Marketing strategies at maturity stage of PLC.

Marketing Strategies at Maturity Stage of PLC

Subject: Research Methods and Techniques Group Members: Waleed Bin Zahid Arsal Rizvi Faizan Khan Mohammad Muneeb Submitted: Miss Salma
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Marketing strategies at maturity stage of PLC.

MARKETING STRATEGIES AT MATURITY STAGE OF PLC.

INTRODUCTION:
Every product that enters into market has to go through a life cycle which is known as product life cycle (PLC). Products have a limited life. Every stage possesses different challenges and opportunities for the seller. Products require different marketing strategies in each life cycle stage. The product life cycle (PLC) has 4 different stages and their characteristics are: 1. Market introduction stage 1. 2. 3. 4. 5. costs are very high slow sales volumes to start little or no competition demand has to be created customers have to be prompted to try the product 6. makes no money at this stage 1. costs reduced due to economies of scale 2. sales volume increases significantly 3. profitability begins to rise 4. public awareness increases 5. competition begins to increase with a few new players in establishing market 6. increased competition leads to price decreases 1. costs are lowered as a result of production volumes increasing and experience curve effects 2. sales volume peaks and market saturation is reached 3. increase in competitors entering the market 4. prices tend to drop due to the proliferation of competing products 5. brand differentiation and feature diversification is emphasized to maintain or increase market share 2|Page

2. Growth stage

3. Maturity stage

Marketing strategies at maturity stage of PLC.

6. Industrial profits go down 4. Decline stage 1. 2. 3. 4. costs become counter-optimal sales volume decline prices, profitability diminish profit becomes more a challenge of production/distribution efficiency than increased sales

Following graph shows the changes that occur in sales of product as time passes by. From graph we can see that during maturity, sales are at their peak and then the decline stage starts and gradually the sales decline too.

Fig: Graph of PLC

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Marketing strategies at maturity stage of PLC.

ORGANIZATION OF THE REPORT:

1. INTRODUCTION

2. LITERATURE REVIEW

3. METHODOLOGY AND LIMITATIONS

4. FINDINGS OF THE RESEARCH

5. CRITICAL ANALYSIS

Figure: Organization of the Report

RESEARCH PURPOSE:
The purpose of this research is to determine following factors: What are the marketing strategies at maturity stage of product in its life cycle? How to retain the market share of the product in its maturity stage? What factors help in gaining more market share of a mature product?

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Marketing strategies at maturity stage of PLC.

LITERATURE REVIEW:
The product life cycle provide some essential perspective for the making of marketing programmes or strategies. Every phase in PLC has a distinct characteristic and strategy for a particular phase may be unimportant for another phase (Abell and Hammond, 1979). Pessemier, (1977) proposed that the strategy of a product may change according to the demand and competitive situations in the various phases of a product throughout the lifecycle. There are 4 basic stages for PLC, introduction, growth, maturity and decline.

INTRODUCTION STAGE: Where the demand of the product just begins to grow.
Due to less demand at this stage the costs are high and the sales volume are low as also the competition is quite less in the market. Demand has to be created so that customers are inclined towards trying the product. Competitors tend to be few in number, indeed there may be only one major player in the marketplace -- the innovating firm

GROWTH: Where there is high market demand for the product. During this stage the costs
are reduced due to higher sales volumes as also the competition starts to begin with newer players. Prices are aimed to increase the market share along with profitability being high. Competition continues to grow throughout this stage. As competitors recognize profit potential in the market, they enter the market with their own versions of the product. As competition intensifies, strategies turn to those that will best aid in differentiating the brand from those of competitors. Attempts are made to differentiate and find sources of competitive advantage. In addition, firms identify ways in which the market can be segmented and may develop focused marketing strategies for individual segments.

MATURITY: When demand stables. During this period the costs are low and sales volume
peaks with increase in competition .Prices tend to drop and industrial profit go down. Competition is most intense during this stage. The intensity of competitive in-fighting drives the changes in costs and profitability.

DECLINE: Demand saturates and tends to fail. Costs become counter-optimal and sales
volume decline or stabilize. While profit becomes more a challenge of production/distribution efficiency than increased sales. There generally are a significant number of competitors still in the industry at the beginning of decline. However, as decline progresses, marginal competitors will flee the market. As a result, competitors remaining through decline tend to be the larger more entrenched competitors with significant market shares.

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Marketing strategies at maturity stage of PLC.

Avvari V. Mohan,K.N. Krishnaswamy, (2006) found out that in maturity, there are five MP (Marketing Program) variables that are prominent in terms of their means are market segmentation, need determination in new markets, improve product styling, targeting repurchases and improving product quality. Some other elements like expenses, addition of features, sales promotion, designing, line extension are also important. Market development is more useful then product development in maturity stage. When a product reaches to maturity, a greater standardization is suggested along with the lower product differentiation. (Dean, 1950) Strategies for maturity stage of PLC: Levitt and Wasson, (1965) found out that in this phase, marketing tries to maintain market share and sales and at the same time find new markets. Market segmentation, increasing product line), increased advertising, increasing complementary products, consolidating distribution, price reductions are some of the important elements of MP in this phase. Hoffer (1975) further concluded that product differentiations, product differentiation through advertising, reduction of distribution extensity are some strategies given by. Segmentation of the market is key strategic action. William E. Cox Jr. (October 1976) found that the maturity stage is divided into three phases: growth, stable and decaying maturity. In the first phase, the sales growth starts to decline. There are no distribution channels to fill. New competitive forces emerge. In the second phase, sales flatten on a per capita basis because of market saturation. Most potential consumers have tried the product and future sales are governed by population growth and replacement demand. In the third phase, decaying maturity the absolute level of sales starts to decline and customers begin switching to other products. Marketing should cut extra ordinary expenses but pricing should be premium, means there should be cost reduction strategy (Hambrick et al., 1982a). Other authors stress upon superior product quality, increase in sales efforts, marketing and advertising expenditures and manipulation of prices. (Hoffer, Wasson, 1975). The main aim and objective of all these activities and strategies is to maintain the market share for the product. Pessemier (1977) states that the promotional emphasis will be a price and marketing expenditures will be moderate and the selling approach is based on the value of the product. The distribution strategy is to increase intensity and extensity, if the strategy to move to new markets. Hofer (1975) discusses in detail all aspects of business strategy at this phase of the PLC. The degree of product differentiation and the nature of buyer needs, he states, are the two important determinants at this phase based on which he presents secondary normative 6|Page

Marketing strategies at maturity stage of PLC.

propositions. If the product differentiation is low, Hofer (1975) proposes that the business should attempt to segment the market or seek vertical integration. If the differentiation is low, but other aspects like buyer needs are non-economic, then universal marketing strategy should be used and increase marketing expenditures. In the case of high degree of product differentiation marketing should develop service capabilities and expand geographically or maintain and enhance distinct competencies in their marketing area and seek improvements in their products. Jordan P. Yale (November-December 1965) states that the third phase of maturity poses the most challenges. The sales decline creates overcapacity in the industry, which leads to intense competition. Competitors scramble to find niches. They engage in frequent markdowns. They increase advertising and trade and consumer promotion. They increase R&D budgets to develop product improvements and line extensions. They make deals to supply private brands. A shakeout begins, and weaker competitors withdraw. The industry eventually consists of well entrenched competitors whose basic drive is to gain or maintain market share.

RETENSION OF MARKET SHARE IN MATURITY PHASE:

Now, we review some pertinent literature about market share strategies in maturity stage of plc.

WHAT IS MARKET SHARE?

Market share is a term used to represent a product or service's popularity and customer base. Retaining that base of popularity has to do with a company's ability to not lose popularity. The definition and computation of a market share figure raises three major operational problems: What measure of sales is to be used? What market are we in? Against which brands is our product competing? The competitive value of market share for a product varies with its stage in the product life cycle.

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Marketing strategies at maturity stage of PLC. STRATEGIES TO RETAIN MARKET SHARE:

Follow up with your customers. Many companies get complacent with the customers that they already have and do not take the time to check up on them periodically. Also personalize the service that you give your customers. Find a way to celebrate victories and special events with your customers. Give them something not offered by any other competitor. A unique offering differentiates us from our competition. Most times this is an added feature, sometimes it's a better delivery system. It can even be the product or service itself.

CONCLUSION:
Dominating the industry are a few giant firms.perhaps a quality leader, a service leader, and a cost leaderthat serve the whole market and make their profits mainly through high volume and lower costs. Surrounding these dominant firms is a multitude of market niches including market specialists, product specialists, and customizing firms. The issue facing a firm in a mature market is whether to struggle to become one of the big three and achieve profits through high volume and low costs, or to pursue a niching strategy and achieve through low volume and high margin. Sometimes however the market will become polarized between lowand high-end segments, and the firms in the middle see their market share steadily erode.

CONCEPTUAL FRAMEWORK:
In this study we look into how to retain market share in maturity stage of product life cycle. In maturity stage, product support must be maintained in order to keep your existing customer base satisfied. Very rarely will customers switch to a competitive product during this phase. The industry philosophy tends to be "if its not broke, don't fix it." Now is the time to handle any adverse perceptions that may have developed such as reliability issues. Marketing communications efforts should be targeted at improving customer perceptions. Advertising and public relations activities should reinforce your brand image as a market leader. All these strategies are used to maintain a products market share. On the other hand, firms dont just maintain the market share of matur e products, but also tries to raise it by emphasizing on market development programs like entering new markets and market segmentation.

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Marketing strategies at maturity stage of PLC.

Other variables for measuring the market share strategy are: Advertisement efforts Sales promotion Market development Product development Product differentiation Price manipulation

RESEARCH METHODOLGY:
In the previous chapter we brought up literature connected to our research questions. In this chapter we will discuss our research methodology choices made for our study. This section clarifies the ways and techniques used to gather information and how to practice it. This increases the possibility to receive appropriate answers on our research questions and make valuable conclusions.

RESEARCH DESIGN:
Our research will take place in two phases.

PHASE 1: PILOT STUDY

SAMPLE & PROCEDURE: First of all, questions to be asked in interviews would be pilot tested among a small sample of 3 consumer goods manufacturers. The procedure will be that the relative executives of selected companies were given the open-ended questionnaire to be filled. Pilot study data will be analyzed and results will be formulated.

PHASE 2: MAIN STUDY

SAMPLE & PROCEDURE: After the pilot study and its analysis, we move towards the main study, we take sample of 9 consumer goods manufacturers. 3 of those would have high market share, 3 having average share and the remaining are having low market share. We make this criterion in order to get closer results to that of population. Then, we will conduct face to face interviews to the 9|Page

Marketing strategies at maturity stage of PLC.

directors marketing of respective companies. After data collection, it will be analyzed by the help of SPSS. SAMPLING: Convenient sampling technique will be used for the research.

POPULATION: This study is being conducted in order to determine the marketing strategies to retain market share in maturity phase of the product. All the consumer goods manufacturing companies in Karachi are the population for this study.

SAMPLING FRAME: Manufacturers of consumer goods in Karachi. SAMPLE: Consumer goods manufacturers 3 companies having high market share 3 companies having average market share 3 companies having low market share SAMPLE SIZE:
N= 9 companies.

DATA COLLECTION SOURCES: The focus of this study is on the marketing programs or strategies. The importance of primary data cannot be neglected; however, secondary data will also be collected to augment the study. Books, articles and journals will be used as sources of secondary data. DATA COLLECTION INSTRUMENT: The researcher will collect data by conducting face to face interviews with the relative executives. The questions to be asked in the interviews will be of open-ended type in order to get a better understanding about the strategies used to retain the market share of mature products. 10 | P a g e

Marketing strategies at maturity stage of PLC.

LIMITATION OF THE RESEARCH: The topic selected for the research falls into a broad area. Limits of both resource and time led us to focus the research on few specific questions. The research is done only in the consumer markets. Industrial markets may have different point of view regarding same questions. Only view points of manufacturers of consumer goods taken as a representation of the population. Therefore, this study cannot be generalized.

Data Collection:
As it has been discussed before that data for this study is collected by both primary and secondary sources. The interviews conducted from the marketing executives of our sample companies has questions like what impact does advertising efforts help in retaining market share of mature products? How much emphasize should be on sales promotion of a product at maturity stage in order to gain market share? Should companies go for gaining more market share or they should sustain their share? Should there be price manipulation in maturity stage of product? Since there is a lot of standardization in maturity products, how companies should differentiate their products from that of their competitors?

Since there are mostly qualitative data, therefore, the analysis will be done by the researchers themselves or with the help software. For the quantitative data, SPSS will be used to analyze the data.

Analysis:
We have collected both quantitative and qualitative data. The qualitative data was analyzed by content analysis technique which is defined as a research method for the subjective interpretation of the content of text data through the systematic classification process of coding and identifying themes or patterns (Hsieh & Shannon, 2005, p.1278). The individual interviews produced the data in the form of notes was analyzed by the help of software like ETHNOGRAPH which systemize and facilitates all the steps in qualitative analysis.

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Marketing strategies at maturity stage of PLC. Conclusion:

We wanted to know marketing strategies at maturity stage of product life cycle. Every product goes through 4 stages i.e. Introduction, growth, Maturity and Decline. It can be concluded that to retain market share in maturity stage of product life cycle organizations uses various strategies such as advertising, sales promotion, product differentiation that helps to retain market share. But, only few companies manage to get the real success which focus on quality at economical cost by providing something extra than others.

References:

Hofer, C.W. (1975), "Toward a contingency theory of business strategy", Academy of Management Journal, Vol. 18 No.4, pp.785-810. Read it at https://www.contentscm.com/vlib/order/OpenURLReceive.aspx?clientid=8710&rft_val_fm t=info:ofi/fmt:kev:mtx:journal&rft.atitle=Toward+a+contingency+theory+of+business+strat egy&rft.jtitle=Academy+of+Management+Journal&rft.volume=18&rft.issue=4 Levitt, T. (1965), "Exploit the product life cycle", Harvard Business Review, pp.81-94. Read it at https://www.contentscm.com/vlib/order/OpenURLReceive.aspx?clientid=8710&rft_val_fm t=info:ofi/fmt:kev:mtx:journal&rft.atitle=Exploit+the+product+life+cycle&rft.jtitle=Harvard+ Business+Review&rft.volume=&rft.issue= Pessemier, E.A. (1977), "Product life cycle", Product Management Strategy and Organisation, John Wiley & Sons Inc., USA, . Read it at https://www.contentscm.com/vlib/order/OpenURLReceive.aspx?clientid=8710&rft_val_fm t=info:ofi/fmt:kev:mtx:journal&rft.atitle=Product+life+cycle&rft.jtitle=Product+Managemen t+%E2%80%93+Strategy+and+Organisation&rft.volume=&rft.issue= Catry, B, Chevalior, M. (1974), Journal of Marketing, Vol. 38, No. 4 (Oct., 1974), pp. 29 34Published, USA.
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Read it at http://www.jstor.org/stable/1250388 Wasson, C. (1974), Dynamic Competitive Strategy and Product Life Cycles, Challenge Books, St. Charles, IL, USA. http://learningstore.uwex.edu/assets/pdfs/g3658-12.pdf Abell, D.F., Hammond, J.S. (1979), Strategic Market Planning Problems and Analytical Approaches, Prentice Hall, Inc, Englewood Cliffs, NJ, USA, .

URL https://www.contentscm.com/vlib/order/OpenURLReceive.aspx?clientid=8710&rft_val_fm t=info:ofi/fmt:kev:mtx:journal&rft.atitle=&rft.jtitle=Strategic+Market+Planning+Problems+a nd+Analytical+Approaches&rft.volume=&rft.issue=

Mohan,A.V, Krishnaswamy,K.N, (2006), ) "Marketing programmes across different phases of the product life cycle: An explorative study in the Indian machine building sector", Asia Pacific Journal of Marketing and Logistics, Vol. 18 Iss: 4, pp.354 373.

URL http://www.emeraldinsight.com/journals.htm?articleid=1575507&show=abstract Levitt, T. (1965), "Exploit the product life cycle", Harvard Business Review, pp.81-94. Kotler, P. (1991), Marketing Management, Prentice Hall, Inc, Englewood Cliffs, NJ, USA,

URL https://www.contentscm.com/vlib/order/OpenURLReceive.aspx?clientid=8710&rft_val_fm t=info:ofi/fmt:kev:mtx:journal&rft.atitle=&rft.jtitle=Marketing+Management&rft.volume=& rft.issue= http://psychology.about.com/od/psychologywriting/ht/method.htm

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en.wikipedia.org/wiki/Product_life-cycle_management_(marketing) www.netmba.com/marketing/product/lifecycle/ http://www.google.ca/imgres?imgurl=http://www.netmba.com/images/marketing/product /lifecycle/lifecycle.gif&imgrefurl=http://www.netmba.com/marketing/product/lifecycle/&h =254&w=309&sz=4&tbnid=mWNSVuUXXr5xnM:&tbnh=90&tbnw=109&prev=/search%3Fq %3DProduct%2BLife%2BCycle%26tbm%3Disch%26tbo%3Du&zoom=1&q=Product+Life+Cycl e&usg=__I_lbXlnqWMcdvM2Qzf5qdFK0fL0=&docid=6ONlJdlLJZ1wEM&hl=en&sa=X&ei=Gfe 8T8_QLo_LrQfNh4isDQ&ved=0CHAQ9QEwAw&dur=238 http://www.urenio.org/tools/en/Product_Life_Cycle_Management.pdf

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