Identify and describe the stage of the life cycle the brand, product, business or organization is in?
The product I have chosen to discuss this week is the Philips Compact Disc (CD). Although this product is fairly common, I believe it to be unique from other examples such as the cassette tape and the Apple iPod. The main difference is that although this product is indeed in the declining stages of the product life cycle, I strongly believe the product will continue to remain relevant for the next several years due to the way Philips has re-designated the CD’s usage. The insights below prove that this product is a unique example of how companies can prolong the life of a product while evolving with newer technologies.
The compact disc was first introduced in the early 1980s and was initially marketed to Japan. Although sales were initially slow, the CD gained popularity in Asia due to efficiencies with file transfers and considerably better audio quality with music recording. By the mid-1980s, the compact disc gained popularity throughout Europe as a primary means of recording music. As sales continued to increase over the next decade, Philips viewed the CD’s niche market as primarily a vehicle for the recording and selling of music. This form of file transfer allowed musicians to record more tracks on an album and continued to provide better clarity than cassette tapes and other forms of file storage. The CD’s popularity eventually spread to the United States where sales eventually topped out at over 700 million units sold in 2001.
As other forms of file recording and transfer such as MP3 players and USB drives became popular in the early 2000s, the market for compact discs began to change. Technology continued its evolution with the popularity of the Internet and the development of online streaming and storage services in the late 2000s, and sales for compact discs began to dramatically decline. By 2007 sales had dipped below 550 million units sold worldwide, and by 2012 the total sales had fallen below 300 million units. Consequently, the compact disc’s niche market of music sales also shifted from the compact disc to online streaming and Internet purchases. According to CNN, digital sales of music through online services accounted for only 10% of the overall sales in 2007. By 2009, Internet purchases doubled their market share to nearly 20%. By 2011, the sales of online music downloads surpassed the compact disc sales for the very first time. The CD continues to experience declining sales and the product is in danger of becoming obsolete.
This brief history provides insight into the compact discs product life cycle. Based on the statistical analysis above, the Philips CD is currently in the declining stage of the product life cycle. The declining stage of the product life cycle is defined by plummeting demand for a product in correlation to the introduction of newer technologies. For the compact disc, this is evidenced by the newer technologies such as portable media storage devices, internet storage capabilities, etc… The consequence is that the compact disc sales have rapidly declined since the mid-2000s. As noted above, the niche market of the CD lost the majority share of the music industry in 2011 due to Internet download purchases. At this juncture, Philips must make the decision to either propose the discontinuation of the product by selling the remaining units at a deeply discount price or re-designate the product for a different purpose. Through various examples such as video game and computer software as well as government file transfers, evidence suggests that Philips is moving to re-designate the CD’s use in order to prolong the life cycle. This business to business market in conjunction with the declining consumer market sales could prolong the life of the compact disc. While the company will likely not see compact disc sales reach the same heights as those in 2001, the compact disc is relevant today and continues to be a staple in the business market.
Tell us what marketing strategies the brand is now employing (or should employ) or marketing challenges the brand is facing and will need to deal with in order to keep the brand successful or to make the brand successful again.
As previously mentioned, Philips is working to re-designate the CD’s purpose and continue its existence in the business to business market. This is evidenced by the company increasing the storage capacity of the compact disc in the late 2000s to accommodate the sales of computer software and video games. Video game devices such as the XBOX One, Playstation 4, and Wii U all continue to utilize the compact disc for sales of video games. Computer software giants such as Microsoft and Apple continue to use the compact disc for the installation of their operating system. So long as companies like Philips continue to coordinate their efforts alongside these main distributaries, the compact disc will continue to remain relevant. The challenge that Philips will face with the next generation of computers and video game platforms is how these companies will chose for their devices to receive and send information. The Internet is increasing the market share of downloadable content, and operating systems and video games can now be downloaded directly to hardware devices through the Internet. However, the consumer still has the option to purchase a compact disc with this same data. By purchasing a compact disc, consumers also have the option of re-selling their software and video games. This had led to a secondary market for this software and companies like GameStop and Redbox continue to thrive off these purchases. I strongly believe that this resell value of the compact disc and the software associated with these discs is what will prolong the lifecycle of Philips CDs. Moving strictly to an Internet-based way of transferring information will result in a chain reaction that will destroy several other businesses.
The next generation of hardware will enlighten Philips as to the future of compact discs. So long as Nintendo, Sony, and Microsoft continue to build capabilities into their next generation devices for the use of compact discs and backwards compatibility, Philips will remain relevant in the sale of compact discs. If these hardware giants build next generation devices without the capability of supporting compact discs, then the writing is on the wall and Philips must phase out its remaining CD stock.
Although the compact disc is a common household item, the many ways in which the product is used makes the CD a unique case study in the product life cycle. By re-designating the way in which the CD is used, Philips has prolonged its lifecycle unlike other devices such as the cassette tape or iPod.