Perreault−McCarthy: Basic
Marketing: A
Global−Managerial
Approach, 14/e- Product Management
and New−Product
Development
Text © The McGraw−Hill
Companies, 2002276 Chapter 10
The life and death cycle seen in our Palm case is being repeated over and over
again in product-markets worldwide. Cellular phones are replacing shortwave
radios and CBs and also making it possible for people to communicate from places
where it was previously impossible. Cellular linkups over the Internet are com-
ing on strong. Cassette tapes replaced vinyl records, and now CDs, digital
minidiscs, and even VHS tapes are challenged by DVD and MP3 digital files on
miniature electronic memory cards. Switchboard operators in many firms were
replaced with answering machines, and then answering machines lost ground to
voice mail services. “Video messaging” over the Internet is now beginning to
replace voice mail.
These innovations show that products, markets, and competition change over
time. This makes marketing management an exciting challenge. Developing new
products and managing existing products to meet changing conditions is important
to the success of every firm. In this chapter, we will look at some important ideas
in these areas.
Revolutionary products create new product-markets. Competitors are always
developing and copying new ideas and products—making existing products out-of-
date more quickly than ever. Products, like consumers, go through life cycles. So
product planning and marketing mix planning are important.The product life cycledescribes the stages a really new product idea goes through
from beginning to end. The product life cycle is divided into four major stages: (1)
market introduction, (2) market growth, (3) market maturity, and (4) sales decline.
The product life cycle is concerned with new types (or categories) of product in the
market, not just what happens to an individual brand.
A particular firm’s marketing mix usually must change during the product life
cycle. There are several reasons why. Customers’ attitudes and needs may change
over the product life cycle. The product may be aimed at entirely different target
markets at different stages. And the nature of competition moves toward pure com-
petition or oligopoly.
Further, total sales of the product—by all competitors in the industry—vary in
each of its four stages. They move from very low in the market introduction stage
to high at market maturity and then back to low in the sales decline stage. More
important, the profit picture changes too. These general relationships can be seen
in Exhibit 10-1. Note that sales and profits do not move together over time. Indus-
try profits decline while industry sales are still rising.^2wiped out Palm’s profit mar-
gins. It also didn’t help that
Palm’s new-product develop-
ment process hit delays.
When its new model didn’t
come out on schedule, even
loyal customers looked
elsewhere.
Given the fast changes in
this market environment, it’s
hard to know what will happen
in the future or how marketing
strategies may change. Soona PDA may just be a promo-
tional giveaway with a
subscription to someservice—like wireless video
teleconferencing over the
Internet. Or the really big mar-
ket may be kids—if PDA
makers build in more interac-tive gaming features.^1Managing Products over Their Life Cycles
Product life cycle has
four major stages