life cycle of product

8/12/2019 Life Cycle of Product

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Introduction

Like Humans Products also have a stipulatedlife

They are Born, grow, Mature and finally die The basic difference between both is Product

has to be killed by a company.

Product is killed because of declining salesand losses being occurred.


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Causes of New Product

Failures Overestimation of Market Size

Product Design Problems

Product Incorrectly Positioned, Priced or Advertised

Costs of Product Development

Competitive Actions

To create successful new products, the companymust:

understand its customers, markets and competitors

develop products that deliver superior value tocustomers.


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New Product Development

Process

Idea Generation and Screening

Concept Development and Testing Marketing Strategy

Business Analysis

Product Development

Test Marketing

Commercialization


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New Product Development Process

Step 1. Idea Generation

Systematic Search for New ProductIdeas

Internal sources

Customers

CompetitorsDistributors

Suppliers


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Process to spot good ideas and drop poorones

Criteria Market Size

Product Price

Development Time & Costs

Manufacturing Costs Rate of Return


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Step 3. Concept Development & Test ing

1. Develop Product Ideas intoAlternative

Product Concepts

2. Concept Testing - Test theProduct Concepts with Groups

of Target Customers

3. Choose the Best One


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Step 4. Marketing Strategy Development

Part Two - Short-Term:Products Planned Price

DistributionMarketing Budget

Part Three - Long-Term:Sales & Profit Goals

Marketing Mix Strategy

Marketing Strategy Statement Formulation

Part One - Overall:Target Market

Planned Product Positioning

Sales & Profit GoalsMarket Share


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Step 5. Bus iness Analysis

Step 6. Produ ct Development

Business Analysis

Review of Product Sales, Costs,

and Profits Projections to See ifThey Meet Company Objectives

If Yes, Move to

Product Development

If No, EliminateProduct Concept


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Step 7. Test Marketing

StandardTest Market

Full marketing campaign

in a small number ofrepresentative cities.

SimulatedTest Market

Test in a simulatedshopping environment

to a sample ofconsumers.

ControlledTest Market

A few stores that have

agreed to carry newproducts for a fee.


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Phases in a Product Life Cycle

The PLC curve is typically divided into four stages:

Introduction A period of slow sales growth as theproduct is launched in the market. This phase is

characterized by high operational costs and so incursinitial losses.

Growth A period of rapid market acceptance andsubstantial profit improvement.

Maturity A slowdown in sales growth because theproduct has achieved acceptance by most potentialbuyers. Profits stabilize or decline because of increasedcompetition.

Decline Sales show a downward drift and profits erode.


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Objectives of PLC

Stages Introduction Growth Maturity Decline

Objectives: Create

product

awareness

and Trial

Maximize

market

share

Maximize

profits and

defend

marketshare

Reduce

expenses &

milk brands


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Product Life

Cycle

Time

ProductDevelop-ment

Introduction

Profits

Sales

Growth Maturity Decline

Losses/Investments ($)

Sales andProfits ($)


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Introduction Stage of the

PLC

Sales

Costs

Profits

Marketing Objectives

Product

Price

Low sales

High cost per customer

Negative

Create product awarenessand trial

Offer a basic product

Use cost-plus

Distribution Build selective distribution

AdvertisingBuild product awarenessamong early adopters and

dealers


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Grow th Stage of the PLC

Sales

Costs

Profits


Product

Price

Rapidly rising sales

Average cost per customer

Rising profits

Maximize market share

Offer product extensions,

service, warrantyPrice to penetrate market

Distribution Build intensive distribution

Advertising Build awareness and interest in

the mass market


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Matur i ty Stage of the PLC

Sales

Costs

Profits


Product

Price

Peak sales

Low cost per customer

High profits

Maximize profit while defendingmarket share

Diversify brand and models

Price to match or bestcompetitors

DistributionBuild more intensivedistribution

Advertising Stress brand differences and

benefits


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Dec l ine Stage of the PLC

Sales

Costs

Profits


Product

Price

Declining sales

Low cost per customer

Declining profits

Reduce expenditure and milkthe brand

Phase out weak items

Cut price

Distribution Go selective: phase outunprofitable outlets

Advertising Reduce to level needed to retain

hard-core loyal customers


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ALTERNATE PLC PATTERNS

The PLC concept can be used to analyze:o a product category (e.g. liquor)

o a product form (e.g. white liquor)

o a product (e.g. vodka), or

o a brand (e.g. Smirnoff)

Not all products exhibit an s-shaped curve.

Three common alternate patterns are described here


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Growth Slump Maturity Pattern

Sales grow rapidly when the product is introduced, then fall to a petrifiedlevel that is sustained by late adopters buying the product for the first timeand early adopters replacing the product.

Often characteristic of small kitchen appliances such as handheld mixers and

bread makers.

Sales Volume

Time

l l


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Cycle-Recycle Pattern

A company aggressively promotes its new product and this producesthe first cycle.

Later the sales starts declining & the company gives its productanother promotion push, which produces a second cycle of smallermagnitude & duration.

E.g. sales of new drugs of a pharmaceutical company.

Sales Volume

Time

Primary CycleRecycle

ll d


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Scalloped Pattern

Here, sales pass through a succession of life-cycles based on thediscovery of a new product characteristics, uses & users.

The sales of nylon, for example, show a scalloped pattern because ofthe many new uses parachutes, hosiery, shirts, carpeting, boat sails,

automobile tires, that continue to be discovered over time.

Time

Sales Volume


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Pricing Strategies at each Stage

Introduction:

- Rapid skimming- Slow skimming

- Rapid Penetration

- Slow Penetration

Growth:

- Penetration Pricing- Push & pull Strategies


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Maturity

- Reduce price becauseof economies of scale.

Decline

- Keeping same price-Reducing promotional

expenditure


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Case Study- Kellogs

Summary:

- kellogs had a world wide recognition over

100 years for healthy breakfast cereals- nutrigrain, rice crispies, cornflakes etc..

- each brand holds competitve image in the

market.- Nutri Grain product did quite well in themarket but after a certain extent sales weredeclining


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- Aim was to relaunch the brand.

- PlC of Nutri Grain was:


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PLC of KellogsNutri Grain

1. Launch- From launch (the first stage on thediagram) in 1997 it was immediately successful,gaining almost 50% share of the growing cerealbar market in just two years.

2. Growth- Nutri-Grainssales steadilyincreased as the product was promoted andbecame well known. It maintained growth insales until 2002 through expanding the original

product with new developments of flavour andformat. This is good for the business, as it doesnot have to spend money on new machines orequipment for production.


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3. Maturity - Successful products attract other competitorbusinesses to start selling similar products. This indicates the

third stage of the life cycle - maturity. This is the time ofmaximum profitability, when profits can be used to continueto build the brand. Kellogg's continued to support thedevelopment of the brand but this was not enough to offsetthe overall sales decline.

4.Saturation- This is the fourth stage of the life cycle and the

point when the market is full. By mid-2004 Nutri-Grainfound its sales declining whilst the market continued to growat a rate of 15%.

5.Decline- Clearly, at this point, Kellogg's had to make a keybusiness decision. Sales were falling, the product was indecline and losing its position. Should Kellogg's let theproduct die, i.e. withdraw it from the market, or should ittry to extend its life


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Strategic Use Of PLC


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Identifying problem

Extending Nutri Grain Cycle instead ofDiversification.

Nutri Grain soft bake was launched withPromotional Pricing i.e discounted Pricing.

Sales increased by 80%..


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life cycle of product

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