its brand, repositioning or reinvigorating it in hopes of moving it back into the growth stage of the product life cycle. P&G has done this with several brands, including Mr. Clean and Old Spice. Over the past decade, P&G has retargeted, repositioned, revitalized, and extended both of these old brands, taking each from near extinction to billion-dollar-brand status.
Management may decide to harvest the product, which means reducing various costs (plant and equipment, maintenance, R&D, advertising, sales force), hoping that sales hold up. If successful, harvesting will increase the company’s profits in the short run. Finally, management may decide to drop the product from its line. The company can sell the product to another firm or simply liquidate it at salvage value. If the company plans to find a buyer, it will not want to run down the product through harvesting. In recent years, P&G has sold off several declining brands and brands that no longer fit strategically, such as Folgers coffee, Crisco oil, Comet cleanser, Sure deodorant, Noxema, Duncan Hines cake mixes, Cover Girl and Max Factor cosmetics, Duracell batteries, Iams pet foods, and others.24
Table 9.2 summarizes the key characteristics of each stage of the PLC. The table also lists the marketing objectives and strategies for each stage.25
Table 9.2
Summary of Product Life-Cycle Characteristics, Objectives, and Strategies
Source: Based on Philip Kotler and Kevin Lane Keller, Marketing Management, 15th ed. (Hoboken, NJ: Pearson Education, 2016), p. 358. © 2016. Printed and electronically reproduced by permission of Pearson Education, Inc., Hoboken, New Jersey.