PRODUCT LIFE CYCLE

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Group Members: Mustaqeem Arif M.Faizan Ahmed Teacher: Nadir Ali Kolachi

TABLE OF CONTENTS

1. Introduction of Product Life Cycle 2. Stages of Product Life Cycle • • • • • Product Development Introduction Stage Growth Stage Maturity Stage Decline Stage

3. Changing the Marketing Mix • • • Premium and Gifts Coupon Entertaining Advertising

4. Analysis of Product Life Cycle Model 5. Strategies of Product Life Cycle 6. Product Life Cycle Phases 7. Some Other Examples 8. Conclusion 9. References

1. Introduction of Product Life Cycle:
All products possess ‘life cycles.’ A product's life cycle, abbreviated PLC, the life cycle refers to the period from the product’s first launch into the market until its final withdrawal and it is split up in phases. Since an increase in profits is the major goal of a company that introduces a product into a market, the product’s life cycle management is very important. The understanding of a product’s life cycle, can help a company to understand and realize when it is time to introduce and withdraw a product from a market, its position in the market compared to competitors, and the product’s success or failure. The product’s life cycle - period usually consists of five major steps : Product Development, Introduction Stage, Growth Stage, Maturity Stage and finally Decline Stage. These phases exist and are applicable to all products or services from a certain make of automobile to a multimillion-dollar lithography tool to a one-cent capacitor. These phases can be split up into smaller ones depending on the product and must be considered when a new product is to be introduced into a market since they dictate the product’s sales performance.

2. Stages of Product Life Cycle:

Product Development:

Product development phase begins when a company finds and develops a new product idea. This involves translating various pieces of information and incorporating them into a new product. A product is usually undergoing several changes involving a lot of money and time during development, before it is exposed to target customers via test markets. Those products that survive the test market are then introduced into a real marketplace and the introduction phase of the product begins. We now make the product do something it did not do in the past. This is a more significant product modification. Examples might be model changes in cars where significant components like air conditioning or theft protection devices have been added. These are important additional benefits that have been added to the product. Personal computers are undergoing rapid advances in which significant new functions (benefits) are constantly added. Similar advances are occurring in software development.

Introduction Stage:

The introduction phase of a product includes the product launch with its requirements to getting it launch in such a way so that it will have maximum impact at the moment of sale. This period can be described as a money sinkhole. Large expenditure on promotion and advertising is common, and quick but costly service requirements are introduced. A company must be prepared to spend a lot of money and get only a small proportion of that back. In this phase distribution arrangements are introduced. Having the product in every counter is very important and is regarded as an impossible challenge. Some companies avoid this stress by Hiring external contractors or outsourcing the entire distribution arrangement. This has the benefit of testing an important marketing tool such as outsourcing The introduction stage has more recently been termed the product development process. Rapid change, increasing competition, complexity, organizational stress and high customer expectations have combined to support a process for reducing product development time. With time as a critical factor in today’s market, speed to market can create a competitive advantage. Instead of being viewed as a single stage, the introductory stage has become the product development process with as many as seven different parts.. Idea generation is the first step, with input gathered from customers, users, market research, outside inventors, competitors, other markets and employees. The mortality rate for ideas is extremely high. It takes a huge amount of input in the idea generation phase to ensure a flow of new product ideas that actually make it to the commercial start-up phase. Each new idea goes through an idea evaluation or screening process. This can range from a very informal review by one or two people to a more formal review by a new product development team. It usually involves determining whether the product fits with the objectives of the company. The strengths and weaknesses of the product are evaluated. The idea is reviewed in light of current or expected market trends. Eventually the product’s volume and revenue potential are estimated. An idea that survives preliminary evaluation will be passed along for a technical and market evaluation. Can it be produced and marketed? Does the concept make sense to potential customers? Rough estimates are generated for costs, required investment, sales and profit margin. The fall-out in these first two stages is tremendous. Ideas that make it through the first two evaluations are usually turned over to the company’s engineers for product and process design work. This involves a great deal of liaison work between marketing and engineering with a lot of input from prospective customers. If the design looks good and the processes make sense, the idea moves into the early development stage. Here prototypes are developed, marketing plans are undertaken and a business plan is developed. Frequently prototypes are shown or tested by prospective customers. Test markets are conducted, and the plans are revised as needed. Once completed, the prototypes and plans are reviewed again against expected objectives. If everything is on track, the new product moves into final development. Financial estimates are reviewed against the objectives. The tooling begins, and advertising and promotion programs are finalized and initiated.

A good example of such a launch is the launch of “Windows XP” by Microsoft Corporation.

Windows XP is a line of proprietary operating systems developed by Microsoft for use on general-purpose computer
systems, including home and business desktops, notebook computers, and media centers. The letters "XP" stand for eXPerience. Windows XP is the successor to both Windows 2000 and Windows Me, and is the first consumer-oriented operating system produced by Microsoft to be built on the Windows NT kernel and architecture. Windows XP was first released on October 25, 2001, and over 400 million copies are in use, according to a January 2006 estimate by an IDC analyst.[3] It is succeeded by Windows Vista, which was released to volume license customers on November 8, 2006, and worldwide to the general public on January 30, 2007.

The most common editions of the operating system are Windows XP Home Edition, which is targeted at home users, and is also targeted at power users and business clients. Windows XP Media Center Edition has additional multimedia features enhancing the ability to record and watch TV shows, view DVD movies, and listen to music. -Videophones certainly are in the introductory stage of the product life cycle. Limited numbers of consumers can afford this technology. As prices come down for videophones, and as consumers recognize the relative advantage of this form of communication over existing communication products, sales may begin to grow and the videophone should transition into its growth stage.

Growth Stage:

The growth stage is where the rising tide of consumer interest lifts the boats of all participants. If there were no competitors in the introduction stage, they are now a factor. Consequently, additional product features and support may be needed. Prices are steady to declining, as every participant in the industry is focused on market share and becoming the low-cost producer. Costs are declining with increasing volumes, and profits are improving. Distribution is increasing as well. Competitors are attracted to enter the market. Usually this is the stage that requires the heaviest investment in marketing to educate, build share and support sales activity. While a marketing plan was developed in the introduction stage, adjustments to the marketing mix are usually required in the growth stage. The marketing mix includes the four Ps: product, price, place (distribution) and promotion. During the growth stage place becomes a hot bed of activity. Frequently this involves – or will in the maturity stage – changes to product, price and promotion. The product may need modifications for new markets with different packaging, warranty and service requirements. Price may come into play not just as list price but in discounts, financing, terms and other options. Promotion activities such as advertising and public relations will change as new channels of distribution are entered and need to be supported.

As additional competitors enter the market, two things happen that begin to slow the increase in profits as maturity is approached. First, as the number of competitors increases, so does the intensity of competitive interaction. Coping with increased competition generally translates into increased spending on strategies aimed at generating selective demand. Selective demand is demand for the firm’s brand. This means that firms, in their battle for market share, will spend larger and larger sums to "buy market share" from competitors. Moreover, increased competition naturally drives prices down. Second, as maturity approaches, the growth in sales naturally slows. This slowing is primarily a result of the declining pool of new adopters for the product category. This transition to market saturation further intensifies competitive interactions and generates additional price reductions. This, of course, ultimately translates into even greater spending as firms fight more intensely for market share.

Wall’s Ice Cream growth was an outstanding 40%, achieved through an exciting stream of innovations, aggressive market penetration, 360 Degree Communication (TV Commercials, Outdoor, Print and Visibility activation) and constant attention to consumer affordability. During the year, 25 new products were launched; some examples are: Kulfi, Moo, Super Twin, Magnum Caramel & Nuts Bar, Cornetto Super relaunch, In Home premium range, Cornetto Junior, Magnum premium range and Donut.

Managing the growth stage is essential. Companies sometimes are consuming much more effort into the production process, overestimating their market position. Accurate estimations in forecasting customer needs will provide essential input into production planning process. It is pointless to increase customer expectations and product demand without having arranged for relative production capacity. A company must not make the mistake of over committing. The company must show all the products offerings and try to differentiate them from the competitors’ ones. A frequent modification process of the product is an effective policy to discourage competitors from gaining market share by copying or offering similar products. Other barriers are licenses and copyrights, product complexity and low availability of product components. Promotion and advertising continues, but not in the extent that was in the introductory Promotion and advertising continues, but not in the extent that was in the introductory phase and it is oriented to the task of market leadership and not in raising product awareness. A good practice is the use of external promotional contractors. This period is the time to develop efficiencies and improve product availability and service. Cost efficiency and time-to-market and pricing and discount policy are major factors in gaining customer confidence. Good coverage in all marketplaces is worthwhile goal throughout the growth phase.

Maturity Stage:

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 lowgrowth 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 doesn’t 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 may be something that you want to divest if possible and reinvest where there is more opportunity. Lipton continued to be the star brand, carrying the premium image that it has established over many years. With strong on-ground activation and successful consumer promotions the brand had double digit growth. Lipton tea bags are the market leader.

During this period new brands are introduced even when they compete with the company’s existing product and model changes are more frequent (product, brand, and model). This is the time to extend the product’s life. Pricing and discount policies are often changed in relation to the competition policies i.e. pricing moves up and down accordingly with the competitors one and sales and coupons are introduced in the case of consumer products. Promotion and advertising relocates from the scope of getting new customers, to the scope of product differentiation in terms of quality and reliability. The battle of distribution continues using multi distribution. A successful product maturity phase is extended beyond anyone’s timely expectations. A good example of this is “Tide” washing powder, which has grown old, and it is still growing.

Decline Stage:

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” loyal remaining customers from buying it. Such an example is telegraph submission over facsimile or email. Dr. M. Avlonitis from the Economic University consideration all the attributes and the subsequences of product withdrawal process. 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” 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.

Declining sales define the decline stage. Profits are also declining. Costs will remain steady or decline. Now is the time to prune unprofitable distribution. Advertising should be reduced unless there is some hope of repositioning the product in an effort to prolong its life and the potential for profits. At this point your product has become a commodity. The salesperson ends up dealing with a re-buyer and often is responding to requests for quotes. The type of salesperson needed is a harvester, someone who can handle quotations, is good at prospecting, has good organization skills and is well disciplined. The buyer owns the relationship. 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. Some examples of decline products are: BioAmla and Insta Excite.

3. 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 to the product's price and its distribution channels. We'll focus mainly on changes to promotion.

Premiums & 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 my kids were little, like most kids, they insisted that we buy 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.

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.

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 Super Bowl viewers, a substantial proportion of viewers watch the game to see the commercials, not the game itself! The logic advocated by many advertising executives is simply that, if consumers like the ads, they are more likely to like the brand!

Product Life Cycle Decline Strategies:
Strategy New Uses New Markets Variations Extend Technology Re-Packaging Use Arm & Hammer produced baking soda for many years, extending the life of the product by turning it into a deodorizer. Home Depot and Lowe’s expanded business by providing do-it-yourself training on projects within their stores. Other examples might include overseas markets. Coca-Cola took an old product and added variations, including Cherry Coke, Vanilla Coke and Diet Coke. Jell-o utilized its knowledge about raw gelatin to create puddings, colored gelatins and snacks. A common practice in retail markets is introducing new labels, different container types and different sizes. Coca-Cola went from 6-oz. glass bottles to 8-oz. cans to plastic liter bottles,

all helping increase consumption. Re-Branding Use More Costly but may be well worth the expense. We saw this with the new consulting company Accenture. Other examples include Datsun/Nissan and GTE/Verizon. Used by many companies with consumable products, as in Miller Time suggesting different times when drinking its product is appropriate. Oldsmobile was perceived as an older person’s car until GM initiated the “This isn’t your father's Oldsmobile” campaign. This was an attempt to reposition a brand in the decline stage of the life cycle. Not all re-positioning strategies work. Attempts to capitalize on the association between strong brands and products. A variation is licensing a name or brand for use on another product. An example might be the Eddie Bauer Explorer or the L.L. Bean Subaru. Price can always influence sales, as in rebates and zero interest from automakers

Re-Position

Co-Brand Price

4. Analysis of Product Life Cycle Model:
There are some major product life cycle management techniques that can be used to optimize a product’s 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 product’s 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). • 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.

5. Strategies of Product Life Cycle:

6. Product Life Cycle Phases:

7. Some Other Examples of Product Life Cycle:
Set out below are some suggested examples of products that are currently at different stages of the product life-cycle:

INTRODUCTION
Third generation mobile phones E-conferencing All-in-one racing skin-suits iris-based personal identity cards

GROWTH
Portable DVD Players Email Breathable synthetic fabrics Smart cards

MATURITY
Personal Computers Faxes Cotton t-shirts Credit cards

DECLINE
Typewriters Handwritten letters Shell Suits Cheque books

8. Conclusion:
Without an understanding of the product lifecycle, marketers are flying blind. Strategic decisions made under these circumstances tend to be short-term and not much more than guesses. 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. Having said that, it is not clear why many companies do not consider product management as a discipline. The answer lies in the fact that product management is not taught as engineering or accounting i.e. does not have formalized training. 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 company’s capabilities. Also he needs to balance product goals with company objectives. The way a product’s success is measured 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.

9. References:
Aaker D. Strategic Market Management, Willey, 1995. Avlonitis G. Strategic Industrial Marketing, Stanoulis, 2001. 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 Business Studies “The product Life Cycle”, on-line <http://www.learn.co.uk> Clifford D. “Managing the Product Life Cycle”, European Business Journal, July 1969. Cox W. E. “Product Life Cycles as Marketing Models”, The Journal of Business, p.p. 375-384, October 1967. Daft L. Organizational Theory And Design, West Publishing, St Paul Minnesota, 1992. Drummond G. Ensor J. Strategic Marketing: Planning and Control, Butterworth – Heinemann, 2001. 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, on-line http://www.questteam.com Life Cycle Strategies Inc. “Three Fundamentals for Effective Product Management: A Practical Guide for Improving Product Success”, 1999 Lightfoot W. “Product Life Cycle Stages”, on-line <http://www.marketinginc.com> McGrath M. Product Strategy of High-Technology Companies, McGraw-Hill, 2000. McNamara C. “Basic Overview of Organizational Life Cycles”, on-line

http://www.mapnp.org/library/org_thry/org_cycl.htm Norman D. “The life cycle of a technology: Why it is so difficult for large companies to innovate”, 1998, on-line http://www.jnd.org Resources “Locational Implications of the Product Cycle”, on-line http://www.faculty.washington.edu/krumme/systems/pcycle.html Smith J. C. “Product Life Cycle”, on-line <http://www.accessnorthga.com> Twiss B. C. “Forecasting Market Size and Market Growth Rates for New Products”,

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