What is a Product Life Cycle?

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By: Site Engineer, Staff

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After launching new product management wants the product to enjoy a long and happy life. Although the product may not sell forever and there would need to want to earn a decent profit to cover all the efforts and risks that went into the production. This calls to mind that each product has a life cycle but one may not know the cycle’s exact shape and length in advance.

Five Distinct Stages of a Typical Product Life Cycle (PLC)

  • Developmental Stage: This stage begins when the company finds develops a new product idea. During this stage, sales are zero and the company’s investment costs up.
  • Introductory Stage: This is the period of slow sales growth as the product is being introduced into the market. Profits are not realized yet because of the heavy expenses on product, production, promotions etc.
  • Growth Stage: In this stage, there is market acceptance. Both sales and profit rise often at a rapid rate. Competitors enter the market in large numbers. Sellers now shift to a “buy my brand” rather than a “try this product promotional strategy”.
  • Maturity Stage: It is a stage or period of a low down in sales growth because the product has achieved acceptance by most of the potentials buyers. Profit level is on the decline because of increased marketing outlays to defend the product against competitors.
  • Decline Stage: This is a period when products become outdated to changes in technology or competitors improvement on their products. Here new products start a new life cycle and replace the old ones. Advertising declines and a number of competitors withdraw from the market. At this stage what is needed here is an innovation by withdrawing the old stock in the market and adding value to them. This will lead you to start afresh from stage one.

Marketing Audit and SWOT Analysis

An organization’s performance in the market place is influenced significantly and directly by the strategist’s perception of three factors namely:

  • The organization’s current position,
  • The nature of environmental opportunities and threats, and
  • The organization’s ability to cope with environmental demands.

The marketing audit is thus designed to provide the strategist with a clear understanding of these three dimensions and in this way provide a strong foundation for the development of the strategy. The marketing audit is in a number of ways the true starting point for the strategic planning process. This is because it is through the audit that the strategist arrives at a measure of both environmental opportunities and threats and of the organization’s marketing capability.

The thinking that underpins the concept of marketing audit is straightforward. The corporate objective and strategy can only be developed effectively against the background of a detailed and objective understanding of both corporate capability and environmental opportunity.

The audit is, therefore, the means by which a company can identify its own strengths and weaknesses as they relate to external opportunities and threats. It is thus a way of helping management; to select a position in that environment based on known factors. A marketing audit is also a comprehensive, systematic independent and periodic examination of a company’s or business unit’s marketing environment objectives, strategies, and activities with a view to determining problem areas and opportunities and recommending a plan of action to improve the company’s performance.

Taken together these perceptions highlight the three major elements and potential benefits of a marketing audit.

These are:

  • The analysis of external environmental condition,
  • The evaluation of past performance and present activities, and
  • The identification of future opportunities and threats.

These elements are important because irrespective of the size of the organization, corporate decisions have to be made within the constraints of the limited total resources. Recognizing this, therefore, the strategist is then faced with the task of producing a resource allocation pattern that would offer the best potential for meeting the firm’s objectives.

Marketing Strategies

Quite naturally, products do not sell themselves, it is the responsibility of the small business firm to reach out to their potential customers by making its goods and services accessible to them. Effective marketing management involves the development of a consistent market plan that encapsulates all the necessary market imperatives and identifies ways and means of high but realistic sales objectives.

The basic elements of a market plan include:

  • Pricing Strategy: The processes that are set on the product or services of a small business firm should be determined after weighing marketing.
  • The Firm’s Mission: This is a careful articulation of the firm’s purpose its current position, its target and strategies for achieving this. In other words, the firm’s identity, strategic objectives, and priorities as far as its customers, goods, and services are concerned.
  • Market Analysis: An analysis of the market environment in which the small firm operates. This encompasses assumptions about its potential market, the impact of competition and the goods and services delivered to its market to satisfy potential customers.

Considerations such as the followings:

  • The relative sensitivity of the firm’s customers to different price levels.
  • The customers’ perceptions of his needs or value benefits and satisfaction the costs of production and distribution of the goods or services.
  • The relative strengths and weaknesses of the firm’s products vis-a-vis competitors’ products in terms of quality and price.
  • Feasible alternatives to changes in pricing and their impact on the firm’s sales volume and profits.
  • The firm’s image and advertising campaigns targeted at its customers.

Though there is no hard and fast formula for pricing goods and services it is still important to bear in mind that each product presents its own unique pricing decision. Therefore, determining price levels appropriate to a firm’s products is more of an art than a science.

Promotional Strategies

Promotion is one of the four major elements of the marketing mix. It represents the company’s attempt to stimulate sales by directing persuasive communication to buyers, in totality, promotion covers areas such as advertising, public relations, sales promotion, and personal selling.

Promotion helps to build a product or create a service. A producer or marketer who ignores promotional tools and activities after producing his product and sits back to watch the product sell itself soon discovers that he has achieved very little. It is even more important for a small-scale entrepreneur with a limited resource base because he must sell to remain afloat. Promotion, therefore, assists in pushing forward and advancing an idea or product with the underlying motive of gaining acceptance and approval for it.

Objectives of Promotion

  • A typical promotional campaign has several objectives but three are outstanding;
  • To portray the service benefits in a pleasant and appealing manner
  • To differentiate its offerings from those of its competitors and
  • To build a good corporate image and reputation.

The basic objective underlying most promotional activities are to increase sales. In some others, such as the recent promotional campaign by Coca Cola it was aimed at winning back customers. Coca Cola may have observed that following the increase in the prices of its products, patronage had reduced considerately. The conception of the promotional strategy was therefore targeted at winning back its family of customers. When targeted at increasing sales the strategies could be devised for achieving short and long-term goals. In most cases, however, both aims are achieved but the short-term objectives will shape the strategies, methods, and tools utilized.

As earlier mentioned products do not sell themselves. A well-articulated and relatively cheap campaign to publicize and promote a firm’s goods and services though will depend on all the circumstances that may be unique to it. Nevertheless, it is still necessary for a small firm.

However, the following issues help to inform the focus of a firm’s promotional effort:

  • What is the cost of the preferred medium?
  • How can customers be reached through the selected medium?
  • Which alternatives would yield greater coverage or make a greater impact at different levels of expenditures?
  • What are the different ways of attracting potential customers and retaining old ones?

Above all, before embarking on a promotional campaign, it is important to develop the firm’s basic sales message, that is, what the firm should tell its potential customers about itself, its goods or services.

To understand the role of promotion in marketing we need to assign specific roles to the tools within an integrated communication strategy. The promotions tools often found in any marketing organization’s promotional model include advertising public relations, sales promotion, personal selling, packaging, and other marketing mix.

We shall examine these tools briefly to underline their roles and examine their implications for the activities of small-scale enterprises.

Advertising

There are several perspectives regarding what advertising is and what it does. Advertising represents any form of non-personal presentation and promotion of ideas, goods or services by an identified sponsor.

The basic role of advertising in marketing is to make relevant information available to the target audience. Effective advertising can determine the success or failure of a particular product.

In a market, economy communication has proved to be a useful installment in exerting individual, corporate and national prowess. A promotional campaign involves the use of communication to demonstrate the importance of competitive advantage in the decision to purchase a product. Without advertising, it is inconceivable that promotional activities could take place on a large-scale. In current practice the use of multimedia is noticeable. Here, a combination of several media channels such as radio, television, billboards, newspapers and magazines, posters, promotional items among others are employed simultaneously.

Public Relations

Public Relations have been viewed as the deliberate planned and sustained the effort to establish and maintain mutual understanding between an organization and its public. It comprises all forms of planned communication between an organization and its public for the purpose of achieving specific objectives.

The purpose of public relations activities is to create understanding, goodwill, and support among the public upon whom the organization depends for success. Effective public relations strategies are used to generate awareness and a positive disposition to enhance the success of the sales effort. It may be used to improve or restore public confidence on a product, indicate social responsibility, underlines the potential for stability correct misconceptions, plead a case, improve attitudes and opinions create understanding g and establish special relations.

It is generally assumed that public relations coverage has a less than obvious price tag than advertising in the media. In truth, however, there is a cost attached to it though it may not be immediate and obvious. Effective public relations strategy works in consonance with other promotional tools for the success of the business. As a promotional tool, it is noted for having more impact and credibility than any form of the paid form media message. Public relations should not be substituted for publicity as its width is wider and more embracing.

Sales Promotion

This involves strategies utilized to give a product a temporary ‘lift’ in order to achieve a tactical objective. The objective involved could be to get retailers to stock the product or the customers to sample it or to stimulate sales. Under normal circumstances, sales promotion is not a routine activity. Sales promotion activities are often used to supplement other promotional tools and usually consume a large percentage of the advertising budget. It includes different forms of packaging exhibition and sponsorship all aimed at attracting consumers to patronize a particular product or outlet.

Personal Selling

As a promotional strategy personal selling is time-consuming expensive and slow. But for a small-scale business trying to break into a market dominated by products and services of large enterprises, it is worth the while to spend quality time and resources on it. Therefore, personal selling functions providing specific inputs that are not contained in advertising messages.

While advertising primarily seeks to inform consumers, personally selling goes a step further in attempting to convince the individual to try out a product. Obviously, personal contact is necessary to effect a sale answer all the consumer’s information needs, elaborate upon specific points perceived as significant by individuals and resolve doubts regarding the suitability in a particular situation. The sales of life insurance policies thrive on personal contact without which it would be extremely difficult.

Integrated Promotional Strategy of Small Businesses

The nature of business undertaken by small-scale enterprise determines to a large extent the promotional strategies to be adopted by the entrepreneur. A cottage business that produces a brand of beverage or pure water needs to consider a combination of several strategies and options before settling for a particular one or more of them. For example, before the product reaches the market the public would have been sensitized adequate about the new product through the use of press releases featured in newspapers and other media that enjoy patronage in the area. This is an aspect of public relations strategy.

The entrepreneur should be careful about trying to reach an audience that it cannot serve defectively as this could be reflected in the use of a medium that serves a wide area and therefore rather expensive. There is absolutely no harm in focusing on one local government area, town or one city. In some big town in Africa for instance, the various brands of pure water have areas regarded as their traditional strongholds. It is when demand has been effectively met in the area that the enterprise could consider expanding its scope of marketing and coverage.

The use of advertisements should not be limited to media outlets alone. Other viable avenues include the use of stickers, posters, banners among others. These channels have been found to be very effective as they could be targeted at particular areas with a considerable degree of success. A cottage industry that wishes to focus initially on its local environment would naturally discover that it spends a lot less in promoting its image and product than an enterprise that begins by focusing on an entire state. In this case, personal selling through personal contact is important.

Prospective patrons that already have their loyalties elsewhere require a lot of conviction to be able to sway them and change their convictions. Other than these prospective patrons require incentives to be able to make up their minds.

 

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