mkting project sem2
DESCRIPTION
Marketing projectTRANSCRIPT
UNIVERSITY OF MUMBAI
A PROJECT ON
“PRODUCT LIFE CYCLE”
MASTER OF COMMERCE PART –I
SEMESTER - II
2013-2014
SUBMITTED BY
“VISMAYA RAMESH RAUT”
PROJECT GUIDE
“PROF GATTING KOLI ”
ST JOSEPH COLLEGE OF ARTS & COMMERCE
VIRAR (West)
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DECLARATION DECLARATION
‘VISMAYA RAMESH RAUT’ student of M.COM-I (Semester-II).ST
JOSEPH COLLEGE OF ARTS & COMMERCE hereby declare that we have
completed this project “PRODUCT LIFE CYCLE” in the academic year 2013-
2014.
I declared that the project report is my original work and it has not
been submitted by me in part or full to any other university/institution/statutory
body for the award of any degree/diploma/certificate.
Name Of Candidate Sign.
Place: Date:
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ST JOSEPH COLLEGE OF ARTS & COMMERCEST JOSEPH COLLEGE OF ARTS & COMMERCE
VIRAR (WEST)VIRAR (WEST)
CERTIFICATE CERTIFICATE
This is certify that VISMAYA RAMESH RAUT has completed the project titled
“PRODUCT LIFE CYCLE” under the guidance of PROF GATTING KOLI in
practical fulfillment of the requirement for the award of ‘Master of Commerce
part-I’ studies degree for academic period ‘2013-2014’
PROJECTGUIDE PRINCIPAL
EXTERNAL GUIDE CO-ORDINATOR
Date:
PLACE:
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ACKNOWLEDGEMENT
Although, I am responsible for the execution of my project, it would truly unjustified on my part to.
Acknowledge the valuable help provided by the under mentioned at various stages of my work.
I hereby acknowledge with deep gratitude to our Principal Name Prof. SUBHASH D’SOUZA SIR And for the constant guidance I would to express my gratitude to PROF GATTING KOLI my guide, for him valuable guidance and constant encouragement throughout the course of the project work.
I would also like to thanks other M.COM teachers of my college who have helped me at times and the library staff also for the reference material.
I would like to extend sincere thanks to those people who have helped majority in this project and who spared their valuable time in answering the questionnaire.
Lastly, I want to thank my family and friends who have been supporting me morally and financially.
ADOPTED BY MARKETING SRATEGIES AND PLANS “PRODUCT LIFE CYCLE”
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Index
Sr. No. Content Pg. NO.
1 Introduction 6
2 Definition of 'Product Life Cycle' 7
3 Product Life Cycle Stages 8
4 Objectives of the Product Life Cycle 12
5 Phases of product lifecycle and corresponding technologies 15
6 Advantages 23
7 Limitations Of The PLC Model 27
8 Extending the product life cycle – A Kellogg's case study 28
9 Bibliography 34
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Introduction
The product life cycle is a marketing theory cycle or succession of strategies experienced by every product which begins with a product’s introduction, sometimes referenced as research and development, followed by its sales growth, then maturity and finally market saturation and decline.
The product life cycle parallels and is analogous with that of human beings and animals, i.e. from birth to growth to maturity to decline and eventually to death. For products this involves many disciplines, skills, tools and processes as the product goes through market forces involving raw materials, parts, various business processes, costs, distribution to markets and sales.
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Definition of 'Product Life Cycle'
The period of time over which an item is developed, brought to market and eventually removed from the market. First, the idea for a product undergoes research and development. If the idea is determined to be feasible and potentially profitable, the product will be produced, marketed and rolled out. Assuming the product becomes successful, its production will grow until the product becomes widely available. Eventually, demand for the product will decline and it will become obsolete.
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Product Life Cycle Stages
As consumers, we buy millions of products every year. And just like us, these products have a life cycle. Older, long-established products eventually become less popular, while in contrast, the demand for new, more modern goods usually increases quite rapidly after they are launched.
Because most companies understand the different product life cycle stages, and that the products they sell all have a limited lifespan, the majority of them will invest heavily in new product development in order to make sure that their businesses continue to grow.
The Introduction Stage of the Product Lifecycle
This introduction stage relates to new products being launched on the market for the first time. The most important element here is to correctly define your target audience and determine how you are going to effectively reach them with your message and product. You essentially want to connect with the ‘early adopters’ to generate early market penetration. These early adopters are most likely to provide you with considerable and constructive feedback that will be invaluable going forward with your product.
At product introduction stage it is typical for sales and marketing costs to be high with turnover low. In many cases products are not profitable at a market introduction stage due to low market adoption.
You may find distributors or third party re-sellers are reluctant to take on your new product as it is yet to be a proven seller so the strategic targeting of key distributors or even a direct sales approach may work best at this stage. Your pricing strategy also needs to be carefully considered.
The pricing strategy might be that of Price Skimming where the highest amount possible is charged initially and then slowly reduced. Or the price strategy might be Penetration Pricing, where the lowest possible price is charged and then gradually increased. Both are strategies that focus on increasing market share quickly.
In summary, the main objective of the product introduction stage is to achieve early market adoption while showing and demonstrating a positive trend of sales and distribution growth which will lead to profitability.
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The Growth Stage of the Product Lifecycle
You’ll find during this stage that while you’re steadily growing sales your competitors are now tagging along for the ride. Your product has been accepted by your target market and cash flow is positive. You’re selling well so your manufacturing costs are lessened – you’re enjoying economies of scale and you’re starting to make profits.
The strategy during this growth stage might include investing in advertising to promote brand awareness to a wider target audience (“Early Majority”). Ideally you’re looking to penetrate the market – taking your competitors customers, encouraging non users to start buying your product and maybe convincing current customers to buy more of your product.
Distribution growth is normally a key driver of sales growth at this stage so you may wish to broaden the number and type of channels used (eg a combination of traditional and online sales). You will also need to continue educating and keep your product at the forefront of your target audiences mind so this means continued promotional spending.
The growth stage is also the ideal phase in which to make improvements to your product. If you are selling software for example maybe you could add on new features or improve the interface to give the product a fresh look, all the while offering current customers ‘added value’.
The Maturity Stage of the Product Lifecycle
During the maturity stage sales will typically be flat, and the profit margins of your products will begin to decline. This is typically caused by a number of factors including market saturation or the displacement of your product with other alternative solutions or technologies. In this stage the nature of competition is often very price driven.
Mature markets can often present opportunities for companies however if an innovative outlook is taken. Do other markets exist where your current product or technology can find growth (eg international markets)? Fiat Tractors is an outstanding example of a company that changed their sales channels and market and even their brand in order to remain competitive back in the 1960’s.
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When the western world wanted new hi-tech tractors Fiat found themselves with a stock of traditional basic models that their target market no longer wanted. Having carried out much research the company began selling these traditional tractors in countries like Turkey at a price point suitable to the market. Seeing instant success Fiat secured a licensing agreement with Turkish company Tümosan to manufacture the tractors in the home country and even changed the brand name to Turk Fiat to align themselves more closely with the country and its culture.
The maturity stage is also the time to start planning and researching for a next generation product or technology – don’t wait until your product enters the decline stage. Invest in market research therefore.
The Decline Stage of the Product Lifecycle
During this decline stage you will most certainly notice a decline in sales. Your market is now either saturated and/or overrun by competitors. You will see a decline in profits and cash flow will become somewhat weaker.
So what are the potential strategies during the decline stage of the product lifecycle?
You could choose to harvest cash from your ‘cash cow’ product and invest these funds in a more promising brand. If you have done your research in the maturity stage for a next generation product or new product introduction you will be able to invest more time and resources into this.
According to Pareto’s Law for product lines typically 80% of profits or sales come from 20% of products. What he’s really saying here is that companies continuously add products to their product line and fund each addition, focusing on the entire portfolio. Why not look at product line rationalization and focus resources on growing your ‘cash cows’ and products that are yielding that 80% of profits.
All products in the product lifecycle should have an exit strategy. How you remove the product from market in the most professional and manageable manner is vitally important to the company’s reputation. An exit strategy would normally coincide with the introduction of a next generation product or new product introduction. It is vital that advanced communication to channel partners, customers, in fact all stakeholders is clear, concise and understandable. Don’t let the removal of your product be a surprise to your stakeholders.
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Product Life Cycle Examples
It’s possible to provide examples of various products to illustrate the different stages of the product life cycle more clearly. Here is the example of watching recorded television and the various stages of each method:
Introduction - 3D TVs
Growth - Blueray discs/DVR
Maturity - DVD
Decline - Video cassette
The idea of the product life cycle has been around for some time, and it is an important principle manufacturers need to understand in order to make a profit and stay in business.
However, the key to successful manufacturing is not just understanding this life cycle, but also proactively managing products throughout their lifetime, applying the appropriate resources and sales and marketing strategies, depending on what stage products are at in the cycle.
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Objectives of the Product Life Cycle
Just as human beings have a definitive life cycle that starts at birth and ends at death, the products they consume also have a life cycle. For products, the life cycle consists of introduction, growth, maturity and decline. A manufacturer's marketing objectives for a product often depend upon what stage of the life cycle the product has entered.
Creating a Market
When a company introduces a new product to the marketplace, its primary objective is to create a market for it. During its preliminary market research, the company identifies what it believes will be the suitable market for the product and uses devices such as advertising and special pricing to reach the desired target market. The company also attempts to build brand awareness and show how the product differs from those offered by competitors in the same category.
Increasing Market Share
After the successful introduction of a product, the company then tries to increase its market share, which is its percentage of sales volume compared to competitors in the same category. The company focuses on additional promotional and distribution efforts to reach as many potential end users as possible. During this growth phase, pricing typically remains stable unless the competition is able to deter the product's growth by implementing marketing techniques of its own. If this occurs, the company may be forced to lower the price.
Maximizing Profitability
As demand levels off and the product matures, the company attempts to maximize its profits. Less money may be spent on advertising and promotion as brand awareness is firmly entrenched and the product is well-established in the marketplace. Instead of increasing market share, a primary objective at this point in the life cycle is to maintain current market share. Promotional efforts are geared toward building brand loyalty with existing users, although some attempt is made to entice users of competitors' products to switch.
Prolonging Life
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As product sales begin to decline, the company attempts to reap profits for as long as possible while making a decision regarding its ultimate fate. The company may attempt to revive the product by creating new uses or lowering prices in an effort to maintain market share for as long as possible. If the product has become obsolete or the company has developed a replacement product, it may discontinue manufacturing it altogether and liquidate existing inventory.
Introduction to development process
The core of PLM (product lifecycle management) is in the creation and central management of all product data and the technology used to access this information and knowledge. PLM as a discipline emerged from tools such as CAD, CAM and PDM, but can be viewed as the integration of these tools with methods, people and the processes through all stages of a product’s life. It is not just about software technology but is also a business strategy.
For simplicity the stages described are shown in a traditional sequential engineering workflow.
The exact order of event and tasks will vary according to the product and industry in question but the main processes are:
Conceive Specification Concept design Design Detailed design Validation and analysis (simulation) Tool design Realize Plan manufacturing Manufacture Build/Assemble Test (quality check) Service Sell and deliver Use Maintain and support Dispose The major key point events are: Order Idea
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Kickoff Design freeze Launch
The reality is however more complex, people and departments cannot perform their tasks in isolation and one activity cannot simply finish and the next activity start. Design is an iterative process, often designs need to be modified due to manufacturing constraints or conflicting requirements. Where a customer order fits into the time line depends on the industry type and whether the products are for example, built to order, engineered to order, or assembled to order.
Phases of product lifecycle and corresponding technologies
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Many software solutions have developed to organize and integrate the different phases of a product’s lifecycle. PLM should not be seen as a single software product but a collection of software tools and working methods integrated together to address either single stages of the lifecycle or connect different tasks or manage the whole process. Some software providers cover the whole PLM range while others single niche application. Some applications can span many fields of PLM with different modules within the same data model. An overview of the fields within PLM is covered here. It should be noted however that the simple classifications do not always fit exactly, many areas overlap and many software products cover more than one area or do not fit easily into one category. It should also not be forgotten that one of the main goals of PLM is to collect knowledge that can be reused for other projects and to coordinate simultaneous concurrent development of many products. It is about business processes, people and methods as much as software application solutions. Although PLM is mainly associated with engineering tasks it also involves marketing activities such as product portfolio management (PPM), particularly with regards to new product development (NPD). There are several life-cycle models in industry to consider, but most are rather similar. What follows below is one possible life-cycle model; while it emphasizes hardware-oriented products, similar phases would describe any form of product or service, including non-technical or software-based products:
Phase 1: Conceive
Imagine, specify, plan, innovation
The first stage is the definition of the product requirements based on customer, company, market and regulatory bodies’ viewpoints. From this specification, the product's major technical parameters can be defined. In parallel, the initial concept design work is performed defining the aesthetics of the product together with its main functional aspects. Many different media are used for these processes, from pencil and paper to clay models to 3D CAID computer-aided industrial design software.
In some concepts, the investment of resources into research or analysis-of-options may be included in the conception phase – e.g. bringing the technology to a level of maturity sufficient to move to the next phase. However, life-cycle engineering is iterative. It is always possible that something doesn't work well in any phase enough to back up into a prior phase – perhaps all the way back to conception or research. There are many examples to draw from.
Phase 2: Design
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Describe, define, develop, test, analyze and validate
This is where the detailed design and development of the product’s form starts, progressing to prototype testing, through pilot release to full product launch. It can also involve redesign and ramp for improvement to existing products as well as planned obsolescence. The main tool used for design and development is CAD. This can be simple 2D drawing / drafting or 3D parametric feature based solid/surface modeling. Such software includes technology such as Hybrid Modeling, Reverse Engineering, KBE (knowledge-based engineering), NDT (Nondestructive testing), Assembly construction.
This step covers many engineering disciplines including: mechanical, electrical, electronic, software (embedded), and domain-specific, such as architectural, aerospace, automotive, ... Along with the actual creation of geometry there is the analysis of the components and product assemblies. Simulation, validation and optimization tasks are carried out using CAE (computer-aided engineering) software either integrated in the CAD package or stand-alone. These are used to perform tasks such as:- Stress analysis, FEA (finite element analysis); kinematics; computational fluid dynamics (CFD); and mechanical event simulation (MES). CAQ (computer-aided quality) is used for tasks such as Dimensional tolerance (engineering) analysis. Another task performed at this stage is the sourcing of bought out components, possibly with the aid of procurement systems.
Phase 3: Realize
Manufacture, make, build, procure, produce, sell and deliver
Once the design of the product’s components is complete the method of manufacturing is defined. This includes CAD tasks such as tool design; creation of CNC Machining instructions for the product’s parts as well as tools to manufacture those parts, using integrated or separate CAM computer-aided manufacturing software. This will also involve analysis tools for process simulation for operations such as casting, molding, and die press forming. Once the manufacturing method has been identified CPM comes into play. This involves CAPE (computer-aided production engineering) or CAP/CAPP – (production planning) tools for carrying out factory, plant and facility layout and production simulation. For example: press-line simulation; and industrial ergonomics; as well as tool selection management. Once components are manufactured their geometrical form and size can be checked against the original CAD data with the use of computer-aided inspection equipment and software.
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Parallel to the engineering tasks, sales product configuration and marketing documentation work take place. This could include transferring engineering data (geometry and part list data) to a web based sales configurator and other desktop publishing systems.
Phase 4: Service
Use, operate, maintain, support, sustain, phase-out, retire, recycle and disposal
The final phase of the lifecycle involves managing of in service information. Providing customers and service engineers with support information for repair and maintenance, as well as waste management/recycling information. This involves using tools such as Maintenance, Repair and Operations Management (MRO) software.
There is an end-of-life to every product. Whether it be disposal or destruction of material objects or information, this needs to be considered since it may not be free from ramifications.
All phases: product lifecycle
Communicate, manage and collaborate
None of the above phases can be seen in isolation. In reality a project does not run sequentially or in isolation of other product development projects. Information is flowing between different people and systems. A major part of PLM is the co-ordination and management of product definition data. This includes managing engineering changes and release status of components; configuration product variations; document management; planning project resources and timescale and risk assessment.
For these tasks graphical, text and metadata such as product bills of materials (BOMs) needs to be managed. At the engineering departments level this is the domain of PDM – (product data management) software, at the corporate level EDM (enterprise data management) software, these two definitions tend to blur however but it is typical to see two or more data management systems within an organization. These systems are also linked to other corporate systems such as SCM, CRM, and ERP. Associated with these system are project management Systems for project/program planning.
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This central role is covered by numerous collaborative product development tools which run throughout the whole lifecycle and across organizations. This requires many technology tools in the areas of conferencing, data sharing and data translation. The field being product visualization which includes technologies such as DMU (digital mock-up), immersive virtual digital prototyping (virtual reality), and photo-realistic imaging.
User skills
The broad array of solutions that make up the tools used within a PLM solution-set (e.g., CAD, CAM, CAx...) were initially used by dedicated practitioners who invested time and effort to gain the required skills. Designers and engineers worked wonders with CAD systems, manufacturing engineers became highly skilled CAM users while analysts, administrators and managers fully mastered their support technologies. However, achieving the full advantages of PLM requires the participation of many people of various skills from throughout an extended enterprise, each requiring the ability to access and operate on the inputs and output of other participants.
Despite the increased ease of use of PLM tools, cross-training all personnel on the entire PLM tool-set has not proven to be practical. Now, however, advances are being made to address ease of use for all participants within the PLM arena. One such advance is the availability of "role" specific user interfaces. Through tailorable UIs, the commands that are presented to users are appropriate to their function and expertise.
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These techniques include:-
Concurrent engineering workflow Industrial design Bottom–up design Top–down design Front-loading design workflow Design in context Modular design NPD new product development DFSS design for Six Sigma DFMA design for manufacture / assembly Digital simulation engineering Requirement-driven design Specification-managed validation Configuration management Concurrent engineering workflow
Concurrent engineering (British English: simultaneous engineering) is a workflow that, instead of working sequentially through stages, carries out a number of tasks in parallel. For example: starting tool design as soon as the detailed design has started, and before the detailed designs of the product are finished; or starting on detail design solid models before the concept design surfaces models are complete. Although this does not necessarily reduce the amount of manpower required for a project, as more changes are required due to the incomplete and changing information, it does drastically reduce lead times and thus time to market.
Feature-based CAD systems have for many years allowed the simultaneous work on 3D solid model and the 2D drawing by means of two separate files, with the drawing looking at the data in the model; when the model changes the drawing will associatively update. Some CAD packages also allow associative copying of geometry between files. This allows, for example, the copying of a part design into the files used by the tooling designer. The manufacturing engineer can then start work on tools before the final design freeze; when a design changes size or shape the tool geometry will then update. Concurrent engineering also has the added benefit of providing better and more immediate communication between departments, reducing the chance of costly, late design changes. It adopts a problem prevention method as compared to the problem solving and re-designing method of traditional sequential engineering.
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Bottom–up design
Bottom–up design (CAD-centric) occurs where the definition of 3D models of a product starts with the construction of individual components. These are then virtually brought together in sub-assemblies of more than one level until the full product is digitally defined. This is sometimes known as the review structure showing what the product will look like. The BOM contains all of the physical (solid) components; it may (but not also) contain other items required for the final product BOM such as paint, glue, oil and other materials commonly described as 'bulk items'. Bulk items typically have mass and quantities but are not usually modelled with geometry.
Bottom–up design tends to focus on the capabilities of available real-world physical technology, implementing those solutions which this technology is most suited to. When these bottom–up solutions have real-world value, bottom–up design can be much more efficient than top–down design. The risk of bottom–up design is that it very efficiently provides solutions to low-value problems. The focus of bottom–up design is "what can we most efficiently do with this technology?" rather than the focus of top–down which is "What is the most valuable thing to do?"
Top–down design
Top–down design is focused on high-level functional requirements, with relatively less focus on existing implementation technology. A top level spec is decomposed into lower and lower level structures and specifications, until the physical implementation layer is reached. The risk of a top–down design is that it will not take advantage of the most efficient applications of current physical technology, especially with respect to hardware implementation. Top–down design sometimes results in excessive layers of lower-level abstraction and inefficient performance when the Top–down model has followed an abstraction path which does not efficiently fit available physical-level technology. The positive value of top–down design is that it preserves a focus on the optimum solution requirements.
A part-centric top–down design may eliminate some of the risks of top–down design. This starts with a layout model, often a simple 2D sketch defining basic sizes and some major defining parameters. Industrial design brings creative ideas to product development. Geometry from this is associatively copied down to the next level, which represents different subsystems of the product. The geometry in the sub-systems is then used to define more detail in levels below.
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Depending on the complexity of the product, a number of levels of this assembly are created until the basic definition of components can be identified, such as position and principal dimensions. This information is then associatively copied to component files. In these files the components are detailed; this is where the classic bottom–up assembly starts.
The top–down assembly is sometime known as a control structure. If a single file is used to define the layout and parameters for the review structure it is often known as a skeleton file.
Defense engineering traditionally develops the product structure from the top down. The system engineering process prescribes a functional decomposition of requirements and then physical allocation of product structure to the functions. This top down approach would normally have lower levels of the product structure developed from CAD data as a bottom–up structure or design.
Both-ends-against-the-middle design
Both-ends-against-the-middle (BEATM) design is a design process that endeavors to combine the best features of top–down design, and bottom–up design into one process. A BEATM design process flow may begin with an emergent technology which suggests solutions which may have value, or it may begin with a top–down view of an important problem which needs a solution. In either case the key attribute of BEATM design methodology is to immediately focus at both ends of the design process flow: a top–down view of the solution requirements, and a bottom–up view of the available technology which may offer promise of an efficient solution. The BEATM design process proceeds from both ends in search of an optimum merging somewhere between the top–down requirements, and bottom–up efficient implementation. In this fashion, BEATM has been shown to genuinely offer the best of both methodologies. Indeed some of the best success stories from either top–down or bottom–up have been successful because of an intuitive, yet unconscious use of the BEATM methodology. When employed consciously, BEATM offers even more powerful advantages.
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Front loading design and workflow
Front loading is taking top–down design to the next stage. The complete control structure and review structure, as well as downstream data such as drawings, tooling development and CAM models, are constructed before the product has been defined or a project kick-off has been authorized. These assemblies of files constitute a template from which a family of products can be constructed. When the decision has been made to go with a new product, the parameters of the product are entered into the template model and all the associated data is updated. Obviously predefined associative models will not be able to predict all possibilities and will require additional work. The main principle is that a lot of the experimental/investigative work has already been completed. A lot of knowledge is built into these templates to be reused on new products. This does require additional resources "up front" but can drastically reduce the time between project kick-off and launch. Such methods do however require organizational changes, as considerable engineering efforts are moved into "offline" development departments. It can be seen as an analogy to creating a concept car to test new technology for future products, but in this case the work is directly used for the next product generation.
Design in context
Individual components cannot be constructed in isolation. CAD and CaiD models of components are designed within the context of part or all of the product being developed. This is achieved using assembly modelling techniques. Other components’ geometry can be seen and referenced within the CAD tool being used. The other components within the sub-assembly may or may not have been constructed in the same system, their geometry being translated from other collaborative product development (CPD) formats. Some assembly checking such as DMU is also carried out using product visualization software.
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Advantages
Business is often associated with the dryer side of dullness, and many of us frequently refer with some distaste to "getting round to the business side of things". But over the years some very useful methods and techniques have emerged from the "other-side", many of which can be beneficial to all of us. After all, while we may consider much of what we do as a labour of love, we are nonetheless trying to make some money out of the whole thing as well! A good place to start is with the concept of the product life cycle.
Like most things, the sales (and demand) for your software conform to some sort of pattern. The advantages of the product life cycle concept is that it provides a basic structure that allows you to see where you are, and what lies ahead. There are four components to the cycle; introduction, growth, maturity and decline.
Introduce Your Product To The Market
The first component is fairly self-explanatory; when a new product is introduced, market gain tends to be very slight, and it is almost impossible to spot any kind of emerging patterns in demand. Depending on how you launch the software, marketing costs may be high, and it is unlikely that there are any profits as such. After the creation and subsequent release of your software, this often boils down to gritting your teeth and waiting. If this stage doesn't lead into the next, then it may be time to jump ship.
The growth stage exhibits a rapid increase in both sales and profits, and this is the time to try and increase your product's market share. By now you should be seeing where your demand is coming from, and which of your efforts are worth spending time and energy on. With a little bit of luck, you might even have knocked some of the competition out of the way too!
The growth stage is closely followed by the maturity stage, often seen as the "most common" stage for all products. Competition becomes more fierce and marketing becomes the key to your software's success. During this time, any attempt to increase your market share will probably be expensive; growth at this stage is more likely to be down to external factors beyond your control.
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Decline Doesn't Equal Death
The final stage in the life cycle is the decline. This doesn't necessarily mean that it's time to abandon your product altogether, but rather that the introduction of new strategies might be in order. These could include new versions, new distribution methods, price reductions, in short anything that will inject a little life into the cycle.
Each of the four stages have their own characteristics, and each are open to different strategies being implemented. However, for many this stage will prove to be the critical one; many wait until this period before acting, and it is the only stage where some sort of action is critical. Two situations are frequently confused with a declining product. The product life cycle graphic below demonstrates the point.
Theoretically the product life-cycle is a smooth and elegant curve; in reality there are constant short-term fluctuations due to external factors. The first common mistake is to assume that any reduction in sales signals the onset of the decline phase. The area between points 1 and 2 may at first appear to be decline, but in fact are part of the growth stage. Similarly, the area between points 3 and 4 may at first be read as a new growth phase; in fact it is little more than a temporary increase that has no real significance.
Remember The External Factors
The advantages of the product life cycle concept speak for themselves. Once you've applied this model to your software, there are an unlimited number of options and strategies that may be implemented, according to the specifics of your software and its' current stage in the life cycle. For example, you may wish to considering product life cycle acceleration strategies, or at the very least recognise where you are, and what lies ahead. Before responding to any of the stage characteristics, don't forget to consider the external factors, particularly in response to the decline phase. My own favourite for analysing external factors is the PEST analysis; Political, Economic, Social and Technological - between them they pretty well cover the whole lot. Take all of this information into account before jumping to any conclusions.
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As with all business ideas and theories, keep an open mind, be honest with yourself, and never rule out any option before thoroughly chewing it over. Professionalism and management techniques are not the sole prerogative of the big-boys; we can do far worse than picking-up a few of their better habits. The software industry is seen as amateur and unprofessional by far too many people; don't start believing it yourself. Be seen, be sold.
Importance of Product Life Cycle
A company or product's life cycle has a significant impact on decisions related to the use of media. Savvy business owners make different marketing decisions at every stage in a product's life, beginning with the need to generate awareness for new products and ending with the ability to maintain that awareness.
New Product Entrants
When a new product is introduced, or a new company opens its doors, the business owner's challenge is to generate awareness for that product or service. In these very early stages of market introduction the use of traditional print and broadcast media is a proven way to create demand.
Establishing Preference
Once a product has gained market awareness, advertisers begin creating product preferences among target customers. Establishing that preference over other available offerings requires telling the product's story through various media. At this point, mass media use gives way to more targeted media, including social media, which allows more information to be shared.
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Competing in a Crowded Market
Competing in a crowded market occurs during a product's mid-life stage. Marketers begin to rely on word-of-mouth generated not only through satisfied customers, but also through the public relations efforts of third-party endorsements. What advertisers say about their own products and services will always be viewed by consumers with a certain amount of skepticism. What they hear from others, including the media, has more impact at this stage in the product life cycle.
Maintaining Awareness
Once a product is established (think CocaCola or Chevrolet), the advertiser's challenge is to maintain that awareness. At this stage, mass media becomes important in maintaining a general level of awareness for the product. Mass media also raises awareness among new market entrants, and even established product marketers know that there are always opportunities to attract new customers.
Backing Off and Starting Over
Products and services eventually reach a point of diminishing returns. When this happens, media use declines unless the marketer is able to introduce a brand extension or an entirely new product. Then the cycle begins again. At every stage in a product's life cycle, the marketer will be concerned about choices related to generating awareness, preference, demand and, ultimately, a purchase decision.
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Limitations Of The PLC Model
It is difficult to foresee transitions in PLC stages since the key indicator are sales, which are always calculated with some lag. Therefore, the realization a stage transition has occurred is nearly always in retrospect. In addition, fluctuations in sales will produce erroneous conclusions, so slowing sales do not necessary mean the product has reached the Decline phase and the resulting conclusion to retire the product and divert resources is wrong. Products, companies and markets are different, so not all products or services go through every stage of the PLC. There have been many cases where products have gone straight from introduction to decline, usually because of bad marketing, misconceived features, lack of value to the consumer or simply a lack of need for such a product.
However, even if products would go through every stage of the PLC, not all products/services spend the same length of time at each stage. This adds another level of complexity in determining which PLC stage the product is in and consequently, which strategy to apply.
Finally, the PLC model is inefficient when dealing with Brands or Services. Brands are not products but do have a life cycle of their own, and products belonging to a certain brand will experience a very different life cycle than the brand itself. For example, Dell and Mercedes-Benz are very strong brands whose life cycle is marginally affected by the failure of any of the products, which they hold. Apple Computer’s Lisa, Newton (market failures) and iMac (market success) are proof that brands and products have different PLC’s although they are closely related
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Extending the product life cycle
A Kellogg's case study
Introduction
Businesses need to set themselves clear aims and objectives if they are going to succeed. The Kellogg Company is the world's leading producer of breakfast cereals and convenience foods, such as cereal bars, and aims to maintain that position.
In 2006, Kellogg's had total worldwide sales of almost $11 billion (£5.5 billion). In 2007, it was Britain's biggest selling grocery brand, with sales of more than £550 million. Product lines include ready-to-eat cereals (i.e. not hot cereals like porridge) and nutritious snacks, such as cereal bars.
Kellogg's brands are household names around the world and include Rice Krispies, Special K and Nutri-Grain, whilst some of its brand characters, like Snap, Crackle and Pop, are amongst the most well-known in the world.
Kellogg's has achieved this position, not only through great brands and great brand value, but through a strong commitment to corporate social responsibility. This means that all of Kellogg's business aims are set within a particular context or set of ideals. Central to this is Kellogg”s passion for the business, the brands and the food, demonstrated through the promotion of healthy living.
The market
The company divides its market into six key segments. Kellogg's Corn Flakes has been on breakfast tables for over 100 years and represents the 'Tasty Start' cereals that people eat to start their day. Other segments include 'Simply Wholesome' products that are good for you, such as Kashi Muesli, 'Shape Management' products, such as Special K and 'Inner Health' lines, such as All-Bran. Children will be most familiar with the 'Kid Preferred' brands, such as Frosties, whilst 'Mum Approved' brands like Raisin Wheats are recognised by parents as being good for their children.
Each brand has to hold its own in a competitive market. Brand managers monitor the success of brands in terms of market share, growth and performance against the competition. Key decisions have to be made about the future of any brand that is not succeeding.
This case study is about Nutri-Grain. It shows how Kellogg's recognised there was a problem with the brand and used business tools to reach a solution. The overall aim was to re-launch the brand and return it to growth in its market.
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The product life cycle
Each product has its own life cycle. It will be 'born', it will 'develop', it will 'grow old' and, eventually, it will 'die'. Some products, like Kellogg's Corn Flakes, have retained their market position for a long time. Others may have their success undermined by falling market share or by competitors.
The product life cycle shows how sales of a product change over time. The five typical stages of the life cycle are shown on the graph. Not all products follow these stages precisely and time periods for each stage will vary widely. Growth, for example, may take place over a few months or, as in the case of Nutri-Grain, over several years.
However, perhaps the most important stage of a product life cycle happens before this graph starts, namely the research and development (R&D) stage. Here the company designs a product to meet a need in the market. The costs of market research - to identify a gap in the market and of product development to ensure that the product meets the needs of that gap - are called 'sunk' or start-up costs.
Nutri-Grain was originally designed to meet the needs of busy people who had missed breakfast. It aimed to provide a healthy cereal breakfast in a portable and convenient format.
1. Launch - Many products do well when they are first brought out and Nutri-Grain was no exception. From launch (the first stage on the diagram) in 1997 it was immediately successful, gaining almost 50% share of the growing cereal bar market in just two years.
2. Growth - Nutri-Grain's sales steadily increased as the product was promoted and became well known. It maintained growth in sales until 2002 through expanding the original product with new developments of flavour and format. This is good for the business, as it does not have to spend money on new machines or equipment for production. The market position of Nutri-Grain also subtly changed from a “missed breakfast” product to an 'all-day' healthy snack.
3. Maturity - Successful products attract other competitor businesses to start selling similar products. This indicates the third stage of the life cycle - maturity. This is the time of maximum profitability, when profits can be used to continue to build the brand. However, competitor brands from both Kellogg's itself (e.g. All Bran bars) and other manufacturers (e.g. Alpen bars) offered the same benefits and this slowed down sales and chipped away at Nutri-Grain's market position. Kellogg's continued to support the development of the brand but some products (such as Minis and Twists), struggled in a crowded market. Although Elevenses continued to succeed, this was not enough to offset the overall sales decline.
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4. Saturation- This is the fourth stage of the life cycle and the point when the market is 'full'. Most people have the product and there are other, better or cheaper competitor products. This is called market saturation and is when sales start to fall. By mid-2004 Nutri-Grain found its sales declining whilst the market continued to grow at a rate of 15%.
5. Decline - Clearly, at this point, Kellogg's had to make a key business decision. Sales were falling, the product was in decline and losing its position. Should Kellogg's let the product 'die', i.e. withdraw it from the market, or should it try to extend its life?
Strategic use of the product life cycle
When a company recognises that a product has gone into decline or is not performing as well as it should, it has to decide what to do. The decision needs to be made within the context of the overall aims of the business.
Strategically, Kellogg's had a strong position in the market for both healthy foods and convenience foods. Nutri-Grain fitted well with its main aims and objectives and therefore was a product and a brand worth rescuing. Kellogg's aims included the development of great brands, great brand value and the promotion of healthy living.
Kellogg's decided to try to extend the life of the product rather than withdraw it from the market. This meant developing an extension strategy for the product.
Ansoff's matrix is a tool that helps analyse which strategy is appropriate. It shows both market-orientated and product-orientated possibilities.
Extending the Nutri-Grain cycle - identifying the problem
Kellogg's had to decide whether the problem with Nutri-Grain was the market, the product or both. The market had grown by over 15% and competitors' market share had increased whilst Nutri-Grain sales in 2003 had declined.
The market in terms of customer tastes had also changed more people missed breakfast and therefore there was an increased need for such a snack product.
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Extension strategies
The choice of extension strategy indicated by the matrix was either product development or diversification. Diversification carries much higher costs and risks.
Kellogg's decided that it needed to focus on changing the product to meet the changing market needs. Research showed that there were several issues to address:
The brand message was not strong enough in the face of competition. Consumers were not impressed enough by the product to choose it over competitors.
Some of the other Kellogg's products (e.g. Minis) had taken the focus away from the core business.
The core products of Nutri-Grain Soft Bake and Elevenses between them represented over 80% of sales but received a small proportion of advertising and promotion budgets. Those sales that were taking place were being driven by promotional pricing (i.e discounted pricing) rather than the underlying strength of the brand.
Implementing the extension strategy for Nutri-Grain
Having recognised the problems, Kellogg's then developed solutions to re-brand and re-launch the product in 2005.
Fundamental to the re-launch was the renewal of the brand image. Kellogg's looked at the core features that made the brand different and modelled the new brand image on these. Nutri-Grain is unique as it is the only product of this kind that is baked. This provided two benefits:
the healthy grains were soft rather than gritty
the eating experience is closer to the more indulgent foods that people could be eating (cakes and biscuits, for example)
The unique selling point, hence the focus of the brand, needed to be the 'soft bake'.
Researchers also found that a key part of the market was a group termed 'realistic snackers'. These are people who want to snack on healthy foods, but still crave a great tasting snack. The re-launched Nutri-Grain product needed to help this key group fulfil both of these desires.
Kellogg's decided to re-focus investment on the core products of Soft Bake Bars and Elevenses as these had maintained their growth (accounting for 61% of Soft Bake Bar sales). Three existing Soft Bake Bar products were improved, three new ranges introduced and poorly performing ranges (such as Minis) were withdrawn. New packaging was introduced to unify the brand image. An improved pricing structure for stores and supermarkets was developed.
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The marketing mix
Using this information, the re-launch focused on the four parts of the marketing mix:
Product improvements to the recipe and a wider range of flavours, repositioning the brand as 'healthy and tasty', not a substitute for a missed breakfast
Promotion a new and clearer brand image to cover all the products in the range along with advertising and point-of-sale materials
Place better offers and materials to stores that sold the product
Price new price levels were agreed that did not rely on promotional pricing. This improved revenue for both Kellogg's and the stores
As a result Soft Bake Bar year-on-year sales went from a decline to substantial growth, with Elevenses sales increasing by almost 50%.
The Nutri-Grain brand achieved a retail sales growth rate of almost three times that of the market and most importantly, growth was maintained after the initial re-launch.
Conclusion
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Successful businesses use all the tools at their disposal to stay at the top of their chosen market.
Kellogg's was able to use a number of business tools in order to successfully re-launch the Nutri-Grain brand. These tools included the product life cycle, Ansoff”s matrix and the marketing mix. Such tools are useful when used properly.
Kellogg's was able to see that although Nutri-Grain fitted its strategic profile a healthy, convenient cereal product it was underperforming in the market. This information was used, along with the aims and objectives of the business, to develop a strategy for continuing success.
Finally, when Kellogg's checked the growth of the re-launched product against its own objectives, it had met all its aims to:
re-position the brand through the use of the marketing mix return the brand to growth improve the frequency of purchase introduce new customers to the brand. Nutri-Grain remains a growing brand and product within the Kellogg's product family.
Bibliography :
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