Amity Business School

Amity Business School

Product Life Cycle

Amity Business SchoolDefinition

• Product Life Cycle (PLC) deals with the life of a product in the market with respect to business or commercial costs and sales measures

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• Every Product has a limited life• Product sales pass through distinct stages, each

posing different challenges, Opportunities, and Problems to the seller

• Profits rise and fall at different stages of the Product Life Cycle

• Products require different Marketing, Financial, Manufacturing, Purchasing and Human Resource Strategies in each Life Cycle stage.

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Product Life Cycle Stages

Amity Business SchoolIntroduction

a. Costs are highb. Slow sales volumes to startc. Little or no competition - competitive

manufacturers watch for acceptance/segment growth losses

d. Demand has to be createde. Customers have to be prompted to try

the productf. Makes no money at this stage

Conti….

Amity Business SchoolGrowth

a. Costs reduced due to economies of scale

b. Sales volume increases significantly

c. Profitability begins to rise

d. Public awareness increases

e. Competition begins to increase with a few new players in establishing market

f. Increased competition leads to price decreases

Conti…

Amity Business SchoolMaturity

3. a. Costs are lowered as a result of production volumes increasing and

experience curve effectsb. Sales volume peaks and market saturation is reachedc. Increase in competitors entering the marketd. Prices tend to drop due to the proliferation of competing productse. Brand differentiation and feature diversification

is emphasized to maintain or increase market sharef. Industrial profits go down

Conti….

Amity Business SchoolSaturation and Decline

a. Costs become counter-optimal

b. Sales volume decline or stabilize

c. Prices, profitability diminish

d. Profit becomes more a challenge of production/distribution efficiency than

increased sales

Amity Business SchoolStrategies for the differing stages of the Product Life Cycle.Introduction.

• The need for immediate profit is not a pressure. The product is promoted to create awareness. If the product has no or few competitors, a skimming price strategy is employed. Limited numbers of product are available in few channels of distribution.

Amity Business SchoolGrowth

• Competitors are attracted into the market with very similar offerings. Products become more profitable and companies form alliances, joint ventures and take each other over. Advertising spend is high and focuses upon building brand. Market share tends to stabilise.

Amity Business SchoolMaturity

• Those products that survive the earlier stages tend to spend longest in this phase. Sales grow at a decreasing rate and then stabilise. Producers attempt to differentiate products and brands are key to this. Price wars and intense competition occur. At this point the market reaches saturation. Producers begin to leave the market due to poor margins. Promotion becomes more widespread and use a greater variety of media.

Amity Business SchoolDecline

• At this point there is a downturn in the market. For example more innovative products are introduced or consumer tastes have changed. There is intense price-cutting and many more products are withdrawn from the market. Profits can be improved by reducing marketing spend and cost cutting.

Amity Business SchoolClassification of New Products

• Marketing Innovations:

The actual product is not changed and the habits of the consumer also need not to be changed, only a few alternatives are done. Eg. Packaging, branding, easy availability etc.

Maggi

Juices

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• Product Improvements

when a little improvement is done to the existing product. Like 100 cc scooters, Tubeless tyres, Digi Cams etc.

These are normally targeted to a new segment of buyers.

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• Technological Innovations

personal Computers, Photo copiers

Here early entrants enjoy the major market leadership.

Amity Business SchoolNew Product Development

• Transfer of Technology

• Penetration of New Market

• New Product Lines

• Product Line Extensions

• Cost Reduction

• Repositioning or New Product Launch

Amity Business SchoolTransfer of technology

• This is more of an adoption of any product.

New products are often launched on the basis of new technology.

It can be acquired from the parent company or with foreign collaboration.

Eg. Personal Computers

Amity Business SchoolDiversification

• Eg. ITC venturing into Paper Products, FMCG Etc.

Bombay Dieing Venturing into Real Estate Business.

Amity Business SchoolAdditions to existing product line

• Eg. Godrej extension from Durable like Refrigerators to Office equipment etc.

• Videocon entered into washing machine and Music Systems etc.

Amity Business SchoolImprovement in existing product

• New product which offers superior performance than the existing one and replace it.

• Eg. Gramophones and record players have been replaced by cassette players and now CD players.

Amity Business SchoolCost Reduction

• New product which provides similar performance at lower cost.

Classic Eg. Nirma

Amity Business SchoolProduct Re-launch

• Some times old products are re-launched with little improvements.

• Eg. Tata Tea, Maggie

Amity Business SchoolNew Product development process

• Idea Generation

• Screening

• Business Analysis

• Prototype Development

• Test Marketing

• Commercialization

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Home Assignment:

• Details of New Product Development

Submitted on 8th of September.

Individual Assignments only.

Will be marked

Hand written

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Thank You