I

Product lifecycle
strategies

Name Bhargesh Ved
Batch XMBA 15 (Malad)
Ref No MAL2012XMBA15P008



Bhargesh Ved


ITM executive education center
[PRODUCT LIFECYCLE MANAGEMENT STRATEGIES]

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Contents
Introduction .............................................................................................................................................. 3
What is Product life cycle? ................................................................................................................ 3
Stages in a Product life cycle ..................................................................................................................... 4
Product development ....................................................................................................................... 4
Introduction ...................................................................................................................................... 5
Growth .............................................................................................................................................. 7
Maturity ............................................................................................................................................ 8
Decline .............................................................................................................................................. 9
Changing the marketing mix ..................................................................................................................... 9
Premiums and gifts ......................................................................................................................... 10
Discounts and coupons ................................................................................................................... 11
Entertaining advertising .................................................................................................................. 11
Analysis of Product Life Cycle Model ...................................................................................................... 12
Product life cycle strategies .................................................................................................................... 13
Conclusion ............................................................................................................................................... 14

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Introduction
What is Product life cycle?
A product is like any living organism and goes through a lifecycle. The lifecycle
refers to the products journey from its development through its final withdrawal.
The lifecycle is divided in phases and is often referred to Product Life Cycle (PLC)
The primary aim of any company that introduces a product in the market is to
derive profits from it. Managing Product life cycle helps the company know if they
should Introduce or withdraw a product from the market, its position compared
to competitors and the products chances to succeed or fail in the market.
The life cycle of a product consists of 5 major phases.
Product development
Introduction
Growth
Maturity
Decline
These phases are applicable to all products that are sold in the market. It could be
a daily use product like a new brand of biscuits or an electronic gadget like a
mobile phone or an automobile.
These phases need to be considered by the company before introducing any
product in the market since they dictate the products sales performance.
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Stages in a Product life cycle
The below chart shows a relationship between sales volumes of a product and the
time in its product life cycle.

Lets start looking at each phase of a product lifecycle in detail.
Product development
The product development phase begins when a company finds an idea on the
basis of which it wants to develop a product.
The ideas are evaluated on many criteria such as:
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Whether the product is fits with the objectives of a company
The strengths and weaknesses of a product.
Whether the product will work in the current and future market trends.
The volume and revenue potential of the product.
Can it be manufactured and marketed?
Rough estimates of costs, investment, sales and profit margins
If the product idea passes these evaluation criteria it is then turned over to the
engineers to make a prototype of a product which involves a lot of liaison work
between the engineers and the marketing, conceptualizing teams.
The product undergoes several changes involving huge investments in time
and money; it is then exposed to target customers via test markets. Those
products that survive the test market are then introduced into a real
marketplace. The products might go through several iterations of product
development before they are introduced in the real market. There can be
modifications and additions to the products features during the product
development phase. These modifications are bought about through user
surveys or consumer reactions gathered thru the test markets.
There are no profits at this stage and the money is spent only on developing a
product to ensure a product that is complete and saleable.
Example of Product development:
Television serials are show put through extensive conceptualization and
test viewing with selected audience to gauge audience reaction. Changes
are made to some elements in the script before the television serial can be
aired.
Food products go through taste tests to determine flavors that will be
more popular
Introduction
The initial stage of the product life cycle is all about building the demand for the
product with the consumer, and establishing the market for the product. The key
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emphasis will be on promoting the new product, as well as making production
more cost-effective and developing the right distribution channels to get the
product to market.
The type of advertising depends on the product. If the product is intended to
reach a mass audience, than an advertising campaign built around one theme
may be in order. If a product is specialized, or if a company's resources are
limited, than smaller advertising campaigns can be used that target very specific
audiences. As a product matures, the advertising budget associated with it will
most likely shrink since audiences are already aware of the product.
As per leading management author Philip Kotler, marketing departments can
choose from four strategies at the commercialization stage. The first is known as
"rapid skimming." The rapid refers to the speed with which the company
recovers its development costs on the productthe strategy calls for the new
product to be launched at a high price and high promotion level. High prices mean
high initial profits (provided the product is purchased at acceptable levels of
course), and high promotion means high market recognition. This works best
when the new product is unknown in the marketplace.
The opposite method, "slow skimming," entails releasing the product at high
price but with low promotion level. Again, the high price is designed to recover
costs quickly, while the low promotion level keeps new costs down. This works
best in a market that is made up of few major players or productsthe small
market means everyone already knows about the product when it is released.
The other two strategies involve low prices. The first is known as rapid
penetration and involves low price combined with high promotion. This works
best in large markets where competition is strong and consumers are price-
conscious. The second is called slow penetration, and involves low price and low
promotion. This would work in markets where price was an issue but the market
was well-defined.
Besides the above marketing techniques, sales promotion is another important
consideration when the product is in the introductory phase. According to Kotler
and Armstrong in Principles of Marketing, "Sales promotion consists of short-term
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incentives to encourage purchase or sales of a product or service. Whereas
advertising offers reasons to buy a product or service, sales promotion offers
reason to buy now." Promotions can include free samples, rebates, and coupons.
Growth
The growth phase occurs when a product has survived its introduction and is
beginning to be noticed in the marketplace. At this stage, a company can decide if
it wants to go for increased market share or increased profitability. This is the
boom time for any product. Production increases, leading to lower unit costs.
Sales momentum builds as advertising campaigns target mass media audiences
instead of specialized markets (only if the product is a mass market product
otherwise specialized markets will continue to be targeted). Competition grows as
awareness of the product builds. Minor changes are made as more feedback is
gathered or as new markets are targeted. The goal for any company is to stay in
this phase as long as possible.
It is possible that the product will not succeed at this stage and move immediately
past decline and straight to cancellation. That is a call the marketing staff has to
make. It needs to evaluate just what costs the company can bear and what the
product's chances for survival are. Tough choices need to be madesticking with
a losing product can be disastrous.
If the product is doing well and killing it is out of the question, then the marketing
department has other responsibilities. Instead of just building awareness of the
product, the goal is to build brand loyalty by adding first-time buyers and
retaining repeat buyers. Sales, discounts, and advertising all play an important
role in that process. For products that are well-established and further along in
the growth phase, marketing options include creating variations of the initial
product that appeal to additional audiences.
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Maturity
The market maturity stage occurs when the market has become saturated. Sales
growth rate tends to decrease. Efforts are focused on differentiation of the
product. Pricing may be lower because of increased competition. More internal
pressure is placed on reducing costs. Margins begin to shrink as marginal
competitors are forced out of the market. Distribution is maxed, and promotions
come into play as a way to encourage preference over competing products.
Market share becomes the main focus in the maturity stage. The market is well
established. There are numerous players, although some have started falling by
the wayside, and the competitive pressures are building. If your profits are steady
or increasing, regardless of where you are on the product life cycle, you are well
positioned. On the other hand, if profits are flat or decreasing, then it is time to
take action. Sales reach their peak, while pressure remains on reducing price. The
product must be defended against competitors and promoted to build stronger
retail relationships. Distribution is intensive, and profits start out high but can
drop quickly.
The company works to maximize profits while defending market share. Instead of
dealing with the president or merchandise manager, the salesperson is relegated
to dealing with the buyer. It is a relationship that the buyer controls and
constantly looks for more from the supplier. This takes a salesperson who is a
strong negotiator, flexible and persistent. It requires relationship-building and
problem-solving skills. Everyone looks for new markets, more models and ways to
increase usage or diversify. In the low-to-no-growth stage, there are two types of
players. Cash cows are what everyone hopes for, but few attain. They have a high
relative share in a low growth market, and they harvest the profits.
The other position is that of the dogs. They have low market share in a low-
growth market. It doesnt usually make sense to invest heavily to gain market
share unless there is some reason to believe that the market might once again
move into a growth stage. It might also have some strategic importance and
might be considered a guard dog. More than likely, it maybe something that
you want to divest if possible and reinvest where there is more opportunity.
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Decline
The decision for withdrawing a product seems to be a complex task and there a
lot of issues to be resolved before with decide to move it out of the market.
Dilemmas such as maintenance, spare part availability, service competitions
reaction in filling the market gap are some issues that increase the complexity of
the decision process to withdraw a product from the market. Often companies
retain a high price policy for the declining products that increase the profit margin
and gradually discourage the few remaining customers from buying it. Such an
example is telegraph submission over email.
Sometimes it is difficult for a company to conceptualize the decline signals of a
product. Usually a product decline is accompanied with a decline of market sales.
Its recognition is sometimes hard to be realized, since marketing departments are
usually too optimistic due to big product success coming from the maturity phase.
This is the time to start withdrawing variations of the product from the market
that are weak in their market position. This must be done carefully since it is not
often apparent which product variation brings in the revenues.
The prices must be kept competitive and promotion should be pulled back at a
level that will make the product presence visible and at the same time retain the
loyal customer. Distribution is narrowed. The basic channel is should be kept
efficient but alternative channels should be abandoned. For an example, a 0800
telephone line with shipment by a reliable delivery company, paid by the
customer is worth keeping.
While two strategies are commonly followed in the decline stage -- close up shop
or milk the cash cows -- there are a number of other good strategies that can
extend the lifecycle and increase the return on the original investment in the
product, brand or company.
Changing the marketing mix
Product sales can be substantially improved during both growth and maturity by
making changes to non-product components of the marketing mix. Most such
changes usually affect how the brand is promoted, but changes can also be made
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to the product's price and its distribution channels. We'll focus mainly on changes
to promotion.
Premiums and gifts
Premiums and gifts are excellent tools for inducing initial trial, brand switching,
and repeat purchases. These tools have been effectively employed by breakfast
cereal manufacturers for decades. When kids are little, like most kids, they insist
on buying some breakfast cereals just for the gifts or premiums that were offered.
Premiums and gifts, as well as coupons and other forms of sales promotion are
effectively employed to 'buy' market share from competitors. Sales promotions
can be so effective at generating incremental sales that some major consumer
goods producers, such as Procter and Gamble, have channeled more money into
this form of promotion than into advertising
Examples of premium and gifts:


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Discounts and coupons
Coupons are a type of sales promotion and can be even more effective than gifts
or premiums for generating added sales for brands . If you are a "coupon clipper,"
you are are considered to be in a" coupon-elastic" market segment. In contrast,
those people who generally don't redeem coupons are considered to be "coupon
inelastic." It's basically a waste of money for marketers to target this latter group.
Firms that rely heavily on couponing seek to determine who are these "coupon
elastic" and "coupon inelastic" customers. Marketers are very interested in
stretching their promotional dollars as far as possible. If coupon elastic customers
possess unique demographics and / or media graphics, marketers can find ways to
efficiently target their couponing dollars and avoid wasted coverage on the
inelastic segment of the market.
Example of discounts and coupons:



Entertaining advertising
Probably one of the best things that you can do at any stage of the product life
cycle is to have entertaining advertisements that attract and hold people's
attention. Many people watch TV for the entertaining commercials. In fact, based
on a recent survey of IPL viewers, a substantial proportion of viewers watch the
game to see the commercials, not the game itself! The logic advocated by many
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advertising executives is simply that, if consumers like the ads, they are more
likely to like the brand.
Example of Entertaining advertising:



Analysis of Product Life Cycle Model
There are some major product life cycle management techniques that can be
used to optimize a products revenues in respect to its position into a market and
its life cycle. These techniques are mainly marketing or management strategies
that are used by most companies worldwide and include the know-how of
product upgrade, replacement and termination. To comprehend these strategies
one must first make a theoretical analysis of the model of product life cycle.
Nevertheless, a product manager must know how to recognize which phase of its
life cycle is a product, regardless of the problems in the model discussed above.
To do that a good method is the one, suggested by Donald Clifford in 1965, which
follows.
Collection of information about the products behavior over at least a period of
3 5 years (information will include price, units sold, profit margins, return of
investment ROI, market share and value).
Analysis of competitor short-term strategies (analysis of new products emerging
into the market and competitor announced plans about production increase,
plant upgrade and product promotion).
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Analysis of number of competitors in respect of market share.
Collection of information of the life cycle of similar products that will help to
estimate the life cycle of a new product.
Estimation of sales volume for 3 5 years from product launch.
Estimation of the total costs compared to the total sales for 3 5 years after
product launch (development, production, promotion costs). The estimate should
be in the range of 4:1 in the beginning to 7:1 at the stage where the product
reaches maturity.

Product life cycle strategies
Each new product is made to better satisfy the needs of a previous one. If a
company concentrates only on its own brand life cycle, it will miss the total
picture of the product life cycle which is going on. Companies should decide when
and what kind of product demand should be invested in. This is best done by
having a product life cycle strategy. Below are the strategies that are employed by
organizations to help them in their PLC decisions.
Development Introduction Growth Maturity Decline
S
t
r
a
t
e
g
i
c

G
o
a
l

Develop on a
product idea,
test its
feasibility and
prototyping
Introduce a
product
Maintain and
increase market
position
Defend market
position from
competitors
and improve
the product
Derive
remaining
profits from
the product.
C
o
m
p
e
t
i
t
i
o
n

Almost non
existent
Early entry of
aggressive
competitors in
the market
Price and
distribution
channel
pressure
Establishment
of a
competitive
environment
Some
competitors
are already
withdrawing
from the
market
P
r
o
d
u
c
t

Variations
based on initial
response to
prototype
Introduction of
initial product
Improvement / upgrade of
product
Non profitable
variations are
withdrawn
from market.
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Development Introduction Growth Maturity Decline
P
r
i
c
e

G
o
a
l
High sales to
middle men
Aggressive price
policy for sales
increase
Re-estimation
of price policy
Defensive price
policy in line
with
competition
Maintain price
level for small
profit
P
r
o
m
o
t
i
o
n

G
o
a
l

Creation of
Public
awareness
Reinforcement
of product
awareness and
preference
Reinforcement
of relationship
with middle
men
Maintain
middle men
loyalty
Gradual
Decrease
D
i
s
t
r
i
b
u
t
i
o
n

G
o
a
l

Exclusive and
selective
distribution
through certain
distribution
channels and
creation of high
profit margins
for middle men
General and
reinforced
distribution
through all
distribution
channels
available
General and
reinforced
distribution
with good
supply to
middle men but
low margins of
profit for them
General and
reinforced
distribution
with good
supply to the
middle men but
with low
margins of
profit for them.
Gradual
withdrawal
from most
channels of
distribution
xcept those
used in the
development
phase.

Conclusion
Without an understanding of the product lifecycle, marketers are will be unable
to make long-term strategic decisions. Using the product lifecycle as a tool for
evaluating your current business situation facilitates a longer-term perspective
and can point out options for future strategic decisions.
Managing a product must not be taken as a part time job or function. It requires
continuous monitoring and review. Many companies now are taking product
management seriously. There are dedicated courses for it in educational
institutions. The product manager as the person that will make a new product to
work, needs to understand and have a strong grasp of the needs of the customer
/ market and therefore make the right decisions on market introduction, product
life cycle and product cannibalization. To achieve the above he must balance the
needs of the customers with the companys capabilities. Also he needs to balance
product goals with company objectives. The way a products success is measured
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depends on where the product is in its life cycle. So the product manager must
understand the strategic company direction and translate that into product
strategy and product life cycle position.

References
Barringer P. H. Why you need practical reliability details to define life cycle costs
for your products and competitors products, Barringer & Associates, on-line
http://www.barringer1.com

Genesis Strategies Product Life Cycle Management, on-line
http://www.genesisstrategies.com

Hata T. Sakamoto H. Kato S. Kimura F. Suzuki H. Feasibility Study for Rapid
Product Life Cycle, University of Tokyo, on-line
http://www.cim.pe.u-tokyo.ac.jp

Jensch J. Strategic Marketing and the Product Life Cycle, 1999,
http://www.questteam.com

Lightfoot W. Product Life Cycle Stages,
http://www.marketinginc.com

McGrath M. Product Strategy of High-Technology Companies, McGraw-Hill, 2000.
McNamara C. Basic Overview of Organizational Life Cycles
http://www.mapnp.org/library/org_thry/org_cycl.htm

Resources Locational Implications of the Product Cycle,
http://www.faculty.washington.edu/krumme/systems/pcycle.html

Smith J. C. Product Life Cycle,
http://www.accessnorthga.com


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