smartamarketing: Managing the Mature Product

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.

It is this perhaps this very success which has been cited by critics as a reason for dismissing the concept as not having any practical value. The OLC/ PLC charts the progress of an innovation in the absence of managerial intervention. Our continued emphasis upon its utility means that by identifying the stage of the life cycle we can define the strategic options available to the product manager and so develop effective action plans. Further, by identifying the transition from one stage to the next we can judge when it will be beneficial to modify one strategy for another to take account of the changing conditions in the marketplace.

As growth slows and the product enters maturity, profit margin will begin to decline. (We emphasise margins because mature products usually make up the backbone of a firm's product portfolio and are frequently the major source of cash to sustain current and future operations: hence, 'cash cow' in the BCG growth share matrix.)

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.

Because of this profit erosion the industry tends to stabilise, with a set of well-entrenched competitors all seeking a competitive advantage, the absence of above-normal profits deterring any further new entrants. However, before examining the strategic options available to these entrenched competitors it will be useful to look more closely at the symptoms and causes of maturity

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.

The main reason why this should be so is that by concentrating on product, price and place, suppliers reduce their emphasis upon promotion. This is not to suggest that this reduction in promotional support is not justified, as it will usually be obvious that spending money to support new products will be more effective than seeking to prop up old ones. That said, the reduction in promotional support will often lead to a contraction in overall demand as the product loses the front-of-mind awareness, stimulated by advertising, so that usage will gradually decline. This phenomenon was quite marked in the market for FMCG in UK supermarkets during the late 1980s and early 1990s. As the major retailers increased the number of own brands, the branded-goods manufacturers' share of market declined. Faced with declining sales many manufacturers reduced their promotional spend and this was paralleled by a reduction in sales volume for the product category as a whole, i.e. consumers consumed less. This decline in volume sales impacted on the retailers' overall profitability with the result that many pegged the proportion of own label products so as not to discourage branded goods manufacturers from promoting the generic product — instant coffee, breakfast cereals, canned foods, etc. — through the medium of their own branded product — Nescafe, Kelloggs, Heinz, etc. In the case of Heinz it also prompted the firm to use modern direct marketing methods to deliver promotional incentives direct to consumers, thereby encouraging them to 'pull' Heinz brands through the distribution channel.

Market saturation is not simply a case of having reached all potential consumers of the product in question. In reality sales will usually plateau before all potential users 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.

Some years ago one of the authors (Baker, 1980) proposed a series of marketing maxims, one of which is that 'consumption is a function of availability'. Clearly, this is a truism but the implications are obvious. The bigger and more prominent the in-store display of a product the greater the likelihood that consumers will notice it and be prompted to buy. The obverse is equally true: as retailers reduce display space for mature brands so they are likely to hasten their decline. Further, the retailer is likely to use the evidence of declining sales to put pressure on the manufacturer to provide price incentives to boost its purchase, thereby reducing its profitability still further and encouraging the manufacturer to turn to other, more profitable products.

Despite the pressures on mature products described above, their classification as cash cows makes it clear that a mature product can be a considerable asset to the firm and an essential part of a balanced portfolio. It is for this reason that much thought and effort has been devoted to the management of mature products. Indeed, the discussion to be found in most marketing management textbooks implicitly assumes that one is dealing with such a product and focuses on how to manipulate the marketing mix to best advantage — it is the development and marketing of new products (usually the subject of a single topic) that is regarded as the exceptional case. The effect of this concentration has been the prolonging of the mature stage of the PLC beyond what might be anticipated if events were allowed to take their normal course.

Four basic mature product strategies are available to the marketing manager: