wo MARKETING STRATEGIESABOUT THE AUTHOR DARPAN SAXENA Darpan Saxena has worked as a Marketing and Product development strategist at an edu-corporate in New Delhi. He has also worked at a multinational business process outsourcing company in their Marketing & Artificial Intelligence business. He is practicing believer of smart work and the impact of shared knowledge and this is the major reason why hestarted Super Heuristics in February 2018, He is an engineer by qualification and an MBA from Indian Institute of Management (IIM), Udaipur, “Super Heuristics | 2 | successrUt PRiciNc AND MARKETING STRATEGIES FOR PRODUCT LIFE CYCLEINTRODUCTION For Product Managers, the Product Life Cycle (PLC) stage of their product is one of the biggest determining factors of a lot of their decisions. This makes complete sense, The decisions related to the 4Ps of Marketing, namely Product, Price, Place and Promotion, should be closely aligned with the PLC. It you are a product manager or a student of marketing and are willing to learn more about Product Life Cycle, you are or will be one of those who will be taking these decisions. But let me tell you something that you should know right now. ‘There is one aspect where most product managers go horribly wrong. The sad part is that itis one of the most crucial decisions that the manager has to take. Have you guessed it already? That decision is the Pricing decision. Care must be taken while pricing such that the price complements the product life cycle stage. This is what the purpose of this book is. Through this book I wish to explain you the various marketing strategies that one can use at the various stages of the Product Life Cycle. Along with that my objective is to guide you about the pricing decisions one must take in alignment with the various product life cycle stages. “Super Heuristics | 3 | successrUt PRiciNc AND MARKETING STRATEGIES FOR PRODUCT LIFE CYCLEWHY IS PRICING SUCH A CRUCIAL DECISION? I mentioned it in one of my blog posts that | wrote sometime back and | shall mention it here again. The factis, outof the 4Ps, Pricing decisions prove tobe the makers or the breakers of success of the product andthe firm, Read More>> The Elements Of The Marketing Mix (4ps With Examples} ‘One needs to take note that I am obviously referring to financial success. The reason why pricing is. such a crucial decision for a Product Manageris this. BeFore a Pricing is the firm's attempt to capture the value in return of the value that the firm has provided to the customer. Here is a Doodle that | drew in this regard on my Facebook group, Learn Marketing Strategy. How managements and organisations think about pricing has changed over the years. Credit for this should be given to a lot of volatility associated with the products, Products fight out in the market with products of the competitors. In this battle of products, there are situations where some products take the beating and some are marching towards success. Some bounce back, some don’t. Some fall flat Justbefore success. ‘So much volatility in product behaviour, a good part of which is mapped by the product life cycle, has ensured that the pricing decisions come in the hands of product managers, The product manager are the closestto the marketin the corporate hierarchy and it makes sense to do that. ‘Sono longeris the pricing decision a senior managementissue. Pricing is now in your hands as a manager and, therefore, so isthe financial success of the product. “<= Super Heuristics | 4 | successrUt PRiciNc AND MARKETING STRATEGIES FOR PRODUCT LIFE CYCLE<> Competitive Advantage — the Messi of your Business This also includes the idea of operational excellence where the costs are expected to reduce with volume. Therefore, in the growth stage, while the sales growth is increasing, the objective should be to reduce the costs with increasing volume. Once this is achieved, then you, as the industry-wide cost leader, should use penetrative pricing. You have the comfort of not using penetrative pricing if the market you are dealing with is not very price sensitive. An unrelated example of this to explain non-price sensitive markets Is the cigarettes market, Even with increasing price of cigarettes, the passionate ‘smokers are unlikely to quit buying them. Now | will highlight an important point that you must take care of while setting the price in the growth stage. Discounts should be avoided, given that the overall sales for the products ona rise. Also, ithe marketis growing the discounts should be avoided. However, exceptions in this could be made in this if there is economies of scale due to large production volumes and therefore discounts can beatforded. Cost Leadership SSS TCLCLo nT SOME EXAMPLES OF PRICING IN THE GROWTH STAGE If you ate aware about the pharma company Zydus’ artificial sweetener product Sugar Free, you can understand this concept better. Sugar Froe \as initially launched as a artificial sweetner that would help the diabetics in managing their sugar consumption. For years, Sugar Free continued pursuing that segment. However, over time when the competitors caught up and flooded the market with similar offerings, Sugar Free took a diversion and focused on another segment. This new segment was the segment of the health conscious people, Sugar Free positioned itself at the healthier alternative to sugar. The taste like sugar without any calories, From a pricing angle, ifthe two segments are completely unrelated, the company can also change the pricing for the new segment. Pricing is now in yourhands as a manager and, therefore, sois the financial success of the product. “<= Super Heuristics |10| successrUt PriciNc AND MARKETING STRATEGIES FOR PRODUCT LIFE CYCLESTRATEGIES IN THE MATURITY STAGE While | mentioned that the Introduction stage is the most crucial when it comes to pricing decisions, | will mention that the Maturity stage is the toughestto handle, This is because this stage is characterized by intense competition that has finally brought the sales growth toa halt. In this circumstances, your job as a product manager should be to defend your market share while maintaining profitability. There are obviously alot of challenges that you willbe surrounded with inthis stage. And you needto be cognizantof these challenges in order to be able to fight them, Some of these challenges are: * Firstly, theres a certain accumulated experience of purchases of the customers. This accumulated experience helps them in evaluating and comparing the products across the competitors. Even innovations suffer the bruntin this stage. '* Secondly, there is a lot of imitation that takes place even within your segment. Therefore, you are fighting with a lot of products that are almost the same as yours. The points of differentiation which once used to justty your price are no longer your points of differentiation. © Lastly, as time passes and technology improves, your competition may find more economical ways of producing your product. Given this situation that you will find yourselt in, itbecomes a challenge in itselfto price. Here are some of the things that you must do in this situation, Applying either of these will ensure that you are able to sustain your profitability fora longer period of time, a ‘Heuristics |11| successFUL PRICING AND MARKETING STRATEGIES FOR PRODUCT LIFE CYCLEYOU SHOULD CONSIDER UNBUNDLING YOUR PRODUCT, Ihave an example to share over here that worked for me at one of my previous companies. In the ‘education company that | worked for in New Delhi, | was managing a product which you could say was. pastits growth stage. Itwas a video course. A great and differentiated product when it had come out some three years before that, Butnow, there were quite a good number of similar products out there in the market. Itwas then that this strategy of unbundling worked quite well. We atomized the product and split up the entire video course into smaller sections. Each of the course we were able to sell to a much more focused segment. IMPROVE COST CONTROL This is similar to what | had explained in the cost leadership strategy for the growth stage. By the time of maturity, you must aim to achieve economies of scale wherein you are able to lower your costs. The knowledge of cost control is one of the most basic business knowledge and it does go a long way in managing the pricing of your product. EXPAND THE PRODUCT LINE This is not much of a pricing decision per se but it definitely serves the purpose of extracting a much larger value from your customers than you would otherwise. A product line extension is aimed at reviving the demand for that kind of product through newer offerings. thas also been found that newer products in the product line could enhance the need for the existing product. But that is net the aim. The aimis tonow to led the new produets to lead profitability. ‘SOME EXAMPLES OF PRICING INTHE MATURITY STAGE A classic example of this is most of the Apple products. Say, for example, when a previous iPhone model has reached its maturity stage, iPhone releases a new model. The releases are less frequent in cease of the iPads and the Mac because they have a longer product life cycle and, therefore, it takes a longer time for a product to reach the maturity stage. Pricing is now in your hands as a manager and, therefore, sois the financial success of the product. # Pe “<> Super Heuristics |12| successrUt PRicINc AND MARKETING STRATEGIES FOR PRODUCT LIFE CYCLESTRATEGIES IN THE DECLINE STAGE ‘The decline stages of a products when you should ideally bid your product a farewell. But while there is. Still time for you to do that you can try still make the most from your pricing. ‘To be frank, in the decline stage the aim is no longer to invest in the product anymore, In fact, the ‘company should begin to look at reducing the expenditure on the product. Here are some ways that prove to useful in the decline stage. RETRENCHMENT AND DIVESTMENT STRATEGY This is aimed at eliminating the product completely from the product line butin a phased manner. With each phase you reduce your cost associated with the product with the mindset of retrenchment, ‘One way is that you free up your resources by outsourcing this product to a manufacturer. This ensures that you eventually spend more on your current products that are in the earlier stages of the product life cycle. “Super Heuristics |13| successrUt PRiciNc AND MARKETING STRATEGIES FOR PRODUCT LIFE CYCLERETHINKING THE DISTRIBUTION STRATEGY Imagine it like this. You could redesign the distribution strategy for a declining product such that, if for ‘example, it was sold through a dense distribution network through brick-and-mortar stores, you can now consider to sellitonline, A move like this will lead to a great decrease in the costs and will also allow you to pass on this cost saving benefitto your customers. This is quite a frequently used strategy. ‘SOME EXAMPLES OF PRICING INTHE DECLINE STAGE | will again take the example of Apple and this example sort of brings together both these points that | mentioned for the decline stage. A few years back Apple announced that its likely to open a production facility in india, most ikely in the state of Hyderabad. This production facility would be solely dedicated to working on the refurbishediPhone andiPads which can be resold. While India is an ‘Apple crazy’ market, the Apple CEO had the opinion that introducing refurbished iPhones in India would increase the overall sales. ‘And I must say thisis a sound strategy. So, what have they exactly done? Firstly, they have altered their distribution strategy. Now they would produce the phones right in the market where they want to sell it. This is serendipity that the market they have chosen is also economically conducive to setting up manufacturing. ‘Secondly, with this refurbished range of products they will make the most of their dated or older models, of iPhones relevant. So, ifthe iPhone XR and XS are the latest model, you can easily expectthem to sell iPhone 5, Ss and 6 toa larger share of market through this move. Pricingis now in your hands as a manager and, therefore, sois the financial success of the product. < ‘Heuristics |14] successFUL PRICING AND MARKETING STRATEGIES FOR PRODUCT LIFE CYCLE >ete ed Product Life Cycle Management is crucial for any marketer and product manager. The important aspect in that marketing strategy is the pricing. Through this comprehensive book, my aim was to bring to your Notice the pricing and the marketing strategy for each stage of the product life cycle that will help you in extracting the maximum value from your customers. | started off by brietly explaining what the Product Life Cycle is and then about how in each of the stages, applying different pricing and marketing strategies can lead to better profitability. Please note that these strategies are the proven ones. | have quoted sufficient examples to explain their usage and impact. However, | am also aware that these will not be the only strategies that there are. So if you are a marketer or a product manager and have experience and success with strategies different from these then | would love to hear from you. If you are a student who has certain questions or concerns, | would love to hear from you too! Here's how youcan reach outto me. S Heuristics |15| successruL pRicINc AND MARKETING STRATEGIES FOR PRODUCT LIFE CYCLE >FEEDBACK am sure that you have read the complete book by now. You may have certain things to say or questions to ask. | invite you to get into a conversation with me on my email id darpan@ superheuristics.com. Further, Ihave a request for you. | seek your help. If you fee! that | have been able to add value to. your knowledge through this book, | would be delighted if you could give your feedback regarding the book here on this form, Itcould bea review or any suggestion that you have for me to improve this book andall the other things that | plan to share with you in the future. This book is for you and you have the right to let me know how do you wantit. So here's the form. Click the link and please share your feedback. Finally, | also invite you to join my exclusive Facebook group that | have created for marketing ‘enthusiasts like you. This group is ‘Learn Marketing Strategy’ where you will find marketing strategists like you discussing various things about marketing strategies. You can meet me there as well “Super Heuristics |16| successrUt priciNc AND MARKETING STRATEGIES FOR PRODUCT LIFE CYCLE >SUCCESSFUL PRICING ano MARKETING STRATEGIES FOR PRODUCT LIFE CYCLE Nooo tN aoa eae ae tae ges etd ake) init tee Gatley a Nao ss) Super Heuristics Marketing Blog for the MBAs