0:01
So now let's go to the Market Maturity Phase.
It's the third phase of the product life cycle.
When you see the graph you notice is, demand is leveling off at this phase, so
there's going to be a different dynamic when that demand levels off.
Think about the smartphone market.
0:19
A lot of you have smartphones.
In fact, a lot of you have probably bought your second, your third,
your fourth smartphone at this point.
Well when that market was new, Blackberry had a near monopoly.
But then what happened after that?
Well, Blackberry had a monopoly for
a certain period of time, then in came iPhone.
In came Android based phones.
All that increased competition in the marketplace and
increased price sensitivity because people were familiar with the different options.
It was true also that as competition increased, it's not just the price of any
individual phone that went down, it's really all of market prices went down.
The whole category experience lower prices.
All this to say, maintaining margins in the mature phase is more challenging and
you're going to have to do some strong tactics to maintain those margins.
Now, what can you do in this situation?
Well one thing you can do, is you can unbundle related products and services.
You may have been selling things like a package.
Consider the New York Times, that's what they did.
They sold their digital content in a package
with their newspaper that they delivered to you at the home.
You paid one price, you got both of them.
But as competition increased in the digital space, they had to unbundle that.
Why?
Because if they didn't unbundle that, the knowledgable consumers will shop around.
And they'll probably end up buying it from someone else.
So it's not that you want to unbundle related products and services.
The market just may force you to do that.
And if you don't, you're going to lose business.
2:07
So at the mature stage of the market, you probably have a lot of purchase data.
You've seen the price that you've charged.
You've seen the demand that that produced.
So this is the space where you can do some of the modeling that we've talked about
in previous courses.
Really honing in on that price sensitivity estimate and
using it to optimize revenue, to optimize profit really.
You also need to focus on cost and utilization of costs.
2:37
You might have to identify products and customers that,
you know you like the product, you like all your customers,
but maybe you can't serve them all profitably.
Consider a bank.
I've got a bank example here.
A bank may decide there's certain customers that don't have a lot of money
in their accounts and they use the tellers a lot.
They show up at the bank at the teller window.
That's very costly for a bank.
So if they fine those customers that are very costly to them.
What they want to do, and
I hate to use the term, but they kind of need to fire the customer.
And the way they do that, is they develop product and service offerings that
are unattractive to the customers that are less profitable to them.
That sounds really hard core, that may even sound mean.
But at this stage of the market, you've gotta consider that.
Who are the profitable customers?
Who are not the profitable customers?
Which of your products really are profitable?
And which, no matter how much you love them and it's a great product,
they're not profitable.
And you may have to get rid of them.
3:38
You also could think about expanding the product line.
Now we'll talk more about product line pricing later but
the way you want to think about this, is pricing a related series of products.
Like you've got a Giant bicycle.
Giant is a brand of bicycle and they've got the 100 series, the 200 series, etc.
Those are all related products and
you might want to expand the number of those that you have.
Take a market like this, Old Bay Seasoning.
I hope a lot of you are familiar with this.
This is a popular seasoning in the United States and
this is a very old brand in a very mature market.
And if you look on their packaging, maybe you can't see it now.
But it says, same great taste for 75 years.
They've been selling the same stuff.
This is very mature.
Well, not so long ago Old Bay said, you know what we need?
We need more flavors.
So they expanded the product line to try to get more demand in
what amounts to a very crowded and mature market.
4:39
Finally, you're going to need to re-evaluate your distribution channels at
this point.
So you may need to reduce dealer margins.
Why will they put up with that?
They may put up with it because this is the stage of
a product lifecycle where there is a lot of demand.
So they're pushing a lot of volume through.
They may be making their money on volume.
Given that, you may be able to get away with reducing the margins to them by
raising the price a little bit to them, in getting more of that margin for yourself.
And finally, you may want to consider opening up distribution channels.
Look at this yellow dress in front of you.
This is a dress that might have sold at a boutique dress shop.
But at this type of dress becomes more familiar, more common,
the market gets more saturated with this type of dress.
Whoever makes the dress might decide, we need to go not just to the boutique shop,
but we need to open up distribution channels and sell it in stores.
Where before, we might not consider selling it.
But the market is mature.
We just can't afford to stay here in this little niche.
Margins are getting tighter for us.
We need to push volume and push it out through distribution channels.
So what are the tactics here?
Think about unbundling those products and services if you have to.
I know you don't want to, but you might have to.
Go in to figuring out your price sensitivity estimates.
This is the point where you can do it and
the point where it probably makes the most sense.
Focus on controlling your costs, expand the product line, and
constantly re-evaluate your distribution channels, to make sure that
you're getting the profit you need to make your product successful.
Jean Manuel IzaretSenior Partner and Managing Director, Leader of BCG’s Global Pricing Practice
Ronald T. WilcoxNewMarket Corporation Professor of Business Administration & Senior Associate Dean for Degree Programs
Thomas KohlerAssociate Director, Pricing
