Agriculture Reference
In-Depth Information
The
maturity stage
is characterized by slow growth or even some decline of sales as the
market becomes saturated. Sales lag because most of the potential customers have been
tapped and because competitors have entered the market, leaving only new sales to the late
majority and laggards and replacement sales to established customers. This stage usually
lasts longer than the others, so most products in the market at any point in time are in
this stage.
Much marketing activity is designed to prolong the maturity stage by propping up sales
and protecting profi ts. Competition often becomes intense in the maturity stage as competi-
tors battle for market share, often using price as a weapon. Firms struggle to refi ne their
product by changing design, adding features, making new advertising claims, and develop-
ing promotional campaigns and incentives to protect or enhance market share. Strategically,
fi rms hope to differentiate their product suffi ciently to push it back into the growth stage.
But all this additional marketing activity drives costs up, and profi ts begin to decline. How
rapidly profi ts decline in the maturity stage depends on a host of factors, but this decline
is always of major concern to management.
The
decline stage
fi nds sales declining more rapidly. Changes in consumer preferences
or new substitute products may hasten the death of the product. As the product dies, profi ts
slip to zero or become losses, and some fi rms withdraw from the market. The remaining
fi rms may reduce marketing expenditures, until eventually the product may disappear totally
from the market.
Many fi rms fi nd the decline stage very diffi cult to manage. Managers who have built their
professional careers around the growth of a product are sometimes emotionally involved
with the product and are thus reluctant to admit its decline. Marketing managers may legiti-
mately expect sales growth to resume as economic conditions change. In any case, to drop a
product from the line and to decide on the best timing for this action is a diffi cult decision.
Yet attempting to prolong the life of a product may drain the fi rm fi nancially and preclude
the development of new products.
The evolution of a product through its life cycle presents the essence of product decisions
for the marketing manager in the agribusiness fi rm. Although each product has a life cycle,
the life cycle can look very different from one product to another. Some products have short
life cycles lasting only a year or two, while others may have life cycles that span decades.
One of the marketing manager's jobs is to use the marketing tools at their disposal to prolong
the profi table life stages. In an age of social media with information available everywhere,
all the time, product life cycles and the adoption process can become incredibly compressed.
Such compression puts pressure on agribusiness marketers as the window for success can be
very small before a competing product/service is introduced by a competitor.
Price decisions
Pricing is a critical marketing decision because it so greatly infl uences the revenue generated
by an agribusiness. Pricing decisions do this in two ways:
1.
Price impacts revenue as a component of the revenue equation:
(revenue
=
price
×
quantity sold)
2.
The price level itself greatly affects the quantity sold, through its effect on demand
relationships for the product or service.
