Every product goes through what is called “the Product Life Cycle”. This concept helps marketers interpret product and market dynamics and to develop strategies to react to changing market conditions.
The product, and the strategies employed to promote it, sit within what is happening to the overall market so this needs to be kept in mind. Basically though, a product has four phases:
Each of these phases exhibit different characteristics and require different approaches to marketing objectives, product design, distribution techniques, advertising and sales promotion.
An analogy can be drawn to your own building businesses and your approach to how you might contemplate running and promoting your business.
Now this is not a magic formula, but does provide some insights into the sorts of things you may want to consider.
When a product is first introduced (eg, new materials) some of the characteristics that exist relate to:
• Sales — low
• Costs — high cost per customer
• Profits — negative
• Customers — they are innovative
• Competitors — few
So what are the strategies you should generally employ in this phase?
• Marketing objectives — create product awareness and trial
• Product strategies — offer a basis product
• Price — charge cost-plus
• Distribution — build selective distribution
• Advertising — build product awareness among early adopters and dealers
• Sales promotion — use heavy sales promotion to entice trial
Now that the product is introduced it moves into the Growth Phase (hopefully). Its characteristics are:
• Sales — rapidly rising
• Costs — average cost per customer
• Profits — rising profits
• Customers — early adopters
• Competitors — growing number
How should you respond?
• Marketing objectives — maximise market share
• Product strategies — offer product extensions, service, warranties
• Price — price to penetrate market
• Distribution — build intensive distribution
• Advertising — build awareness and interest in mass market
• Sales promotion — reduce to take advantage of heavy customer demand
The product then enters the Maturity Phase, which is characterised by:
• Sales — peak sales
• Costs — low cost per customer
• Profits — high
• Customers — middle majority
• Competitors — stable number, beginning to decline
So, what should you do?
• Marketing objectives — maximise profit while defending market share
• Product strategies — diversify brands and items models
• Price — price to match or beat competitors
• Distribution — build more intensive distribution
• Advertising — stress brand differences and benefits
• Sales promotion — increase to encourage brand switching
Finally, every product has its day (some take longer than others) and starts to Decline, characterised by
• Sales — declining sales
• Costs — low cost per customer
• Profits — declining profits
• Customers — laggards
• Competitors — declining number
How do you react?
• Marketing objectives — reduce expenditure and milk the brand
• Product strategies — phase out weak
• Price — cut price
• Distribution — go selective: phase out unprofitable outlets
• Advertising — reduce to level needed to retain hard-core loyals
• Sales promotion — reduce to minimal level
As mentioned earlier, this is not a magic formula and a panacea to all woes. The key is to recognise what phase you are in early enough so you can react appropriately and in time.
It is also not to be confused with overall poor economic conditions that affect sales as it is quite feasible to still grow and increase market share during such times. It’s just at a slower rate.