Marketing Strategies for Different Stages of the Product Life Cycle

Kotler says, "the company must think about how to extend the product's life and profitability in the face of knowing that it will not last forever". This assumes of course, that products have a lifecycle. I guess we can all think about products/brands/services that we have used in the past that no longer fit with either today's way of living or my own life cycle.

Kotler continues,"to say that a product has a life cycle is to assert four things;

1. products have a limited life
2. product sales pass through distinct stages, each posing different challenges to the seller
3. product profits rise and fall at different stages of the product life cycle
4. products require different marketing, financial, manufacturing, purchasing, and personnel strategies in the different stages of their life cycle.

We understand the typical product life cycle (PLC) as being an S-shaped curve with four phases; introduction, growth, maturity and decline.

But, as Kotler says, in reality, very few products follow this S-shape during its life - what is more normal is an overlap of this S-shape as marketers look to extend various satges or even start a new PLC for the same product. There are of course a range of strategies available to help the marketer extend the products PLC.

Kotler gives us a handy model - see table 12.1, to show how the marketer can set the relevant strategy depending upon where the product is on its PLC.

The end of the chapter goes on to discuss the PLC for markets. This again is probably very familiar territory for us marketers.

But, how many of us actually plot either the PLC for our brands under management or the market they compete within ? And then use this analysis to help set strategy ?

In my years working across a wide range of sectors and georgraphies, I have used the concept of PLC but not really analysed the PLC that thoroughly and then gone onto to use this analysis to help set the strategy moving forwards. I can think of a few projects where this analysis could be useful and I will plan to add this tool into the range of marketing models I use on a regular basis when working as a marketing consultant.

Marketing Strategies for Market Leaders, Challengers, Followers and Nichers

This chapter looks at designing "winning strategies" for organisations that takes into account; the competitor situation of a market, stages in the organisation's product life cycle and global opportunities & challenges.

Kotler argues; "Competitors in a particular target market will, at any point in time, differ in their objectives and resources, and hence in their strategies."

I have often come across companies that claim they have "maxed out" in their market - I think they mean that they have probably reached the maximum market share level possible. In this case, the objective maybe to maintain this position and defend against competitor attack - not easy but with a well planned strategy, this is achieveable.

Also, many companies are not number one in their market and they look to get to that position - should you attack the number one player or is there a 'softer' target ?

This chapter by Kotler looks at various positions an organisation can take within their market - he actually lists six positions that he has taken from Arthur D Little, a management consultant firm.

Kotler goes onto discuss how a 'market leader', 'market challenger', 'market follower' and 'market nicher' can design their strategy based upon their objectives, resources and competitive strengths.

In summary, Kotler says that a 'market leader' faces three options; i) expand the total market and by retaining the same share position, their business will grow, ii) protect current position by defending off attacks from competitors, and iii) growing market share.

Kotler also covers options fro the other three positions of the organisation.

This chapter is still, I think, very real and relevant for today's marketer - we are all faced with the dynamics of whatever market we are working in. And it is true to say that when I work with an organisation on their strategy, their competitors are also working on theirs - and if they are not, we should adopt the position that they could be.

Identifying Market Segments, Selecting Market Targets, and Developing Market Positions

This chapter starts with Kotler talking about the importance of recognizing that companies cannot effectively serve all customers in a market. "The firm, instead of competing everywhere, often against superior odds, needs to identify the most attractive market segments that it can serve effectively."

Kotler goes on to say: "the heart of modern strategic marketing can be described as STP marketing - namely, segmenting, targeting and positioning. This does not obviate the importance of LGD marketing - lunch, golf and dinner" !

Kotler explains that sellers have not always held this view and marketing thinking has passed through three phaes; i) mass marketing, ii) product-variety marketing and iii) target marketing.

In today's world, most companies adopt the target market approach and by using new technologies effectively, marketers are able to target customers and importantly, measure response.

Even today, marketers need to follow Kotler's three step approach to Market Segmentation, Targeting and Positioning;

• Identify segmentation variables & segment the market
• Develop profiles of resulting segments
• Evaluate the attractiveness of each segment
• Select the target segments
• Identify possible positioning concepts for each target segment
• Select, develop, and signal the chosen positioning concept

 Getting this stage of your marketing strategy correct is clearly critical to developing an effective strategy. Get it wrong and your business is heading for disaster.

Measuring and Forecasting Markets

"Market measurement and forecasting skills are an essential requirement for formulating marketing objectives and plans."

As Kotler discusses in Chapter 2, the two criteria for market attractiveness to organisations are; i) market size and ii) market growth.

Measuring the market size accurately and precisely are important skills for the marketer. Kotler provides a model on page 257, that provides 90 different types of demand estimates for a market size that an organisation could use; Kotler's model has three dimensions, i) product level, ii) space/territory level and iii) time. 

"Market demand for a product is the total volume that would be bought by a defined customer group in a defined geographical area in a defined time period in a defined marketing environment under a defined marketing program."

This clearly shows how complex market measurement can be and that as marketers, we must embrace all of these areas to fully understand what we mean when we say that a market size is x.

Measuring market share is relativley easy when you know the actual size of the market. Forecasting future market share is discussed by Kotler and he provides some interesting modelling based on relative marketing expenditure values. I think that these are now outdated as we have moved into an era where digital can provide us with more accurate means to predict future sales and market shares.

The chapter goes onto discuss forecasting future market sizes - again, an important element for the marketer when developing a marketing plan over one, three and five years.

In my experience, knowing the size of the defined market and what share each organisation has, is critical when developing marketing objectives and strategies. Being as precise as possible with market definitions, market size measurements and market shares, is one important part of the process of developing strategies for growth, i.e. if the market is static, market growth will come from stealing market share from a competitor - which one(s) and how ? then follow.

Analyzing Competitors

This chapter starts off with "having an understanding of customers is not enough today" - in saturated markets where growth is relatively flat, business growth will predominantly come from taking market share away from competitors, hence, the importance of knowing your competitors.

This market situation is one faced by many companies/brands competing in Europe and North America. Other parts of the world, such as the Middle East and Africa are experiencing market growth and so as long as a company/brand holds onto its market share, the business will grow with the market.

Kotler goes onto to say that companies should have a good understanding of the following five things;

i) who are our competitors ?
ii) what are their strategies ?
iii) what are their objectives ?
iv) what are their strengths and weaknesses ?
v) what are their reaction patterns ?

Who are the competitors ? This often appears to be a simple question to answer but it is important to gain a good understanding of how a market works and have a view based on the industry and customers.

"Economists define 'close substitutes' as products with a high cross-elasticity of demand" Companies often take a view that their market is made up of companies offering similar products at similar price points - but, as Kotler points out, consumers take a different view - in one of the markets I work in, we have witnessed the small automobile market being affected by motorcycles - traditionally, the small automobile market would have been viewed as all small automobiles. Due to the economy, consumers are seeking out more cost effective ways to satisfy their need for independent travel - motorcycles are satisfying this need very well.

Having identified the competitors, marketers must then work to establish; their strategy, objective(s), strengths & weaknesses and what their reaction patterns maybe.

This level of information will be vital for a company to establish its own strategy of where market share growth will come from, i.e. which competitors to attack and how and which competitors to avoid.

As Kotler says, "this is especially necessary in slow-growth markets because sales can only be gained by winning them away from competitors"

Analyzing Organisational Markets and Buyer Behaviour

Organizational buying is defined in this chapter as; "the decision-making process by which formal organizations establish the need for purchased products and services, and identify, evaluate, and choose among alternative brands and suppliers."

Kotler goes on to say; "no two companies buy in the same way, yet the seller hopes to identify enough uniformities in organizational buying behaviour to improve the task of marketing strategy planning."

As we know, the b2b market is very different to the b2c market, in terms of buyer behaviour. The buying decision is often not made by one person but in many cases, a committee of people - making it very complex for the marketer to understand the target and how best to market to them. 

The time line for decision making is also very much longer and there are often many steps in the process - all of which need to be understood and appropriate marketing strategy put in place.

A third difference can be geography, buyers in the b2b sector can be located in a different country from where the product & services will be used.

This complexity must be fully understood if today's marketer is to be successful in the b2b sector - again, we have a chapter from Kotler, that understood this and the relevance today is even more so - with digital marketing becoming an important part of the marketers tool kit, this makes the process of marketing in this sector even more complex and therefore it's even more important for the marketer to put the customer at the centre of their business.

Analyzing Consumer Markets and Buyer Behaviour

"Understanding the buying behavior of the target market is the essential task of marketing managers under the marketing concept". Ref: Kotler

He goes on to say that marketers find it useful to segment consumer groups & to develop products & services for these groups. If a segment is large enough, it maybe effective to implement focussed marketing programmes to these groups. The question is; how do you know if the segment is large enough ? The answer lies in the area of cost v benefit - if the benefit is greater than the cost, then it maybe worth creating tailored marketing programmes to segmented groups.

Marketers should seek to understand the buyer behaviour and in particular, how consumers respond to "marketer-controlled stimuli" - if marketers understand this relationship, then it can be used to maximise ROI of valuable resources. This level of understanding will also help develop competitive advantage and help with growth in market share.

The consumer buyer behaviour is influenced by a range of factors; cultural, social, personal and psychological. This chapter explores all of these in great detail and I believe can still be useful for today's marketer seeking to gain the best understanding of their target segment as possible.

Kotler goes on to talk about the process the buyer actually goes through and talks about the buying decision, the type of buying decision involved and the steps in the buying process.

An effective marketing programme must show an understanding of the consumer buying behaviour and how groups respond to marketing messages and also allow for the buying process itself and allow for the steps in the buying process.

Since 1988, the world has become even more complex and for us marketers, the task of understanding our consumers has become even harder. But, if we are to be successful, we must understand our buyers, the buying behaviour and how outside factors influence them in choosing a brand and once the brand choice has been made, what factors will affect the buying process.

Another chapter full of very insightful thoughts and very practical ideas for today's marketer.