Term Paper on "Sales Promotion Product Life Cycle"

Term Paper 10 pages (2775 words) Sources: 1+

[EXCERPT] . . . .

Sales Promotion and Product Life Cycle

The aim of this paper will be to analyze the variation of the promotion techniques, as a component of the marketing mix, across the product life cycle. The thesis of the paper is that the promotion instruments and messages for the customers vary significantly across the product life cycle, as the company is trying to adapt it more to the reaction of the market in the different stages of the product's life. In order to exemplify, we will use the iPhone, as one of the introduced technologies that has not yet gone through all the stages of the product's life.

While examine the current promotion techniques, identifiable for the stages that have already been completed, we will also look into the future and anticipate how the promotion instruments will vary in the next stages. At the same time, this practical aspect of the research will be doubled by a theoretical background that will look at the general characteristics of promotion through the literature available on this subject and from a general perspective.

Introduction

Apple announced the new concept of iPhone in January 2007 and the entire novelty of the concept proposed the new technology as a great success. There were several things of great novelty, but perhaps the best thing about the new product was that it seemed to put together everything that other phones had separately. The notion of touch screens had existed in other electronic tools as well and it was successfully incorporated by the iPhone, along with everything ranging from quick access on the Internet to larger storage capacities.

The best advantage of the new product was, however, the fact that it provided a large and varied flexibility for the user through the incorporation in the same tool of different devices. With the iPhone, you had the GPS, the camera, the musical facilities, the text functions and action to Internet all at your fingertips and all incorporated in a small and handy device. This is probably why it was named the invention of the year 2007 by Time Magazine.

Apple had always been at the very top of the creative processes on the market, ever since they began as a computer company in the late 1970s. Some of its computers and operating systems have remained fundamental milestones in the evolution of the computer. Today, through products such as the iPhone and the Mac Book, the products that Apple releases on the market have remained synonym to style and to class and, additionally, to an extra something over existing products on the market.

The reasons why the iPhone and Apple were chosen as the object of study for this project are covered in the previous paragraphs, but it was also an incentive to have a product that is not yet at the end of its life cycle and for which this study can also anticipate its future development on the market, given the existing signals about how it is positioning itself and what the company's policies towards the iPhone, its market and customers are.

As mentioned, the report will focus on an analysis of the theoretical background relating promotion as part of the marketing mix to the product life cycle and carry that theoretical background to match the evolution of the iPhone during its lifecycle.

Summary of critical review

Sales promotion is a form of communication by which the seller sends positive signals about the product it commercializes to the buyer. As such, sales promotion has to be, first of all, translated through the main elements of the communication process: source, message and receiver. While this model is too simplistic, it can be developed to include additional elements such as feedback, response, encoding and decoding and the media as the intermediary of the communication process.

The encoding and decoding is particularly important in the sales promotion model, since some of the communication here is not straightforward, but passes an encoded message to the potential future customer, which the respective client will need to properly decode in order to obtain the right message. One such example is, for example, the fact that a sales promotion may advertise a bonus of an additional product for free or something similar. Nevertheless, such a sales promotion will never be valid in the case of a luxury product such as the iPhone. Offering a free iPhone for any iPhone bought will only degrade the brand in the eyes of the consumer.

The product life cycle, on the other hand, ties directly the stages in the product's existence of the market with the revenues it generates at that certain stage. There are five recognized stages in a product's lifecycle: development, introduction, growth, maturity and decline. Except for the development phase, where all work is internal and aimed at the introduction of the product on the market and, as such, there is no promotion on the market, "as the product progresses through its life cycle, changes in the marketing mix usually are required in order to adjust to the evolving challenges and opportunities."

If we are to theoretically look at how promotion varies with the product life cycle, during the introduction phase, the promotion function of the marketing mix is focused on "creating awareness." This practically implies that the organization will be focused on sending information to the public about the newly launched product and facilitating the interaction of the public with the new product, exactly with the idea that the potential future customers will have a chance to learn about the benefits of the new products. Promotion campaigns in this stage will probably abound in press release, testing sessions, presentation in specialty magazines and reviews, participating in fairs and different exhibitions, all with the goal of popularizing the new brand or product and of creating awareness.

With the growth phase, the attention of the promotion element shifts from creating awareness to "creating a favorable attitude towards the product." Indeed, at this point, the general perception is that the public already knows some of the basic things about the new product, including some of its technical characteristics (if we are talking about an electronics product), the places where it can be bought, what its comparative advantages are etc. This is why, at this point, promotions will include heavy advertising in the media, including through TV advertising and regular posters throughout the city, for example. Explanations are no longer as necessary as in the growth stage: the informed client will know what the advertising refers to. At this point it could be useful to have an external contractor to handle the promotion part, as this is significantly important in this stage and needs full time and resources.

With the maturity stage, the product has already lost its novelty characteristic which helped carry sales through the first two stages. At this point, it is important to use promotion to (1) develop customer loyalty, which will help customers buy the respective product because of its reliability and because of customer loyalty despite the appearance of superior products on the market and (2) emphasize differentiation, that is, build the promotion campaign so as to show what this product has extra compared to other similar products on the market.

Finally, during the decline stage, the organization is most likely to reduce promotion costs for the respective products and most of the promotion campaigns will be directed towards the brand rather than the product itself and towards using its presence on the market to announce future products from the same portfolio or brands.

As we will further analyze in the next paragraphs, the iPhone and Apple abided by many of these briefly presented promotion tactics in the development, introduction and growth stages, where the product is now.

One can also expect that many of these recommendations will be followed through the subsequent maturity and decline stages of the product.

Analysis

With the iPhone, the promotion actually did start in the development phase, despite the previous considerations that have been discussed. According to different sources, the rumors about the launch of the iPhone had already circulated for several years before the product was eventually released.

With such rumors, Apple was trying (and it succeeded) to create the right atmosphere and expectation on the market for the new product. Such a promotion campaign in the development phase can also be dangerous and costly, because the expectations on the market can have a double sense and the customers may find, when the product is eventually released, that it has not lived up to the promises of the company and to what has been discussing on the market. This was not however the case of the iPhone.

Despite the fact that the differentiation objective becomes a priority usually only in the maturity phase, Apple decided to emphasize this aspect ever since the introduction phase of the iPhone. The main element of differentiation was the touch screen option, which had been used before for other technological devices, such as cameras,… READ MORE

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