What is the Product Life Cycle? How is it related to the Technology Adoption Life Cycle? and What is a High-Tech Market?
Product Life Cycle
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| Figure 1: Product Life Cycle |
When a new product is launched and sold, the product goes through a cycle known as the Product Life Cycle (PLC). Figure 1 on the right shows a graph of a typical PLC. The PLC has 4 main stages, Introduction, Growth, Maturity, and Decline. Depending where a product is located on the PLC, a company's marketing strategy and marketing mix will differ. Let us look at the 4 stages in more detail.
- Introduction: At the first stage, the sales of the product are still low, the market for the product is still small. Additionally, the per unit production cost is still high.
- Growth: At this point, the sales of the product start to increase. Also, the Company selling the product can start benefiting from economies of scale, the per unit production cost of the product decreases.
- Maturity: At this point, the product sales grow at a lower rate, and the sales will peak at a point, and then decline. Profit also starts to decline because at this stage competition in the market is strong, a lot of money is spent on marketing and advertising.
- Decline: At the last stage, the market for the product diminishes. Sale of the product decline. Profits also decline, this results in companies leaving the market. Money spent on advertising also declines at this stage.
For more information on the Product Life Cycle Stages visit: productlifecyclestages.com
In last week's blog, we looked at the Technology Adoption Life Cycle (TALC). The TALC model and the PLC model follow a similar curve shape, however they are not the same model, they complement each other. The TALC explains to us how consumers, in different groups, adopt a product based on their psychographics. The PLC explains to us how the sales of a product vary over time.
The two models complement each other. When the early market group (in TALC) adopts a product, i.e. the Innovators and the Early Adopters, the product will be in the Introduction stage of its life cycle (in PLC). When the Early Majority of people (in TALC) adopt the product, it will be in the Growth stage of its cycle (in PLC). And so on so forth. Interestingly, the PLC doesn't account for the "chasm" period of time, seen in the TALC model, where sales drop.
Each stage of the PLC and the TALC offer different challenges when it comes to marketing. A different marketing strategy and mix is needed at each stage of both models. But before we can jump into the marketing world, we need to understand what a High-Tech Market is.
High-Tech Market
To be successful in marketing a High-Tech product, we need to find out what IS a market. Based on Geoffrey Moore's book Crossing the Chasm, a market is the following:
The two models complement each other. When the early market group (in TALC) adopts a product, i.e. the Innovators and the Early Adopters, the product will be in the Introduction stage of its life cycle (in PLC). When the Early Majority of people (in TALC) adopt the product, it will be in the Growth stage of its cycle (in PLC). And so on so forth. Interestingly, the PLC doesn't account for the "chasm" period of time, seen in the TALC model, where sales drop.
Each stage of the PLC and the TALC offer different challenges when it comes to marketing. A different marketing strategy and mix is needed at each stage of both models. But before we can jump into the marketing world, we need to understand what a High-Tech Market is.
High-Tech Market
To be successful in marketing a High-Tech product, we need to find out what IS a market. Based on Geoffrey Moore's book Crossing the Chasm, a market is the following:
- A set of actual or potential customers
- for a given set of products or services
- who have a common set of needs or wants, and
- who reference each other when making a buying decision.
According to Moore, the first 3 parts of the definition are easily understood, but people often forget the 4th part. According to Moore, "Getting the last part is absolutely key to successful high-tech marketing." If two people buy the exact same product, but they don't have a reasonable basis for communicating with each other, then they are not in the same market. Each person is in a different market.
To make sure that people don't forget this crucial part of the definition, we often hear people speak about a Market Segment. This is essentially the breakdown of the market's natural boundaries.
Marketing Segmentation is very important, because no marketing strategy is meaningful "if it is implemented across a set of customers who do not reference each other".
Although this definition is written by Moore for High-Tech markets, we can see it apply in different types of markets.
To make sure that people don't forget this crucial part of the definition, we often hear people speak about a Market Segment. This is essentially the breakdown of the market's natural boundaries.
Marketing Segmentation is very important, because no marketing strategy is meaningful "if it is implemented across a set of customers who do not reference each other".
Although this definition is written by Moore for High-Tech markets, we can see it apply in different types of markets.
Application: Entrepreneurship Project
In our entrepreneurship project for the Telfer Business School class of MBA6262, we have spoken with a group of people about our app idea. As we review what we have learned from these people, we can make two observations.
Firstly, for most people, our idea is considered very new. By the comments we have gathered from our interviews, we can say that our idea would fall under the "Early Adopters" segment of the TALC. In other words, we would still be in the Introductory stage of the PLC.
Firstly, for most people, our idea is considered very new. By the comments we have gathered from our interviews, we can say that our idea would fall under the "Early Adopters" segment of the TALC. In other words, we would still be in the Introductory stage of the PLC.
Secondly, we realized that there were different types of potential customers. As we spoke with people, we saw individuals interested in becoming buyers, some in becoming sellers for short periods of time, others for longer periods of time. These essentially are different market segments that our app can target. As we review our Business Canvas, we can use each market segment in a different way to generate revenue. Each group of people are willing to pay us for different uses of our product.
Sources
Moore, G. (2014). Crossing the chasm: Marketing and selling high-tech products to mainstream customers (3rd ed.). New York: HarperBusiness.
Product Life Cycle Stages. from http://productlifecyclestages.com/
Product Life Cycle Stages. from http://productlifecyclestages.com/
I just went through your article on the product life cycle and high tech marketing. It's really well written in a simple language. The graphic representation makes it very easy to understand. I was thinking of text message marketing for car dealerships. Does it come under high tech marketing or it's part of the conventional marketing?
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