Page 176 - DMGT408DMGT203_Marketing Management

Unit 7: New Product Development and Product Life Cycle Strategies

During the later part of growth stage, market share leader particularly endeavours to lengthen Notes
the period of growth stage by improving product quality, adding new features, lowering costs,
adding new segments, and trying to increase product usage rate. Due to the combined total
efforts of all competing companies, market expands and more customers start buying the product.
Seeing the trends of increasing demand, more resellers are willing to carry the product and
generally prices are reduced.
Near the end of this stage, there is a drop in the overall growth rate and typically the prices are
significantly reduced. Generally, weaker companies start exiting the market and strong
competitors capture more market share. This results in major changes in the industry’s competitive
structure. Strong companies evaluate their product lines and eliminate their weaker items, start
promotional pricing, and strengthen their reseller relationships. What happens to a company
during this period depends much on how well the product has been positioned with respect to
target customers, the state of distribution system, and relative costs per unit.

Example: Chevrolet is in the growth stage in India.
Marketing Mix Changes during Growth Stage: At the product level, the line expands by making
available products with differing features, and at different prices. The main focus now is on
creating meaningful and persuasive differentiation relative to other competing brands in the
category. The prices tend to decline, more so during competitive turbulence period because of
price competition.
Generally price differences among different brands narrow down. The level of price decrease
would depend on cost-volume relationship, level of concentration in the industry, and the
fluctuations in raw material costs. Promotion expenditures cover advertising, sales promotion,
personnel selling etc. aimed at increasing demand for the company’s brand (selective demand)
and not really much concerned with category demand (primary demand) building.

Companies try hard to build positive consumer attitudes toward their brand, communicating
unique features and benefits. Another objective of communications is to address newly targeted
segments. As a percentage of sales, costs of promotion generally decrease. However, during the
later part of the growth stage, promotion costs may increase particularly for low-share consumer
goods companies to maintain their distribution system by offering consumer and trade incentives.
Companies try to develop their distribution network. This is true both for consumer and industrial
companies to provide increased product availability and service at the lowest cost. Many firms
now try to build some kind of direct-sales system to expand their market share. If a company
succeeds in accomplishing this, it definitely puts competitors at a disadvantage. It is necessary to
gain some degree of success at the distribution level before the maturity stage. Channel members
often tend to disinvest in less successful brands during maturity stage.

7.4.3 Maturity Stage

Most products after surviving competitive battles, winning customer confidence and successful
through growth phase enter their maturity stage. The sales plateau, and this flattening of sales
usually lasts for some time because most products in the category have reached their maturity
stage, and there is stability in terms of demand, technology, and competition. Sales slow down,
competition is intense; price and promotional wars erupt, and profits decline.
The demand for the category is at its highest during maturity. Strong market leaders manage to
gain high profits and large positive cash flows because they have the advantage of lower-cost
and have no need to expand their facilities. In general, if the maturity stage is protracted, a
company cannot ignore the possibility of changes in the marketplace, the product, the distribution,
production processes, and the nature and structure of competition.

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