Life cycle of the product | Marketing Concepts.
The analysis of the life cycle of the product or service is that they have a finite life; This is similar to what happens to us human beings. The
products and services have a cycle of life that begins with his
creation (birth) and ends with the withdrawal from the market (death).
Relating to living beings, we can say that products and/or services have a period of growth following a period of decline that precede the death and birth.
Therefore, the life cycle is the process by which the products or services that are released to the market through a series of stages ranging from its conception until its demise by other more up-to-date and more appropriate from the perspective of the client.
When she is monitoring the results of many products or services over a given period, it is discovered that the most common pattern of sales remains a consistent introduction, growth, maturity and decline curve (as shown in the graph). It is obvious that at the beginning the sales are very low, are increasing gradually and then begin to decrease.
Goods and services meet, from its origins until its demise, the next stages in their life cycle: run-up; introduction; growth; maturity; declination; disappearance and removal.
Greater efforts are concentrated in: coverage of distribution channels; promotion, merchandising; training and supervision of sales force; physical distribution for meeting with customers; Home communication advertising and, most importantly, its positioning.
There are several indicators to identify this stage. Firstly, gradual coverage of the sales points selected as targets. Then, reduced rotation of stocks in the channels; its gradual growth in volumes of sales, purchases slow repetitions as well as their progressive participation in the market. Can not specify figures accurate or valid for all cases; But experiences indicate that when a product has managed to exceed 10% of the goals for its stage of maturity when it will reach the maximum of the long-awaited sale has been its introduction and starts growing.
At this stage, the pricing policy and funding should be strategically decided to facilitate rapid penetration.
increased basic differentiation;
degree of loyalty or repeat purchases with sustained progress;
very good coverage in the distribution channels;
increased penetration in the market, but with ample opportunities to advance (between l0% and 95% of the maximum target set for when the product reaches maturity);
marginal contribution higher than 25%;
utilities gross in growth, but still low in relation to their potential;
developing learning curve;
portfolio wide out, but with the possibility of extension;
significant pressure and competitive response;
sustained progress to achieve leadership in costs;
sustained trend in sales growth;
segments and niches still Virgin market, or with low penetration.
The key signals that reflect this stage include, but are not limited to:
optimal level of coverage and penetration of the market, with little potential for growth;
completion of the sales growth trend;
maximum levels of contribution and profitability final, firm but stabilized;
maximum action of the competition to move reached positions;
leadership and dominance in the operated segments, or total market;
high levels of customer loyalty;
wide and almost total extension of lines or varieties of the product;
brands and uses of high recognition and deep positioning;
high turnover of inventories in the business and sales points;
lack of requirement of additional investments to sustain successful positions.
changes in the behavior of customers and users;
technological innovation that marks the initiation of a cycle of obsolescence;
strategic errors inherent in the company;
changes in the socio-economic conditions of the environment;
laws or regulations;
geopolitical influences (case Mercosur, Nafta, etc.).
Within the cycle of decline, we can recognize three instances:
loss of up to 25% of the positions previously supported (sales, share of market, utilities, etc.);
In the cycle of decline, it is possible to try efforts to slow the pace of the fall, but no more than this, since, when their initiation signals are detected, the cycle is irreversible and not justified, economically, make investments to stop it or reverse it.
In the second part of the decline, up to 50% of their overall maturity, the product or service is still interesting for the company. It provides good sales volumes, absorbed costs of structure, generates perhaps even utilities, complements the product line and serves to cater to a clientele that is still true, in significant quantities. As that instance does not require investments nor additional efforts, similar to the previous one must be accompanied and followed with attention, because it is beneficial both for the interests of the company and its customers and distributors.
Already in the third of the decline phases, when is it is exceeding 5 l % of previous earnings and sales, it is necessary to begin to schedule the removal of the product from the market, since in these circumstances economic results are not obtained.
The time of the decision of definitive retirement.
What strategies should use in each of the stages of the life cycle, management of value?
The different stages of the life cycle of the product required, for good business management, specialized marketing strategies. We will then discuss each one of them.
In the introduction
At this stage it is necessary to have ready, for its launch, innovation or new product that will be introduced in the market to further replacement of the product which will withdraw from marketing.
When the product on its decline is still above 50% of the records achieved at maturity, is still interesting for the company, so strategies are maintenance and harvest, or the achievement of maximum recovery offering the product (usually in this instance results in reduced contribution margins and cooperate for the absorption of costs of structure).
From this level of sales and market share, the product begins to generate negative results for the company, and customers already don't care about it. This is where, according to the indicators, the decision of withdrawal, should be mediate or immediate depending on the circumstances, of the product.
Relating to living beings, we can say that products and/or services have a period of growth following a period of decline that precede the death and birth.
Therefore, the life cycle is the process by which the products or services that are released to the market through a series of stages ranging from its conception until its demise by other more up-to-date and more appropriate from the perspective of the client.
When she is monitoring the results of many products or services over a given period, it is discovered that the most common pattern of sales remains a consistent introduction, growth, maturity and decline curve (as shown in the graph). It is obvious that at the beginning the sales are very low, are increasing gradually and then begin to decrease.
Goods and services meet, from its origins until its demise, the next stages in their life cycle: run-up; introduction; growth; maturity; declination; disappearance and removal.
Previous stage
At this stage, prior to its origin, the following processes in the life of the product are developed, among others,: conception of the idea, development of the project, prior to mass production and launch investigations, plan business, etc.Introduction stage
In this instance, once launched the product on the market, the company is occupied through the marketing of all the activities necessary to ensure the coverage and original penetration plan laid down in the objectives of the project.Greater efforts are concentrated in: coverage of distribution channels; promotion, merchandising; training and supervision of sales force; physical distribution for meeting with customers; Home communication advertising and, most importantly, its positioning.
There are several indicators to identify this stage. Firstly, gradual coverage of the sales points selected as targets. Then, reduced rotation of stocks in the channels; its gradual growth in volumes of sales, purchases slow repetitions as well as their progressive participation in the market. Can not specify figures accurate or valid for all cases; But experiences indicate that when a product has managed to exceed 10% of the goals for its stage of maturity when it will reach the maximum of the long-awaited sale has been its introduction and starts growing.
At this stage, the pricing policy and funding should be strategically decided to facilitate rapid penetration.
Stage of growth
At this stage, the product completes its final positioning, consolidated its coverage and began to increase their participation in the market.The signs that identify this stage are:
positioning defined segment;increased basic differentiation;
degree of loyalty or repeat purchases with sustained progress;
very good coverage in the distribution channels;
increased penetration in the market, but with ample opportunities to advance (between l0% and 95% of the maximum target set for when the product reaches maturity);
marginal contribution higher than 25%;
utilities gross in growth, but still low in relation to their potential;
developing learning curve;
portfolio wide out, but with the possibility of extension;
significant pressure and competitive response;
sustained progress to achieve leadership in costs;
sustained trend in sales growth;
segments and niches still Virgin market, or with low penetration.
Maturity stage
When the product has reached the maximum participation possible and predicted its evolution in the market, it has reached the so-called stage of maturity.The key signals that reflect this stage include, but are not limited to:
optimal level of coverage and penetration of the market, with little potential for growth;
completion of the sales growth trend;
maximum levels of contribution and profitability final, firm but stabilized;
maximum action of the competition to move reached positions;
leadership and dominance in the operated segments, or total market;
high levels of customer loyalty;
wide and almost total extension of lines or varieties of the product;
brands and uses of high recognition and deep positioning;
high turnover of inventories in the business and sales points;
lack of requirement of additional investments to sustain successful positions.
Decline stage
After a plateau of high participation and very good sales and profits in the market, any product or service, over time, tends to decrease in its evolution. This can occur in some, or more, of the following causes:changes in the behavior of customers and users;
technological innovation that marks the initiation of a cycle of obsolescence;
strategic errors inherent in the company;
changes in the socio-economic conditions of the environment;
laws or regulations;
geopolitical influences (case Mercosur, Nafta, etc.).
Within the cycle of decline, we can recognize three instances:
loss of up to 25% of the positions previously supported (sales, share of market, utilities, etc.);
In the cycle of decline, it is possible to try efforts to slow the pace of the fall, but no more than this, since, when their initiation signals are detected, the cycle is irreversible and not justified, economically, make investments to stop it or reverse it.
In the second part of the decline, up to 50% of their overall maturity, the product or service is still interesting for the company. It provides good sales volumes, absorbed costs of structure, generates perhaps even utilities, complements the product line and serves to cater to a clientele that is still true, in significant quantities. As that instance does not require investments nor additional efforts, similar to the previous one must be accompanied and followed with attention, because it is beneficial both for the interests of the company and its customers and distributors.
Already in the third of the decline phases, when is it is exceeding 5 l % of previous earnings and sales, it is necessary to begin to schedule the removal of the product from the market, since in these circumstances economic results are not obtained.
Disappearance and removal phase
In its last phase of decline, the product is in the company but has no effect on the market: the distribution channels give it low in its marketing, because there is no demand. Buyers and users do not accept it by not adapt to your expectations and desires.The time of the decision of definitive retirement.
What strategies should use in each of the stages of the life cycle, management of value?
The different stages of the life cycle of the product required, for good business management, specialized marketing strategies. We will then discuss each one of them.
In the introduction
Most recommended marketing strategies for this stage should focus on internal and external sectors of the company.
For internal clients (staff):- Create shared organizational culture.
- Intensive monitoring of the entire process.
- Incentives, incentives and awards, both qualitative and quantitative, for this stage.
- Contingency plan to correct or overcome disadvantages or problems in the launch and introduction.
- Definition of what channels or sales points shall incorporate in the distribution chain.
- Design of trade-marketing strategy, is to say, products or varieties of its line, which drive, which policy of prices, competitive strategies and goals and business objectives should be fixed for each channel to use.
- Intensive sales promotion with objectives and strategies appropriate to the particular objectives of this first stage of the life cycle.
- Merchandising with appropriate action to achieve the best places, exhibitions and activities at the points of sale.
- Development of meetings or conventions of product presentation, where the company explain objectives of business, benefits and advantages.
- Broadcast and direct marketing for distributors and final customers considered necessary for this stage.
- Start of the advertising campaign.
- Activities aiming at generating construction concept and brand image, or in the absence of line or family of products or services.
- Physical distribution, to ensure rational supply, ensuring replenishment and deliveries.
- Immediate gaps between what was planned and what real adjustments.
- Immediate response to competitive strategies, in accordance with the plan or their contingency plans.
- Monitoring of evolution, to define the entry into the next stage.
In the stage of growth strategies to follow are:
For internal clients:- New schemes of incentives, incentives and rewards for results, typical of this stage.
- Analysis of suggestions and innovations, to capitalize on the experiences of the participants.
- Supply of new investments or elements required to meet the growth of production, management, finance, marketing, promotion, merchandising, sales and distribution of the product at this stage.
- Extension in the coverage of geographical areas and segments of retail and wholesale business.
- Continuity in merchandising, promotion of sales, direct marketing and dissemination efforts.
- Negotiation and incentive plan by growth in sales to dealers. Setting new goals and business agreements.
- Support to accelerate the rotation and the penetration of the product in each channel and sales area.
- Continuity of the campaign, but with reconsideration of objectives and strategies, to communicate and to position the competitive advantages and significant differences.
- Continuation of the activities to solidify the concept and the brand image, with enough significant differentiation and identity.
- Customer loyalty. Intensification of frequency of purchases and sales volumes.
The following strategies will be applied in the stage of maturity:
For internal clients:- Designing the new roles and performances required of different functions to ensure having the product or service assistance that requires transit on its maturity.
- Activate participation to achieve improvements in the product or service, either in quality or by extension of lines.
- Stimulate ideas and processes to achieve the greater use of the experience curve, the economy of scale as well as the opportunities to reduce costs and increase profits, of the consequences of this stage of the life cycle.
- Set new standards for systems of incentives, incentives and awards for achievements according to plans and budgets for sales.
- Activities for the promotion of sales, merchandising, direct marketing, contests and events that encourage purchases and consumption.
- Position probable extensions of lines and variety of assortments, and incorporate new users.
- Find new uses and applications for current services and products.
- Extend the segmentation criteria and explore new market niches.
- Expand distribution possibilities.
- Agree on strategic alliances and activities co-marketing.
- Deepen customer loyalty plans.
In the decline stage
In the first phase of decline, until the product has lost less than 25% of its participation in the market in relation to the previous stage, is suitable to support actions of promotion, merchandising, negotiation and sales to slow the loss of market.At this stage it is necessary to have ready, for its launch, innovation or new product that will be introduced in the market to further replacement of the product which will withdraw from marketing.
When the product on its decline is still above 50% of the records achieved at maturity, is still interesting for the company, so strategies are maintenance and harvest, or the achievement of maximum recovery offering the product (usually in this instance results in reduced contribution margins and cooperate for the absorption of costs of structure).
From this level of sales and market share, the product begins to generate negative results for the company, and customers already don't care about it. This is where, according to the indicators, the decision of withdrawal, should be mediate or immediate depending on the circumstances, of the product.
Published for educational purposes