Factors Affacting Selection of Promotion Strategy at Different Stages of Product Life Cycle (Case Study: Food Products Companies in Mashhad)

اقتصاد و توسعه کشاورزی

Article 5, Volume 30, Issue 4, December 2017, Pages 360-369   

Document Type: Research Article

DOI: 10.22067/jead2.v30i4.56943

Authors

H. Mohammadi^{* 1}; M. Mohammadi²; S. Kargar¹

¹Ferdowsi University of Mashhad

²Islamic Azad University, Sabzevar Branch

Abstract

Introduction: Food industry is one of the most important industries in developing countries that has an enormous role in employment, export and value added of the agricultural sector. Iran as a developing country has a comparative advantage in food product industries for several reasons such as adequate and cheap raw materials and having several companies in the field of food industries. The food products, sales promotion strategy is one of the strategies used to promote the sale of products in different stages of product life cycle. Appropriate usage of promotional strategy in different stages of product life cycle has an important role in the profitability of these industries and so determining the factors affecting the selection of promotion strategy in different stages of product life cycle is important. In this study, the main objective is to determine factors affecting the selection of promotion strategy in different stages of product life cycle in food product industries in Mashhad, Iran.
Materials and Methods: The main aim of this study is to determine factors affecting the selection of promotion strategy in different stages of introduction, growth, maturity and decline in food products industries in Mashhad. For achieving this goal, some explanatory variables such as education manager, company experience in food industry, operational cost, product diversity and market fluctuations considered as independent variables and ordered logit model was used for analyzing the effect of these variables on the probability of selecting different categories of a dependent variable. Dependent variable has four categories and shows the stage of product life cycle that managers select for applying promotion strategy.
Results and Discussion: One of the most important strategies for increasing sales in food product industries is sales promotion. Producers used this strategy, according to the life cycle stages of their products. In this study, for determining the important factors that affect the probability of selecting promotion strategy in different stages of product life cycle, we used ordered logit model in Mashhad food products companies. The results show that variables such as education of managers and company experience in producing food products have not any significant effect on choosing promotion strategy at different stages of product life cycle. Furthermore, operational costs and market fluctuations have a negative and significant effect on choosing promotion strategy in different stages of product life cycle. Therefore, when operational costs increase or when market fluctuations exist, producers in the food product industries apply promotion strategy mainly in the introduction and growth stages of product life cycle and the possibility of using promotion strategy in maturity or decline phase decreases because selecting promotion strategy in markets with high volatility or increasing operational cost is not economical. On the other hand, products diversity has a different pattern and with more diversity of products, the possibility of using promotion strategy in maturity and decline stages of product life cycle increases. It is recommended that if products diversity is high, producers use the appropriate promotion strategy at each stage of product life cycles and with identifying appropriate markets and products, profitability would increase in these phases. Companies should consider a sufficient budget for this subject. With increasing market volatility and operational costs, producers try to introduce and sell more products and increase the possibility of using marketing mix in the earlier stages of product life cycle. Diversity has a different pattern and perhaps the reason is that there is an interaction between the promotion strategy and diversity. Producers in the introduction and growth stages spend their costs for product introduction through advertising and replace more advertising instead of promotional strategies. However, in maturity and decline stages, the usage of promotional strategies increases because there are enough products in the market and producers try to sell their products by different promotional strategies. The promotional strategy will apply when consumers through advertising finds sufficient knowledge of the product, and then because of the promotion in buying this product, increase their purchases.
Conclusion: Because using appropriate marketing mix have a considerable effect on the profitability of companies, determining the appropriate marketing mix in each stage of product life cycle is essential. Promotion strategy has a substantial role in the profitability of food products companies and according to this research, the following recommendation might be important. At first, each producer should select an appropriate promotion strategy in each phase of product life cycle and then companies should devote adequate budget for research and strength the efficiencies of each marketing strategy such as promotion in each stage of product life cycle.

Keywords

Food industry Iran; Ordered Logit Model; Product life cycle; Promotion strategy

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