The product life cycle is about the stages a product goes through from the time it is conceptualised, developed, introduced into the market, and up until the time when it declines and vanishes from the marketplace. It helps marketing managers by informing their decision-making when they promote products and services at each life stage of the product. The stages of the product life cycle are introduction, growth, maturity and decline.
In this article, we examine and contrast two banking products – the early stages of mortgage bond products (introduction and growth stages) and the late stages of retail banking products (maturity and decline stages).
In South African banking, a product life cycle is the set of four unique phases that a banking product traverses from the moment it is introduced to the market through various phases of growth and maturity, and finally to the undesirable decline phase where the product could be revised, upgraded, modified, or else gradually discontinued. Just like the standard stages of a product life cycle, these phases are heavily shaped by competitor products, shifting consumer demands, and innovations in technology within the highly competitive South African banking landscape.
Early stages of the product life cycle in the South African mortgage bond products: How marketing is different from the mature stages
The four major South African legacy banks are ABSA, First National Bank, Standard Bank and Nedbank. Much earlier on these banks realised the importance of using the product life cycle when selling mortgage bonds. Let us explore each stage of the product life cycle of the mortgage bond products through the lenses of these legacy banks.
The Introduction Stage
The Introduction Stage saw the banks introducing mortgage bond products to the consumer markets through launching and heavy commercialisation. During this stage, the banks’ marketing expenditure was extremely high with very little or no profit at all. This is due to the higher costs of research and development, as well as other related costs such as underwriting guarantees, underwriting costs, various insurance products attached to the mortgages and legal production.
The mortgage bonds were only made available to early adopters at varying prices which were driven by penetration strategies which allow for lower prices offered to penetrate the marketplace as rapidly as possible. This strategy builds awareness and increases demand. Skimming strategies were also used whereby product prices were set higher initially and later dropped lower to allow more consumers to afford the product and adopt it.
The Growth Stage
After heightened consumer communication and intensive integrated marketing communications involving massive advertising campaigns, the banks started experiencing a spark in mortgage product sales and many competitors who are not part of the big four banks began to enter the market. Such competing banks were Capitec Bank, African Bank, Bidvest Bank, Imperial Bank and others.
The increasing demand put pressure on the supporting departments to sign up and conclude as many mortgage products as possible to as many regions and provinces as possible, guided by the demand. As a result, the product support and underwriting costs continue to be higher at this stage. There were also higher profits during the growth phase.
Late stages of the product life cycle in the South African retail banking branch network: How marketing is different from the early stages
A product achieves broad adoption and steady consumer demand when it reaches the later stages, especially the maturity phase. However, banks face many difficulties because of the intense competitors and the saturation levels of the marketplace.
The Maturity Stage
Marketing effectiveness at the maturity stage is mainly about differentiation and showcasing the rise of innovation. For many years, having a large branch network has always been a product in and of itself in retail banking. However, as internet banking and mobile banking apps become more popular, branches in all major metropolitan areas are reaching maturing and some are even closing, reaching the decline stage.
Many bank branches are still in the maturity stage where branch sales are levelling off as a result of many competitors who enter the branches and the dwindling numbers of many new potential customers. The remaining sales are replacement purchases (replacing a financial product with another financial product, replacing a credit or debit card, or replacing a bank account with a different one) and repeat consumers rather than new customers. New customers continue to download and use banking apps and gravitate towards online banking. The main attraction is self-service which gives a customer what they want immediately and eliminates standing in very long queues in the bank branches.
The Decline Stage
The maturity stage of the branch network has lasted for a very long time. However, the adoption of online banking and banking apps is aggressive and will soon cause the decline stage of the branch network. We have already witnessed the reduced capacity of the branches with many services such as cash handling, cash withdrawals, cash deposits, the printing of banking statements, etc., all currently handled by the banking apps. At this time, marketing is focused on fighting off the competition, and corporations frequently produce new or modified goods to appeal to different market niches.
The recommended improvements to the marketing strategy for each product life cycle stage
Using systematic ways, organisations must fully exploit the Product Life Cycle vigorously by raising product awareness to the maximum and in unlimited ways, at each stage of the product life cycle, including encouraging many customers to test the products, offering product giveaways, running discounted product promotions, et cetera.
They may accomplish this even more successfully throughout the introduction, growth and maturity stages by demonstrating the value and benefits of the product to encourage consumers to purchase it over rival goods. To counter the inevitable decline of product sales during the decline stage, marketers can use product revitalisation strategies which include modifying and upgrading the product to keep it interesting and attractive.
The product life cycle idea has been explored and proven to be effective in most large companies throughout the world for marketing decision-making, to a variety of circumstances, spanning from manufacturing and industrialisation to financial management, as evidenced by the continued availability of vast literature on the subject. Its full impact must continue to be leveraged to realise the full potential of heightened sales records.
Article Images by Media Logic and Appsierra
About bandile ndzishe
Bandile Ndzishe is the CEO, Founder, and Global Consulting CMO of Bandzishe Group, a premier global consulting firm distinguished for pioneering strategic marketing innovations and driving transformative market solutions worldwide. He holds three business administration degrees: an MBA, a Bachelor of Science in Business Administration, and an Associate of Science in Business Administration.
With over 29 years of hands-on expertise in marketing strategy, Bandile is recognised as a leading authority across the trifecta of Strategic Marketing, Daily Marketing Management, and Digital Marketing. He is also recognised as a prolific growth driver and a seasoned CMO-level marketer.
Bandile has earned a strong reputation for delivering strategic marketing and management services that guarantee measurable business results. His proven ability to drive growth and consistently achieve impactful outcomes has established him as a well-respected figure in the industry.
As an AI-empowered and an AI-powered marketer, I bring two distinct strengths to the table: empowered by AI to achieve my marketing goals more effectively, whilst leveraging AI as a tool to enhance my marketing efforts to deliver the desired growth results. My professional focus resides at the nexus of artificial intelligence and strategic marketing, where I explore the profound and enduring synergy between algorithmic intelligence and market engagement.
Rather than pursuing ephemeral trends, I examine the fundamental tenets of cognitive augmentation within marketing paradigms. I analyse how AI's capacity for predictive analytics, bespoke personalisation, and autonomous optimisation precipitates a transformative evolution in consumer interaction and brand stewardship. By extension, I seek to comprehend the strategic applications of artificial intelligence in empowering human capability and fostering innovation for sustainable societal advancement.
In essence, I explore how AI augments human decision-making and strategic problem-solving in both marketing and other domains of life. This is not merely an interest in technological novelty, but a rigorous investigation into the strategic implications of AI's integration into the contemporary principles of marketing practice and its potential to reshape decision-making frameworks, rearchitect strategic problem-solving paradigms, enhance strategic foresight, and influence outcomes in diverse areas beyond the marketing sphere.