Marketing Mix Product Life Cycle
|✅ Paper Type: Free Essay||✅ Subject: Marketing|
|✅ Wordcount: 996 words||✅ Published: 21st Apr 2017|
“A product is a physical good, idea ,person ,or place that is capable of offering tangible attributes that individuals or organizations regard as so necessary, worthwhile or satisfying that they are prepared to exchange money, patronage or, or some other unit of value in order to acquire it… “(Brassington and Pettitt, 2006:288)
Like our company Aldi provide services in certain area of the region. It is necessary to
Strategically plan the services and manage the brand and product line portfolios, serving multiple markets and segments.
Product life cycle
“No matter how wide the product mix, both product lines and individual brands needs to be managed over time. A useful tool for conceptualizing the changes that may take place during the time that a product is on the market is called the product life cycle.” (Jobber 2007)
There are four stages in a product life cycle.
First stage is introduction
“When first introduced on the market a product’s sales growth is typically low, and losses are incurred because of heavy development and promotional cost. Companies will be monitoring the speed of product adoption and, if this is disappointing, may terminate the product at this stage.”(Jobber 2007)
Aldi in the introduction stage
Aldi’s product approach was based on delivering a restricted selection of quick moving product.
The company focused in selling staple products like food, beverages, and household supplies, which customers shopped for on a normal basis. (Reportedly, many German customers made their main purchases at Aldi, and supplemented their shopping by purchasing products that were not stocked by Aldi from other stores.) Typically, Aldi stores carried only around 700 different products, compared to around 25,000 products carried by a traditional retailer and almost 150,000 carried by a Wal-Mart Supercenter.
Second is Growth:
Growth is the second stage in the product life cycle. In this stage product is considered by speedy sales and profit growth which is topped by rapid market recognition. At the closing stages, there are lots of competitions from the rivals and the profits decreases slowly but surely because of competitive shakeout.
Aldi in the growth stage:
Despite the fact that Aldi was one of the largest and most booming retailers in Germany, some analysts expressed concerns that the company’s growth might slow down as the German market became saturated. Apparently, more than 80 percent of the Germans lived within 20 minutes of an Aldi store. Analysts said that this would limit the company’s expansion in Germany. Besides, in Germany, shopping at discount retailers was not limited to the lower income groups.
This proves their deep saturation into the market and intensive network. Statistics show that there are repeated customer’s which proves that Aldi has created brand preference also.
This proves that Aldi has migrated from the introduction stage to the Growth stage of the product life cycle.
Third stage is Maturity
“Sales peak and flatten as saturation occurs, hastening competitive shakeout.
The survivor’s battle for market share by employing product improvements, advertising and sales promotional offers, dealer discount and price cutting: the result is strain on profit margin particularly for follower brands.
The need for effective brand building is astutely recognized during maturity as brand leader are in the strongest position to resist the pressure on profit margin” (Jobber 2007)
Aldi’s business model is based on simplicity and competence. The company’s motto is ‘Top quality at extremely low prices – guaranteed.’ even though officially Aldi are two separate companies; both of them followed the same strategies and operating with the same business model. All the rudiments in Aldi’s business model are aimed at keeping costs low, so that the company could fulfil its guarantee of providing the lowest prices to its customers.
Last stage is Decline
This is the last stage of the product life cycle company’s experiences decline in the sales and profits due to new technology or changes in consumer’s tastes, fashion, style or companies Budgets for promotions and product development. Companies need to look for other segments or products need to be dropped or slashed down to maintain profits.
The cash flow of the product is believed to be dependent on the box in which the product falls in the Boston consulting Group Growth-Share Matrix.
There are four boxes
They are the market leaders and they tend to high growth and profitability. Resources should be invested to maintain /increase the leadership position.
Aldi in Stars Stage:
Since retail business is looked in long term prospective, Aldi decided to continue its operations. In the growth stage of the life cycle, Aldi has gradually entered into the Star box of the matrix. People started recognizing the brand name and reputation of the company. They started introducing innovative products and services and applied strategies to channelling their distribution network.
These are the low share products I high growth markets which are not profitable and causes a drain on cash flows.
The product in this box shows high profitability with lo investment. They have the highest market share in low growth markets. Excess cash generated are used to fund stars, problem children.
These are weak products that fail to achieve market dominance in low growth markets. They produce negative cash flows.
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