The product life cycle and product differentiation are intertwined. Every product goes through a product life cycle consisting of four stages: introduction, growth, maturity and decline. Every product also needs to be differentiated from its competitors by offering a unique set of valued differences to a consumer. Those differences might be in product features, pricing, how it’s advertised or where it’s retailed. That’s why a consumer buys your product instead of your competitors. The challenge for marketers is that the strategy you choose to differentiate your product from competitor’s changes as the product moves through its life cycle.
Introduction Differentiation
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At the introduction stage, marketers need to focus on informing potential consumers about the product. The product is differentiated simply by being new and establishment of a strong brand name. Promotion and pricing are geared to generating product trials -- getting consumers to buy and try the product. Retail distribution is established, but through limited channels. Determining where a product can be purchased significantly differentiates it from the competition.
Growth Differentiation
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As product sales start to take off, marketers increase the offerings by expanding the sizes and flavors or types available. Use of lower prices becomes more common, either through a lower list price or more frequent promotional pricing. Profit margins actually increase despite lower prices because of the economies of scale achieved through increased sales. The lower pricing helps differentiate the product from competitors that are introducing similar products but are in their introductory stage. Because of the increasing product sales, marketers can expand the channels of distribution to get new retail distribution. Services such as increased warranties or better return opportunities are usually introduced.
Maturity Differentiation
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At the mature stage, marketers start to modify their products, promoting them as “new and improved” or “bigger," or “stronger." Changes are made to improve the aesthetic appeal of the product. Additional uses are promoted to attract new target markets. For example, Cheerios are marketed to senior citizens as lowering cholesterol, daily aspirin is marketed as heart healthy, baking soda is presented as a refrigerator deodorant.
Decline Differentiation
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The expanded selection of different sizes and types introduced in the growth stage are slowly eliminated in the decline stage. The focus is on consolidating volume into a few basic options, to achieve economies of scale where possible. If the company feels there is a limited hard-core customer base, it may decide to pursue a strategy know as harvesting. Under this strategy, the price is increased and it is assumed that the profits from the increased prices will more than offset the decline in volume that typically accompanies increased pricing.
