Research Paper

SYMBIOSIS INSTITUTE OF MANAGEMENT

STUDIES

ASSIGNMENT ON

Is Creating Brand Equity for Products with Short

PLC (Product Life Cycle) a challenge?

Submitted to: Submitted By:

Prof VV Ramasastry SNEH SAGRIKA
1B- 30

Date of submission: 15 FEBRUARY, 2010

Date at which submitted: 15 FEBRUARY, 2010

Marks Obtained:

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Signature:

Is Creating Brand Equity for Products with Short PLC (Product Life
Cycle) a challenge?

Product Life Cycle (PLC) provides us with the various stages that a product
undergoes and this information can be used to formulate strategies on how to position
and differentiate a product. Proper planning goes a long way in creating Brand
Equity, which is the added value endowed to products and services. Products have
evolved, but in some cases they have shorter life cycle compared to the earlier times,
especially technological products like cell phones and home computers. Apparently,
this has become a major concern for companies as the PLC of products are becoming
shorter with each day. So they are faced with multiple challenges to sustain the
product in the market and create brand equity.

The product lifecycle shows the period of time over which customers will want to buy
a product. It goes through different stages depending on the level of sales. ASOS is
the UK's market leader in online fashion retailing. It has more than 22,000 product
items on its website and introduces up to 1,000 new ones each week. ASOS has to be
aware of the product lifecycle to ensure that the products it is offering continue to
meet the needs of its customers. ASOS introduces new styles all the time because
customers want the most up-to-date fashions. By understanding the product lifecycle
ASOS can determine how long products are likely to continue to sell for and can plan
ahead for future ranges.

Businesses can use extension strategies to prolong the lifecycle of its products.
Following a trend started by Apple, mobile phone suppliers now provide apps (short
for applications) to extend the possible lifecycle of its products. Apps are mini-
programs which can be downloaded by the mobile phone user, often for free. Last
week, Starbucks released an app which shows users their nearest outlet and the
nutritional values of its drinks. U2 has also introduced an app. The U2 Mobile Album
app provides the group's latest news. (The Sunday Times 27th September 2009).

By providing these additional features, more customers may be encouraged to buy the
handsets that support them. Some products will have relatively short product
lifecycles whereas other products may continue to sell for years. As ASOS is in the
fashion industry, the lifecycles of its ranges will be limited; although there are
techniques it can use extend them, for example, using its newsletter facility to remind
customers about certain styles. Technology also changes rapidly and the mobile phone
industry is no exception. The introduction of apps means that the same handsets will
continue to sell, thereby extending the product lifecycle, but the users can personalise
them with their own favourites.

The introduction part covers what is the rationale behind launching products with
short PLC. And then it also gives us the advantages of creating Brand Equity. Taking

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cell phones as an example of products with short PLC, a case study on Nokia has been
included. The case study describes the life cycle and the various stages that a cell

phone goes through and how is Nokia dealing with the 4 Ps of marketing.

After that, it includes some of the challenges faced by companies like the limited
time-frame, competition in the market, changing consumer preferences and
uncertainty.

Lastly, some recommendations have been made to tackle challenges like how deal to
with the limited time factor taking Hero Honda CBZ as an example. Why is it
important to know competition and what are the ways to deal with it? It also discusses
the possible pricing strategies that can be adopted by the companies. And finally, it
answers how to deal with the changing consumer preferences.

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NTRODUCTION:

Product Life Cycle

Product Life Cycle, commonly referred to as PLC, can be defined as the various
stages a product undergoes during its lifetime, with each stage giving an insight into
the product and market development so that the product can be successful in a very
holistic way.

The PLC curve is bell-shaped and is divided into four stages: -

According to Philip Kotler, a company's positioning and differentiation strategy must

change as the product, market and competitors change over the PLC. This is the basic
idea as to why one should know about the product life cycle.

The rationale behind companies launching products with short PLC can be attributed
to the following reasons: -

Fast paced changes in technology and demands always keep a company on the move.
A company, therefore, has to upgrade its product even with a slight change or a shift
in consumer's demands.

A consumer always wants to be in style irrespective of the stature he/she enjoys in the
society. This leads to a stage where consumer's tastes and preferences change very
often and are governed by fashion and style.

To cater to such segment of the market, companies have to come up with products
with short PLC. For example - mobile phones, clothings and accessories.

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Brand Equity

According to Philip Kotler, Brand Equity is defined as the added value endowed to
products and services.

The company develops brand equity, however, it is shaped by consumer's perception

of the product, which in turn is governed by factors like brand awareness / knowledge.
Hence, it becomes vital and challenging for the company to ensure the development
of right kind of brand awareness and knowledge of the product and services.

Advantages of brand equity as given by Kotler are as follows: -

1. Improved perceptions of product performance

2. Greater loyalty, due to which consumers can pay 20-25% more for the product
3. Less vulnerability to competitive marketing actions
4. Less vulnerability to marketing crises
5. Larger margins
6. More inelastic consumer response to price increases
7. More elastic consumer response to price decreases
8. Greater trade cooperation and support
9. Increased marketing communications effectiveness
10. Possible licensing opportunities
11. Additional brand extension opportunities

Case Study on Nokia

Life Cycle of Mobile Phones

The life cycle of mobile commences with Material Extraction. A mobile phone is
made up of 40% metal, 40% plastic and 20% ceramics and trace materials. Material
Processing then follows material extraction.

The nine basic components of cell phones viz. - Circuit Board, LCD, Battery, Keypad,
Antenna, Microphone, Speaker, Plastic and Accessories are then obtained in the
manufacturing stage of the mobile PLC.

Once the product passes the manufacturing stage, it is then Packed and Transported
via different distribution channels. The mobile then sees the light of the Useful Life
stage of the mobile PLC, wherein consumer can keep the same number even after
changing the service provider. To extend the useful life, it is suggested to use the
same company for continuing the services. Finally, the cell meets the End of Life
stage.

Nokia as a Company

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Nokia, a Finland-based company, is the largest manufacturer of mobile and mobile

devices. Nokia was established in 1865 as a wood pulp mill. By 1990s, the company
dabbled into mobile phone industry, and today it has made its presence felt across the
globe so much so that it is the sixth most valued brand of the world.

Though mobile phones have short PLC, owing to changing consumer demands and
fast-paced technological developments, Nokia has been successful in capitalizing on
the growth and maturity stages of PLC to the best and creating a niche for itself.

With 'Think Global and Act Local' being the punch-line for every company, even
Nokia has not been far behind in incorporating it in its strategy.

In India where cell phones are viewed as mere handy device for easy communication
and access, it was difficult for Nokia to establish its high technology mobiles in the
mass market and change the mindset of the masses. To surmount these kinds of
problems and influence the mindset of the people, Nokia came up with advertisement
for its 6600 model, where it conveyed that mobiles are not just meant for talking over
but it is meant for more than that. Also with competing brands like Motorola pricing
its products at lower prices, it was expected that Motorola would dominate in the
Indian market.

However, Nokia introduced and launched its mobiles for all segments of the market
and catered well to the demands of consumer varying from a basic mobile phone
model to voice-centric, colored-screen, camera-fitted, MP3, blue-tooth, infra-red and
multi-media enabled cell phones.

Lets have a sneak peak into the marketing mix of Nokia given by the 4 Ps.

1. Product

Nokia has been very accommodating in its approach towards the needs and demands
of its consumers. It offers multifarious mobile phones ranging from basic models like
1100, 2100 to colored screen model like 3230 to high-tech mobiles that include
features like camera, MP3 player, blue-tooth and infra-red technology like 6600, 7610
to name a few.

Nokia has been considerate to an extent of paying attention to the needs of the
disabled people and have included special features like text to speech software for
blind customers. It also offers suitable wireless devices to be used with hearing aids
and provides features like adjustable fonts for low vision for elderly people.

Hence, Nokia has designed its product with all the styles and features included,
keeping the consumers tastes and preferences and changes pertaining to it in mind.

2. Promotion

Nokia has set up some 'Concept Stores' in Delhi and Bangalore for the customers to
experiment with application downloads and product experience. In a bid to attract
customers, Nokia has opened some flagship stores in November 2005 in Moscow,

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where in people can purchase and set up Nokia products and experiment with new
ideas and technology at kiosks.

3. Price

Nokia follows the skimming price strategy for its products. It introduces its mobiles at
higher prices and then goes onto reduce the prices as the product moves from one
stage of the PLC to another.

4. Place (Distribution)

Nokia has the best distribution network and retail execution, which is evident from the
success of Nokia Priority Dealers across 255+ towns offering not only the mobile
phones as a product but a buying experience to the customers.

Nokia follows the chain of distribution in the following way: -

Nokia India - National Distributors - Redistribution Stockist - Micro

Distributors - Retail Outlets – Consumers

Some more examples of products with short PLC

Health Foods

Diet foods have a short PLC because they are generally come into existence because
of the popularity of an individual who propagates diet food.

For example, diet food like Energy Drinks & Blueberry D’Lite yogurt parfait which is
at present popular in New York.

Challenges:

• Diet food does not appeal to the sense of taste of an individual

• Lack of immediate results leads to loss in confidence of the product

Events

Gala events, theme parties hosted by celebrities and media shows are short PLC
products in perspective of the event organizers.

Challenges:

• Events are expensive, so they lack consistency

• Events are at times just an outcome of snob factor

Remix Albums

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Albums by DJs and remixes of old songs are not examples of great music or lyrics.
They just follow the present trend that is popular among the youth who desire variety
and change.

Challenges:

• Lack of quality and variety

Apparels:

Blue jeans are products with infinite maturity stage. But apparels like Flare or low rise
Jeans, Chinese collars that are popularized by a particular celebrity or soaps are
classic examples of products with short PLC.

Challenges:

• Frequent arrival of new products that is better than the previous product.

• Disappearance of motivating factors that induce buying behavior

Accessories:

They are comparatively cheap and help in portraying a particular image, hence they
attain instant popularity. “Shakira” belts, “Ghulam” (Amir Khan) rings, tongue are a
few examples of examples accessories fad.

Challenges:

• Fatigue Factor due to frequent usage

• Lack of reinforcements that induce buying decisions

Celebrity:

Ordinary individuals who become over night stars due to freak incidents have a short
PLC. For example celebrities who become famous due to a particular movie, soap etc,
boy/girl bands.

Challenges:

• Lack of consistent public appeal

• Lack of strong deliverance

Cartoons:

Cartoons that are inspired due to a particular product or person have short PLC. For

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example Glow friend cartoons that were inspired by the glow friend series of toys,
Britney spear & Dubya Man cartoons that were inspired by celebrities.

Challenges:

• Short attention span of children

• Diminishing popularity of the product/celebrity that inspired the cartoons

TV Channels & Shows:

Amidst the clutter of TV channels, a new channel that gains immediate popularity due
to the novelty factor. But due to lack of content and differentiation factor, the
channels have short PLC. For example DD Gold, Sab TV and Regional channels.
Reality T.V shows like American Idol are latest fads.

Challenges:

• Lack of Innovation and differentiation of the product

Chick-Lit Books:

Literary works that caters to the whims and fancies of the present readers and doesn’t
aim to be preserved for prosperity like works of Shakespeare or Dan Brown.

Challenges:

• Lack of Quality and caters to small and specific market segments

Brand Extensions:

Brand extension uses the equity/goodwill of an existing brand and uses` it in another

context. But the Brand extensions are mainly a fad like the LUX shampoo which was
an example of a short PLC product.

Challenges:

• Lose the tight focus of the existing brand by introducing new conflicting/

confusing attributes.

Software & Web:

Technology has never been static and now more than before technology is at steeply

increasing curve. Softwares developed to solve Y2K problems, Tivo / PVR's

(Personal Video Recorders) had short PLC.

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Challenges:

• Utility of the product is for a short period and a specific cause

Computer/Video Games:

Games, which are based on World Cup and Movie themes, indulge the short term
needs of the die-hard supporters. For example, games like Texas hold 'em Poker &
play stations.

Challenges:

• Caters to a specific need and a small segment of the market

The Challenges that the Companies Face

 Time Factor - The very fact that products now have short product life cycle is
itself a challenge for companies. The products get short time to establish them in the
market or, in short, create Brand Equity. The problem is that by the time a product is
launched in the market, the competitors already have a similar variant ready, thereby,
shortening the life of the original product. The challenge, therefore, is to sustain the
product in the market.

 Changing Consumer Preferences - The consumer today, is inundated with

alternatives as compared to the earlier times. Take the example of automobile industry
when only Fiat and Ambassador were available. There was little or no choice and the
consumer had to be satisfied with whatever was on offer. But now the consumer can
choose from a number of brands and the brand itself has a number of products.

Also, the consumer possesses a superior level of knowledge and information about a
particular product before the purchase decision is made. Thanks to the Internet which
provides the consumer with every bit of information. In addition to this, blogging has
become a culture today. The consumer can not only collect information from his own
contacts but also ask other people or read other people's view on a particular product.
The challenge for the companies is to keep up with the change and persuade the
consumer by successful differentiation. The consumer's preference is also guided by
the word-of-mouth publicity which, in contemporary times, is believed to be a crucial
publicity tool. The test for a company is to initiate a positive word-of-mouth publicity.

• Competition - A lot has been said and written about the consumer being the
king and their role in product development. But in due course, the company
has to face competition from brands first and then the products that represent
the brand. It is not only important to know the consumer, but it is equally
important to know about the competitors as well. And then design strategies,
target segments, define objectives and sense the reaction pattern; all of which
should be in tune with the short nature of the product life. Another important
aspect would be to gauge the strengths and weaknesses of the competitors.
• Uncertainty - This can have three basic issues: -

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The first priority would be to find out if the customer is willing to pay the price for
the product. Since the product would have a short life cycle, it is essential to have an
effective pricing strategy in place.

Then it is very difficult to predict whether the product will be successful or not.
Whether the product would be able to add to the existing Brand Equity of the
company or capitalize on it and build it's unique brand equity.

Another issue with products having short product life cycle is that the retailer and the
whole-saler is always in dilemma of how much to stock. In case the product fails, then
the remaining stock would be a waste, and if the stock is not sufficient enough, then
there is a chance of creating unsatisfied customers, which in turn would damage the
existing brand equity of the company. Therefore, the challenge is to strike a balance
between sufficient and insufficient stock.

RECOMMENDATIONS

• Create Hype & Curiosity - Since the product has a short life cycle, a good
strategy would be to create a lot of hype and curiosity in the mind of the
consumer before the launch of the product. In a way, it extends the life of the
product as the consumers begin to think and react even before the product is
launched. Lets look at Hero Honda CBZ motorbike.

CBZ was a hugely successful product when it was launched and it was able to
sustain itself in the market until Bajaj Pulsar took over. Now, Hero Honda is about
to launch it's new product and it's capitalizing on CBZ's success by using the tagline -
'From the makers of CBZ', thereby, creating hype and setting consumer expectation.
This strategy works well before the launch. Whether the expectation is met or not
remains to be seen.

• Another example would be that of movies. Movies have been particularly

affected by this short product life cycle as most of them recover cost in the
first week of release, make profit in the next few days, and then fade away.
The trailers that are shown on television before the release are nothing but
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creating hype and curiosity in the mind of the consumer. If the companies are
successfully able to do this then they should also allow pre-booking facilities.
Before Tata Indica was launched, it had such a large number of pre-bookings
that it virtually failed to meet the demand. So a company must not only create
demand, it should also be able to satisfy the demand.
• Understanding Market Competition - The companies must have an
insightful understanding of competition in the market. This understanding
goes a long way in creating brand equity. The first thing that a company must
look at is to have it's strategies in place. For example - form a strategic group
and give them the constraints to work on. The constraints could be the type of
product, expected life cycle and the price at which the company is planning to
launch it in the market. Analyzing strengths and weaknesses is a reactive
approach in product development. But it helps in targeting the market. For
example -

X - has excellent features but poor availability and service

Y - is overall good with excellent service

Z - is less known but is an average product

Now, a new entrant can target Z on availability and service and overall target Z but it
should never target Y.

Apart from all this, the company can also use the traditional research tools in
analyzing markets and estimating the customers association with a particular brand.
The idea is to collect as much information as possible before the development of the
product.

Pricing Strategies - The customer ultimately has to pay the price and purchase the
product. The price of a product has to be precisely determined. Too high prices
would result in consumers not buying the product, and too low prices would not be
profitable depending on the type of product. In case of products with short product
life cycle: -

1. Sell the product right away with minimum down-payment and recover the money
in future in form of equated monthly instalments. For example, in case of products
with high price, it is difficult for the customers to pay the price at one go, so they pay
some amount of money initially, and then rest of the amount is paid in instalments. In
fact this strategy has brought a revolution of sorts in recent times with the consumers
able to make high and multiple purchases.

2. It is believed that the consumer makes the maximum purchase in festive seasons.
So a product can be made attractive by combining additional gifts, or companies can
have a combination of products for sale. This type of strategy is especially useful
when the consumer wants to make multiple purchases.

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3. Offer discounts on early purchases or introduction stage. And just as the product
enters the growth stage and demand increases, increase the price. But this is not
followed by the companies today, because of intense competition. Instead, this is used
in the test phase to determine how much price the consumer would pay for the
product.

 Brand equity can also be created by merchandising - Though it is more of a

concept extension, but sometimes it works well for the product. Companies should
take a cue from Pantaloons which has perfected this art.

 Meet the consumer's expectations and empower the consumer - Like we saw
earlier, it's very easy for brands to create expectations but most of them fail to meet
the standard of expectation set by them. Now that the marketing philosophy
emphasizes so much on the consumer, it is important for the companies to set the right
kind of expectation. The next alternative would be to involve the consumer in product
development process. Not only involve but also inform, engage and energize them in
the process of building the product. In this way, the product gains a fair share of
consumer's mind and heart.

All these initiatives will not only create brand equity but also value equity and
relationship equity. In short, don't sell products... empower the customer.

Based on the findings above it can be safely said that creating Brand Equity for
products that have a short PLC is indeed a challenge.

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