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During the Market Maturity stage, industry sales are "flat"; in other words, for every
product sold, one is taken off the market. This is where laptops are right now. For every
laptop purchased, one is discarded. Since there is little, if any, growth in the market
during the maturity stage, brand loyalty is the key to retaining ones market share. Few
competitors enter the market during this stage and those that do often target smaller under-serviced
or under-served niche market segments. It is during this stage that the first payoff
can be realized by the first-to-market company, if they were able to overcome the challenges
experienced during the Market Growth stage. You see, retaining a brand loyal customer
is much easier than keeping customers who are willing to brand switch. In fact, it is
often said that it costs ten times as much to earn a new customer than it does to keep
a happy one. If the company overcame the challenges during the Growth stage and developed a large
base of brand loyalists, then most of their money during the Market Maturity stage could be spent
on attracting new customers, since very few of their marketing funds would be needed to
retain their customer base. This is what Apple is doing. Such a large percentage of their
customer base is loyal that they were able to run ads such as the following one to attract
people who currently use PCs. http://www.youtube.com/watch?v=BpOvzGiheOM Man on Right: Hello I'm a Mac. Man on Left:
And I'm a PC. Hey mac did you hear the good news? Windows 7 is out and it's not going
to have any of the problems that my last operating system had, trust me. Mac: I feel like I have
heard this before PC. PC: What? PC: Windows vista is here and it is not going to have
any of the problems that Windows XP had. It's not going to have any of the problems Windows
ME had. It's not going to have any of the problems Windows 98 had. It's not going to
have any of the problems Windows 95 had. It's not going to have any of the problems Windows
2 had, trust me. This time it's going to be different, trust me.
There is military language to describe what a company does during market maturity: entrench and snipe. Entrenching,
in warfare, is holding ones ground by digging trenches to fight from. In business, it is
holding onto ones customers. Sniping is "picking off" the enemy one-by-one in war. In business,
it is going after your competitor's customers one-by-one. This is exactly what Apple is
doing! The final stage of the product life cycle is the Sales Decline stage: This is
usually due to the obsolescence of the product category. Eventually, every product gets replaced
by something else. During this stage, marketing does several things: First of all, they pull
most/all of promotions to reduce overall marketing costs. There is no reason to promote a dying
product. Secondly, they reduce distribution channels. In fact, they may pull a physical
product from all brick 'n mortar retail locations and only sell it online. This reduces overall
marketing costs further. It is here that the first-to-market company could have a second
payoff if they overcame the challenges during the market growth stage to develop brand loyalists
and kept these brand loyalists during the maturity stage. You see, during sales decline
many brand loyalists will still seek out the product. A good example of this is analog
television sets. With the introduction of high-definition TV and digital broadcast signals,
analog televisions are no longer being manufactured. For instance, people who still own a Sony
analog television set may try to find another one when their TV needs to be replaced. They
will probably go to Sony.com or another consumer electronics outlet website to find one. Of
course, they will expect to pay a discount price, but they will proactively find the
product. Here is what could happen. With the marketing costs being lowered so much, Sony
could still make high profit margin for this product even when selling it for a discount.
This can lead to what is called a "cash cow". A cash cow is a product line that generates
revenue with little-to-no marketing effort! One additional note about Sales Decline stage.
Rather than allowing their product to be obsoleted by a competitor's product, the first-to-market
company would rather obsolete their own products! Thus, when a product hits market maturity
and sales are flat, they introduce a replacement product line and begin the growth stage again.
This is where the first-to-market company has another advantage over second-to-market
companies. When a first-to-market company begins to experience the growth stage, they
need to begin developing the next generation of that product line during that stage! Why?
Because it is during that stage their competitors are just trying to enter the market. Second-to-market
companies generally do not work on their next generation until the hit market maturity.
If the first-to-market company begins these efforts during the growth stage, they can
always stay ahead of the competition in terms of innovation. This is best exemplified by
Intel during the 1990s. Intel is the largest manufacturer in the world of microchips. They
introduced the Pentium microchip in 1993. When sales of computers using this chip took
off, Intel immediately began developing the next generation of the chip while Advanced
Micro Design, their major competitor, started work on a chip to compete with the Pentium.
Three years later, the Pentium 2 microchip was introduced. Sales of computers using this
chip took off again and Intel began work on the Pentium 3 microchip while AMD was working
on a competing chip. For many years, Intel was able to leap frog AMD by developing their
next generation of microchips during the growth stage.