Managing the Mature Products or Services

For many organizations, their long-term success was built on one or two cornerstone products – the “cash cows” that drove the growth of their business.  But what do you do when those products are mature and aren’t experiencing the same growth rates that they once enjoyed?

It takes a different mindset and different strategies to manage mature products successfully.  When done effectively, product life cycles can be greatly extended, when ignored; the products can wither and die a slow death.  Consider the following when managing mature products:

• Build off your base of loyal customers – continue to delight them and ask for referrals
• Differentiate your product in ways that are important to your customers
• Continue to reevaluate targeted segments and explore opportunities in new segments
• Look for product improvement and extension opportunities
• Always know what your next big product will be
• Make the hard decision to invest in winning products and discontinue products that are no longer adding to the bottom line or enhancing your strategic position

The onset of aggressive competition in the growth phase of a product life cycle may well lead to the beginning of premature maturity for the innovator who first introduced the new product to the marketplace. Thus, while industry sales continue to grow rapidly, the innovator’s sales may plateau out and call for a quite different set of tactics from those appropriate in the growth phase. In this topic we examine in some detail what factors result in the slowing down of the growth phase, the characteristics of maturity and the options available to the product manager to exploit fully the opportunities available in the mature phase of product and market development.

Maturity – Its Nature and Causes

As the market approaches saturation so the growth rate slows down until eventually it stabilises at a sales level equivalent to the replacement rate together with any natural growth in market size due to increases in population. Usually this is the longest single phase of the life cycle and will normally be proportionate to the length of the gestation/introduction phase. That this should be so is logical in that the very forces which accelerate or delay the acceptance of a new product invariably hasten or delay its decline. That said, it is also true that in the same way that medical science has been singularly successful in extending the mature phase of the human life cycle, so product managers have been particularly successful in prolonging the life of mature products.

As growth slows and the product enters maturity, profit margin will begin to decline. Possible reasons for the decline in profit margins:

• Increasing number of competitive products leading to over-capacity and intensive competition.
• Market leaders under growing pressure from smaller firms.
• Strong increase in R&D to find better versions of the product.
• Cost economics used up.
• Decline in product distinctiveness.
• Dealer apathy and disenchantment with a product with declining sales.
• Changing market composition where the loyalty of those first to adopt begins to waver.

The increasing number of competitive products leading to over-capacity and intensive competition is the natural reaction of suppliers in a market faced with slowing sales and a perceived limit to growth. As predicted in our life cycle model, as a phenomenon approaches a limit to growth its behaviour becomes erratic (‘hunting’) as it seeks to avoid the limit or find a way around it. Once it is appreciated that the market is of a finite size and approaching saturation, individual suppliers will recognise that further increases in their sales can only come from increased market share. While demand is growing rapidly all suppliers can benefit from this without worrying unduly about the sales of competitors — it is a win—win situation. But, when sales stabilise, the only route to continued growth is through aggressive competition for market share which, inevitably, is a win—lose situation. In these circumstances individual suppliers will resort to predatory tactics — product proliferation, discounting, own label manufacture, etc. — in an attempt to consolidate and protect their share. Ironically, these tactics tend to accelerate maturity rather than stave it off.

Market saturation is not simply a case of having reached all potential consumer of the product in question. In reality sales will usually plateau before all potential user have tried the product. Drawing on the concept of adopter categories introduced previously, it is quite likely that by the time laggards are entering the market the innovators and early adopters will be becoming bored with the product and so consuming less of it, or even switching to other, possibly completely new products. This trend is likely to be accelerated by changes in the distribution channel as wholesalers and retailers become less willing to carry the product, as it offers them lower margins than other, newer products in the growth phase of their life cycle. Given that there is a limit to the amount of display space available in a retail outlet, most retailers will seek to carry that assortment of products which maximises the return from the space available. Consequently, they will tend to reduce the space available to slow-moving products and those with low margins in favour of faster-moving products and those with higher margins.

The main characteristics of the maturity stage which help to define the appropriate marketing strategies are

• At some point of time, growth rate slows down and the product enters the maturity stage.
• The stage is likely to stay longer than the previous stages
• Most of the products stay in the maturity phases for a very long period and the most of the marketing management deals with mature products

Maturity Stages

Maturity stage is made up of three stages

Growth maturity

• Sales growth start declining due to availability of better products in the market
• Laggard buyers enter market because of low price
• No new channels are left to fill as the distribution network reaches its saturation

Stable Maturity

• Sales stagnates due to market saturation
• Future sales governed by population increases and replaced demand

Decaying Maturity

• Absolute sales volume decrease
• Customers start switching to substitutes/other products which are available in the market
• After this stage, the life cycle enters into the decline stage

Affect during maturity phase

• Slowdown in sales growth creates over capacity which leads to intensified competition
• Competitors try to find new segments or niche areas to boost growth
• Prices may decrease significantly due to lower sales volume and increased production capacity
• Advertising increases and sales promotion increases
• R&D expenses increases to discover new features, products improvements and line extensions
• Shake out may occur due to intense competition. Weak competitors may withdraw.

Companies have to decide whether to be a dominant or a niche player to sustain during this product life cycle phase. Marketing strategies in maturity phase could be Market modification, Product Modification and Marketing mix modification

Strategies

There are few effective strategies that can be examined in the market to demonstrate revitalization:

• Adding a new value – usually this is the way to look for creative opportunities to redefine the product. Sony executed this strategy when it created the Walkman, while it replaced speakers with a headset. The minivan combined the benefits of a station wagon and a van. In can even go way further into creating a hybrid from two products that are so unrelated, but when merged create a “new” niche product. Michael Gibbert and David Mazursky call those category revolutions or “cross-breeds” in their article on combining two categories to come up with new products.
• Maintenance strategy – It can be viewed as being defensive in technique. It used as a way to prevent a product from incurring losses due to increased competition in its market. When applying maintenance strategies, these approaches can be followed: continue to do what you always did (also known as “stay the course”); reduce the scope; and defend your market share.
• Revitalization strategy – It is for managing existing and mature products is revitalization. Its purpose is to revitalize the sales of products that should be performing strongly but, for various reasons, have instead started to falter and decline. This requires lots of planning and supervision, and is the most commonly used strategy when managing existing and mature products.
• Rationalization strategy – It is used for managing existing and mature products, and it should be applied to all product lines. Rationalization seeks to keep the product lines operating in a lean and efficient manner. The purpose is to identify where beneficial opportunities can be achieved and wasteful processes pruned. There are three rationalization approaches: reduce product costs; discontinue the product; and increase product price to drive customers toward a new substitute product that the company has developed.
• Repositioning – involves creating a new competitive position in the minds of the consumers. Many a times, it can be classified as a bit controversial or far-fetched from the status quo.  Examples include utilizing some social trend in a reverse manner – with a wireless technology being built in various products – some coffee shops or service establishments chose to create a demand for anti-technology while jamming some sections of their establishments to provide cell free and wireless free zones for its customers. Or like the mentioned Ikea store experience, where no sales assistance store experience is accepted by customers in lieu of other benefits (specific ambiance, cafe, etc).
• Extending the base – implies increasing the adoption rate, usage rate or entering new markets. To figure its feasibility, product managers would profile the customers that tend to buy more than average or consume more than average and find out what causes them to do that. Another way to do so is to find unusual customers or product usage patterns that lead to defining new segments.  Example of this approach is Superior Clay Corporation that reacted to its clay sewer pipes being replaced by plastic.  It did discover a new niche for decorative chimney pots and fireplace flue liners.

Whatever strategy one might apply, sometimes killing a product could be the best solution. Thus, it is critical to assess its performance, demand and potential costs before exercising any of the above-illustrated options!

Market Modification

• Sales volume can be increased by influencing constituent variants or by modifying the market itself
• Number of brand user can be expanded by
• Converting non user which are yet to use the brand or product
• Entering new market segments or geographies to expand the market
• Try to get competitor’s customer base by attracting them to own products
• To increase usage rate, the strategies would be
• Try to get customer to use a product more frequently – Juices can be taken anytime, except breakfast.
• More usage per occasion – large diameter of tube opening for tooth paste adopted successfully by Colgate.
• Companies tries to discover new product uses and tries to convince customers to use a product in different ways.

Product Modification

Sales can be increased during the maturity stage by modifying the product. Product modification can be done in three main ways

• Improvement in quality
• Improvement in features
• Improvement in style and looks

Quality improvement tries to increase the final performance of a particular product in terms of

• Durability
• Reliability

Feature improvement aims at improving

• Usability
• Versatility
• Safety

Marketing Mix Modification

Sales can be increase by stimulating other marketing mix components. These are

• Product – Specified in the product modification segment which aims to modify the existing product to attract more customers
• Place – Specified in the market modification segment which aims at increasing the market segments and geographies
• Price – Price decrease to increase sales by attracting price sensitive customers. Price increase to indicate superior quality and services which can be used successfully for some products
• Distribution – Companies can try to obtain more product support and display in existing outlets. Number of outlets may be increased. New Distribution channel may be used
• Advertising – Advertising expenses may increase. Advertising message or appeal may change
• Sales Promotions – Sales promotion can be used to enter into new market segments or lift sales volume temporarily.
• Personal Selling – Number/quality of sales force may change. Sales territories/sales force management may change
• Services – Companies may change a product’s services in terms of Delivery, Technology assistance to customers and Maintenance and Support to boost sales volume