12.2 Product Life Cycle

Stages in New-Product Development

1. Idea generation 2. Idea screening 3. Concept development and testing 4. Marketing strategy development 5. Business analysis 6. Product development 7. Test marketing 8. Commercialization

business analysis

The analysis involves assessing the new product's potential sales, profits, growth rate, and competitive strengths and determining whether it fits with the company's product, distribution, and promotional resources.

Idea screening

screening new-product ideas to spot good ideas and drop poor ones as soon as possible

product development

developing the product concept into a physical product to ensure that the product idea can be turned into a workable market offering

product life cycle

four basic stages—introduction, growth, maturity, and decline—through which a successful product progresses.

Commercialization

introducing a new product into the market - this is sometimes referred to as a product launch

Test Marketing Stage

introduction of a new product supported by a complete marketing campaign to a selected city or geographic area.

Concept development

Concept testing—marketing research designed to solicit initial consumer reaction to new-product ideas—may be used at this stage

What are the stages of the product life cycle?

In the introduction stage, the company attempts to promote demand for the new product. In the product's growth stage, sales climb, and the company earns its initial profits. In the maturity stage, sales reach a saturation level. In the decline stage, both sales and profits decline.

introduction stage of product life cycle

The product is introduced to the target market. Characterized by: 1. Sales grow slowly. 2. Minimal profits as a result of large investment costs in development

growth stage of product life cycle

Characteristics: •Rapid increases in sales •Competition appears •Profit peaks •Advertising shifts to selective demand. •Sales grow at an increasing rate because of new people trying the product and repeat purchasers bought again. •Changes appear..."New and Improved!"

What are the marketing implications of each stage?

Marketers sometimes employ strategies to extend the product life cycle, including increasing frequency of use, adding new users, finding new uses for the product, and changing package size, labeling, or product design.

decline stage of product life cycle

Sales drop, often because of environmental changes. For example, CD's declined as digital music players proliferated. Companies typically follow one of two strategies: 1. Deletion: dropping the product from the company's product line...the most drastic strategy. This option is not taken lightly because there is usually a residual core of customers who continue to consume or use the product even in the decline stage. Example: IBM stopped making laptop computers. 2. Harvesting: the company retains the product but reduces marketing costs. The product continues to be offered, but salespeople do not allocate time in selling nor are advertising dollars spent. The purpose of harvesting is to maintain the ability to meet customer requests. Coca-Cola, for instance, still sells Tab, its first diet cola, to a small group of die-hard fans.

maturity stage of product life cycle

Total industry sales slow, and marginal competitors begin to leave the market. Sales increase at a decreasing rate, and most consumers who would buy the product are either repeat purchasers of the item or have tried and abandoned it. Fewer new buyers enter the market. Marketing actions are focused on maintaining market share through product differentiation and finding new buyers. -Examples: Soft drinks and DVD players.

Marketing Strategy Implications of the Product Life Cycle

the product life cycle is a useful concept for designing a marketing strategy that will be flexible enough to accommodate changing marketplace characteristics. These competitive moves may involve developing new products, lowering prices, increasing distribution coverage, creating new promotional campaigns, or any combination of these approaches. In general, the marketer's objective is to extend the product life cycle as long as the item is profitable.

Idea generation

the systematic search for new product ideas