product life cycle strategies.docx

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Product Life Cycle

The product life cycle describes the sales pattern of a product over time. Generally, the time span beginswith product introduction and ends with its obsolescence and replacement. While the form of the life cycle isfairly standard, it is subject to variations. The concept underlying the premise of product life cycle is that allproducts pass through the stages outlined below and illustrated inChart 1.

Basic Stages in the Product Life Cycle

Development Stage Growth stage Maturity stage Decline stage

The first of these stages, the development stage, represents a slow growth period. It is assumed that newly

released products require some time to gain market acceptance, so sales in the initial period are slow.

If the product introduction proved successful, rapid growth stages are reached and sales increase markedly.According to the concept of the life cycle, the market for any product is limited, and sales will generally fallshort of their potential. When this point is reached, the market enters the maturation stage. The life cycle

goes further to assume that each product eventually is replaced by another or that initial rapid growth willend in decline.

If a product enters a market that has already moved into the mature stage, competition is intense becausethe product must compete for a share of an existing market that is not experiencing growth. Once themarket enters the decline stage, new products are not entering the market and demand levels are falling. Atthis point, the objective is to increase market share to maintain stable sales levels.

Methods of Measurement

The concept of the product life cycle has become central to market forecasting. The stages of the life cycleform a framework that you can use to analyze the dynamics and the primary factors that can impact amarket segment and product sales.

The basic stages of the product life cycle can be expanded into a more-comprehensive model that better

explains the various parts of the life of a product in the market. The list below outlines the various stages ofthe expanded product life cycle concept.

Stages of the Expanded Product Life Cycle

1. Research and development2. Product introduction3. Development of the market4. Exploitation5. Market maturation6. Market saturation7. Market decline

To calculate or measure at what stage of its life cycle a given market is, the following parameters need to be

measured and monitored:

Investment in R&D by year Number of competitors in the market by year Number of competitors that entered the market by year Number of competitors that left the market by year Market growth rate by year Market size by year
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Industry profitability by year Investment in marketing (such as advertising, trade shows, and direct sales forces) by year

The measurement of these parameters over time will help you determine what stage a given market is in.Figure 1 below has been developed to aid you in making this determination:

Figure 1 - Market/Product Age: How to Measure the Stage of the Product Life Cycle

StageNo. of

CompetitorsMarket

Growth (%)Profits Market Size Investment

R&D Unknown 0 0 0 Growing

ProductIntroduction

Few Highest 0 Small High

Development Growing Fast High Low Small High

ExploitationModerateGrowth

Good Growing Modest High

Maturation Stable Low High Largest Stable

Saturation Stable None Lowering Stable Declining

Decline Reducing Negative High & Low Declining Stopped

Note: All figures are rounded. Source: Frost & Sullivan

During the R&D stage, profits are nonexistent. In certain rare circumstances, profits are made early in thelife cycle. However, generally profits are not made until the development of the market stage. It is usually atthis point that products that have not reached profitability are withdrawn from the market.

Profits reach their zenith during the exploitation stage; the maturation stage and saturation stages are

characterized by steady to declining profits. The declines in profits typical during these stages are attributedto increased competition. Profits will continue to decline to the point where they no longer exist, and losses

will take hold during the product decline stage.

Thus, the life cycle is vital as a planning tool because the extent of profit changes during each stage of the

life cycle. Forecasting and market planning over the medium term can be performed effectively using theproduct life cycle segments as the timing stages. The marketing strategies used will have to be modified asthe product passes through each stage of the cycle.

What Does Market/Product Age Really Tell You?

Recognizing the current stage of the life cycle for a product type is vital to a firm considering the

introduction of a product of that type. It is considerably easier to enter a market in a growth stage than it isto enter a saturated, mature marketplace. Levels of competition in markets experiencing growth areconsiderably less intense than in mature markets, where competitors are concerned about loss of sales andmarket share. Introducing a product into a market characterized by intense competition will probably proveexpensive and result in retaliation from established competitors.

The product life cycle can be used to determine likely competitive trends. The list below outlines the typical

levels of competition for each stage of the life cycle process.

Typical Competition for Each Product Life Cycle Stage

Product Introduction

Levels of competition are practically non-existent since the company introducing the product can be the solesupplier.

Market Development

The market is still dominated by the product innovator, but other companies have entered the market and


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developed smaller shares.

Exploitation Stage

A single company usually remains the primary force in the market although it may not be the productoriginator. The product innovator may have been overtaken by subsequent market entrants. In addition, the

market leader may be fending off leadership challenges from other large competitors. Generally, the leading

company's share will experience decline over this period as competitive activity in the market continues.

Maturation Stage

The leading company usually still holds its leadership position, but its share is smaller than that of all othermarket competitors together.

Saturation Stage

A host of smaller companies are all engaged in trying to secure a market niche they can dominate. Towardsthe conclusion of the saturation period, three of four competitors typically emerge to dominate the market.

Vigorous marketing allows these competitors to hold the majority share.

Decline Stage

The market leader during the saturation stage may be replaced by a competitor better suited to competingin small, contracting markets. As specialized market segments continue to decline in scale, larger-scaleproducers cease to perceive them as profitable. Sales typically diminish across the board as productsbecome more obsolete and are replaced by newer technology.

The primary reason for stressing the importance of the product life cycle is that for each stage or segment ofthe life cycle a different marketing strategy will prove best in meeting the unique demands of that stage ofthe life cycle.

Market factors such as demand and supply are changing constantly as they pertain to your company,market, and industry, so a detailed knowledge of the appropriate product life cycle can make your market

strategy more timely and effective.

Strategies:

Strategies for Introductory stage


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Strategies for Growth stage

During the growth stage, the firm uses several strategies to sustain rapid market growth.

protect the main product).

- awareness advertising to product- preference advertising.

ext layer of pricesensitive buyers.

Strategies for Maturity stageThree potentially useful ways to change the course for a brand are market, product, and marketing

program modification.

Market Modification

Sales volume = no. of brand users * usage rate per user.

Expand the no. of brand users

Convert nonusers

Enter new market segments

Attract competitors customers

Increase the usage rate among users

Have consumers use the product on more occasions.

Have consumers use more of the product on each occasion

Have consumers use the product in new ways.

Product modification

Trying to stimulate sales by modifying the products characteristics through

Quality improvement

Aims at increasing the products functional performance. Eg: Aashirvaad, Annapoorna, Pillsbury,

Naturefresh

Feature improvement


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Aims at adding new features, such as size, weight, materials, additives, and accessories, that expand the

products performance, versatility, safety, or convenience.

Style improvement

Aims at increasing the products esthetics appeal. Eg; New car models, New Coke

Decline Stage

Increase investment

Resolve uncertainties - stable investment

Selective niches

Harvesting

Divesting

To establish a system for identifying weak products.

Some firms abandon declining markets earlier than others.

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