A new product progresses through a sequence of stages from introduction to growth, maturity and decline. This sequence is known as the product life cycle and is associated with changes in the marketing situation. The product life cycle has a major impact on marketing strategy and marketing mix.
(D) DECLINE STAGE:
During this stage, the sales start declining may be at a slower rate or rapid rate as a result, there is fall in profitability.
- Sales: The sales start falling during this stage due to reasons like, the customers may start using better and new products, technological Advancement, the fashion and tastes of consumers change, imported goods become cheaper in relation to domestic goods or increased domestic or foreign competition.
- Costs: During the decline stage, cost per customer is low because every company avoids any increase in expenses to maintain their profit position
- Profits: As it is not possible of any company to maintain the same position forever, profits start declining during the decline stage. Although different companies try to change their strategies to overcome decline in sales and profit but it is unavoidable.
- Customers: During the last stage, only few customers remain in the market who have had not tried the product. These customers are known as laggards who are very conscious and alert and always buy once most of the customers have tried the product.
- Competitors: Due to considerable fall in profit, many firms leave the market and invest funds in more profitable lines. It means the during ‘the decline stage, the number of competitors start declining because every competitors tries to divert its resources to some other profitable business or activity.
Strategies During Decline Stage
(i) Identify weak products: The first task is to establish a system for identifying weak products. Many companies appoint a product review committee to develop a system for identifying weak products. The product-review committee makes a recommendation for each doubtful product – Leave if alone, modify its marketing strategy or drop it
(ii) Determining Marketing Strategy: The company can adopt any one of the following different strategies during the decline stage (a.) Continuation Strategy: The firm continues its past marketing strategy, (i.e.) it does not change its old strategy, it means that the firm continues with the same market segments, channels, pricing and promotion. Thus, it leaves the product in the market till its natural death. (b.) Concentration Strategy: The company establishes a system for identifying weak product and then concentrates its resources only in the strongest markets. It means that the firm avoids smaller market segments where profits and sales of product are less (c.) Harvesting Strategy: Harvesting refers to recovery of the firm’s investment as quickly as possible. The firm reduces its expenses very fast in order to harvest (increase) current profits. The firm tries to get maximum possible profits. If the company adopts harvesting strategy, it has to identify sources of cost reduction and maintain its sales. Harvesting strategy is difficult to execute but if substantially increases the current cash flow of the company.
(iii) Drop decision : When the firm finds that product will go out of the market very soon. They have to take many other decisions. These decisions can be….
- The firm can sell or transfer the product to someone else or drop the product completely
- The firm has to decide whether to drop the product quickly or slowly
- The firm has to decide what levels of inventory or service to maintain to cover existing units.