STRATEGIES IN EVERY PRODUCT LIFECYCLE
ARIZONA STATE UNIVERSITY
ENT 441 - ENTREPRENEURIAL MANAGEMENT
WEEK 6
Introduction:
A product undergoes a life cycle that begins with a period of introduction or introduction,
growth, saturation and finally decline (introduction, growth, maturity, decline) which is called
PLC (Product Life Cycle). At each of these stages various strategies can be implemented.
At the induction stage, strategies can include:
1.
Always strive to improve the appearance of its products.
2.
Distributing as many goods as possible to all stores so that all stores can be filled, of
course this must be in accordance with the nature of the goods. For example, toothpaste
manufacturers try to fill all stores, which sell toothpaste with a certain brand. This action
is called sell-in to as many stores as possible. If necessary, a contest or race is held among
salesmen, whoever gets limited stores to fill, then he wins the race. Here, it is the number
of stores that is important, not the amount of money achieved by the salesman.
3.
Then try to encourage goods that have entered the store (sell-in), can be sold immediately
(sell-out), by means of advertising and other promotional methods everywhere
aggressively.
At the growth stage, where the product is again favored by consumers and sales turnover
continues to increase, the strategies that must be carried out are:
1.
Constantly look for new segments to increase sales. This means having to increase the
number of salesmen, and transportation fleets to distant areas.
2.
Always improve the quality of the product, with an appearance that remains attractive,
or tips can create new products
3.
Consider a strategy of lowering the price of high-priced items, so that they can be
reached by middle- or low-income consumers.
At the maturity stage the product has begun to be somewhat saturated, consumers are getting
bored, they are waiting for new products or waiting for other flavors, from the product.
Human nature, will always be bored if given the same thing, they want another variation.
In this case, the manufacturer may adopt the following strategies:
1.
Trying to find small segments or marketing niches, or market niches, that have not been
filled by its products in the hope of attracting new consumers.
2.
Creating products with large sizes, so that the number of sales continues to increase,
such as Coca-Cola drinks creating drinks with 1 liter or milk creating super large cans,
as well as detergent powder It creates packages of 2 kilos, 5 kilos, toothpaste creates
packages of large size, family size, small and so on.
3.
Improving the appearance of the product with something new, with a slight
improvement, such as now being whiter, more durable, longer lasting, super with a new
scent, more economical, three times stronger and so on.
At the decline stage, the state of the product begins to depress because consumer demand
is greatly reduced. If that can no longer be helped, it will cause the product to be abandoned
by consumers (abandonment). The strategies that can be done are:
1.
If the symptoms are already parch, the promotion budget is forced to be reduced, so that
expenses can be reduced.
2.
Focus on markets where there is still hope of absorbing the product while ignoring other
markets.
3.
The final strategy is to discontinue the product and create another product, which will be
reintroduced.
9.6. Market Orientation Strategy
Each type of goods and services offered in the market experiences a different marketing
situation. There are various types of demand that must be anticipated by the producer, among
others:
a.
Negative demand
In vegetarian people, who eat only vegetables, there is a negative demand for ivory, because
they do not eat meat. Similarly, certain people have negative demand for vaccinations, fear of
injections, fear of dentists, fear of flying, fear of eating certain fruits. To overcome this, it is
necessary to study what exactly is the causal factor of the negative demand, whether it is due
to fear, unaccustomedness, not knowing the haul of benefits, or because of beliefs, values,
superstitions, customs, habits and so on.
The task of marketing is to reverse the demand for conversion marketing. find the real causal
factor, and then fix it through lighting, with no intention of violating generally accepted
values, which creates social tension.
b.
There is no demand, i.e. people do not care, are not interested, neither positive nor negative,
in the sale of car alarms in a place where there are not many cars. Boat manufacturing in a
place where there is no lake. It is necessary to create demand through stimulation marketing.
For example, an artificial lake, or a large pond, where people can ride boats as a recreational
object is created in the city.
c.
Latent demand, meaning pent-up demand, which has not been met by the market so far. Pros
must be creative in meeting this latent demand, with developmental marketing. For example,
people used to be afraid of smoking because of the dangers of nicotine. Therefore people want
the danger of nicotine to be reduced with certain tools. Then manufacturers created Berlilter
Cigarettes. which can filter nicotine. It was also invented as a pipe. Another example is that
Americans have long coveted gasoline-efficient cars, especially after gasoline prices soared.
Eventually, Japanese manufacturers emerged to produce gasoline-efficient cars, compared to
the gas-guzzling American-made cars.
d.
Faltering demand. Here the task of marketing is to revive public demand, by reviewing the
marketing system through remarketing. Faltering demand is a state of demand for a
good/service that is less large than it should be, and is predicted to continue to decline, so
remarketing is necessary. For example, the marketing of trains in our country lately, the
longer the demand decreases. Then a review was carried out, about the marketing system so
far, which has many weaknesses, including, among others, old rails and carriages, departure /
arrival times are often late, travel time is long, cleanliness is not maintained and other
transportation equipment rivals are increasingly endangering the position of trains. Finally,
improvements were made, wagons were replaced, rails were replaced, speed was increased,
service was satisfactory, guaranteed fast and safe to the destination. Trains began to be
favored again, especially by executives.
e.
Demand is irregular, sometimes a lot of other times a little, the task of marketing here is to
synchronize demand with synchronous marketing. Examples of irregular demand are found
in marketing services, recreation, hotels, museums, zoos, which are very large on holidays,
and quiet on other days. In fact, there is a threat that large hotels in Yogya will go out of
business, because there are no visitors, and new hotels are still being built. Through marketing
synchronization, programs, special events that attract visitors on low days, and a reduction in
tariffs should be sought. With D'Rails the decline in demand can be avoided.
f.
Full demand, this situation needs to be maintained with defensive marketing. This full
demand means that the level and time of demand is equal to the level and time of demand that
is in line with expectations. In this case the company must remain on guard not to let its guard
down, because later rivals will appear, or saturation from consumers will appear. Survival
marketing requires maintaining efficiency in marketing, creating the right tactics, and paying
attention to marketing mix elements, in the form of product, prices, promotion, as necessary
and place by maintaining accuracy, speed of distribution so as to ensure the availability of
goods at all times.
g.
Abundant demand, meaning that there is too much demand, causing danger. The task of
marketing here is to reduce demand with marketing gone. Over full demand can occur
unexpectedly, for example due to natural disasters, bridges breaking down, the atmosphere is
about to break out in war, harang supplies are running low, buyers are scrambling to buy.
Marketing vanishing or marketing needs to take action to reduce the amount of demand. for
example by increasing prices, reducing services, reducing promotions, reducing store opening
hours and so on.
h.
Demand is unhealthy, so it is necessary to undermine this demand with counter-marketing.
For example, demand for alcoholic beverages, cigarettes, which can cause health hazards. For
this reason, counter marketing needs to be carried out by preventing sales, or campaigning for
advice not to buy and the dangers caused by buying these goods. This action can be taken by
the company or by the producer itself.
9.7. Marketing Strategies for Different Stages of Product Life Cycle
The concept of Product Life Cycle (DHP) or Product Life Cycle (PLC) is an important
concept in marketing life because it provides a deep understanding of the product competitive
dynamics of a product. At the same time, this concept can solve if used carefully.
The life cycle of marketing thinking should not start with product demand and or even
product classes, but should start with needs. Technology in a given technology demand cycle
will see various forms of products that take turns fulfilling a particular need at any given time.
This distinction is important because if a company focuses on the lifecycle of its own
brand, it will miss the bigger picture and one day be surprised to realize that all businesses
have been destroyed.
What is important is that the company must decide which technology-demand cycle it
will be involved in and when to switch to a new technology-demand cycle. Ansoff calls this
technology-demand cycle a strategic business area (SBA), i.e., "a clearly defined segment of
the environment in which a company wants or may want to operate". The problem in today's
world is that many companies that operate in the in a chaotic market with fast-changing
technologies and unable to master all the existing technologies. They are in a position to guess
which technology demand cycle will prevail. They can bet everything on just one new
technology, or go all-in on a few. In the latter case, it is unlikely that they will become market
leaders. Pioneering companies that put a lot of effort into winning technologies are more
likely to gain leadership. So, the critical issue facing companies is to choose the strategic
business field in which they will play. The next question is how to manage that area and
whether the answer is to set up a strategic business area with a life cycle With this
background, we can now focus our product and attention on the product life cycle, which
takes up much of the time of marketing people. The concept of the product life cycle is an
attempt to recognize the different stages in the sales history of a product. At these stages there
are different opportunities and problems in relation to marketing strategies and profit
potential. By recognizing the stage that a product is in, or is heading towards, a company can
formulate a good marketing plan.
To say that a product has a life cycle would be tantamount to stating four things, namely:
1.
Every product has a lifespan.
2.
Product sales go through distinct stages and each stage presents a different challenge to the
salesperson.
3.
Profit earned from sales will increase and decrease at different stages of the product life cycle.
4.
Products according to different strategies in terms of marketing, finance, production,
personnel and purchasing at each stage in the product life cycle.
Most discussions of the product life cycle (DHP) always depict the sales history with an
S-shaped curve as shown in the figure This curve is described as having four stages and is
commonly referred to as the introduction, growth, maturity and decline stages.
Introduction. A period of slow sales growth because the product has just been introduced
to the consumer community. Costs are so low that the product generates no profit at all.
•
Growth
The market quickly accepted the new product so sales soared and generated huge profits.
•
Maturity
The period when sales growth begins to decline as the product has been accepted by most
potential buyers. The amount of profit is steady, stable or declining due to increased
marketing costs to fight fierce competition.
•
Decline
In this period sales decline sharply followed by shrinking profits. The determination of when
a stage begins and ends is somewhat arbitrary. Usually these stages are characterized by a
marked change in sales growth.
The product group DHP concept can be used to analyze a product form group
(cigarettes), a product form (filtered cigarettes) or a brand and cycle (Philip Morris regular,
unfiltered). For more details see the brand life drawing. The DHP concept has a degree of
applicability in every field of discussion.
The product group has the longest life cycle
Sales of many product groups are able to stay in the maturity stage for an indefinite period of
time, because they are related to the population.
Some product groups such as cigars, newspapers, coffee and motion pictures are already in
the decline stage. Meanwhile, microcomputers, videotapes, and wireless phones are clearly in
the introduction or growth stage. Shapes tend to follow the standard DHP pattern.
•
The brand apparently showed the shortest DHP
A study conducted by Nielsen came to the conclusion that in the past the lifespan of a
new brand was around three years; and the symptoms point to an increasingly short lifespan.
Another form of life cycle reality proves that not all products have an S-shaped product life
cycle. Selectors have found six different product life cycle patterns out of the 17 DHP patterns
they studied. Three common patterns are shown in Figure 19 (a) Showing a 'growth maturity
decline' pattern, often characterizing new kitchen appliances. For example, sales of saucepans
grew rapidly between 1970 and 1976, then increased from mid-1976 to 1979, and stabilized at
that level thereafter. The "helpful" rate was aided by the slow adoption of the product by
buyers when it first came out and the slow replacement of the product in what appears to be a
"cycle-recycle" pattern, with the second cycle usually taking a shorter time and being smaller
in size. The second surge in sales is a direct response to the massive promotional program
undertaken in the decline stage in Figure 19. (b). Another pattern as shown in Figure 19 (c) is
the "scalloped patern"; in this pattern, the life cycle of a product is "renewed each time" due
to the discovery of new features, new uses or new consumers of the same product.
•
Life cycle of style, fashion and fad
There are three categories of product life cycle that must be clearly distinguished from
other DHPs, which relate to style, fashion and seasonal fashion. Style is a particular and
fundamental way of expression in a field. For example, the styles seen in houses (traditional,
colonial), clothing (formal, casual, eccentric), art (realist, surrealist, abstract). When a style
has been discovered then this It can last for a very long time, alternating between generations
and appearing at one moment and disappearing at another. The cycle of a force shows an up
and down curve over time, as interest returns and returns again.
Deviating Product Life Cycle
A fashion is a style that is popular and prevails in one area e.g. Jeans are a popular
fashion in clothing, while "Jazz and "country" are fashions for music that is widely accepted
today. Fashion usually goes through four stages. The first stage of distinc-tiviness is the
period during which consumers pay attention to something new to apply to themselves so as
to appear different from other consumers.
Products are made to special order or produced in limited quantities. Next comes the
imitation stage, where other consumers step in to match or compete with the fashion pioneers.
A fad is a fashion that emerges quickly into society, is received with passion, peaks very
early and ends just as quickly. The welcome cycle is very short.
In day-to-day reality, it is very difficult to predict whether a model will be just a fad; and
if so, whether it will last for a while. How many days? How many weeks? How many
months? Several factors, especially the role of the media, will determine its longevity.
The rationale in the preceding discussion is that the DHP is in the form of a life cycle S
without presenting its rationale in marketing language. Diffusion theory and adoption theory
are the underlying ideas. When a new product is launched, the company must try to influence
consumers to be interested, interested, try and finally buy the product. This process takes a
long time and at the introduction stage, only a few people buy.
If it turns out that the product satisfies the consumer, then a number of other buyers will
buy as well (early adopters). The entry of new competitors will accelerate the adoption
process by increasing market interest and by lowering the selling price. At the next stage,
more buyers enter the market (early majority). Then the growth rate starts to decline as the
number of potential new buyers shrinks to near zero.
Broadly speaking, the DHP concept is very useful in terms of developing effective
marketing strategies at various stages in the product life cycle. We will now discuss the
various stages and the marketing strategies appropriate to each stage. The introductory
pioneering stages begin when a new product is introduced and distributed for the first time
and is available in the market for purchase by the public. It takes a long time to replenish
distributors and push it into various markets; thus it is understandable that sales usually grow
slowly.
The amount of profit earned during this stage is very little or even loss-making due to
low sales results coupled with high distribution and promotion costs. Large amounts of money
are needed to attract distributors and "fill the pipeline". Spending on promotion is high as a
percentage of sales, to:
1.
Notifying potential customers of the arrival of a new product that is completely
unknown.
2.
Persuade consumers to try and
3.
To ensure product availability at each end retailer.
There were few competitors and they produced basic versions of their products because
the market did not yet require product enhancements. Companies concentrate their sales
efforts on potential buyers who are most ready to buy, namely those with high income. Selling
prices tend to be high. Why?
1.
High costs due to low production levels;
2.
Technological problems in the production process may not have been overcome
perfectly.
3.
A high enough profit margin is required to cover the cost of promotion.
Marketing strategy. In launching a new product, the marketing manager sets in stage each
marketing variable at a high or low level, such as introduction in terms of price, distribution
promotion and product quality. When the main considerations are only price and promotion,
management can follow one of four types of strategies.
The skimming strategy is carried out by setting high prices and vigorous promotion.
Rapid (rapid price is set high in order to obtain as much gross profit per unit as possible)
skimming strategy. Promotions are organized on a large scale to convince consumers of the
high value of the product, despite the high price level. This promotion is utilized to accelerate
the rate of market penetration. This strategy can be successful if:
1.
Most of the potential market is not yet aware of the product;
2.
Those interested in buying can afford to pay any price;
3.
The company faces potential competitors and wants to build preference for its brand.
Slow Filtering Strategy
It is chosen by setting high prices and low promotion. The purpose of high pricing is to
generate the highest possible gross profit per unit; while low promotion is intended to
minimize marketing costs. This combination is expected to generate high profits. This slow
filtering strategy can be successful if:
1.
Market size is limited;
2.
A large part of the market is aware of the presence of this product;
3.
Buyers are willing to pay high prices and
4.
Potential competition is not apparent.
Rapid Breakthrough Strategy
It is carried out with low pricing and supported by vigorous promotion. This strategy is
expected to result in the fastest market penetration and capture the largest market share. The
success of this strategy can be achieved if:
1.
The market size is vast;
2.
The market is unaware of the product's presence;
3.
Most buyers are very price-sensitive;
4.
There are indications of great potential competition and
5.
The cost of goods produced tends to fall as the scale of production increases and more
experience is gained.
Slow Penstration Strategy
This is done by setting low prices and promotions. The low price will speed up the acceptance
of the product by consumers, and the promotion plan is intended to achieve more net profit for
the company. This strategy is often chosen in the belief that demand is highly sensitive to
price but less sensitive to promotion. Companies can expect this strategy to be successful if:
1.
The market is vast
2.
The market is very aware of the presence of the product;
3.
The market is sensitive to price levels and
4.
There is little potential competition.
Companies, especially pioneers in their markets, should not choose any of the four
strategies arbitrarily. Instead, whatever strategy is chosen should be a carefully determined
first step in an overall life-cycle marketing plan.
The pioneer must analyze the potential profits from each market as well as from various
combinations of markets, and then the market expansion strategy must be determined. In
Figure 9.11 product 1 is initially marketed into market 1 (P1 M1 ) and then planned to enter
market 2 (P1 M2 ).
Figure 9.11. Then the competition is surprised by the expansion strategy of launching
product 2 in market 2 (P M22 ). The next step product/market 2 is again marketed long term in
the market (P M21 ). Finally, a third product is tried to be launched into the first market (P M31
). If this strategy works well, the pioneering company will be able to gain market share with
two or three products.
Over time, with the introduction of new factors, the plan may be replaced by a more
adequate strategy, but from the preceding example, the company can at least get ahead of
what to do with its new product in this new market.
In the beginning, the pioneer company was the sole supplier, with 100% production
capacity and a monopoly on all product sales.
The second stage, often called breakthrough competition, begins when a new competitor
builds a factory and starts marketing its output. As more competitors enter the market, the first
company's position in terms of production capacity and sales begins to fall.
Subsequent competitors rejoin the market, often at a lower selling price than the first
seller. This is associated with risk and uncertainty about product quality. Over time, the
relative values of the lead firm that have been accepted by the consuming public begin to
decline; this development results in a decline in the high selling prices set by the lead firm.
During times of rapid growth, production capacity tends to become too large, so that
when cyclical downturns occur, this excess capacity results in profits falling back to normal
levels. New competitors are reluctant to jump in, and those who have already done so.
Market participants seek to solidify their position. This development leads to stage three,
share stability, where both capacity share and market share tend to stabilize.
This period of stability is followed by a period where the product has turned into a
commodity and buyers no longer pay a price premium and the company receives only an
average level of profit. Under these circumstances, one or two companies may withdraw.
Growth stage. The early adopter group who are the pioneers are satisfied with the new
product, then followed by the majority of consumers.
Profit and production opportunities, for example, have attracted many new competitors to
the market. They introduce new product features and this has the further effect of expanding
the market. The increase in numbers will lead to the expansion of distribution channels. This
must also be followed by a flood of products to fill the distribution channels.
Marketing Strategies During this stage, several strategies can be used to sustain rapid
market growth for as long as possible.
1. Product quality is improved and product features and models are added 2. New models and
products are added 3. New market segments are entered 4. New distribution channels are
utilized 5. Some forms of advertising are shifted from persuading consumer interest in the
product to creating confidence in the product so that they want to buy. 6. Prices are lowered at
the right time to attract other price-sensitive consumer groups.
Companies that implement the above market expansion strategies will be able to
strengthen their position in the competition. However, this requires an increase in costs.
Stage There will come a time when the growth rate of product sales begins to mature and
this product begins to enter relative maturity. This stage (maturity) It usually lasts longer than
the previous stages and faces gradual challenges in marketing management. Most products are
in the maturity stage of the product life cycle, so most marketing management addresses
mature products.
There are three stages in this maturity stage. In the first stage, growth maturity, the rate of
sales growth begins to decrease due to the maturity of distribution. No new distribution
Volume = number of product users X
usage rate. With corporate brands per user
channels can be added, although some buyers belonging to the followership group enter the
market. In the second stage, stable maturity, sales per capita become flat due to market
saturation. Most potential consumers have tried the product and future sales depend on
population growth and demand for new replacements. At decaying maturity, the absolute
value of sales starts to fall and consumers start moving to other products or substitute
products. The declining rate of sales growth leads to overcapacity in the industry, which in
turn leads to intense and intensified competition.
Marketing strategies are not a few companies finally give up on handling In the stage of
product saturation, they feel that there is not much more that can be done. So what they do is
better to divert funds to newer products that are still under development.
Market Modification:
Companies should make more efforts to expand the market for their brands by addressing the
two determinants of sales volume, namely:
The following will discuss these factors. Companies can try to expand the number of
users of company-branded products in three ways:
1. Change the non-user material.
Here the company tries to convert non-users into product-group users.
2. Enter new market segments
The company tries to enter a new market segment (geographically, demographically and
so on) that uses the product but not the company's brand.
3. Seize customers from competitors
Companies try by all means to attract consumers from competitors to try and use the
brands that the company has.
In addition to the strategy of expanding the number of consumers as above, there are
three other strategies to increase the number of sales by increasing the frequency of use by
consumers who use the company's brand:
1. More frequent use
Companies try to encourage consumers to use the product more often.
2. More usage on every occasion.
In this strategy, companies invite consumers to use more each time they use.
3. New and more diverse uses.
Here you have to find a new use for the same product, and then convince consumers of it.
Product modification
Companies can also try to increase sales by modifying product characteristics in such a way
as to attract new consumers and/or encourage consumers who currently use the company's
brand to consume more. There are several ways to relaunch a product.
Quality improvement strategies aim to improve product functionality, i.e. durability,
reliability, speed, taste and so on. Feature improvement strategies aim to add new features
(size, weight, staples, additives, decoration) that will increase the product's safety or
convenience capabilities.
A style improvement strategy aims to increase the aesthetic appeal of a product. The
periodic introduction of new car models often leads to style competition rather than quality
and usability competition.
Marketing mix modification
Product managers should also try to design sales by modifying one or more elements of the
marketing-mix. In terms of driving sales of mature products, here is a list of key questions that
a marketing manager must answer. These questions are primarily concerned with the non-
product elements of the marketing mix:
1. Price
Will a price cut appeal to the experimental group or to those who are already using? If
so, should the price reduction be everything on the price list? Or should the price
reduction be done through special prices, special bonuses for achieving targets, lighter
terms of sales credit? Or perhaps it is better to increase the price to give the impression
of an upgrade?
2. Distribution
Can the company get more support or showroom space in distribution channels? Is it
possible to penetrate more stores? Can the company penetrate distribution channels
that have not been touched so far?
3. Advertising
Do advertising costs need to be increased? Or should the message in the advertisement
be changed? Should the media channels be changed in type or combination? Perhaps
the timing, frequency or size of advertisements should be improved?
4. Sales promotion
Should sales promotion be increased? In the form of discounts? Guarantees? contests,
prizes?
5. Personal selling
Do the quality and skills of salespeople need to be improved? Perhaps the basis of
specialization for salespeople should be changed? regional divisions should be
reorganized? or should the current incentives for salespeople be improved? what about
possible refinements to the visit plan?
6. Services
Can the company speed up delivery? Can technical assistance for consumers be
improved? Or credit facilities expanded?
The eventual stage is that the sales output of almost all products and the deterioration of
product brands and brands will move downward. The rate of decline may be slow as in the
case of oatmeal cereal, but it may also be fast as in the example of the Holden Kingswood car
in 1975-1976. Sales may fall to zero, or they may just stay at a low level and continue at that
level for years.
There are many reasons why these sales can fall: technological developments, changing
consumer tastes or increased competition at home or abroad. All of these lead to overcapacity,
intensified price competition and ultimately erosion of company profits.
If there is no compelling reason to keep the product, then continuing to market products
that have already been reaped will be very expensive for the company. The costs or casualties
are not only in the form of company losses. Accounting will not be able to record hidden
costs, for example, the time required by management to deal with this problem is very large,
frequent price and inventory adjustments are made; high production costs due to small
production volumes and high setup times; a lot of attention is devoted to advertising and sales
forces that might be better directed to other "healthy" products that are more profitable;
because product obsolescence can cause consumer concerns and can tarnish the company's
image.
The marketing strategy of a number of activities and decisions must be taken by the
company in this stage of dealing with "aging" products.
Setbacks identify weak products. The first task is to establish a system for recognizing
which products are already weak. There are six steps in this:
1.
The company formed a product review committee consisting of marketing, production
and finance.
2.
The committee then devised a system to identify which products were weak in the
market.
3.
Bookkeeping and/or marketing departments that show trends with regard to market size,
market share, selling prices, profit costs.
4.
The information above is then analyzed with the help of a computer to determine which
products are questionable so that they need to be investigated further. Criteria for
determination include: years of declining sales, market share trends, return of investment.
5.
The list of products in doubt is reported to the responsible managers. These managers
then have to fill in a specific diagnostic and pre-assessment form showing what they
think the future sales and profit trajectory will be; both with and without a change in
marketing strategy.
6.
Finally, the review committee summarizes and makes recommendations on each of the
failing products: Leave the product as it is now, improve the marketing strategy or
eliminate it (withdraw the entire product from the market).
Establish a marketing strategy
Some companies will leave a down market earlier than others. This depends largely on the
degree of exit barriers. The lower the exit barriers, the easier it is for firms to leave the
industry and the more profitable it is for the surviving firms. Why? Because there is an
opportunity to accommodate consumers from the retreating company. Increased sales and
profits can be expected by the surviving companies. So the issue here is the company's
decision about whether it will continue to be entrenched in the market until the end.
In a study of strategies employed in declining industries, Harrigan summarized five
strategies that can be used.
1.
Add more capital investment in order to dominate or occupy a good competitive
position.
2.
Stay at the current level of investment until such time as the uncertainties in the industry
are resolved.
3.
Selectively reduce the amount of capital investment by abandoning less profitable
consumer groups, while at the same time increasing capital for small groups that remain
loyal and more profitable.
4.
A "harvesting" strategy, which involves reducing the amount invested in the product in
order to obtain cash immediately, regardless of the capital position.
5.
Leave the business immediately by selling his property.
Product drop decision
If a company decides to withdraw a product, it will face further decision problems. If the
product has strong distribution and goodwill, the company may be able to sell it to a smaller
company.
If it cannot find a buyer, the company must decide whether to liquidate the brand quickly
or slowly. The company will also have to decide how much inventory of service parts it
should keep on hand to maintain service to its existing customers.
The figure above summarizes the characteristics, marketing objectives and marketing
strategies at each stage in the product life cycle. Not everyone in the marketing department
agrees with these strategies, but the strategies in the table are a consensus with a group of
marketing experts.
The awakening stage
Before a market emerges, there is what is called a latent market. A latent market contains
people who share similar but unmet wants and needs. The problem now is to design the
optimal product for this market. there are three main options.
1.
Products are designed to cater to the choices available in one corner of the market
(diagram), and this is called a single-niche strategy.
2.
Simultaneously two or more products are marketed to fulfill two or more parts of the
market or multiple niche strategy.
3.
New products can be designed for the middle section of the market, which is called a
mass market strategy.
For small companies. A single niche strategy is most appropriate, as these companies have
only very limited resources that are not enough to cover the mass market.
Growth stage
If sales are good, new companies will enter the market, leading us to the market growth stage.
The interesting question is, where will the second firm enter the market, assuming that the
first firm places itself at the center? The second firm faces three choices:
1.
The brand is placed in one corner, this is called a single niche market strategy.
2.
The brand is placed on the first shelf of competitors, this is called a mass market
strategy.
3.
Two or more products are marketed in niches that are not already occupied by the first
company, or multiple niche strategy.
If the second firm is small, it should market the product in one corner of the market so
that further competition can be avoided. If the second firm is large, then the product can be
thrown in the middle and face the first firm. The two firms will easily share the market, and
will be almost evenly matched. A large second firm may also opt for the multiple niche
strategy alternative.
Descending stage
Eventually the market demand for the existing product will decline, this may be due to a fall
in the level of total demand or due to new technology replacing the old technology. For
example, an entrepreneur introduces a substitute product in the form of an effective mouth
spray that is better than toothpaste. In this case, the old technology will eventually disappear
and a new technology demand life cycle will emerge.
Dynamics So, in fact, the evolution of the market tells the story of various competing
attributes of companies that discover new benefits to offer to buyers. Consider the evolution
of the paper towel market. Initially, households used only cotton, linen and cloth towels in
their kitchens. A paper company, looking for new opportunities for its market, developed a
type of paper towel that rivaled cloth towels. This development crystallized a new market.
Other paper companies were attracted and began to enter the industry while developing the
market.
So it is clear from the above example that paper towels moved from a simple product to a
product with a wide range of absorption, strengths and applications. Market evolution is
driven by the forces of renewal and competition.
Market competition does result in a continuous series of new product attributes. If a new
attribute succeeds in the free market, then competitors will follow suit, so that the first one
will lose its specialty.
We see today where most bank businesses are friendly and welcoming, over time this
attitude is no longer a factor that encourages consumers to decide which bank to choose.
Since almost all airline businesses serve in-flight meals, this meal is no longer the basis
for prospective passengers to decide on a flight. Which airline to use consumer expectations
are progressive. It is things like this that underline the need for companies to maintain their
pioneering position by conducting new attribute updates; and this is very strategic. If
successful, each new attribute will result in a differential advantage for the company,
resulting in higher than average market share and profits, although it is unlikely to be
permanent. Thus, it is felt that market-leading companies must recognize the need for a
continuous renewal process.
One difficult question comes to the surface: can the company look ahead and anticipate
when a new attribute will be in high demand and technologically feasible? how does the
company investigate for a new attribute? four possible approaches are:
•
First approach
empirical to recognize new attributes. Companies ask consumers what additional attributes
they want and how strongly they want them.
•
Second approach
Treating attribute search as an intuitive process. Entrepreneurs prefer to rely on hunches and
jump into product development without much market research. Natural selection will
determine who are the winners and who are the losers. If the intuition turns out to be in line
with the needs of the market, then the entrepreneur is considered ingenious, although from
another point of view it may be considered good luck. Since it is based on intuition, theory
does not provide any guidance on how to discover the new attribute.
•
The third approach
It states that new attributes can evolve through a dialectical process. Through competition,
any attribute will be pushed to an extreme form. For example, blue jean clothing, which was
not very expensive in the beginning, over time became more expensive and fashionable. But
this movement in this direction contained the seeds of self-destruction as well. Eventually,
some entrepreneurs cheapened the pants and consumers flocked to buy them.
•
Fourth approach
It holds the belief that new attributes develop through the so-called ladder of needs sequence
(see Moslow's theory). According to this theory, it is thought that the first generation of cars
were needed by people only as a means of transportation so they were designed from a safety
perspective. With the passage of time, cars began to be about social valuation and status so
over time they had to be designed to help people fulfill these higher desires. The task of a
reformer, then, is to assess and judge when the market is ready to satisfy these higher-level
wants and needs.
In everyday reality, the development of new attributes in a market is a much more
complex problem than any simple theory. We cannot ignore the role of technology and social
factors that can influence the development of new attributes. As an example we present here,
high inflation leads to a strong desire for smaller cars and car safety leads to a need for
heavier cars. Reformers should implement market research in order to gauge the potential
demand for different attributes. This is important so that the best course of action can be
determined in favor of the attributes.
9.8. Marketing Turbulence
In the world of marketing, the concept of turbo marketing was introduced by Philip Kotler
through his article in The Journal of Business Strategy, September/October 2001, entitled
"Turbo Marketing Through Times Compression". This turbo marketing concept is the
latest development of marketing symptoms that require the fastest service for consumers.
Service speed is the demand of today's consumers, in line with the increasing atmosphere of
globalization in all areas of life, and the world is increasingly transparent, there are no more
borders between countries, the time of the clock runs very fast.
The battle atmosphere in marketing is completely changing with the gradual, step-by-step
abandonment of old-fashioned strategies from long ago.
In the first wave, marketing competition was characterized by the strategy of producers
making goods at a lower price than rivals, due to a reduction in the cost of goods, and
working more efficiently.
In the second wave, there was a strategy for producers to design goods that were different
from rival products in terms of decoration, style, shape, taste and so on. The third wave of
producers made goods better and better, as applied by Japanese producers through the
principle of total quality control. They are very concerned about the needs and wants of
consumers.
In 1990, the fourth wave, manufacturers began with the strategy of producing, servicing
and delivering goods faster than rivals.
This is the competitive arena of this century, with the term turbo marketing. This strategy
has been started first by optical companies, which serve fast orders for glasses, as well as food
services known as fast food, 1-minute photo printing washing services, postal and gyro
services that introduce special express mail, express patas, train services, bus patas,
telecommunication services by PT Telkom and so on.
Time compression is a winning strategy in this century and is expected by consumers.
Whether the turbo marketing strategy will be profitable depends on the answer to the
following question:
1.
Is the speed of time enough to benefit you as a consumer? If there is a clear consumer
benefit from the speed of the service, then consumers will be willing to pay extra.
2.
Is it possible for manufacturers to speed up the production process? This depends on the
costs involved. If a manufacturer wants to speed up the production and service process,
it means that the manufacturer must use expensive advanced technology, or increase the
work speed of individual employees, with a reward/honor system or combining
scattered work, or reducing unnecessary work steps.
3.
What is the subsequent impact on corporate costs as a result of turbo marketing? Many
criticisms have been made, stating that the company's costs as a result of the speed of
production have reduced quality and increased costs. There are the following
arguments: Increasing speed increases costs, and quality decreases. Increasing quality,
will increase costs and take a long time. Lowering costs, will lead to a decrease and
speed will also decrease. So turbo marketing, which will hold? All of the above
statements are not a clear need according to Kotler is: Time, quality and cost are
generally consistent with each other. Many companies report that by improving product
quality, it results in lowering costs and speeding up the production process.
4.
The last question is "Can rivals easily imitate the reduction in production time that has
been created"? Usually if a company has succeeded in emphasizing time, leaders never
rest, they will never rest to create new ones. And an entrepreneur must be a continuous
creative person and never let his guard down from observing the market and his rivals.
The 1990s will not only be about who can produce goods cheaper, different, or better,
but this decade will also favor those who can produce them faster.
9.9. Generic Strategy
It is a strategy that directs its efforts into, comprehensive cost advantage
differentiation and focus, in order to gain a competitive advantage. This strategy was
introduced by Michael E. Porter, former CEO of a number of giant companies, consultant and
professor of management from Harvard University, calling it the "Competitive Advantage
Strategy". Look carefully at the figure and Figure 4-1 of the generic strategy in this session.
The principle that must be built into this generic strategy is how the company wins the war.
This strategy is shown in ways that can be done all at once or one of them, see below:
•
Differentiation
Companies try to be different in products, markets, prices and distribution as well as
services. The goal is to create a consumer's bigotry to the products or services offered by the
company and the company's customers create as well as attract new customers or competitor
customers.
Companies running this way must have strong competencies in the following:
1.
Strong market intelligence and marketing
2.
Creative and innovative
3.
Has a strength of quality that is difficult to imitate
4.
The management of the organization and its functions is stable and conducive.
Companies that do this include IBM in the computer industry, Mc Donald in the fast
food industry, Toyota Kijang in the automotive industry, Citibank Card in the banking
industry, and many other examples.
•
Overall cost leadership
This is the same way as above to gain victory in the business war. Competencies that
companies must have include:
1.
Marketing management with an emphasis on low cost distribution
2.
Strong and reliable human resources
3.
Selective process engineering gives strong controllability
4.
Continuous and strong capital investment in capital.
Companies with the above competencies can have a cost advantage, thus, allowing
accessibility to high volumes of products and a wider market.
•
Focus
Permanent efforts to win the business war, still by avoiding direct competition with
competitors, namely by concentrating on the target market (market target), Competencies that
must be possessed, companies that do this method, among others:
1.
Strong human resources with a stable organization
2.
Create a differentiation advantage in its market segment
3.
Create a cost advantage in its market segment
Companies try to create a market need or try to fulfill market desires (concentration on
consumer desires) compared to their competitors.
