Keywords Product Life Cycle, Segmentation, Branding, Pricing






Solmaz Soltani

STRATEGIC MARKETING PLAN IN
PRODUCT LIFE CYCLE
(More Profitability in Stages of Product Life Cycling)

Case; PLC of HP and ACER laptop





Business Economics and Tourisms
2012
VAASAN AMMATTIKORKEAKOULU

Liiketalous

TIIVISTELMÄ
Tekijä


Solmaz Soltani
Opinnäytetyön nimi
Markkinoinnin strateginen suunnittelu
tuotteen elinkaaren eri vaiheissa
Vuosi
2012
Kieli


Englanti
Sivumäärä


86 + 3 liitettä
Ohjaaja


Thomas Sabel

Nykypäivän liikemaailmassa tunnustaa strategian ja strategian hallinnan. Normaa-
listi kaikissa strategisissa prosesseissa on kolme eri vaiheanalyysia. Selkeyteen ja
asetuksen suunnitelmien ja täytäntöönpanon kaikissa strategioissa vaikuttavat
merkittävästi ympäristön muutos. Täällä keskitytään muotoiluun strategiasta ja
sovittaa tuotteen elinkaaren vaiheet välittämään menestyksekkäästi markkinoilla
kilpailuissa.

Johtajien täytyy laatia markkinointistrategia, joka luo kilpailuetua ja kannat orga-
nisaation tuotteita tehokkaasti. Strategian muotoilu sisältää kolme vaihetta, mutta
tämä artikkeli on rajoitettu yhden vaiheen lisäksi hinnoittelustrategiaan, miten
nämä strategiat ovat yhteydessä ja yhteistyössä keskenään ja kuinka sovittaa ne
tuotteen
elinkaaren
vaiheisiin.

Tämä tavoite on saavutettu esimerkillä tietokoneita myyvästä yrityksestä Vaasassa
ja niiden kilpailu haasteista ja strategioista. Tämän kautta lukijat näkevät, kuinka
kilpailu tapahtuu markkinoilla, kuinka vaikeaa se on ohittaa, kuinka tärkeää on
strategioiden valinta tässä voitoissa ja mitä kypsyys, kasvu ja väheneminen tar-
koittavat markkinoinnissa ja yrityksessä.







VAASAN AMMATTIKORKEAKOULU
UNIVERSITY OF APPLIED SCIENCES
Degree Program of International Business



ABSTRACT
Author


Solmaz Soltani
Title
Strategic Marketing Plan in Product life
cycle
Year


2012
Language


English
Pages


86 + 3 Appendices
Name of Supervisor

Thomas Sabel

Today`s business world recognizes the importance of strategy and strategic man-
agement .Normally any strategic process has three distinct stages which are analy-
sis, formulation of plans and implementation, a strategy is significantly influenced
by environmental change. In this study the focus is formulating strategy and fit
this on the Product life cycle (PLC) phases to advance successfully in market
competition.

Managers need to formulate a marketing strategy that generates a competitive
advantage and positions the organization`s products effectively. Formulating
strategy contain three steps, but this study is limited to one of the steps and pricing
strategy in order to see how these strategies are related and now they cooperate
with each other and also how to fit them in the phases of a product life cycle.

This objective was cleared with a sample of a company selling computers in Vaa-
sa, studying their competition challenges and strategies through this case a reader
will see how competition occurs in a market, how hard it is to over, the im-
portance of chosen strategies in succeeding and what a maturity, growth and de-
cline mean in a market and in a company.



Contents

1 INTRODUCTION ........................................................................................................... 1
1.1 Significance............................................................................................................... 1
1.2 Limitation of thesis ................................................................................................... 2
1.3 Outline of thesis ........................................................................................................ 3

2 BACKGROUND ............................................................................................................. 6
2.1 Strategic Marketing ................................................................................................... 6
2.2 Identify competitive advantage ................................................................................. 7

3 THEORETICAL PART ................................................................................................. 10
3.1 STAGES OF PRODUCT LIFE CYCLE (PLC) ..................................................... 10
3.2 Variations in PLC ................................................................................................... 11
3.3 Technology adaption across lifecycle ..................................................................... 13
3.4 International PLC .................................................................................................... 15

5 FORMULATING STRATEGIES IN PLC .................................................................... 13
5.1 Branding strategy across product life cycle (PLC) ................................................. 16
5.2 Pricing strategy across PLC .................................................................................... 21
5.3 Segmenting in PLC ................................................................................................. 22

6 PROPERTIES OF FORMULATING STRATEGIES ................................................... 16
6.1 SEGMENTATION ................................................................................................. 23
6.1.1 Segmenting importance and effects ................................................................. 23
6.1.2 Benefits Of Segmentation ................................................................................ 23
6.2 Basic Segmenting Considerations ........................................................................... 25
6.2.1 Segmenting Business Markets ......................................................................... 25
6.2.2 Criteria of Successful Segmentation ................................................................ 25



6.3 Identifying Market Segments ...................................................................................... 26
6.3.1Segmenting consumer market ........................................................................... 26
6.3.2 Segmenting Business Market ........................................................................... 28
6.4 Segmenting Attractiveness .......................................................................................... 29
6.4.1 Market Factors Influence On Segment Attractiveness ..................................... 29
6.4.2 Comparative Ability Of Segment Attractiveness ............................................. 30
6.5 Segmenting Strategies ................................................................................................. 31
6.5.1 Market Segment Approach .................................................................................. 31
6.5.2 Target Marketing Strategy ............................................................................... 33

7 BRANDING .................................................................................................................. 36
7.1 Brand reasoning ...................................................................................................... 36
7.2 Branding development ............................................................................................ 36
7.3 Branding strategy .................................................................................................... 39
7.3.1 Strategy ............................................................................................................ 39
7.3.2 Brand name strategy......................................................................................... 41
7.3.3 Managing products in high technology market ................................................ 44

8 PRICING........................................................................................................................ 46
8.1 Pricing Benefits ....................................................................................................... 46
8.2 Price setting ............................................................................................................. 47
8.3 Selecting a price objective ...................................................................................... 48
8.4 Pricing Perspectives .................................................................................................... 51
8.4.1 Sellers perspectives .............................................................................................. 51
8.4.2 Buyers Perspective ............................................................................................... 52
8.5 Adjusting Prices .......................................................................................................... 53
8.5.1 Adjusting prices in Consumer market .................................................................. 53
8.5.2Adjusting price in business market ....................................................................... 54
8.6 Influences On Price Sensation .................................................................................... 56
8.6.1Situations increase price senility ........................................................................... 56
8.6.2 Situations decrease price sensivity ....................................................................... 56
8.7 Responding price attacks and strategies ...................................................................... 58
8.7.1Pricing strategies ................................................................................................... 58
8.7.2 Responding Price Attacks .................................................................................... 60



8.8 Pricing on Industrial Products ..................................................................................... 62
8.8.1 Industrial Pricing Considerations ......................................................................... 62
8.8.2 New entered industries ......................................................................................... 63
8.8.3 Structure of competition ...................................................................................... 65

9 RESEARCH METHOLOGY ........................................................................................ 67
9.1 Case Reasoning ....................................................................................................... 67
9.2 Case study ............................................................................................................... 68
9.3 Interview ................................................................................................................. 72

10 USED METHODS ....................................................................................................... 73
10.1 Research Design .................................................................................................... 73
10.2 Challenges Of The Research ................................................................................. 74
10.3 Qualitative Research ............................................................................................. 75
10.4 Evaluation of the qualitative research ................................................................... 75
10.5 Reliability and Validity ......................................................................................... 76
10.6 Benefits Of Investigation ...................................................................................... 78
10.7 QUESTIONARES ................................................................................................ 81
10.8 Questionnaires Reasoning ..................................................................................... 83

11 CONCLUSION ............................................................................................................ 79
12 REFERENCES ............................................................................................................ 80
1


GENERAL DESCRIPTION OF THE THESIS
1 INTRODUCTION
1.1 Significance

Subject of this study is a challenging aspect for managers to dominate over
stages of product life cycle to forward strategies as they planned, because of
external impediment; like new market analysis, politics and many other aspects
in addition to internal impediments which need to be already covered to progress
next step ( exporting).

Despite of all external problems such as competition effects on the length of the
cycling, there are several internal impediments too, like difficulties in
forecasting a product life cycle, IT problems of collecting information and
changes in global conditions.

But there are many challenges and difficulties in innovation, design and
introducing a new product to a market. Awaking the customers from the new
product and its benefits, in despite of advertising costs to gain the competition.

So managers try to keep alive existing products by following strategies to
maximize the length of the product cycle, and manage a successful company
with all competition barriers among the competitors in the market.
Despite of all observations still companies do not get a high profit as their com-
petitors do while they are good in market and successful in forwarding their prod-
ucts to maturity stage.



2



The main purpose of this thesis is to analysis different kinds of strategies that
companies can or should observe for managing a profitable product life cycle. So
product life cycle will not be only the routine stages which companies should go
through but should also take precedence of profit gaining among market competi-
tion.
Also I would like to know more about the variety of strategies in each stage as to
what should be considered more in each phase to forward and how does it effect
on the profit. Finally is help to know how we can advance more benefit in each
stage by the considerations.
My struggle is to remind essentiality of the chosen strategies due product life
cycling; some controllable strategic consideration that effect on the profit of prod-
ucts life cycling through each stage will be focus of the article.
This thesis will show efficient of considering strategies before entering to market
and thus cause a better evaluation for firms and students to protect with better
forecast which will reduce solution and research expenses and cause higher bene-
fit at the end.
1.2 Limitation of thesis

There are so many considerations and barriers that need to be observed for manag-
ing a successful product life cycle, and actually those are the first basic considera-
tions that need to be remarked before entering the market and starting the cycling.
But the most effectiveness part of these considerations which influence on the
profitability are narrowed in this article.
I will try to find out which advantages (strategies) caused this higher benefit, as
there are so many different strategies that can effect or being chosen by compa-
nies. Therefore I narrowed these strategies down to branding, pricing and seg-
menting to know which was more effective in this case and how each one of these
aspects had an effect on the sales.
3


This thesis will mainly focus on formulating strategies which are most related on
product life cycling profitability and narrowed to first stage of formulating strate-
gy that is second step of whole strategy .This will be explained more in back-
ground with additional considerations for industrial products .
The secondary research that as provided by my trainee place is already clearing
this success reasoning but I would like to prove or find out the customer`s point of
view, to see were they interested in the same strategies as companies for more
sales and benefit or not.Mainly this includes variable strategies which can be con-
sidered as a technique of a company for more profit gaining.
Through the accessible information and goals I had; tried to find out the most ef-
fective strategy in manner of more profit gaining, especially during maturity stage
which have the most sells of the companies in count and this is more clear in the
chosen case as you will see, company A is selling more than company B in the
maturity stage but their income is less than company B. So I would like to know
the reasoning behind this fact.
1.3 Outline of thesis

The process of this thesis will start by a brief definition of product life cycle and
used strategies in each stage of the cycling. Then I will expand the information to
the efficient strategies for making a profitable marketing, such as branding, seg-
menting, and pricing.
Also an introduction of product life cycling and profit increase and decrease dur-
ing these stages will help to learn how to use PLC as a profit measurement and
what are each stages strategic variations, and how the branch of the chosen strate-
gies (segment, brand, price) are used in future stages, for a better forecasting and
prepare for the further theories of strategies in each phase and chosen case study.
In background will start with a total picture of market strategy and main stages of
it, then Theoretical part will start with brief explanation of product life cycle stag-
es, and the strategies should be considered for forwarding to next stage.
then Properties of each strategy (branding ,pricing, segmenting) what are main
considerations and important and how these may become advantages in stages of
4


the cycling .segmenting and branding which are most main effective strategies
after the pricing techniques and have a direct effect on price changes will be ana-
lyzed by mentioning kinds, difference, and details of these strategies .
How to use them in the right stage and their differences in each stage will be men-
tioned and all of these will become a guide of how to manage and forecast these
three strategies during forwarding a product to the next stage. These considera-
tions will help to be more successful in managing these strategies at the right time
with combining product life cycle's staging strategies.
Mentioned Segmentation methods will help in modeling right choices to make
higher pricing opportunity or get more benefit by increasing volume of sell. We
need to be aware of segmenting details for a right targeting and forecasting. Also,
considering the right expectations to minimize future risks and planning easiness,
to make an effective pricing.
Chosen approaches about branding are the knowledge that will help to improve
branding and how right choice of targeting will influence on benefit increases,
through the branding method.
Then will continue the theory on proving importance and effect of pricing on
profit, in purpose of proving importance of the topic, and techniques for increas-
ing prices which will cause profit increases that is goal of the thesis.
Thus I will narrow this article to industrial product`s cycling strategies, to clear-
ance some difference and methods that should be considered for industrial product
in addition, which is related to the chosen case (computers).
Finally, a case study which is selected based on the provided statistical research of
my previous training place that was done in laptops sales with different brand
names which occurred in Vaasa. The chosen option is through the most profited
laptop and its strongest competitor and how far they have similar PLC position in
the market and what was their income diffractions in their maturity stage and why
or what caused this income advantage.
5


The results based on the provided secondary research to aware of the starting
strategy of companies and their continued strategy. Thus, this will more penetrate
in depth through the primary research on the customers’ reason of preference.




6



2 BACKGROUND
2.1 Strategic Marketing

Strategy and strategic management is an important aspect which have a direct
influence on world business by embracing opportunities by occurred changes such
as politics, economic, social and technological factors and understanding core
competencies and external environment to meet customer need which will cause
commercial success of a business.
To gain this goal a company needs to achieve a superior competitive position
within a marketing strategy by considering and managing to forward all the
strategy stages which include; strategic analysis, formulating plans and finally
implementing the strategy. This process should be relevant to the marketing
(business philosophy) which have an important role on strategy process. (Graeme,
John & Ruth 2001, 14)

Table 1 in below is a total mind map of strategies that start with strategic analysis
which is done in the early stage before starting the business to make future
orientation. The second part that is goal of this thesis is a part of formulating
strategy than show how to make a strategic marketing plan.

The third step is the implementation of making a total marketing strategy.
For more clearance of the steps to be followed in making strategic marketing,
wideness of these strategic considerations and the limitations of this thesis caused
me to focus on the second step of the strategy, which is colored in the picture.

This second step is called formulating strategy used in making strategic marketing
plan and is contains three steps;- targeting, positioning and branding ,which is the
focus of this thesis. The two other steps that are product development, innovation
and finally alliances and relationship will not be included in this theory. Product
life cycle is used as a measurement of the chosen strategies and will help making
the right timing in the use of the strategies.
7






(before start) Strategic Analysis/early stage
External analysis
Internal analysis
Customer analysis
Future orientation
Formulating strategy
Targeting
Positiioning
Branding
Product development
Innovation
Relationships
Alliances
Strategic marketing plan
Implementation
Implementation
Control
Make total strategic marketing

Table 1 total strategic marketing (Graeme, John & Ruth 2001.14)

2.2 Identify competitive advantage

While generic strategy is understood, it may not be know how to translate it to
specific competitive advantages which cause sustainability of an organization in a
long term. To offer be sustainable competitive advantage should be appropriate to
current and future market needs and relevant to the organization and achievable
within the available resource base.

Also manager should be defensible to protect the strategy of duplicating by
competitors which can be tended by asset based such as location, plant,
machinery, brands or finance that are tangible factors controlled by the
organization or might use intangible factors based on skills which required to
8


make optimum use of assets such as resources and skills like quality management,
brand development, product design and IT skills (the focus of this case).

For making a successful competitive advantage, the strategic nature of the
industry should be appropriate. And as Boston`s evaluation industries are
classified to four groups by their size of competitive advantage and the number of
the possible way in advantage gain.

Industrial group which doesn`t have potentiality of high advantage like
technological advances, because of their high competition in rapidity and easily to
be copied or developed by other industry or players and often they depend to
commodity products and price is key buying criterion and potential for
competitive advantage is limited, these are called stalemate industries.

Volume industries are capital intensive and win by a few but effective advantages,
and usually dominated by some large players (like in the case).Fragmented
industries use multi segmentation strategy because of undefined variable needs in
the market and the industry is suitable for niche players and profitability is not
linked directly to size and grow of the organization is by offering a range of niche
products to different segments.

Other group of industries called specialized industries which have potential
advantage of differentiation and several ways exist to gain these advantages. They
develop solutions to specific problems and firms involved in application of
innovative technology (e.g. HP in this case) so profitability and size are not
automatically related. (Graeme 2003.150-152)

Thus understanding generic strategies and competitive advantage to the business
environment are fundamental to success. Competitive advantage is achieved by
making something better than competitors if that are important for the consumers
or if a number of small advantage can be combined.
The most potent sources of competitive advantage are listed below in Table 2.


9







Sources of competitive advantage

1 actual product performance

Examples

Robust, economic, easy to use

2 perception of product

Brand image, product positioning


3 low cost operations

Location ,buying power


4 legal advantage

Patents, contracts and copyright


5 Alliances and relationships

Networking ,procurement and joint ventures


6 Superior skills

Database management, design skills


7 Flexibility

Developing customized solutions


8 attitude

Aggressive selling, tough negotiation



Table 2 samples of competitive advantages (Graeme 2003.150-152)



10


3 THEORETICAL PART
3.1 STAGES OF PRODUCT LIFE CYCLE (PLC)
For a right product life cycle (PLC) strategy need to understand shape of cycling
and how the marketing mix vary in each stage and product life cycle is a
measurement of customer`s demanding amount with showing how each change of
needs are followed within stages.
All of markets and products strategic considerations are influenced by product
life cycling (PLC). This why all of organizations should try to be fully understood
the PLC for segmenting their products and industries. So, first I will go through
each stage of the PLC to clearance the variety of sales in each phase.
Introduction stage is the first step of starting sales and introducing the products to
the market and will consider more time for distributing, awaking and increasing
the products to customers or market. Organizations consider strategies such as
specializing in innovation or skimming (as our case) to get more financial benefit
in shorter time or penetrating by pricing to encourage use and build market share
over time.
Growth phase is a stage of competition increase and products will be sold at a
more static price or fall in real terms. This phase includes a rapid increase in sales.
Also product development and variation and distribution will increase despite of
focusing offers on more segments.
Maturity is the longest phase and has the maximum product sales with most stable
level in the market and intensity of the market competition in this stage will cause
some decrease of profits despite of marketing expenses and there will more focus
on expanding the products to potential customers with more encouraging or
finding new segments (e.g. our case).
Decline is a replaceable phase of the PLC that can continue back to other stages
which depend on the success of the organization by chosen strategy, demands,
ongoing supports and services or user needs. Mostly organizations choose one of
the following options for continuing; going back to maturity or reinvesting for
more producing or developments, harvesting which mean maximizing financial
11




Returns and minimizing expenditures, and these up to the demands and market
position
This cycling is not always in the same shape and there are points and concepts
which need to be fully considered by managers for an effective marketing.
(Graeme 2001.164-166). Figure 1 shows an example of the stages.

Sales

ntroduction




Growth

Maturity





Decline



Time

Figure 1 Stages of Product Life Cycle (Graeme 2001.165).
3.2 Variations in PLC

Despite of the mentioned common PLC phases and strategies, some factors vary
in PLCs. This depends on the products such as high technology industrial products
like telecommunication are in the growth phase and individual product lines have
short PLCs because of their rapid replacements with new technology. (Graeme,
John & Ruth 2001.166)
Sometimes the sales level is not same as in the graph, mostly graphs are smoother
than the sales level, and in fact, sales are not constant all the time and a fall in
sales does not always mean a decline point of a product. This is why it is hard to
12


forecast the exact position in the life cycle because a position can be temporary
and it might take a longer time than current moment to point out the stage of the
shape.

Duration of the stages depends on the effectively of the marketing decisions , thus
marketing can extend the growth or maturity stage or apposite around hastening to
declining Shape of the PLC which is often like an S, but not always. These
changes depend on the stability of sales or repetition of growth and the fall of the
product like fashion .Some of these cycling shapes are shown below in Figure 2
(Graeme 2001. 166).


a) Cyclical PLC
b) Constant demand PLC
c) Fad PLC
Figure 2 Cycling Variations (Graeme 2001. 166)

In figure of Constant demand (b) growth is slowly, the product remains popular
for a while, decline is slow and the length of the cycle is hard to predict. Usually
the end is caused by a purchase compromise and consumers start looking for the
missing attributes. This length depends on the extent to which genuine need is
consistent, society, and how satisfies societal norms and values are.

Fads(c) come quickly into the public eye; they are adopted with great zeal, peak
early, and decline very fast. Their acceptance cycle is short, and they tend to
attract only limited following. Fads appeal mostly to the people who look for
excitement or who want to distinguish themselves from others and so they are
hard to predict. Winner of this shape are the one who recognize fads early. (Philip
kotler 2000. 349)

13




3.3 Technology adaption across lifecycle

Tornado
Bowling Alley




Early





Technology
visionaries
Pragmatists Conservatives
Skeptics
Enthusiasts

Figure 3 Life cycle of Technical products (Michel D .Hutt 2004.295)

Each new technology satisfy the needs better than the previous one. If a company
concentrates only on its own brand life cycle, it will miss the total picture of the
product life cycle which is going on. Companies should decide when and what
kind of technology demand should be invested in.
Today many technology changes occur and companies cannot invest in all of
them, so they have to find which technology demand will win. They can bet heav-
ily on one new technology or bet lightly on several, but if they focus on several
they will not become industry leader. (Philip Kotler 2000.344-345)
In the high technology market by making a strong brand name can make competi-
tive advantages with the trusty and familiarity to customers. To cross from chasm

M
ai
n
str
ee
t
c
h
as
m

t
The Landscape of the Technology adoption Life Cycle
14


and forwarding from an early market to the mainstream market a company needs
to make pragmatists with 100% solution to the problems. Some high-tech firms
make products for all type of customers instead of considering any particular mar-
ket segment to meet a complete requirement.
The key to success is to identify a simple beachhead of those customers (pragma-
tist) in the mainstream segment .The goal is to quickly win a niche foothold in a
mainstream (crossing the chasm).Each market segment is like a bowling, hit one
segment to carry over into the next segment.
Lotus notes; when first introduced, notes were offered as a new paradigm for
corporate wide communication. To cross into the mainstream market, the Lotus
team shifted the product's focus from an enterprise wide vision of corporate com-
munication to specific solutions for particular business functions.
The first nitch was global account management function of worldwide accounting
and consulting firms. The solution offered to the customer was enhanced account
activity coordination for highly visible products. This led to a second niche, global
account management for sales team which enhanced the coordination and infor-
mation sharing spur productivity.
A focused strategy was the next step for Lotus to forward customer service and
shares the information which can support the solutions of customer problem. Suc-
cess of this step makes another opportunity such as incorporating the customer
into the notes loop.
As mentioned earlier key customers to success in a bowling alley are economic
buyers looking for particular solutions. Technical buyers in an organization can
make a tornado, therefore IT managers are responsible for making efficient
systems for members to be used for communicating and providing the job. These
buyers are pragmatists and they prefer to buy from an established market leader.

In this step IT managers try to act at same time for creating the latest technology
and, thus, they move together and make a tornado while a massive amount of new
customers enter to the market at the same time with similar demand.
There are some strategic differences between a tornado and a bowling alley. In
this stage, instead of focusing on market segmentations companies should try on
15


maximizing production opportunity to broad market present. (Michel D .Hutt &
Thomas W. Speh 2004.294-296)
3.4 International PLC
When products sales decline in a country, they might be raising in another
country. Product adoption occurs throughout the world at different rates. Late
adapting countries often end up producing more economically and become a
leader in diffusing the product to other countries.
Despite of domestic product life cycling products have also an international PLC
to be considered in national trade which conducts; Manufacture exports the
product in other country with a huge market and high developed infrastructure.
Foreign production starts when a foreign manufacturer becomes familiar with the
product and starts producing a product for their home country under licensing or a
joint venture arrangement or just copies the products and their government aid by
imposing tariffs or quotas on the imports of the product.
Then foreign production becomes competitive in export markets by gained
experience and their lower costs because they easily start exporting the product to
the other countries. Import competition begins when foreign manufacturers
growing volume and lower costs and start exporting and competing with internal
producers.
The main implication of an international PLC is that manufacturer`s sales in the
home market will eventually decline as foreign markets start producing the
product and exporting them to the home country. Thus, global marketers are able
to extend the PLC by moving the product into countries that are ready to use it.
(Philip Kotler 2000.350)


16


FORMULATING STRATEGIES IN PLC
5.1 Branding strategy across product life cycle (PLC)

The case study has been successful in sale volumes by considering some of these
aspects but their profitability were not as expected in comparison to their sales
amounts. Below I will also mention the influence of several factors for raising the
profitability which is the purpose of the case.

Some aspects such a technology developments, consumer behavior changes and
competitions will cause organizations to improve their branding performances
rapidly to raise brands profitability (the goal of the study) or sales volumn.

To increase the volume of the sales factors which have most influence are entering
to a new geography, expanding new segmentation to their targets, motivating
consumers for more purchasers for new occasions, offers, opportunities or focus
on increasing quantity use by occur able changes with considering customers
point of view, advertisements for more promotion, or by removing consumption
barriers. (Graeme, John & Ruth 2001, 199-201)
The time involved during cycling and the length of each stage depends on actions
of firms within the industry. Slowing down, speeding up or recycling of the
lifecycle are due to firms and industries reinventing constantly.
Product life cycle has many limitations. First of all most new products never get
past development and most successful products never die. Secondly, the product
life cycle really refers to the life of a product (market), industry, sector or product
category than specific brands or firm.
Managers consider current periods as much as future plans, also PLC offer a
framework that is useful for making product strategies over time and force
managers to industry and brand considerations these stage strategies start with
development stage in this section.
The development stage is one step before introduction while firms have no
revenue involved with cash flow and innovation and development expenses,
investment financial resources and time are necessary for most innovations and
17


developments and thus with a high risk in the stage.
This stage is mostly for understanding the use and benefit of targets who are
looking for new product, describing products with considering potential benefits,
creating a complete product line that can create synergy in the marketing mix,
analyzing product feasibility like sales anticipates, investment returns, time of
market introduction and lengthy time of use for investment recoups.
Failing of products become a reason for identifying target customer needs before
developing a product, by test marketing to gauge customers response before
launching. Most match products with customer's needs will be able to compete
and more easily enter the introduction stage as a new product.
Introduction stages start after products are developed for the accepted target and
focus on strategies and competitive advantages to reach goals of this stage which
are to attract more customers by informing them of new products with the right
choice of advertisements to be able to fulfill the customers’ needs or wants.
Making different strategy motives for customers to try or buy a product with
offering free samples, or sales for example.
A company can engage in customer`s education activities, to teach members of
the target market how to use the new product is one possibilities strengthening the
supply chain or expanding channels and relationships to ensure products are
accessible for customers through their distributions.
Also a company can make available and visible activities to motive
intermediaries’ channels for support and being able to stock the products.Making
a good price strategy to cope with competitive and investment expenses.
Good distribution and promotion are efficient and being able to teach customers
where they can buy, how to use the product correctly and by making it cheaper
announcements as a smart strategy.
Marketers should be ready for the growth stage, as the competitors and sales,
because they can begin quickly. Therefore a company should gain the profit
before a decline of the growth stage. The length of the growth stage can depend
on competitive reactions and the nature of the products. In this stage the two main
18


factors will be objectives; first readying a good market position that can be strong
and defensive enough to compete with competitors, and secondly achieving
financial objectives to compensate investment costs and profit.
To reach these two objectives there are some strategies to be followed such as
making differentiation advantages like branding, value, quality or price to gain a
stronger market position. A company should clear brand and product identity,
making advertisements to gain an unique position to announce product’s benefits
for the segment, give customer satisfaction by controlling product’s quality,
maximize product availability due to product popularity, enhance ability of
delivering benefits to key partners, like supply chains and retailers. A company
must Keep eyes on the competition market and balance the price with demands;
this pricing elasticity will become even more important in the maturity stage.
In growing stages acquisition strategies will turn to retention strategies, and
product trials will change to great repeat purchases and brand loyalty, these
changes are for both customers and other members such as; traders, wholesalers,
retailers and supply chains.
To prepare for this stage to eventuate to future stages (maturity) should make long
term relationship strategy, again with both customer and partner member, to stay
competitive. Competitors need to make loyal and good friendships with customers
in the supply chain and the growth stage too. The growing stage is the most
expensive stage of marketing as these relationship requirements are expensive and
challenging. While competition becomes more challenging especially in this
stage, efficiency of pricing will also increase. Then firms despite of balancing
prices will need cash flow for being competitive.
Having a good pricing strategy with the fact of it being an indication of perceived
quality and challenge of increasing customer’s pricing sensitivity are some of the
decision impediments. Therefore some firms base their market position on
premium or value based pricing, and some of them offer different products with
different prices to solve this dilemma.

Having enough space to enter the market will reduce a firm`s attention of defining
their market for the maturity stage, because in the growth stage everyone can get
19


their own piece, Soon this stage will over and the stronger firms will stay in the
maturity stage. Most strategies used to be more defensible of this situation are
making positions by a good image, quality, price or some technological advantage
specially in industrial market for not being shacked out of the market in maturity
should take steps in growth stage.

In the Maturity stage competitors will no longer enter the market except those
who have new products or have found some innovations which are enough to
make a market share and attract a large amount of customers. However, a window
of opportunity will stay open in this stage. The fact of being limited to or not
having any growth at this stage, stealing becomes a way of covering competitor
for weaker firms. Strategy of lowering prices during the growth stage to keep
customers becomes a door of entering for some competitors to enter only with
significant promotional investments or cuts in gross margins.
The Maturity stage will be the longest stage if firms can manage the growth stage
and also if companies keep the sales. This stage has four goals that can be
pursued; generating cash flow, holding market share, stealing market share, and
increase share of the customer.
Generating cash flow is important to penetrate investment expenses and
developing new products and growth firms strategic options should enable to hold
market shares among other dominant brands of the market otherwise they can be
taken of market. Stealing market shares is usually used by weaker firms but it can
be used by any firm in the mature market too. The goal of this strategy is
switching brand, even temporarily market share is important in amount of
benefits, and any small gains can encourage a large increase in benefit of firms.
The last goal is increasing customer share and it is mostly used by financial
services and it refers to percentages of customer’s need in the particular area met
by the firm. Stealing customer of others can be an expensive task. However in
some cases making an agreement with a customer can lock them for a certain
amounts of time in to using the product.
The factors mentioned above were the goal of the maturity stage. Next, I will go
through the strategic options to be selected for these goals obtaining. These
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strategies are; introducing a new product image, finding new users, discovering
new or used applications of the product and finally coming up with a new
technology for the product.
Finally the maturity stage will end and start with the next stage which is called the
Decline stage and then there are no more options other than to attempt to
postpone, decline or just accept it .To postpone the stage firms need to renew their
products and make new demands, repositioning or making new technologies. All
of these need resource investments and consume a lot of time.
While companies do not have the opportunity of renewing resources or lack of
investment they should choose the second option of accepting inevitability of the
stage in this case. Firms can harvest their profit while demand declins or divest
the product by abandoning or selling it to another firm.
New product developments in a divesting firm stop supporting product, and the
company might continue selling until losses will be harvesting is gradual
reduction and causes less resource focus and more cash flow by increasing taken
over by another firm.
Before choosing a correct strategy for managing operations during the declining
stage there are considerations to be observed, such as potentiality of the market
segment which means if target customers who will continue to purchase the
product will still be viable and profitable, firms should slowly harvest or postpone
the decline stage.
If products have a stronger market position by having a good image it can be
profitable in comparison of other abandoned competitor’s products. Another
aspect which can help profitability during decline is the value of the firm, while
production cost may have been low, the firm can keep the sales price, or by not
investing any more funds on the product’s marketing program products can still
stay viable.
The rate of market deterioration is another aspect that has an effect on the speed of
the decline as fast as deterioration occurs. In product life cycling firms should
focus on market changes instead of products, because a product’s life cycle
depends on market and customer changes. So the focus is enough to create a
21


better product which is matching it with the customer’s needs, this is the way of
being a source of solution by the target market, remain competitive and able to
continue. (O.C. Ferrell & Michael D.Hartline208-216)
For maximizing beneficiary of a branded product can observe strategies in
minimum profit stage(decline) such as raising price because in this stage smaller
or weaker competitors are dropped out of market and buyer will have less options
for purchasing and thus forced to buy with offered price (higher price).

Another method of this maximization that is more in management`s control is
cutting costs to invest in branding and hasten declining stage for later stage. Also
saving additional costs by cutting product ranging which will not make a strong
effect on overall sales. (Graeme, John & Ruth 2001, 203-204)
5.2 Pricing strategy across PLC
As other marketing strategies, pricing also change while products forward through
life cycling stages. These changes depend on demand and expectation of
customers, competition and product`s changes over
time. Competitors
consideration will make a general method of use in each stage to gain benefit of
each as much as possible.
In the introduction stage pricing depends on sensitivity of the market, If the
market is price sensitive firms will set a lower price to win amongst competitors
(penetration), If the market is not price sensitive, manufactures will set a higher
price to penetrate investment costs (skimming). Especially industrial products are
harder or it will take a longer time to copy them by competitors.
In the growth stage prices are usually decreasing to gain more customers in the
high competition stage and reduce marketing costs, and selling will expand to a
broader part of customers who are quite price sensitive in this stage.
In the maturity stage price decreases will continue until overtaking competitions
and remain in the market. This stage is mostly in use of saving costs promotion,
distribution and other effective aspects in profit margins. Specific pricing tactics
encourage brand switching in an attempt to steal business away from the
competition.
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Decline stage will continue price decreases until competitors fall in a few num-
bers. In that point a company can stabilize their prices but if they are still unique
or popular they can even increase the price to use a last opportunity of getting
high profit. (O.C. Ferrell 2008. 231)
5.3 Segmenting in PLC
The stage of an industry`s life cycle depends on segments entering time. If a seg-
mentation enter in early stages of an industry`s life cycle offers the advantages of
potentially high growth in the future also in this stage there are less competitors.
However there is a need for more investment, securing distribution channels and
promotional activities in this stage when there may be only modest sales revenue.
Also there is a need for more cash in this stage.as a result companies which look
for short term profits and cash generation in mature markets are more favourable.
(Graeme Drummond 2003.172-174)


23



6 PROPERTIES OF FORMULATING STRATEGIES

6.1 SEGMENTATION
6.1.1 Segmenting importance and effects
Segmentation is setting potential buyers in different groups; member of these
groups should have similar tastes and attitudes. Difficulties of customer
segmentation today are caused by targeting smaller segmentation (niches).
Strategic process of dividing total markets to a particular product or category into
similar segments is called market segmentation. (O.C Ferrell 2008. 163)
Awaking of segmenting difference will increase the profitability of the firms by
allowing companies right customer choice which has similar behavior and sense
of certain price, so organizations can gain their best benefit by distinctions
different segments through their price sensate reactions.
One of considerations for maximizing benefit of segmentation based on key
reason of the customer’s purchase, for this purpose producer need to identify
purchasers who look for similar benefit in a market, by this identification
producer can develop specific offer for the chosen segment and finally satisfy
them.
For this purpose the best way of satisfying customer for more benefit is awaking
of consumers need. Consumers are mostly divided to categories which are heavy
users, medium users, occasional users and nonusers of a provided good or service.
The most profitable segment is the heavy users who have the highest consume
percentage of the sales. Identifying this segment will cause new opportunities for
the organization. (Graeme, John & Ruth 2001.63)
6.1.2 Benefits of Segmentation
Market segmentation provides a basic unit of analysis for market planning and
control. If requirements for effective segmentation are considered, several
benefits will be gained for a firm. Segmenting force the marketer to become more
24


attuned to the unique needs of segment`s customers.
Gained knowledge of their need cause marketer focus on product development
and develop profitable pricing strategies, select appropriate channels of
distribution and deploy the sales with develop and target advertising messages.
Also, market segmentation provides the business marketer with guidelines that
are of significant value in allocating marketing resources. Market segmentation
provides the foundation for efficient and effective business marketing strategies.
Industrial firms often serve multiple market segments and must continually
monitor the relative attractiveness and performance of these segments. (Michael
D.Hutt 2004.177-178)


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6.2 Basic Segmenting Considerations
6.2.1 Segmenting Business Markets
Business market can be segmented on several bases that are broadly classified into
two major categories of macro segmentation and micro segmentation. Macro
segmentation centers on characteristics of the buying organization and situation.
The market can be divided by characteristics such as size and geographic location,
SIC or NAICS category and organizational structure. Customers are segmented to
large (government), small businesses and nonprofit segments such as education
and healthcare.
Micro segmentation requires a higher degree of market knowledge, and should
focus on characteristics of decision making units within each macro segment
including; buying decision criteria, perceived importance of the purchase, and
attitudes toward vendors.
Shortly, business market segmentation is based on identifying meaningful macro
segments and macro segments into micro segments. In evaluating alternative
bases for segmentation, the marketer should identify buyer behavior differences
and then target segments with appropriate marketing strategy.
Secondary sources of information, coupled with data in firm`s information system
can be used for dividing the market to macro level segments. Marketing
concentration of business market, allows the marketers to monitor the purchasing
patterns of each customer. And some market concentrations, couple with rapidly
advancing marketing intelligence systems and make it easier for the marketer to
monitor the purchasing patterns of individual organizations.(Michael D .Hutt
2004 178-180)
6.2.2 Criteria of Successful Segmentation
To be a success in having an effective segmentation, there are criteria to be
conducted in a manner of segmenting strategy, firstly the segment's member
characteristics should be clear and identifiable to allow a segment's characteristic
such as size and purchasing power. Also, the segment should be large enough or
profitable enough, and potential of profitability should be more than outgoing
26


costs to which have been used in business.
A successful segmentation should be accessible
in distributions and
communication which means having effective advertisement, emails or telephone
calls to remind or announce any new products. The segment should be responsive
enough to match with marketing efforts even while changes occur overtime and
differ of other segments to be responsive.
It should cover basic exchange criteria like being ready and be sustainable to
make an effective strategy for serving over a long period of time and should
match with mission of the company. (O.C. Ferrell 2008 -168)
6.3 Identifying Market Segments
6.3.1Segmenting consumer market
In whole business, consumer segmentation has many similar issues. Despite of
all the differences and extra considerations foundation is still same. This why
marketers should clearly understand the needs of their potential customers and
how they differ across different segmentations within the total market.
The problem with consumer segment is isolating one or a few characteristics to
fill the need of the customer. This is why four main consumer segment's
characteristics we made by examining different effective factors on this market
that are divided into geographic segmentation, behavior, demographic and
geographic segmentation.
While segmenting groups of customers, firms should observe related groups of
the segmentation, to be able place customers in right category of the consumer
market or business market. In consumer market organizations try to find out
individual characteristics of consumers. These characteristics are the factors
which isolate segmentation groups by grouping them with similar character or
needs.
One of the isolation guides can be consumer behavior which is most powerful
factor in segmenting and being able to use consumer’s actual behavior or usage
of the product. This method is related to reasoning of consumers’ needs and
27


grouped to heavy, medium and light users of the product, heavy users should
always be served well, and most of the strategies are used to increase light or
non-consumer groups.
To make a successful behavioral segmentation business’ need to identify clear
basic needs and profit sought in different consumer groups and combine it with
other segment factors as demographic, psychographic and geographic to be able
to make a clear portfolio of grouped consumers.
Segmenting specific consumer benefits are the best way of using behavioral
segmentation to isolate a best segment while identifying different benefits.
segments need to focus more on research to develop a profile of each segment
which is expensive and also time consuming while it is a strong tool and personal
characteristics which are actually effecting on purchase reasoning is not so clear
and hard to estimate and identify, like buying new car for transportation, even
some consumers reasoning be easy like buying minivan for a big family.
Demographic Segmentation is dividing market factors that are relative to
demographic factors such as age, gender, income and education this is most used
method of segmenting because of its availability and easiness of measuring, and
availability in secondary sources for analysis.
It is easier to make demographic segmentation when there are clear differences in
kinds of needs and characteristics.in this case demographic needs and desired
product make it easier to make this segment, like group of men and women’s
clothing differences and needs like that which the differences are totally clear.
Demographic segmenting isn’t used much only when firms look for motives or
values that drive buying behavior.
Understanding motive and value of the consumers are more related to what a
customer feels and thinks of them than whom they are and this is related to
psychographic segmentation which is dealing more with personality, attitudes,
lifestyle, motives and factors like this which are all directly related to buying
behavior. This method is harder to measure and usually needs primary marketing
research; psychographic is also able to be combined with other segmentation
factors (behavior, demographic...) in making a consumer portfolio.
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One of most useful tools of this segmentation is VALS which stands for
evaluating values and lifecycles this tool is used in several marketing activities
such as new product development, product positioning, branding development or
promotional strategies.
This tool is also developed for geographic segmentation which is called GEO
VALS that is connected each consumer group of VALS by either a zip code or
geographic information, while most segmentation is focused on specific area, this
is primary consideration for marketers some tools like PRIZM in the United States
are useful to help focus on their best area and this will help in reducing marketing
expenses and more successful activities. (O.C. Ferrell 2008.169-175)
6.3.2 Segmenting Business Market
Segmenting business markets depend on different types of business markets (e.g.
producer, reseller, government, institutional) and sometimes business buyers. even
with one type of market firms have variable and unique characteristics, in this
case more variables can be used to fill needs of segmentation like printers in an
office, photography and fine art therefore segmenting business buyers depend on
types of organizations, characteristic ,benefits sought or buying processes,
relationship intensity and personal or psychological characteristics.
To manage these organizations need to make specific strategies, like different and
specific marketing programs depending on type of the organization (e.g.) a glass
manufacture can segment car manufacturers, furniture, window or repair
manufactures.
Need of business segments depend on characteristics of target such as location,
size, usage, computer manufactures often segment markets based on how their
product will be used. Also organization varies depend on goaled benefits and
buying process they use for the sale of their products as some buyers use on line
services and some look for a buying center and others may look for a low cost
product.
Also personal and psychological characteristics of buyers are having an effect on
segment decisions and making changes on buying influence, risk tolerance, job
responsibilities and decision styles.
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Also relationships are another factor that can be considered for segment decisions
sometimes organizations uses this approach to make their business and select their
strongest or longest team or person as their segmentation and the rest of the
organization can focus on developing strategies and finding new customers. (O.C.
Ferrell 2008. 175-176)

6.4 Segmenting Attractiveness
6.4.1 Market Factors Influence on Segment Attractiveness
For managing an effective segmentation should consider both competing seg-
ments attractiveness in the market and their ability in filling need of those seg-
ments. Most important considerations and strategies which are relevant to our case
for managing attractive market segment mainly include market factors, competi-
tion nature of industry structure and environmental effects.
Having a large segment and volume cause higher investment needs and doesn`t
always mean most attractive segment because they can be more competitive.
Smaller organizations may not have the resources to address a large market and
therefore smaller segment might be more appropriate for their attention.
Segments in growth(after inflation) are more attractive than the ones where
growth has peaked or even begun to decline because they have justify of any nec-
essary investments by having longer-term potentiality in despite of being more
competitive. Organization`s profitability should be reviewed by calculating profit-
ability of all companies operating in the segment, this include analysed estimation
of competitors` activities too.
Also, higher profit margins may be gained in segments with lower price sensitive
customers who focus more on quality and services than price, so the price compe-
tition is not necessary, in other hand of price sensitive segments that care more
about price and that cause lower margins and attractiveness.
In a long term a predictable market is more viable. The potential value of a market
will be easier to predict if it is less prone to disturbance and possibility of discon-
tinuities. Any seasonal or other cyclical demand patterns effects on segments at-
tractiveness. Organizations have to be able to withstand the cash flow implications
30


of any skewed demand, such as Christmas time or other events.Thus segmenta-
tions should have potential for substitution to keep the attractiveness by ability of
innovations to change the nature of competition to their advantage. (Graeme
2003.172-174)
6.4.2 Comparative Ability of Segment Attractiveness
Segments with weak competition are more attractive than the ones with strong and
aggressive competitors. Number of competitors is not as important as nature of
them (quality of competition) in a segment competition.
Having potentiality of differentiating position