Chapter 12 - The Marketing Mix: Product and Price
Lesson Objective: To understand how the product life-cycle impacts marketing mix decisions
You have started understanding the Marketing Mix and were exposed to the first element of the Four Ps: Product.
Still regarding Product there are other aspects to be understood:
- The Product Life-Cycle;
- Extension Strategies.
The Product Life Cycle shows how the sales of a product behaves overtime. The cycle is made of four stages:
Introduction:
- The moment in which a product is introduced to the market;
- Low sales, low revenue;
- High costs (R&D and advertisement);
- Potential losses.
Growth:
- Product starts becoming more popular and well-known;
- Increase in sales and revenues;
- Potential profits.
Maturity:
- Sales are now steady;
- Sales and revenues are at their highest;
- Costs are much lower than on prior stages;
- Higher profits.
Decline:
- Sales and revenues are now decreasing;
- The product might become unprofitable;
- Product might be withdrawn from the market.
NOTE: the length of each stage depends on the product and industry itself. The life cycle of a product in the fashion industry, for example, lasts a few weeks/months whereas the life cycle of a medicine may be of decades.
If you were a business and your product is going through the life cycle, what would you want the most?
To be at the introduction stage? Growth? Maturity? Or decline?
The maturity stage is the most profitable stage of the life-cycle: low costs and high revenues.
Business try to find ways to stretch this stage as much as possible before having to introduce a new product - these are called extension strategies:
How do extension strategies work?
Finding new markets for the product (geographically);
Finding new uses for the product (new segments);
Adapting the product/packaging to give it a new look/feel and keep sales up;
Increase investment in promotion to attract new customers.
To-Do List:
Test Yourself (p. 170)
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