Session (3)

• Product life cycle (PLC)


  Indicates the sales and profit of the product over a period of time
• PLC concept


  • Can be applied to a product category (soaps)
  • A particular product form (soap bars, liquid soaps)
  • A particular brand (Lux)
• The life cycle of the product category is the longest and that of the brand is shortest, usually
• PLC is most directly useful to product forms
• Product forms like soaps, gel pens and televisions and mobile phones go through a sales history of introduction, growth, maturity and decline
• Product categories often tend to stay in the maturity stage for longer duration, while the life cycles of individual brands can be extremely inconsistent depending on the effectiveness of their marketing programs
• Godrej's 'Jumping Mango' juice vanished from the market though other product categories exist in maturity stage
• Most of the products follow the "S" shaped curve with certain products deviating, showing a sharp growth followed by a sharp decline, or remain in the maturity phase for a long time and may not face a decline
• Trends and fashion can be grouped in the first category: products in closed economies or in a monopolistic market represent the second type
• Commodities like steel, cement, and food products, where the demand remains inelastic, relative to other manufactured products, also deviate from the S-shaped curve
• In India, cars, refrigerators and television sets etc. did not experience a decline until 1991 as they were operating in the pre-liberalization era with less competition. But things started to change after 1991 with opening up of the markets and increase in competition
• In the current scenario, the product life cycles are also shortening with high competition and changing demands
• Profits are rarely a part of the introduction stage; the growth stage brings profits with an onset in decline in profits being observed in the maturity stages
• New Product Development


  1. Idea Generation

  2. Concept Development and Testing

  3. Market Strategy Development

  4. Business Analysis

  5. Product Development

  6. Test Marketing

  7. Commercialization
• Of the thousands of products entering the process, only a handful reach the market
• It is of crucial importance to understand consumers, markets and competitors in order to develop products that deliver superior value to customers
• Idea sources for new product development

  • Internal (R&D, employee contributions)
  • External (distributors, suppliers, competitors, customers)
• Concept development


  Checking if the product is affordable, meaningful to the customer, which customer segment it is meant for, whether it can be perceived into an actual product, which utilities (size, features, benefits) to build into the product/service
• Concept testing


  A more concrete and physical presentation of the product concept to the target consumers to find out the consumer appeal and customer value
• Market strategy development


  A description of the target market, the planned price, distribution, the sales, market share and profit goals for the first few years
• Business analysis


  Reviewing the sales, costs and profit projections for the new product to find out whether these factors satisfy the company's objective
• Product development


  Developing the product into a physical product - a workable market offering, including testing for safety and effectiveness
• Test marketing


  Testing the product and its entire marketing programme, including targeting and positioning strategy, advertising, distributions, packaging etc. before the full investment is made
• Commercialization


  Building or renting a manufacturing facility, spending on advertising, sales promotion and other marketing efforts in the first year
• Stages of product life cycle

  • Introduction
  • Growth
  • Maturity
  • Decline
• Introduction stage


  • Inducing acceptance and attaining initial distribution
  • High operational costs
  • High promotion costs
  • Customers have low awareness and make trial purchases
  • Competition is limited
  • Negative profits
• Penetration pricing


  Low pricing to ensure a large market share
• Skimming pricing


  High pricing to recover development costs
• Growth stage


  • Reduced costs due to economies of scale
  • Increase in competition
  • Market expansion with new customers
  • Accelerated increase in profits
  • Costs incurred on identifying new uses, developing the product, promotion, and distribution
• Strategies in growth stage

  • Maintain product quality with additional features
  • Pricing may remain the same or drop a level
• Market expansion


  • New customers being added (EARLY ADOPTERS)
• Dominant position


  • Created by focusing on increasing selective demand
• Profits


  • Accelerated increase
• Costs incurred


  1. Identifying new uses

  2. Developing the product

  3. Promotion

  4. Distribution
• Product in growth stage


  • Mobile handsets, with new models being continuously launched
  • Apple launched its iPhone 14 Pro recently
• MARKETING STRATEGIES IN GROWTH STAGE

  • Increase in competitors offering similar features
  • Firm seeks to build brand preference and increase market share
• Product quality

  1. Maintained with additional features

  2. E.g.: Car models with higher capacity, combo meals in restaurants, and support services - Acer 'pick up and drop' repair services may be added
• Pricing

  • May remain the same as firm enjoys increasing demand with a little competition
  • Skimming Price may drop a level whereas Penetration Price may rise a level
• Distribution channels


  Added as demand rises and more customers accept the product
• Promotion


  1. Aimed at a broader audience

  2. Sales promotions, better salesmanship, persuasive advertising used