Among the challenges that marketers face in real life experiences versus school theories is the application of what we learn in our professional life. Schools updating frequently the books they use to reflect market development are limited. Even when some attempt to do it, they are not able to collect enough examples to prepare you for real life experiences. By all means, they cannot teach you a life time experience in a 3 credits course.
When I studied Business, I focused on marketing courses. I liked the field but I never thought I will be traveling to so many countries and exposed to different cultures. No university could have prepared me to such experience, yet I was taught the basics.
One of the concepts I learned in marketing is the Product Life Cycle (PLC) and its effects on the marketing mix. PLC is a term used to define the various stages that a product goes through. From its conception to its production, its maturity to its decline, the product goes through multiple phases and they are usually referred to as: Introduction, Growth, Maturity, and Decline. Although I find PLC to be a sales concept rather than marketing, the interrelation between sales and marketing makes the involvement of the marketers essential as they will have to adopt various approaches when facing the different stages.
Most of the articles I read about the PLC assume that the product is new, the competition is low to none, and that customers need to be educated and prompted to act towards the product. How about the not so new products? What if you are launching a competitive product in the market? Does your PLC follow your competitor’s product PLC? My answer is no.
I have worked in multiple types of markets varying from ones where my company had monopoly over mobile telecommunication to extremely competitive markets where we were the 4th operator to enter the market. I used the PLC as a reference although I believe that the decline phase in mobile communication is not something that I will see in my lifetime hence my preference in using the term Product Cycle versus Product Life Cycle. Surely, I watched the decline of some technologies used, only to be replaced by newer ones (AMPS versus GSM for example), I have also seen companies sold to bigger ones without affecting the presence of the product itself (mobile communication).
As I attempt to define the product cycle below, the reader should take into consideration that my approach is based on a professional experience to introduce a long term product in a competitive market by linking it to the marketing mix versus defining its characteristics from a sales point of view.
1. Introduction:
- Product: Voice telephony is already known to the public. The investment in educating the public about the product is slim to none. Branding is usually what I focus on in order for the public to identify my product and be able to differentiate it from my competitors’,
- Price: “Skim the cream” pricing was applicable when I worked for a company that monopolized the mobile telecommunication. The pricing policy to apply needs to be almost in line with my competitors, since it needs to attract customers without causing a price war between the operators (Fact: Companies need you as a customer for your money)
- Place: Distribution depends on the type of market. If you have enough flexibility you can opt for direct sales via your own shops, through already established distribution channels (when existing distributors are not bound by your competitors’ exclusivity contracts) or by using the franchising approach. Usually I am faced with budget limitation and I start with using the existing distribution channels.
- Promotion: Probably the most essential development in this stage. You will need to position yourself by differentiating yourself from your competition. Your message should be clear; you are not just another mobile operator. You need to build public awareness about your product without forgetting to position yourself in this competitive market. Depending on your strategy, your message is targeting the general public or the niche you are aiming for. Usually I start by targeting the general public since mobile telephony is used on a massive scale.
I should mention that usually at this stage I am introducing the basic mobile services. Due to the large investment made by the company it is not logical to invest in a multiple level of services hence increasing the expenditures. However the basic level of services should be able to offer a certain level of flexibility that guarantees positioning as a competitor.
2. Growth:
It is usually the stage where the company is building the branding differentiation. If your positioning message was well thought of at the introduction stage, then you already differentiated yourself from the competition. By now, if you have not achieved your target, you are probably working in a different company. You should learn from your mistake, although strategies a very useful in marketing tactics are as important in competitive markets.
- Product: Enhance quality while focusing on your message to the target market. In the companies I worked for, enhancing quality is usually increasing coverage areas and upgrading congested sites. You may also want to introduce new services that support your product. I usually have SMS based services launched at this stage.
- Price: It will usually depend on the competition. You do not want to be the first to start a price war yet you should be ready for it especially if your marketing strategy reflected its success into a declining market share for your competitors. If you had launched new services you may be able to set your own pricing if your competitors do not have them. Beware of setting high prices for those services though, your competitors may be able to launch them faster than you could expect.
- Place: You have introduced your product; it’s time to expand your distribution channels. Identify the weaknesses of the first stage and try to explore the possibilities. At this stage I am usually adding a direct presence in the critical areas and adding incentives to encourage exclusivity.
- Promotion: Due to the type of product I am dealing with this is where I target the niche segment, although I keep the general public message.
3. Maturity:
Your competitors are pushing hard, and so should you. When the first two stages are complete successfully you have already guaranteed a market share that you want to keep. Sometimes due to their high investment your competitors are the ones who have problems defending their market share (They matured earlier than you did). If that’s the case, you are still in the growth stage of your product. Reasons for your competitor maturity or a later decline may be an aging network which increases failure in calls and initially high operating expenses such as over-employment (trust me it happens).
- Product: Enhancing features and services (Value Added Services). Although voice is the product of choice in many markets, the introduction and variation of SMS services can help in extending the duration of your product in the market.
- Price: Usually lower than the stage before as your competitor matches with your VAS (Value added services)
- Place: Distribution is fierce, you might have to increase the incentives offered to the distribution chain to keep your market share.
- Promotion: Although you generally promoted your positioning and differentiated your product, you should focus on promoting the differentiation in the features between your product and your competitors’. (For example: Your rates per minute of usage are viewed as being higher but accepted because you are covering a wider area than your competitor. You differentiated yourself as being the operator covering all the country. If that was the case, maybe it’s time to focus that you are actually charging per second although you were announcing the minute price)
4. Decline:
Mobile communication became part of our life and I don’t see it fading any time soon. It is part of the communication process that evolved. However, some technologies used for communication faded and were replaced by other types (Semaphore flag signaling, Morse code, Telex, etc…)
In mobile communication when we talk about GSM (Global System for Mobile Communications) we know it went from phase 1 to phase 2 and the 3G (Although in developing countries Phase 2.5 is still not applicable).
The marketing mix in this stage will depend on your company’s strategy. The cases I witnessed are as follows:
- Maintaining the product by adding features such as the Ring Back Tone, MMS, and GPRS (General packet radio service, which is in brief the service that allows us to offer data)
- Investing further by upgrading to a newer technology hence re-launching the product. Although maintaining (the point above) may be considered as investing further, they are separated due to the high difference in expenditure figures between the two.
- Sustaining the product by offering it to a niche of customers. When my company decided to replace the old AMPS system with the new GSM we operated both networks together for a long period. The Advanced Mobile Phone System (AMPS) was more reliable when it came to fax services and our business customers wanted to maintain this option. Another example happened in a different market where existing operators (and competitors) were not authorized to apply for GSM license until our exclusivity term comes to an end with the government. By using a first generation cellular technology such as AMPS they had to choose what to do. Our competitor kept a minimal number of employees (6 people in the whole company among which 2 were in the commercial department) and offered his service to his loyal yet VIP customers.
- Discontinue the product. When it was time to take a decision as the product entered its decline stage, the majority shareholders of my previous company decided to sell to a firm willing to continue in this line of business. Another way is to simply dismantle and disregard the old product. When the AMPS system (from the previous point c.) became unsustainable, the main towers we used in the new GSM network while other technical equipment was sold.
In a competitive market you cannot deal with your product as an exclusive case. There are many market variations that will affect your decision and performance. The product cycle although theoretical, can help you set your strategy and tactics to ensure your success in your role as a marketer in your company.