Unit – III

Service Product Life Cycle

Arun Kumar Mishra

9893686820
arunjimishra@gmail.com
Service Product Life Cycle

• A service offer goes through stages of slow

acceptance, surge in popularity, steady
sales and sometimes drop in sales.

• The drop in sales can be due to many factors

including better substitute offers, product
obsolescence, changing preferences of the
consumers, etc.
Different Stage of Service Life Cycle
Stage 1: Conception/Incubation
• This is the incubation stage of a service product,
called New Product Development.

• It consists of the complete activities from

ideation, research and development and
product testing.
Stage 2: Introduction
• This is the stage soon after the launch of the
service offer.
• The public at large is not fully aware or exposed to
the offer.
• Sales growth or adoption by the market is
slow.
• The potential consumers display uncertainty
and resistance to any new products that are not
tried and tested.
• The service firm would be incurring heavy
expenditure, without any surge of revenue, only for
building up awareness through different types of
promotions.
Stage 3: Growth
• There will be a surge in demand for the service offer
when customers make repeat purchases.
• Potential customers come in due to
recommendations made by the formers and by the
generally positive publicity floating around.
• The peak of the profit curve does not coincide
with the peak of the sales curve.
• Surging sales, high voltage publicity, increasing
awareness & profits are all indications of success.
• The service marketer has to invest in
promotions to establish consumer attitudes,
increase market penetration and accessibility
through wider distribution reach.
Stage4: Maturity
• Sales at the maturity stage flatten & slow
down.
• Most possible product benefits are usually
developed & the market reaches the point of
saturation.
• More players in the market.
• Price cutting becomes norm for attracting
customers.
• The cost of doing business increases and the
market becomes stable.
• Sales growth can slow down to as low as zero
indicating complete saturation of the market.
Stage 5: Decline
• There is a downturn in revenues, customer
acquisition and retention.
• This could be due to a number of factors:
▫ Direct Competitors: could be doing a better job in
offering the same service with more value.
▫ Emergence of Substitute competition: The
market could witness other offers.
▫ Changing preference of the customers for the
service offer or the category.
▫ Technology obsolescence could make the
service offer redundant.
• The decline of the service offer can be permanent or
last for years.
Stage 6: Post-mortem
• This stage is an after-effect of the changing
environmental factors and the paradigm shift in
global managerial thinking.
• It implies that even after the service product and the
market have declined & the managers have stopped
any further investments, expenditures, or allocating
any responsibility & accountability, quality time is
spent in monitoring and servicing the
customers.
• Servicing of the customers & the service
products continue even if the product has been
withdrawn or the service firm has exited from the
market.
Marketing Responses to PLC
Different Marketing strategies applicable
during different stages of Service
Product Life Cycle
Introduction Stage
• The service marketer can choose from any of the
given four market entry alternatives.
Rapid Skimming
• It is an expensive initiative combining high
price and high promotion, directed at a low
aware, low willingness-to-buy market.
• This strategy is very useful if the market size
and potential is very high.
• When a service firm has a short-term goal of
profit maximization and increase in the
sales volume, it can resort to this strategy.
• The target markets are the Early Adopters &
Innovators who do not mind paying the high
price for the privilege of being the early users.
Slow Skimming
• Combination of high price & low promotion
• This strategy is used when the service firm is
confident that it can recover its investments in
sufficient time.
• This could be due to lack of competition,
requirement of heavy investments in technology
and systems to compete, etc.
• The target market, mostly business & industrial users
pays for the high price as the product is exclusive and
vital for their competitiveness.
• Five star hotels, Enterprise Resource Planning (ERP)
and Supply Chain Management (SCM) System
providers like SAP, etc., used this strategy.
Rapid Penetration Strategy
• If the service firm has a long-term
objective of being a market leader, market
share and profit maximization, and
• If there exist entry barriers like intensive
competition, then this strategy is useful.
• The price of their offers is lower but there is
high visibility in the media.
• Big Bazaar, has successfully used this strategy
to make its mark.
• ICICI Bank is using rapid penetration strategy.
Slow Penetration Strategy
• When the market size is large, well aware of the
service offer and sensitive to price but the
competitive threats are almost non-existent, this
strategy is used.
• The long-term objective of the service firm is to
maximize sales or profits.
Growth Stage Strategies
• It is obvious that the Growth stage is a
battleground for survival.
• After achieving optimum awareness of the
service offer, the marketer should go all out in:
▫ Developing Customers
▫ Increasing Service Delivery Capability to
keep up with demand,
▫ Increasing Access and
▫ Making Distribution Effective.
▫ The advertising should emphasize on
features & image to create favourable attitudes.
Maturity Stage
• This stage will witness steady sales with frenetic
competition and price war.
• The marketer, therefore, concentrates on
▫ Maximizing profits,
▫ Seeks differentiation
▫ Offers wider range of products and
▫ Concentrates on building relationships and long-term
commitments with the customers.
• Product Line Modifications & Line Extensions can
be attempted here.
• The marketer should focus at consolidating the
position & maintaining the market share.
• The distribution should be the widest & multiple
channels can be looked into.
 Decline Stage
• There is really nothing that the marketer can do if the
category of the offer itself is on the decline.
• Four strategies to tackle their products in decline:
▫ Leadership: When there is still potential in the market for
profit, the service firm can invest in product support to
strengthen it & emerge as a strong and competitive player.
▫ Niche: The service marketer can analyse & identify certain
specific segments that has potential for profitability.
▫ Harvest: The marketer is all set to totally exploit the offers.
Reduction of attributes in the augmented product level:
customer service, warranties, training etc.
▫ Divestment: If the marketer is savvy enough to detect the
symptoms of decline, the product line can be sold in the
latter part of maturity or earlier part of decline stages, at a
profit.
Any Questions?