The drafting of a strategic marketing plan should always be preceded by the accurate analysis of the product or service to be promoted. Apart from analysing the target audience, commercial environment and competition, which are useful indications of strategy, the plan can be derived from the study of a specific product lifecycle.
Gaming consoles have evolved from mere gaming platforms to multimedia ones, allowing users to navigate the internet and share content with their home computers- Fabio Giangolini
A product lifecycle is characterised by five main stages: development, introduction, growth, maturity and decline. Product development is characterised by the generation of a new product idea, as well as substantial investments in the field of research and development, with the aim of assessing the feasibility of the project, the size of the target audience, the number of distribution channels available and the market share which can be acquired.
The introduction phase sees the product being launched. Sales at this stage are still slow and profit is non-existent due to the need to cover expenses generated during the development phase and launch campaign.
The growth phase sees the product being accepted by the consumer, resulting in an increase of profits. During maturity, sales slow down due to the presence of competitors or loss of interest among consumers. Even though this phase may lead to the decline of the product, some companies have managed to re-enter a growth phase after carefully repositioning their products.
Each stage requires a different approach to strategic marketing planning.
When introducing a new product in a small market, such as the Maltese one, a company might often opt for a slow introduction, setting a high price and a low marketing budget. While a high price would help recover profits as fast as possible, it has to be noted that this strategy would only work with the so-called ‘innovators’ – those clients who already know about the product and are ready to pay to acquire it.
If, on the other end, potential clients know little or nothing about the new product, a substantial marketing investment would be required. A high price, high-promotion spending strategy would be effective only if targeted at clients who are price insensitive.
A low price, high-promotion spending strategy aims at achieving a fast and wide penetration in a large market, where buyers are price-sensitive and are presented with several buying options for the same category of product.
On the other hand, a low price, low-promotion strategy may be suitable for those companies with a low marketing budget that decide to target price-sensitive clients.
Throughout growth, the product will retain its initial buyers, while gaining new ones. During this stage (when it becomes evident that the product has met the consumers’ needs and time and resources employed in research and development activities are starting to pay dividends), competitors offering similar products will enter the market.
At this point, educating consumers about one’s product becomes of paramount importance. Substantial differences in the product’s features or in its production cycle may be highlighted to emphasise its superior quality.
This may require an increase in the advertising budget, but it would also mean an increase in profits, as promotion costs would now be spread among a wider number of product units.
Since competitors would be presenting similar products, this would also be the right time to add some new features to one’s own product, in order to attain a dominant market position.
Maturity stage is characterised by the slowing down of sales. This is a time when a revision of the product, advertising and sales strategies are required and innovation is needed most.
One way is to develop the market further and aim at new consumer segments the brand is not serving. This is called repositioning, and is usually preceded by an in-depth market research, aimed at establishing the brand’s position with respect to the market, consumers and competition.
No repositioning can be successful without a preceding research phase. A further strategy would be to add additional features to the product. The typical case is that of gaming consoles, which evolved from mere gaming platforms to multimedia ones, allowing users to navigate the internet and share content with their home computers. A third strategy would be that of modifying the marketing mix, trying new media relevant to the target audience or increasing the product’s presence in fast-growing media.
Eventually, a brand may experience a decline in sales. This may be due to increased competition, impossibility to keep up with technological developments, or loss of interest by consumers.
Some companies may opt for cutting down prices or eliminating under-performing products. The latter strategy may be necessary to avoid dedicating time, money and efforts to weak products and divert them towards better-performing ones in terms of sales.
Others may decide to stay in the market, hoping competitors will eventually leave. Again, brand repositioning may be another viable solution in this case. However, this must be preceded by market research for the process to be effective.
fabio.giangolini@strategicmalta.com
Dr Giangolini, a marketing and communications graduate from the University of Rome La Sapienza, has a Masters in marketing management.