Geoff Fripp

May 062017
 

There are many reasons why companies bring products to market place. The one we would naturally think of is to make more money, but that is generally only one of the reasons.

Changing Consumer Needs

Companies need to stay in touch the changing needs of consumers. Companies cannot remain with traditional product lines and expect them to sell well for years on end. Yes we have learnt through the concept of product life cycle that some product categories stay in maturity for a long time, sometimes decades. However, even those industries need to look at the changing needs of the market.

A good example here would be Kellogg’s a major manufacturer of cereals. When you think to what is the underlying need for cereal it would probably be something like “a fast, easy to prepare, easy to consume, low-cost, healthy breakfast”.

However, the market need for breakfast style food is shifting as the lifestyle of consumers change.  For instance, consumers now have far less time for a sit-down breakfast. Let’s take a typical example of a family. If both parents work, which is becoming increasingly common, then it is likely that they will probably rely on child care. This means they are very pushed for time in the morning. Knowing that the children will get food and child-care facility, the transporting parent is more than likely to drop the child that childcare without breakfast.

The child will get fed, but what about the parent? Will they have choices, but they really didn’t have before, such as a drive-through breakfast. Obviously you can’t do that every day, so many parents rely on just a coffee in the morning, from many of the outlet places available.

When you think about it, there are quite a number of indirect competitors for breakfast cereal that attempt to make the process faster by allowing the food to be consumed in transit. These include take-away coffee, juice bars, muesli bars, breakfast bars, yogurt to drink, and cereal in a drinkable form.

If breakfast cereal companies sat back and said “hey we’ve got a good market share in breakfast cereals so we don’t need to be innovative”, it will be the indirect competitors were taken revenge of the customers changing needs that will slowly drifts strength of breakfast cereal market.

That’s why cereal companies are aggressively looking at breakfast bar opportunities. That is, making their products available in different in order to better meet the changing needs of consumers.

 Reasons to introduce new products

  • To block competition
  • To fragment the market
  • To defend against competition
  • To help reposition the organization
  • To better meet the needs of existing consumers
  • To better need the future needs of the market
  • To meet the needs of a new segment
  • To increase profitability
  • To deliver growth for the organization
  • To meet internal goals
  • To enter high-growth markets
  • To help implement the strategy of the organisation
  • To take advantage of excess capacity
  • To take advantage of a new resource

 More than just profit goals

As you can see, profitability is only one of the reasons for introducing new products. Sometimes a firm will introduce a product that has a fairly limited financial return, but is very important to the firm overall strategy will position in the marketplace.

A good example of this is McDonald’s with their healthier food menu. Traditionally McDonald’s made a lot of money from burgers and fries and soft drinks. However, as the market need in terms of fast food changed, there was an expectation that people wanted a broader choice of food and generally healthier food. This is because the market has become more educated in terms of food consumption and as the market has tended to consume more meals outside the home, taking fast route from an occasional treat to almost a daily norm.

Therefore, McDonald’s has sought to reposition themselves as an organization. They want to remove themselves from being solely associated with traditional fast food products. They have deliberately added a range of salads, yogurts, lean burgers, deli choice rolls, and so on, to create the market position that they offer a range of foods that includes quite healthy meals, quite tasty meals, as well it the traditional fast food meals.

It is unlikely, that some of these new types of foods were designed to significant profit-based products. While these products probably deliver a certain level of profitability, they would be nowhere in line with their traditional style products. However, these products are so important to the overall repositioning and strategy of McDonald’s going into the future.

Apr 162017
 

Financial forecasting in marketing

Preparing a financial forecast is usually a key requirement in order to have a major marketing campaign, new product, or other marketing project approved. As in most cases, is there is a significant investment up front or during the early part of the campaign/project. Therefore, it becomes necessary to demonstrate that the marketing initiative will have financial viability and will generate a strong and positive return on marketing investment.

There are multiple ways of constructing a financial forecast for marketing purposes. In a very simplistic sense, you can simply forecast projected sales volumes/revenue and then calculate likely profitability based upon this top level number. However, in most cases, this approach is unsatisfactory as there is no logical basis (or assumptions) for the top level sales revenue projection – particularly for a new project/campaign.

In a more advanced form of financial forecasting, the ATAR forecasting model can be applied. In this case, the letters ATAR stand for – awareness – trial – availability – repeat/rebuy. Please note that there is a separate website that demonstrates this more detailed form of sales and profit forecasting, along with a free forecasting template that utilizes the ATAR forecasting model.

However, in this article, we will take the middle ground and discuss a sales/profit forecast for marketing that demonstrates the construction of the overall sales volume and revenue, based on customer acquisition, brand penetration, average purchases, and price/cost estimates.

Sales and profit forecasting – a step-by-step guide

Step one estimate the size of the target market

The starting point in any financial (sales/profit) forecast is to have a clear understanding of your target market, and its size, and its likely growth rate.

This approach will demonstrate that you have a clear understanding of the intention of the marketing campaign/project, as well as keeping your financial forecasts realistic and more accurate.

For large brands: it is not uncommon to have multiple target markets, with each having its own financial/profit forecast. This would be necessary as you would expect each target market to have a different level of responsiveness to the campaign (or new product), as well as having different purchase volumes (that is, light to heavy users).

Large brands: are also likely to have larger target markets. They usually have the brand equity and the established distribution channels that enable them to reach a greater proportion of consumers.

Smaller brands: the counter argument to above, is that smaller brands (with their limited brand awareness and their likely reduced distribution access) will need to be more selective with their target market definition (perhaps pursuing a niche market) or have an expectation of having a very low level of brand penetration (which is the proportion of the target market that buy their product/brand).

Service firms: it is not unusual for service firms, particularly those with an established customer base, to introduce new products or undertake direct marketing campaigns that deliberately target their existing customers only. In some cases their target market could be just a few thousand of their existing customers.

Step two – estimate the number of new customers to be attracted each year/period

Now you have an understanding of the size of the overall target market, the key task is to determine what proportion (what number) of these consumers will become customers of the brand/product – or change their behavior (purchase more/differently) as a result of the campaign.

Usually this information can be estimated from prior marketing activities, such as the take-up of previous new products or the response to previous campaigns. Sometimes firms will invest in concept testing that is designed to measure the likelihood of future purchase/change in purchase behavior.

Step three – estimate the ongoing loyalty of the customer base

Because we need to forecast the likely financial return of the marketing activity over a period of time – usually 2 to 5 years – we need to work out the size of the relevant customer base over time. This is calculated by:

  • Existing customer numbers
  • Less customers lost (1 – loyalty rate)
  • Plus new customers acquired

The pool of customers is quite dynamic with customers being acquired and lost on a regular basis. Please see the article on the leaky bucket theory. Therefore, as well as forecasting/estimating new customers, we need to calculate the ongoing size of the customer base.

This is important because we are attempting to demonstrate that our marketing actions (campaign/project/new product) will have a measurable long-term positive impact on the firm/brand.

Step four – calculate the size of the customer base over time

With the above information gained in steps one, two and three – we now have enough information to simply calculate the size of the customer base.

At this stage, we should also calculate brand penetration – which is our customer base/target market size. This brand penetration figure is a “safety net” check to ensure that our projections are realistic.

As an example, if our projected customer base in year 5 is 50,000 customers and our target market size is 1 million consumers, then our brand penetration can be calculated as:

  • Brand penetration = 50,000/1,000,000 = 5%

We then compare this figure of 5% penetration of the target market against our competitors and our performance in other areas of our operations (e.g. market share) to determine whether this is realistic.

Obviously, we need to take into account how tightly we have defined the target market. It is possible to achieve a relatively high level of brand penetration in a narrow target market, but much more difficult in a broad/large target market (unless we are one of the major players in the market).

Step five – estimate average purchase volume, average price and unit costs

Now we have a projected customer base that we are relatively confident in, that takes into account customer loyalty, customer acquisition – and then does a “reality check” against the level of brand penetration – we can now move on to the financial and volume aspects of the forecasts. As at this stage of the process, we will need the purchase volume for the average consumer over the year.

We need to take into account the array of purchasing volume – from occasional users, to light users, to heavy users – when formulating this average volume.

We also work out the likely average price that we will receive for the product/service over time. We need to take into account any discounting (sales promotions) that we may use during the period. We also need to be clear about who we sell to – for example, if we are a manufacturer, then we sell to a retailer – so the price should be what we receive from the retailer (not the final retail price).

We also include the likely unit cost of the product/service over time. Then obviously, the difference between the price and the unit cost is the unit margin. Generally, we would expect that the unit margin is lower in the initial period and then increases over time. This is because it is common to utilize some form of discounting/sales promotions in the early stages to help generate demand and change consumer purchasing behavior.

Step six – calculate sales revenue and gross profit contribution

Following the outcomes of the previous two steps, we now have the numbers necessary to calculate sales revenues and profit contribution before marketing expenditure.

This is a simple multiplication of the:

  • Size of the customer base (from step four)
  • Average purchase quantity per consumer (from step five)
  • Average unit price (instead five) – to calculate sales revenues
  • And/or average unit margin (from step five) – to calculate gross profit contribution

As an example

  • 50,000 customer base X
  • 10 purchases per year = 500,000 units sold X
  • $5 average price = $2.5 million sales revenue
  • 50,000 customer base X
  • 10 purchases per year = 500,000 units sold X
  • $2 average margin= $1 million profit contribution before marketing expenses

Step seven – project marketing support costs, and upfront marketing investment

We need to determine, which we probably know fairly well anyway, the marketing budget that has been dedicated to this campaign/project. From year 0 (prior to launch/campaign) and then yearly over the life of the project/campaign – generally up to about a five year period.

In this marketing support area, we would include an array of promotional costs, plus any product development costs, plus any expected product improvement investments, sales force costs, trade promotion, and so on.

Step eight – calculate profit contribution per year after marketing expenses

Once we have the initial and ongoing marketing budget/investment (from step 7), it becomes a relatively easy task to deduct these expenses from the gross profit contribution that we have already calculated is step 6 above.

Step nine – calculate the relevant marketing and financial metrics

When we have a forecast that we think that we are happy with, we should now look to calculate the following key metrics and summarize them in either a table or chart.

  • Profit contribution per year
  • Total profit contribution – over 5 years
  • Sales revenue per year
  • Sales volume (units) per year
  • Marketing return on investment (ROMI)
  • Net present value (NPV)
  • Internal rate of return (IRR)
  • Years to pay back

Step 10 – package and present your financial forecasts

The final step is to receive approval for your project/campaign/new product – and part of this approval will rely upon your financial forecasts. The additional of logical underlying assumptions based upon prior experience, market research and/or marketing experiences is normally expected in a firm. If you are a marketing student, then a supporting statistic or two is usually required – otherwise opt for a logical, reasoned, conservative assumption.

Related websites

ATAR Forecasting for New Products (includes a free Excel template for the ATAR model)

Apr 162017
 

The product life cycle template for Excel – available for free download

Often students want to graph multiple products onto the product life cycle using an Excel spreadsheet or some other charting approach. Perhaps surprisingly, this is sometimes awkward to produce easily, given the focus on the Excel spreadsheet to produce graphs rather than images.

Therefore, in order to simplify this task for marketing students, this website provides a free Excel template that enables the mapping of multiple product names quickly and easily onto a PLC graph – with the ability to move product locations simply.

It is available for download here… plc template free download

Video of how to use the PLC Excel template

 

Video of How to Make the PLC Curve in Excel

Apr 162017
 

As it is possible to use the product life cycle as a portfolio analysis tool, which allows us to consider whether we have adequately provided for the future profitability for the firm/brand, it is an obvious that there is a strong connection between the product life cycle and the firm’s new product development requirements.

Obviously virtually all new products to the firm would generally be introduced during the introduction and/or growth stages of the product life cycle. This is because in these two stages there are opportunities to gain market shares more “easily”, as consumers have lower (less formed) brand loyalty at that point of time, due to their limited direct experience with purchasing the product.

Importance of new products

New products are generally critical to the long-term success of any organization, as they allow the firm to:

  • adapt to changing market conditions,
  • compete against new offerings,
  • utilize new technology,
  • expand their target markets,
  • enter international markets,
  • add excitement to their brand/s,
  • adapt to new consumer preferences and lifestyles,
  • achieve greater revenues and profits,
  • and so on.

The new product development stage

Some variations of the product life cycle will include an initial state known as product development. This product development stage is internal to the company and the product is not available for widespread release to the average consumer. At this point of time the product may be “tested”, which is a form of market research, with some consumers in order to help fine-tune and further develop its product for eventual launch.

It is also possible that during this period of product development that the company may issue public announcements in order to start generating some excitement and initial demand for the product. For example, this would be common for a new game console or some new piece of technology where there is a lot of media attention built up prior to the actual launch date of a new product (which usually requires a strong brand to achieve).

Obviously in the product development stage, there are no actual sales of note (other than testing sales), so in terms of final market adoption this stage is of limited impact to its long-term success..

Apr 162017
 

Marketing mix strategies during the introduction stage

  • Offer a basic product with limited choices, as this also helps test the overall market demand/interest, while keeping costs and logistic challenges relatively low
  • Use marketing communications (IMC/promotion) that are effective in generating initial awareness and reaching innovators. Often specialist websites/blogs and magazines provide a specific audience, as well as utilizing mailing lists of innovators from the customer database
  • While the marketing communications program should seek to generate simple awareness, it also needs to start to communicate one or two benefits relative to the existing product solution in the marketplace – this is important in building clear positioning over time
  • Promotional efforts also need to be targeted at retailers and distribution channels (trade/push marketing), as these relationships will be effective in generating sales and awareness and long-term word-of-mouth. Also stronger retailer relationships will provide protection in a potentially competitively aggressive growth stage that will follow the introduction phase
  • Free samples may be effective in generating initial trials – or some other similar from of sales promotion that is capable of putting the product in a potential consumer’s hand
  • Pricing needs to be balanced between being attractive enough to reduce the initial purchase barrier, yet high enough to try and recoup costs – this is not always possible with a new product that lacks latent demand

Marketing strategies for a growth stage market

  • Introduce a variety of product offerings (product line extensions), in order to reach new market segments and to defend against new competitors
  • Increase scope of relevant retailers and distributors, and try to develop exclusive channels where possible, again to defend against new players
  • Progressively focus marketing communications on broader/mainstream channels (as opposed to specialist communications) – targeting early adopters/opinion leaders and then onto the early majority (please refer to adopter categories)
  • Provide more detailed information about the products and its competitive advantages and/or any technology breakthroughs, relative to established products – as this will start to build a clear market positioning
  • Reduce emphasis on price competition, where possible, in order to create a clear long-term reference price and to communicate strong brand quality
  • Start to consider customer loyalty programs in order to maintain market share over the longer-term

Marketing strategies for the mature stage of the PLC

  • Introduce product line extensions (PLE’s) and other variations in order to saturate/dominate the market and capture solid market share of different target markets. Also look to provide an incentive for consumers to purchase the product more frequently (often achievable through sales promotion tactics)
  • Maintain a clear brand positioning and continue to build brand equity
  • Attempt to create an emotional engagement with the brand and look to leverage consumers who are very positive supporters/advocates of the brand
  • Increase focus on social media and brand engagement communication channels
  • Retain key retailer relationships and work towards good in-store placement and being the preferred brand for the retailer
  • Implement stronger customer loyalty programs and/or incentives
  • Stabilize pricing, but relative to competition and brand strength – in order to communicate superiority and stability and overall brand quality
  • Look for opportunities in international markets
  • Look to grow share of customer, as opposed to acquisition of new customers

Marketing strategy for the decline stage of the PLC

  • Progressively reduce overall product line and variations – as this will help reduce costs and logistics structures
  • Potentially reduce communication and advertising expenditure, in order to further reduce costs
  • Progressively reduce smaller and less supportive retailers over time – again with a focus on logistics efficiency and maintaining profitability as much as possible
  • Look to low-cost ways of selling products to repeat long-term customers – perhaps through an online channel or some form of regular purchase plan
  • Where possible, look for repositioning opportunities to “reinvent” the product category in the marketplace
  • Pursue opportunities in international markets
  • Remember that it is generally more important to focus on profit levels, as opposed to sales revenue or market share goals

 

Apr 162017
 

While the product life cycle model is a very helpful tool for helping to understand current and potential market conditions, in order to develop appropriate marketing and competitive strategies, there are some limitations and concerns with the usage of the PLC.

Firstly, not all new products will be successful. That means that for many new product categories, they will never leave the introduction phase and will never experience growth or maturity. Therefore, there is a concern on overlying upon the “belief” of a new product becoming a high-growth product – which may lead to over investment in a potentially under-performing and expensive new product.

Not all new products will follow the standard product life cycle curve/pattern. Most marketing textbooks represent the same S shape/roller coaster shape PLC curve. This creates a false sense of security about the predictability of future sales. There are multiple PLC patterns possible (as available in this academic article), so it is important to consider the possible variations of the product life cycle for its future.

The turning points in the product life cycle curve are critical in understanding and in adapting to the relevant market conditions. This is very easy to do in hindsight once the whole market has been played out. However, from a forecasting perspective, it is quite difficult to determine turning points in advance. This means it is important, when utilizing the product life cycle, not to be overly reliant upon sales results as the only determining factor for the stage of the market. There are other characteristics that need to be considered, as discussed in this article.

The concept of the product life cycle has been extended and utilized in different forms – some of which is quite acceptable business practice. But the essence of the product life cycle relies upon mapping the overall industry, not a particular firm or a particular product. For example, Coca-Cola should not map its Coca-Cola product only – instead it should map out all carbonated cola drinks across all players in the marketplace. Therefore it is possible, at times, that a visual presentation of the PLC may be misleading if it is limited to one firm/brand.

Further reading

Forget the PLC concept (HBR)

Apr 162017
 

One of the challenges of a mature market in the PLC is that, more than likely, eventually the firm will be faced with competition from new style of product. That is, the most significant competitors are going to introduce technology that is quite different in their design/features (while meeting the same underlying consumer need). For example, laptops became a new competitor against desktop computers, due to their advantages of flexibility and portability.

A firm should be aware of this potential new competitor threat from outside the existing offerings in the market. Therefore, it then becomes a strategic question of whether or not we should directly challenge ourselves and introduce new products that cannibalize our existing product range.

The challenge at Apple

This was the challenge that Apple faced when they first introduced the iPhone (which included music player capabilities of their highly established iPod products). At the time, Apple’s main income stream was from sales of iPods and associated revenue from iTunes. So you could imagine that some of the discussion at the time was whether or not it was financially viable to introduce a smart phone at Apple. (Note: Obviously the iPhone has since proved far more successful than probably anticipated, even at Apple at the time – but that doesn’t change the essence of the above discussion point.)

The question was whether or not the proposed smart phone would simply switch sales from the iPod to the iPhone without any significant increase in revenue, yet with an additional increase in the set-up costs of research and development as well as the costs of ongoing manufacturing and logistics.

However, it was reported that Steve Jobs – the then founder and CEO of Apple – famously said words to the effect “if we don’t cannibalize products then somebody else will”.

Note: Keep in mind that this is an organizational culture perspective, which you would generally find in many innovative style companies. However, some, more conservative organizations are more protective of their existing product “cash cows” and are less likely to be willing to cannibalize and challenge their existing product line-up.

This leads to an ongoing management challenge in some organizations, where there is an argument to maintain the status quo and therefore profitability, but at the risk of potential new competitor challenges. Obviously, in the Internet era, we have seen many established organizations significantly affected by their hesitance in adopting new business models – such as traditional newspapers.

Related topics

Extending the PLC

Apr 162017
 

In order to assess where a product is on the PLC curve, a multiple of factors can be considered, including:

  • Sales to date, graph accordingly, to visually demonstrate any turning points from introduction to growth, and so on,
  • The number of competitors entering/leaving the marketplace (competitors enter in growth and leave in decline),
  • The number of retailers and other distributors entering/leaving the market (retailers will tend to make the product more prominent in the growth and/or early maturity phase),
  • The number of product innovations/offerings and product line extensions (there is an increase in innovation in growth and increase in product line extension in maturity),
  • The stability of market share (market shares will stabilize in maturity),
  • The stability of profit margins and pricing (pricing and profit margins generally stabilize in maturity),
  • The proportion of consumers adopting the product (first time customers are very high in introduction and growth, but relatively minimal in maturity),
  • The level of advertising, and its focus (advertising expenditure will tend to flatten in maturity and shift towards subtle differences of the brands offering – whereas awareness and basic information communication is common in introduction/growth).

These aspects of overall market conditions – as opposed to using changes in market sales levels only – will provide a more accurate identification of the current life cycle stage of the product.

Apr 162017
 

This website has discussed consumer innovators numerous times, due to their importance in generating product adoption and kick-starting the introduction phase of the product life cycle. While innovators are the initial type of consumer, there are other consumer mindsets that are typically discussed in marketing textbooks.

The standard consumer adoption categories include:

  • Innovators
  • Early adopters
  • Early majority
  • Late majority
  • Laggards

Typically these are presented using a standard bell curve concept. Innovators, early adopters and the early majority represent the first 50% of consumers to adopt a new product, whereas the late majority laggards represent the final 50%. Obviously, keep in mind that not all consumers will adopt the product. For example, not everybody has a smart phone, although they are widely utilized in many markets and countries.

This classification of consumers relates to their willingness to take risks and to switch purchase behaviors relative to particular product categories. For example, a consumer may be an innovator or early adopter of technology products, but perhaps be in the late majority for household furniture. Therefore, these categories are relevant to particular products, not necessarily the consumer themselves – but obviously some people are more risk takers whereas others are more conservative, so there would be some correlation of behaviors across related product categories.

Innovators

Keep in mind that these adopter categories primarily relate to a mindset, as well as the consumer’s lifestyle and product interest level. Consumers who are classified as innovators are less reliant upon the word of mouth persuasion of others. They are generally more adventurous and more willing to take risks. Relative to the particular the product category, they would tend to have a higher level of knowledge, confidence and interest in the product.

Early adopters

Early adopters also have some of the similar characteristics to innovators. However, they are more reliant upon word-of-mouth and the reassurance of other people’s purchase – which helps reduce their purchase risk. This means that they would be somewhat influenced by the innovator (who has already made a purchase). They will also conduct their own research in addition to word-of-mouth discussion, and also like innovator, they will have a high level of interest in the product category.

Opinion leaders – those consumers viewed as experts by other consumers – are typically found among early adopters, as they tend to have better social networks and connections than innovators (as innovators tend to make their purchase decisions irrespective of others).

Therefore, early adopters, as opinion leaders, are a foundation to gaining widespread adoption of the new product. Usually the shift of the product life cycle from the introduction to the growth phase is driven by the transition from purchases by innovators to purchases by the early adopters.

Innovators and early adopters account for 16% of all consumers. As early adopters make their initial and then their repeat purchases, there is a significant impact on broad word-of-mouth (including face-to-face and digital/Internet), which provides a broader reach to the balance of the population. At this point, there is a compounding effect of word-of-mouth, and the growth phase of the PLC ramps up essentially, creating that roller coaster look of the PLC chart.

Early majority

Early adopters then substantially influence the early majority – which essentially moves the new product to the mainstream consumer. The early majority relies heavily upon positive word-of-mouth, as they tend to be more cautious purchasers and will look to rely upon social influence to help “justify” their decision – both for the product itself and for the particular brand selected.

Therefore, at this stage of the market’s development, we have a shift towards market share stabilization as the word-of-mouth impact is now suggesting/recommending certain brand preferences for this particular new product category.

Late majority

The late majority are those consumers that are generally reluctant to change their purchase behaviors, but tend to do so if they feel that they are out of step with what everybody else is doing (that is, outside social norms). It is not until they see the product widespread – in retailers and in people’s homes/possession – that they eventually decide to start buying the product.

Typically, the late majority will support the purchases in the decline phase of an alternative/substitute product life cycle, while providing the final growth in the late stage of the growth phase of the PLC. Because of this behavior, some of these consumers are “forced” to adopt the new product, as the existing product solutions are being withdrawn from the market (as it is in the decline stage of the PLC).

Laggards

Final mindset is laggards – which are consumers that may not even adopt the product at all. They are very conservative in their actions (or are quite elderly people) who prefer not to change purchase behavior. For example, some of these consumers may still have a VCR/video player that they have maintained for many years.

They may be troubled by adopting new technology and learning new things or simply have a preference for stability. Either way, laggards are generally not an overly attractive target and usually not worth the effort to try and persuade their thinking. From a marketing perspective, it is just worth considering that there is a proportion of consumers that are prone to avoid new product and any form of innovation.

Apr 162017
 

There is a strong relationship between the product adoption process and the product life cycle. Both consider new to the world products – the product adoption process considers the “stage” that the consumer is in relative to the product – whereas the product life cycle model will track sales (and indicate distinct market conditions), depending upon the particular PLC stage.

Sales do not occur in the product adoption process until trials occur. This would, in the initial stages, connect directly to the introduction stage of the product life cycle. In this stage, firms are primarily depended upon consumers known as innovators. Innovators of those consumers who purchase products based upon their own thoughts and research and are less dependent upon word-of-mouth and related people pressure.

In the trial phase of the product adoption process, sales will tend to be quite limited, as there are less consumers and they are usually buying in smaller quantities initially – as it is often just a trial/test for them to assist in a more formal product evaluation.

As more consumers shift into the adoption phase itself, the market will shift into the growth phase of the PLC. This occurs because you have a base of core customers who are repeat buyers, plus you have the added benefit of growing word-of-mouth which is compounding progressively as more and more consumers have direct experience with the product.

Please keep in mind that not all products will shift through the product adoption process and there are many new products and inventors in the market, with most products failing to gain traction.

From a marketing strategy perspective, there needs to be a recognition of this process and the steps that the brand needs to leave the market through in order to achieve long-term success.

Therefore, in the early part of a new product launch, simple awareness measures (media, PR, advertising, bloggers, influences, and so on) are critical. In terms of generating interest in evaluation, it is important to highlight the competitive advantages of the new product, particularly relative to the existing product offering (that is, substitute/alternative products).

The firm really needs to progress to trial as soon as possible. For low involvement/low-cost products, this could be as simple as free samples and substantial upfront discounting. However, for more involved purchases, strong retailer relationships may be necessary to provide the facility for firms to access and engage with the product.

Related topics

Marketing strategy checklist for each stage of the PLC

 

Apr 162017
 

Underpinning the pattern of sales in the product life cycle is how consumers adopt new products. Not all new products are successful, indeed, most new products will fail. For example, even Apple has its fair share of failed products.

As we know, the product life cycle moves through four distinct phases of introduction, growth, maturity and then finally decline. What is driving the pattern of sales through its shape and change is primarily the number of consumers that are active purchases in the marketplace.

When a brand new product comes to market, it has no customers. Obviously, it has been designed and launched with the intention of generating customers (or selling to existing customers of the brand), but initially nobody has actually bought the product. In terms of the product life cycle, what the marketer is seeking to do is to dramatically change the purchase behavior of consumers. Typically, the market is purchasing an alternative/substitute product, and the marketer is seeking to change that behavior.

Ideally, we are looking for the consumer to “adopt” a new product. That means that the consumer sees the new product as something of value and some think that they will purchase on an ongoing basis. However, we need to transform the consumer’s thinking over time to achieve this goal.

The product adoption process, in most marketing textbooks, follows five distinct steps or stages, namely:

  • Awareness
  • Interest
  • Evaluation
  • Trial
  • Adoption

Awareness phase

Awareness is a simple understanding of the product. It’s when the consumer has heard of it and has a general understanding of the product (that is, basic positioning). For large brands, generating awareness by bringing out a new style of product under an existing brand is generally quite easy, but carries the risk of contamination if the new product is ineffective and performs poorly in the marketplace.

For smaller firms/brands, generating awareness of the new product is often a challenge. You have possibly watched various reality shows where inventors pitch the new products seeking investment from wealthy people – such as Shark Tank. As you will see from these TV shows, there are plenty of people out there with new product ideas that they are trying to generate awareness and interest in it and hopefully make a profit in the longer-term.

Interest phase

Interest is a progression from simple awareness. It is when the consumer generates some form of curiosity about the new product and considers that it may be a possible suitable solution down the track for them. As a consequence of this slight shift in thinking, the potential buyer becomes more receptive to information and communications about the product and may even conduct some form of basic research and information gathering, such as word-of-mouth discussions.

Evaluation phase

Evaluation is a natural progression beyond interest, where the potential consumer has gathered basic information about the new product and how it works and what it does and why it is better/different from existing product offerings and solutions. In the evaluation stage there is more critical consideration of whether this is a suitable product for the consumer. At this stage the consumer will decide whether or not they are likely to be a purchaser of the product in the short-term. They do this by considering the potential value (that is, benefits less costs) of the product them, as well as considering it against alternate substitute product alternatives.

Trial phase

The next step is a trial purchase (or a demonstration or other product usage where possible). If it is a relatively low-cost product, then the consumer may purchase it to “see how it goes” If it is a higher cost product, the consumer may try to have the product demonstrated or view it in store or engage with it in some other manner (such as, through friends or reviews).

The trial is the consumer’s first real interaction with the product. This direct product experience will either directly reinforce their views from their evaluation or will change their thinking. Therefore, like all purchases by consumers, the first initial purchase is significant as it drives/determines their level of customer satisfaction, resulting in a significant impact on long-term purchasing behavior.

Adoption phase

Assuming that the trial purchase/interaction was positive for the consumer, then the final stage of the product adoption process is the actual adoption. This is where the consumer sees the product as a viable solution and they became a regular purchaser of this style of product.

Keep in mind that product adoption process is across all firms/brands – not just individual brands, as we are considering the overall product category. As an example, a consumer may buy an electric car, where this consumer has moved through the adoption process primarily due to the offerings of multiple competitors in that market – so they are impacted by overall offerings rather than one particular player.

Related topics

Consumer adoption categories

 

 

Apr 162017
 

The PLC model can be utilized for portfolio analysis

Do we have an appropriate balance of existing products in a mature market, and are we investing in future new product opportunities by entering products into introduction and growth stage markets? Again, this is conceptually similar to the underlying principle of the Boston Consulting Group matrix – in terms of reinvesting profits from established/stable products towards products competing in growth markets.

Portfolio analysis is using various models/matrices to help the firm make decisions on its overall product offering and business portfolios. The product life cycle curve can be effectively utilized for the purposes of portfolio analysis.

Typically a firm could map out its core sets of related products to see its proportion of products in the various stages of the product life cycle. A balanced product portfolio should consist of multiple products in the mature stage – which generate good profitability and provide cash flow stability – while ensuring that they have suitable product portfolios within both introduction and growth stages of the PLC – as these will provide the future profits for the firm and ensure that they are able to remain competitive against new players and offerings, as well as adapting to changing consumer preferences and needs.

The following charts demonstrate how this could easily be visually achieved. For example, the first chart provides an overview of a well-balanced product portfolio where there is a mix of current profit and future profit portfolios.

However, the other charts demonstrate a poorly balanced product portfolio, that either has limited future visions by over relied upon current profitability and current mature markets or is too aggressive for future profitability and is eroding current profitability as a result.

PLC and the BCG Matrix

You should note that the linkage/connection between the product life cycle and the Boston Consulting Group model/matrix. The BCG matrix uses the market growth rate as a classification on one of its attributes. As a result, only products that sit in the introduction and/or growth stages of the PLC can be classified as either stars or question marks, and products in the maturity and decline stages of the PLC would therefore be classified as cash cows or dogs. This is demonstrated in the following visual image of the connection between the PLC and the BCG matrix.

 

Apr 162017
 

A more limited competitor set

It is likely, in the introduction phase of the product life cycle, that there are limited numbers of competitors. At this stage of the PLC, the level of sales and profits in the market are quite small – which is unlikely to attract a large number of new entrants.

While having a reduced competitive set is generally good, when you are trying to grow a market, a limited set of competitors means that there is less “noise” in the market about the product. Collectively there is less communication, advertising, media efforts – there is less access to retailers – there is less access to innovators – all resulting in a slower take-up rate of the new product.

If there are multiple competitors trying to promote a new product and get the market established, then that is often a good result for all competitors = growing the market overall.

Some competitors will wait for the growth phase

There are also firms who would generally like to see the market take off before they decide to enter it. A good example here is Apple, which has generally been a slightly later entrant to market – for example, entering the smart phone market (with significant innovation) after it had started to become established.

These competitors will sit back and wait until the market is established – thereby saving themselves the cost of the initial “market start-up” – and looking to enter with some product variation of interest to the market. This puts the early entrant at risk, as these firms may “over-invest” in attempting to grow the market, only to see that much of their market share is eroded by newer and fresher players.

Greater innovation likely with new entrants

As competitors enter market, they are generally looking to have some form of innovation in order to provide consumers with an incentive to purchase their product. This leads to an increase in the variety products being offered. Existing firms, those early in the market in the introduction phase, have also developed further experience and expertise – thereby, making them more likely to be able to improve their existing products and to offer new variations.

Related topics

Marketing strategy checklist per PLC stage

Apr 162017
 

Key marketing challenges in the introduction phase

One of the key marketing challenges in the introduction phase of the product life cycle (PLC) is to clearly communicate the advantages and benefits of the new product offering, relative to existing products in the marketplace. This requires a significant and targeted communications program – typically targeting consumer innovators.

As discussed elsewhere on this website, innovators make more independent decisions, and are less reliant upon word-of-mouth and the influence of other consumers. This type of consumer is the logical choice as the initial target market for any new product. But how does the firm identify and reach an innovator?

Targeting innovators

Luckily, in today’s data-driven world, firms are able to capture information about purchase history and able to build e/mailing lists and website registrations. Innovators generally purchase the early in the new product life cycle. Therefore consumers who have purchased other related products early in their life, are more likely to be innovators. Likewise, consumers that engage in surveys with the firm, post to forums and discussion boards, sign up for a firm’s mailing lists/emails are also more likely to be innovators – due to their increased interest in the firm/brand and the products that they offer.

This means, that over time, a firm can develop a good profile of an innovator and actually develop a contact list for promotional purposes to assist with the launch of new products.

In addition, specialist blogs and websites are another way of reaching highly interested consumers – again who are more likely to be innovators – and be able to communicate rich and deep information, which they require to make a decision on a brand-new product.

The choice of blogs and websites are broad and provide a greater ability to access interested consumers in order to help generate support for new products. Blogs are essentially “influencers” in the marketplace. They typically have greater credibility and believably than traditional advertising, and are being utilized to a greater extent than ever before. Traditionally, firms would embark on some form of media/PR campaign – but blogs and websites allow the targeting of more precise consumers and increased ability to reach the innovators for new product launches.

Use of sales promotions

For products that are generally “lower involvement” and simpler products, there may be a lack of “interested consumers” looking to research and learn about the new products. This may be the case for some new types of grocery products. As a result, it will be harder to reach innovators. A simple solution to this barrier is to embark on a free sampling promotional campaign. We often see this in supermarkets and food stores, where somebody will be demonstrating a new product and providing free samples in the store. This is a form of sales promotion, which is quite effective in gaining first-time trials for a product.

Price points

Another challenge in the introduction phase is usually price. There is the cost of research development and launch that marketing is expected to recoup. Also the firm has limited experience in producing the product, resulting in higher average costs initially. The scope of sales is generally low, also contributing to a higher average cost per product.

If the product is sold through a retailer channels, retailers typically look for an incentive to take on a new product, which further puts pressure on price.

As highlighted above, in the introduction phase of the product life cycle, it is unlikely that the product will be profitable, creating the need to set prices on the basis of:

  • Being attractive enough to encourage first-time consumers and trials,
  • Being high enough to reflect the quality of the offering and the brand, and
  • Being high enough to allow for more aggressive retailer margins and to cover as many costs as possible

Keep in mind, of course, that this new product is competing against established products in the marketplace that are the “accepted” product solution among consumers – that is, most people buy that sort of product at the moment and the new product has been designed to alter that established purchase behavior.

B2B products

If the new product is a B2B product, then the firm’s sales force is the key to the selection of appropriate customers and early success. Just as individuals can be innovators, early adopters or late adopters – businesses operate the same way, with some organizations being willing to take on new products and ideas, whereas others are very conservative in their approach.

Key characteristics of the introduction phase

  • Sales are typically low
  • Firms are losing money, due to low sales and high costs and the need to support the product
  • There is generally a limited choice of products, as the firm is looking to “prove” the product concept to the market – and there is limited funds to offer a broader product portfolio at this time
  • Innovators are the key target market, as they are more likely to make purchase decisions independent of word-of-mouth
  • There is uncertainty within the firm (and possibly the industry) on whether the product will be successful in the long-term
  • As a result, over time there is growing pressure within the firm to reassess whether or not to continue supporting the new product
  • Retailers are typically less interested in the new product while sales are low – this means that they will often seek incentives to take on the product
  • Blogs and specialist websites and magazines provide an opportunity to reach a select market, hopefully rich in innovators
  • Free samples and initial discounting is often required to generate first-time purchases (trials)
Apr 162017
 

Well-managed Product Portfolios

Having survived the significant competitive battle of the growth stage, firms are looking for stability and ongoing profitability and to leverage their “cash cows”. It is also likely, in most well-managed firms, that they have now/since entered other markets and have new products in the introduction phase and growth phases as well. This means that they would like to take their profits from a mature/cash cow market and reinvest in their new product lines – which create the future profitability. This concept is the main concept underpinning the Boston Consulting Group model/matrix.

Stable or not?

As an aid to the stability of the market, mature stage markets generally attract fewer new entrants, as there is less opportunity to gain new customers easily at an attractive acquisition cost. Also, smaller/weaker competitors may decide to exit the market and invest in more attractive new markets. Again in terms of the Boston Consulting Group matrix, market followers in a low growth market are classified as “dogs”, which are typically low profit and low potential products.

However, one of the concerns with a mature market is that there is an incentive for a new competitor to “disrupt the market” with some breakthrough or innovative offering that provides a need/solution in a different form (which is probably how this particular market started anyway). A new product offering, entering the introduction phase of the product life cycle, would generally compete against mature stage products. Therefore, products and firms competing in a mature market, while protected from intense existing competitive battles, may face potential long-term challenges from new product solutions.

As a consequence, it is important that firms keep considering the longevity of their operations and product offerings and do not become too reliant on the core product profit contributors. They always need to be thinking about the future and about bringing on new products that compete in the introduction and growth stages of the product life cycle.

Related Website

About the BCG Matrix

Apr 162017
 

In the growth stage of the PLC there is a limited degree of customer loyalty. This is because most customers are “first-time consumers” and have no direct experience purchasing the product.

This means that in a growth market, it is common to see the competitors try to obtain as much market share as possible during the growth stage. Typically we find that market shares are far more volatile in a growth market, primarily due to this lack of underlying habitual loyalty.

Many firms will take the view therefore, that if they can win a consumer’s first-time purchase of a new product, then there is a reasonable likelihood that they can hold the consumer for a significant period of time – generally through simple repeat/habitual purchase loyalty. This concept is strongly related to customer lifetime value, where customer loyalty is a significant driver of long-term profitability.

Aggressive competitive rivalry

Because of this incentive to gain as many consumers as possible in the growth stage of the PLC– that is, maximize market share – the growth stage of the product life cycle can tend to be quite aggressive in terms of competitive rivalry. This is a firm’s opportunity to position themselves as a market leader or a dominant player, due to a greater proportion of the market being “available” and being willing to trial new brands and offerings.

Once the market becomes mature, consumers tend to revert back to establish purchase patterns and a certain degree of loyalty, making significant changes in market share quite difficult.

This underlying premise of a market highlights why the Boston Consulting Group model/matrix classifies market leaders in high-growth markets as “stars”, whereas market followers are classified as “question marks”. You can see by the wording difference of a star versus a question mark that most firms would prefer to have stars not just question marks.

Apr 162017
 

Growth phase follows the introduction phase

The growth phase follows a successful introduction stage. There is no guarantee that a new product will be successful – therefore, not all new products will have a growth phase.

However, provided that the firm has been successful in reaching innovators in the market, and the product has some advantages over the existing product solution, and there is positive consumer word-of-mouth and supportive retailers – then there is a likelihood of a product entering its growth stage.

Main Driver of the Growth Phase

The dynamics of a growth market of very different to a new product in its introduction phase. In a growth market, there are significant dynamics of the driving growth, in particular there are a significant number of consumers that are now purchasing the new product for the first time.

This means that they are “switching” their purchasing behavior from a product that they would normally buy to meet this particular need, to this new product offering. As we learn in marketing, consumers generally have a significant degree of loyalty – either by choice or by habit – that they use to help simplify their “consumer life”. Therefore, a change in purchase behavior demonstrates a willingness to embrace (adopt) the new product.

It is this increase in numbers of consumers purchasing the product that is the most significant driver of growth of the sales. There is also some growth contribution from consumers who increase the frequency/volume of their purchases as the new product becomes more socially accepted.

Changes in the Marketplace During the Growth Phase

There is also the likelihood of a variation of product offerings – often due to new competitors entering the market with new benefits/features in the growth stage – which will also help drive the volume of purchases.

As the interest in the product increases and sale volumes increased dramatically, there are a number of other key changes in market conditions that also help contribution to increased sales, which include:

  • Retailers become far more interested in the new product category, as consumers are coming in and asking about the product = essentially moving from push to pull marketing
  • The volume of sales – and its impact on logistics efficiencies and learning curve benefits and economies of scale – generally allows for a lower price point through the cost efficiencies, which also aids the ability of the product to reach a broader market
  • Word-of-mouth and product visibility increases dramatically, as more and more consumers discuss, engage, and gain direct experience with the product. This creates a significant compounding effect on awareness and willingness to trial the product.

As highlighted in the discussion on the introduction stage, competitors are more likely to enter the market as growth starts to ramp up – primarily because it is an attractive market because of its size and potentially because this new market/product is eroding sales from their established product offerings.

Increased Competitive Rivalry

As competitors enter market, they generally like to have some form of innovation in order to provide consumers with an incentive to purchase their product. This leads to an increase in the variety products being offered. Existing firms, those early in the market in the introduction phase, have also developed further experience and expertise – thereby, making them more likely to be able to improve their existing products and to offer new variations.

One of the most interesting and attractive aspects of a growth market is the limited degree of customer loyalty that exists. Obviously strong brands have some form of advantage where consumers are aware of and trust the brand in the market. However for new products that are quite distinct, as the market grows – which primarily comes from first-time consumers purchasing the product – they typically have limited loyalty.

This is because they are “first-time consumers” and have no direct experience purchasing the product. Therefore, in a growth market, it is common to see the competitors tried to grab as much market share as possible. Market shares are far more volatile in a growth market, primarily due to the lack of underlying habitual loyalty.

Many firms will take the view, that if they can grab a consumer’s first time purchase of a new product, then there is a significant likelihood that they will hold the consumer for a significant period of time – generally through simple repeat purchase loyalty. This concept is strongly related to customer lifetime value, where customer loyalty is a significant driver of long-term profitability.

Because of this incentive to grab as many consumers as possible – that is maximize market share – the growth stage of the product life cycle can tend to be quite aggressive in terms of competitive rivalry. This is a firm’s opportunity to position themselves as a market leader or a dominant player, due to a greater proportion of the market being “available” and being willing to trial new brands and offerings.

Once the market becomes mature, consumers tend to revert back to establish purchase patterns and a certain degree of loyalty, making significant changes in market share quite difficult.

This underlying premise of a market highlights why the Boston Consulting Group model/matrix classifies market leaders in high-growth markets as “stars”, whereas market followers are classified as “question marks”. You can see by the wording difference of a star versus a question mark that most firms would prefer to have stars.

Key Marketing Strategies in the Growth Phase of the PLC

When firms become competitive and more aggressive – in their efforts to maximize market share – they are more likely to engage in:

  • Price discounting and sales promotions
  • More significant retailer incentives
  • More product variations and choices
  • Attractive offerings for repurchases and loyalty
  • Increased communications and promotion

Collectively, while these various marketing practices, particularly across many players in the industry, will help growth the market and attract new customers – which are a key goal of the growth stage – it also has the impact of reducing the profitability in the marketplace.

Therefore, in the growth phase we have profit levels increasing from the negative levels of the introduction stage, but they are dampened from their potential by the degree of competitive rivalry experience, as firms compete to maximize market share in this more dynamic phase of the market.

There is a possibility that some firms, surprisingly, may decide to withdraw from a growth market, particularly if they do not have any underlying competitive advantages. They may not be able to compete on price or retailer access or brand strength or product innovation. Therefore, while it is financially and potentially a very attractive market, they are simply not in a position to be a viable long-term competitor.

This is a difficult decision to make – and shown as the “question mark” in the Boston Consulting Group model. Where the question is: do we continue to compete in this attractive, but highly competitive market? Is it worthwhile continuing to invest – perhaps at a loss – in order to grab a small piece of this market in the longer-term?

Key PLC growth stage strategies

As you should see from the above discussion, as the market dynamics of a growth stage market is quite different to the introduction, it is necessary for the marketer to adapt its strategies to the new conditions. In particular,

  • Increased communication that highlights the unique benefits and features of the product offering
  • Increased emphasis on retailer expansion and retailer relationships and expand channels
  • Development of product variations, in an attempt to broaden the scope of the target markets
  • Look beyond consumer innovators and reconsider target markets – looking to capture market-leading positions in smaller market segments
  • Reduced pricing levels to encourage adoption, to increase market share, and to deter potential new entrants
  • Look to improve logistics and efficiencies in order to maintain margins, due to reduced pricing
  • Analyze customer lifetime value in order to ensure an appropriate marketing budget and investments
  • Invest in various forms of consumer loyalty incentives and programs, where relevant
  • Eventually, the rate of growth in a market will slow and eventually the market will become “mature”.
Apr 162017
 

Product reinvention to trigger a new growth phase

In a mature market, potentially entering the decline stage of the product life cycle, larger firms may be in a position to try and rethink the overall positioning of a product in order to try and broaden its market or to create new usage or opportunities for silence.

In other words, instead of simply accepting that the product will decline in sales and profitability – think about whether there is an opportunity to “breathe new life” into the product.

A good example here would be a traditional home loan/mortgage. In many cases, consumers have the goal (or encouraged) to pay off their home loan/mortgage as quickly as possible. This repayment approach obviously has the impact of reducing the potential size of the market.

Therefore, in some developed countries, banks have “repositioned” home loans/mortgages from being simply lending facilities to purchase a house to ongoing financial facilities for housing, investments, shares and so on. So instead of seeking to pay off the loan over time, some consumers have a permanent loan facility and actually increase their debt levels as they become more affluent.

As you can see, this had the impact of taking a product that was in the mature stage of its product life cycle and pushing it into another growth phase.

Another good example of extending the maturity stage of the PLC would be Kellogg’s with their efforts to shift breakfast cereals into ready-to-eat breakfast bar variations. This is a nice adaption of their traditional product to the changing needs of their time-poor consumers.

Apr 162017
 

Following the maturity stage of the PLC, many products at some point will enter the decline stage. The decline stage is a significant reduction in sales volumes. Typically this occurs for two main reasons:

  1. There is a new product category in the market that provides a better solution and has provided enough incentive for consumers to switch on a widespread basis
  2. There has been a significant change in consumer lifestyles and that particular product is no longer relevant

Most products into the decline phase due to “replacement” products being offered, primarily through enhanced technology or unique design. As mentioned above, the Apple iPod is a good example, where the smart phone technology includes a music player and has easier access to the Internet and is a more visual device. Therefore provides significant usage and relative advantages over the iPod.

An example of where a change in consumer lifestyles would trigger a decline might be a product such as a sewing machine. There was a period of time where women were primarily in the home, looking after their family. As part of this lifestyle, it would not be uncommon for them to make and/or fix clothes and own a sewing machine as a result. However, in today’s world most women pursue work or some career, and have less time to dedicate to home life and also have enhanced income ability to buy close, rather than make them = thereby reducing the demand for sewing machines in the home.

In the decline stage we have a dramatic falling of sales volume. In the early part of the decline stage in particular, the product line can be very profitable to the firm. Keep in mind that sales are reducing each year, although they could still be relatively high. What is also changing is the need to invest in support the product to its previous extent.

For example, a product in the decline stage of the PLC is likely to need far reduced marketing communication investment and it is not likely to need product enhancements and improvements. With the production/removal of these two significant marketing investment costs, the overall profitability of the product set can remain quite high during the decline stage.

Also, as smaller competitors tend to leave the market first, as their sales volumes reduce to the point of breakeven or less, the existing/remaining sales in the marketplace will revert to the larger brands by default. Therefore, the larger players in the market are likely to see an increase in market share during this period. This means that their reduction in sales volume is not as significant as the overall reduction in the marketplace (in percentage terms), which means that they can remain profitable for a longer period.

In order to further assist profitability, it is usual for firms to reduce their product mix of the products in the decline stage. They no longer need to offer so many variations and choices, primarily because the mix and diversity of consumers is also reducing. This more efficient product line helps to retain cost efficiencies and help support profitability levels.

Smaller retailer and distribution channels are also eliminated in a further attempt to maximize profits for the remaining period of time. Clearly online channels become a more efficient possibility, due to their ability to reach large numbers of consumers at a low-cost.

Apr 162017
 

One of the key challenges for the firm during the introduction phase, given the important role of innovators, is the limited level of sales and likely negative profitability. This occurs because only a small proportion of consumers – the innovators – will trial/purchasing new product in its early stages. Because the firm has its normal cost of supporting a new product and has likely invested a significant amount in its development and launch, new products are generally quite unprofitable in the introduction stage of the PLC.

Continue to support or withdraw the product?

This leads to a significant dilemma for a firm. If the new product takes a period of time to become successful, then the firm is required to support it financially. Keep in mind, that not every new product category will be successful. Even Apple has brought new products to market over its history that have not been successful and have not been widely adopted by consumers.

As you can imagine, perhaps over a period of months/years, the marketer is faced with the challenge of whether to continue supporting a product that is losing money or to consider whether the firm/brand would be better off by discontinuing and withdrawing the product from the market.

A good example here would be microwave ovens, which were commercialized in the mid-1960s, but were not widely adopted until the early 1980s. As you can see, this is a period of around 15 years or so, where a reasonable level of financial support would have been required to maintain the new product, on the basis (or hope) that it would eventually be financially successful. As we know, microwave ovens but now widely adopted, but not all new products prove quite as successful.

It is likely that during this period of “certainty” that the firm will discuss whether or not to keep supporting the product. Because new products frequently require promotional support (both at the consumer and at the trade level) and usually continued product improvement and fine-tuning, there are substantial investment costs (relative to the minor revenue in flow at the time). This means that the introduction phase of the PLC is a time when there is significant concern about the viability of the new product.