THE VARIOUS PRODUCT LIFE CYCLE AND THEIR LAGGARDS

THE VARIOUS PRODUCT LIFE CYCLE AND THEIR LAGGARDS

According to Thom Holland’s work on (Sales & Marketing) which was published on April 6th, 2011, he argued that business leaders create and develop strategies that will put their organization in the best possible position for success. To do so they need to have a good understanding of how things work around them and how things are likely to work once they start to move forward.  Therefore, when developing a marketing mix strategy for a product, it is typically a good idea to create unique strategies for each phase of the product life cycle.  To do so, there is the need to have a solid understanding of common characteristics typically seen with each phase in the product life cycle.

A new product progresses through a sequence of stages from introduction to growth, maturity, and decline. This sequence is known as the product life cycle and is associated with changes in the marketing situation, thus impacting the marketing strategy and the marketing mix.
The product revenue and profits can be plotted as a function of the life-cycle stages as shown in the graph below:

     

Introduction

When a product is first introduced to a market, typically sales will be very low. This is usually due to the simple fact that not a lot of people are aware of the product. As a result, the fixed costs can not be spread out very well, which leads to a high cost per customer. The combination of low sales and a high cost per customer typically result in negative profits. During the introduction phase, it’s not very likely that there will be very much competition.

Growth

As the product enters the growth phase, sales should start to rise rather rapidly. As people become aware and start to buy the product, the overall cost per customer will ultimately decrease. With more customers and a lower cost per customer, the product’s profitability should start to increase. During the growth phase, competition will start to take notice and will likely enter the market with a similar product.

Maturity

Once a product finally enters the maturity phase, sales revenue should start to level out. Because the product is selling in such large volumes, the overall cost per customer should be very low. As a result, the product’s profitability should be at its highest point yet. During the maturity phase, it’s likely that the number of competitors in the market has become stable, possibly even declining some.

Decline

And lastly, the phase that people tend to dislike, the decline. During the decline phase, the product’s sales should start to decline, while the cost per customer continues to stay relatively low. Due to the declining sales revenues, the product’s profitability will eventually start to decline. During the decline phase, competitors will likely leave the market.

CHARACTERISTICS OF THE PLC STAGES

Market introduction stage
cost high
sales volume low
no/little competition - competitive manufacturers watch for acceptance/segment growth
losses
demand has to be created
customers have to be prompted to try the product

Growth stage
costs reduced due to economies of scale
sales volume increases significantly
profitability
public awareness
competition begins to increase with a few new players in establishing market
prices to maximize market share

Mature stage
costs are very low as you are well established in market & no need for publicity.
sales volume peaks
increase in competitive offerings
prices tend to drop due to the proliferation of competing products
brand differentiation, feature diversification, as each player seeks to differentiate from competition with "how much product" is offered
very profitable

Decline or Stability stage
costs become counter-optimal
sales volume decline or stabilize
prices, profitability diminish
profit becomes more a challenge of production/distribution efficiency than increased sales
consumer demand for spare parts, maintenance and or product servicing.

THE LAGGARDS

2. Apart from knowing the characteristics of the various stages in the Product Life Cycle (PLC), there are other variables that must be understood during the stages of the PLC which marketers must adhere to whenever a product is expected to be launched unto the market or otherwise.

Marketers must be able to explore the market segment that got the least attention from both academics and practitioners, the LAGGARDS. Being the last to adapt a product or idea, laggards are ignored as irrelevant market players by many companies.

For instance in his seminal work, Diffusion of Innovations, Everett M. Rogers laid down the process of consumer’s adoption lifecycle. Rogers’s segmented the market into five different groups namely, innovators, early adaptors, early majority, late majority and laggards.

Each segment has different characteristics, sizes and attributes and companies have to focus on one consumer segment at the time as these consumers have different needs and desires. Mostly innovators and early adaptors are the important segments when launching a new product. While small, these segments are very vital as they act as the entry point to bigger share of the market.

According to Everett M. Rogers, early adaptors are technologies that can see the potential of the new product. This group is more willing to pay higher prices for immature technology, suffer more pain from product malfunctions and defects. Other research also found that early adaptors have exploratory consumer bahaviour seeking novelty while being characterized by tolerance to ambiguity and low dogmatism (Manning, Bearden &Madden, 1995).

In comparison to innovators, laggards are mostly defined as the last group or segment of consumers to adopt a new product, service or an idea of any kind. Laggards seem to be ignored by both academics and practitioners. However, laggards are too big of a segment to be ignored. Everett M. Rogers (1995) also calculated that laggards comprise about 16% percent of the market. Other calculations put laggards at 21.9% percent of the market (Mahajan, Muller & Srivastava, 1990).

On this not it could be said that while it is difficult to come up with an accurate number, the consensus is however that the percentage is not small, therefore the understanding of laggards and their behavior may help in gaining adoption by late majority, laggards and maybe those who are considered to be non-adaptors.

Finally and demographically, laggards have been characterized by low level of education, low income status and low social mobility (Uhl, Andrus & Poulsen, 1970). For example spending Gh500 cedis on an iphone or ipad is not the best way to spend ones tight money supply. The scarce financial resources may force many people to wait for the product price to come down before making a purchase. This wait makes many people LAGGARDS.

However we should not deter companies from pursuing this segment, in fact, research suggests that laggards are as important as innovators and early adaptor. A recent study by Jacob Goldenberg and Shaul Oreg suggest that laggards do indeed become innovators in some cases (2006).

consumers in both the Business and the Consumer Market

 Markets can be critically examined via the product itself, or end-consumer, or both.  And the most common distinction is between consumer and business markets. To also understand the types of consumers in both the consumer and business market we need to firstly define who a consumer is? And in this case a consumer according to Phillip Kotler looks at a consumer as the ultimate user of the product or service; the consumer may not have paid for the product or service

Let’s for instance consider the following:

• A food manufacturing business makes own-label, Ghanaian ready meals for the major supermarkets.

• So far as the business is concerned, the customer is the supermarket to whom it supplies meals

• The consumer is the individual who eats the meal.

In terms of its marketing effort, who should the business above target?

In reality, it needs to understand the needs and wants of both the customer and the consumer.

It needs to develop a strong understanding of the needs of the supermarkets in terms of their requirements for ready meals (e.g. packaging, recipes, price & delivery).

It also needs to understand (perhaps with the help of the supermarkets) the needs and wants of the consumer. How are tastes changing? Are consumers happy with the standard / taste of the product?

The consumer Markets of today are experiencing rapid changes and is flooded with new opportunities and new challenges.

The significant changes in the consumers' buying behavior, urbanized lifestyle and growth of service sector are the main reasons behind the changed scenario in the consumer market.

The Consumer Market can be classified into following type of markets:
This market comprises of the markets for different consumer products. This includes market for consumer durables, FMCG (Fast Moving Consumer Goods), consumer electronic goods, domestic electrical appliances, cosmetics, jewelry, furniture, air conditioners, bicycles and apparels.
In Consumer Products Market aggressive marketing is required because the customers of consumer product market lack in loyalty and tend to shift from one brand to another very quickly. The consumer products market is characterized by high level of competition among the sellers.
The companies are continuously engaged in modification of business models and business activities to match up with the changing consumer needs. Moreover, the norms of WTO (World Trade Organization) are resulting in various mergers, alliances and tie-ups among the companies. The companies are being compelled to go for these alliances to remain competitive and to exist in the market because, losing the competitive edge will ensure complete market exit.
• Food and Beverages Market
This market consists of the sub-markets like markets for dairy products, bakery products, packaged food products, Beverages, Confectionary, Beer, Alcohol, meat and poultry products.
This type of Consumer Market is full of growth opportunities because of changing lifestyle of present era. Consumer Awareness and Brand Loyalty of customers help this market to grow to a different high.
• Retail Market
The Retail Market comprises of the Supermarkets, Departmental Stores, Food Chain Outlets, Specialty Stores and Franchise Sores.
This type of Consumer Market is discovering new business opportunities with each passing day because of the rapidly changing lifestyle and spending pattern of the people. Even in the suburban areas and in small towns, Departmental Stores are coming up from the big retail chain houses as westernized lifestyle and western culture is making their presence felt all over the world. This type of market generates low profit margins but has high growth potential. To utilize this growth potential, companies need to modify their business activities in accordance with the changing lifestyle and changing consumption trends of the customers. If the customers receive enough value for money, only then they will be loyal to the brands and will make repeated purchase.
• Transportation Service Market
This type of Consumer Market consists of Postal Services, Courier Services and Logistic Services.
Transportation Service Market is generally dominated by a large no. of medium and small enterprises and a few no. of large enterprises. Companies in this type of market essentially require brand name and strong distribution network and significant amount of capital investment. With emergence of technology based advanced facilities like e-commerce and with the increasing use of internet, new horizons are opening for this type of market.
The companies can utilize the advantages of reduced costing, improved customer relationship and accelerated movement of materials and can go for strategic tie ups with international business houses. This way, they can make proper use of the new business opportunities which has been generated by the rising level of Foreign Direct Investment and Economic Growth around the world. (Source Economy Watch November 23, 2010)

On the other hand, the business market encompasses organizational entities that purchase goods and services for the “use in the production of other products and services or for the purpose of reselling or renting them to others at a profit.”
Business markets possess a smaller amount of large buyers, unlike the consumer market, and whose consuming traits are “more geographically concentrated.” Dependent on the type of buyer and consumer, characteristics through decision processes may differ. For instance, the consumer market’s behavior is “influenced by four key sets of buyer characteristics: cultural, social, personal and psychological.” Also the Business markets involve the sale of goods between businesses. These are goods that are not aimed directly at consumers. Industrial markets include
• Selling finished goods
– Examples include office furniture, computer systems
• Selling raw materials or components
– Examples include steel, coal, gas, timber
• Selling services to businesses
– Examples include waste disposal, security, accounting & legal services

Business market consists of profit making organizations. They can be industries, business and retailers. They buy products for business use, reselling or making other products. Buying is done by professional people. The product is backed by company's reputation, sales force and competitive price.

The characteristics of business market are:

I) Focus: The focus of the market is organizations. They are geographically concentrated. It is business to business marketing.

II) Profit: The customers buy products for business use, reselling or making other products. Their aim is to make profit.

III) Demand: The demand for products is generally inelastic. It is not much affected by price. Buyers buy in large volume.

IV) Professionalism: The buying is done by trained and skilled professionals. Quotations and tenders are used as buying instruments. Internet is extensively used.

V) Rationality: The buying is rational based on adequate information. There is no emotional buying.

VI) Channel: Buying is generally done directly from manufacturers or authorized dealers.

VII) Relationship: There is close relationship between the buyer and the seller. Relationship marketing is important.

Finally, Sales force is used for promotion. The image of the company provides credibility to product.

Criteria for selecting an international advertising agencies.

BENJAMIN WILLIE GRAHAM
GIJ LEVEL 300 (WEEKEND)

Very importantly Advertising is a paid message used to promote a product, service or an idea to a specific audience, therefore International advertising refers to advertising which is carried out in multiple countries around the world. Effective international advertising requires specialized cultural knowledge that considers differences between target audiences in different countries. International advertising is considered not only a communication process, but a business activity, an industry and a reflection of society as a whole.

The primary goal of advertising is to effectively communicate with the target audience. The communication process involves multiple aspects which are affected by media, culture, literacy and language. For example, a multinational company that wishes to place newspaper ads will find that their ads will most likely be unsuccessful in countries that have significantly low literacy rates. Additionally, cultural norms and values differ among countries. For example, a television commercial for birth control does not cause concern in many Western countries, while the same ad televised in a conservative Muslim country, such as Saudi Arabia, may be very controversial.

International advertising Agency can also be considered a business practice by which an advertising firm attempts to influence audiences in other countries about itself, and its products and services. Advertising agencies decide whether to create global or regional campaigns that are capable of building a global image about a product or service. Agencies create advertisements and place them in the appropriate media outlets throughout the world.

Indeed there are different types of advertising agencies which have specific functions to operate that would have to be properly be looked at by companies before deciding on what type of agency they would like to work with in the promotion of their products. They may include;

1.      In-House advertising agencies: which believes that they can provide such advertising services to themselves at a lower cost than would be charged by an outside agency.

2.      Interactive agencies: may differentiate themselves by offering a mix of web design/development, search engine marketing, internet advertising/marketing, or e-business/e-commerce consulting.

     3.Search engine agencies: Lately, pay per click (PPC) and search engine optimization (SEO) firms have been classified by some as 'agencies' because they create media and implement media purchases of text based (or image based, in some instances of search marketing) ads.

4. And finally the Full-service Advertising Agency in fact this is a method which can save time and labour. This is the advantage for companies who use this method to advertise. The full-service advertising agency has a whole specialist team for its clients.

Example,  Graham Group of Company’s  has just introduced its new product “DUCY PEANUT”  onto the local market and now wants to advertise internationally, the company has numerous international advertising agency to choose from and some of them include;

1. Aegis Group

2. BBDO

3. DDB Worldwide

4. Dentsu

5. Grey Global Group

6. Interpublic Group

7.  Ogilvy & Mather

8. Saatchi & Saatchi

9. TBWA Worldwide

10.WPP Group

However after a careful research, the company finally decided to work with OGILVY & MATHER  for a number of reasons, for instance, Ogilvy & Mather was founded in 1948 by David Ogilvy, as "Hewitt, Ogilvy, Benson, & Mather" in Manhattan. The company became a leading worldwide agency by the 1960s. Central to its growth was its strategy of building brands such as American Express, BP, Ford, Barbie, Maxwell House, IBM, Kodak, Nestlé, and Unilever brands Pond's and Dove.

Ogilvy & Mather was built on Ogilvy's principles, in particular, that the function of advertising is to sell and that successful advertising for any product is based on information about its consumer.

Some of the major criterion, which was considered by the board and management of Graham Group of Co. following the company’s decision to advertise the DUCY PENUT in the UK and the US. Theses criterion are as follows;

1.      The MARKET COVERAGE OF OGILVY & MATHER, the Agency has very reputable cliental, such as Nestle, and Unilever Brands Pond’s and Dove American Express, IBM, Adidas and Gillette, therefore the DUCY PEANUTS is projected to make a lot of impact in the UK as well as the US. The most important aspect of the sale is the fact that OGILVY & MATHER market coverage within the two developed countries would increase the market share of “DUCY PEANUTS” within the international market and also compete favorably with the other PEANUT products in the UK and the US.

2.      IMAGE AND REPUTATION OF OGILVY & MATHER, in fact when it comes to the image of the Agency it really commands a lot of respect both in Africa and Ghana in general. Indeed its local partners MMRS have for over the years maintained a high standard with regard with the management of its clients therefore Ogilvy and Mather certainly has a huge impact internationally which stands a greater chance of providing enough mileage for “DUCY PEANUTS” world wide.

3.      BUDGET, Looking specifically at Graham Group of Co. The Board and Management took a critical bird’s eye view of the Budget of the company before deciding to engange the services of Ogilvy and Mather in promoting the “DUCY PEANUTS” in both the UK and the US. The company was certified that its budgetary allocation for the international advertisement of the product was well prepared and which meets the needs of the target of the product.

4.      ECONOMIC DEVELOPMENT OF UK AND USA, economically the two countries will provide a real opportunity for the company’s quest to achieve an important milestone the “DUCY PEANUTS” owing to a number of factors which may include the fact that the two countries are superpowers economically with a GDP and economic revenue rate which creates a real enabling environment for the product to be launched and also make the necessary impact needed to sustain the growth of the company.

5.      SERVICES ON OFFER OTHER BY OGILVY & MATHER, One of the factors that made Graham Group of Co. was their desire to take care of the Marketing strategy, Sales Promotion, the selection of media and finally the public relations aspect for the promotion of the “DUCY PEANUTS” which appears more lucrative and attractive for the company to ignore and for that matter this services are expected to propel speedy sale of the product.

6.      COMMUNICATION AND SUPERVISION, Ogilvy & Mather among other things has corresponding agencies in both the UK and the US which will see to the proper sale and promotion of the “DUCY PEANUTS” in these countries owing to the establishment of a proper internal systems within the market of the products sale and this is expected to check the performance of the “DUCY PEANUTS” in the UK and the US where the company has high hopes of achieving a considerable results.

This criterion which was critically considered by Graham Group of CO is expected to attract more consumers to the products of the company starting with the DUCY PEANUTS which is very attractive to its new market. Therefore OGILVY & MATHER coming on board is supposed to also give room for new innovations to the company’s products internationally.