Strategic Management Strategic Management in Product Lifecycle in Product Lifecycle

Divya Sindhu Lekha Divya Sindhu Lekha MTech (Technology Management) ‘08-’10, MTech (Technology Management) ‘08-’10, Dept. of Futures Studies, Kerala UniversityDept. of Futures Studies, Kerala University

IntroductionIntroduction

Lifecycle – The period from the Lifecycle – The period from the product’s first launch to the market product’s first launch to the market until its final withdrawaluntil its final withdrawal

Split up in phases. Split up in phases. Lifecycle management by strategic Lifecycle management by strategic

planning.planning. Helps to identifyHelps to identify Time to introduce product into marketTime to introduce product into market Time to withdraw a product from marketTime to withdraw a product from market Product’s position in market (compared to Product’s position in market (compared to

competitors)competitors) Product’s success/ failure.Product’s success/ failure.

Product Lifecycle ModelProduct Lifecycle Model

Five major phases:Five major phases:1.1. Product development phaseProduct development phase2.2. Product introduction phaseProduct introduction phase3.3. Product growth phaseProduct growth phase4.4. Product maturity phaseProduct maturity phase5.5. Product decline phaseProduct decline phase Applicable to all products/ services.Applicable to all products/ services. Phases can be split up into smaller Phases can be split up into smaller

ones depending on the product.ones depending on the product.

Product LifecycleProduct Lifecycle

Product Development PhaseProduct Development Phase

Begins when a firm finds and Begins when a firm finds and develops a new product idea.develops a new product idea.

Product introduced to a Product introduced to a test test marketmarket..

If survives, introduce to real If survives, introduce to real market.market.

Sales = zero, Revenue = negativeSales = zero, Revenue = negative Period of spending with Period of spending with absolute absolute

no return.no return.

Product Introduction PhaseProduct Introduction Phase

Product launch.Product launch. ““Money sinkholeMoney sinkhole” – Large ” – Large

expenditure on promotion and expenditure on promotion and advertising, costly service advertising, costly service requirements, distribution requirements, distribution arrangements.arrangements.

Aggressive pricing policy.Aggressive pricing policy. Formulate market strategy – Market Formulate market strategy – Market

research, define appropriate market research, define appropriate market mix.mix.

Introduction PhaseIntroduction PhasePricePrice High, Early adoptersHigh, Early adopters

DevelopmentDevelopment Focus on time to market and uniquenessFocus on time to market and uniqueness

PromotionPromotion Limited. Highly targeted at specific customers.Limited. Highly targeted at specific customers.

ManufacturingManufacturing High expenditure for new production capacityHigh expenditure for new production capacity

DistributionDistribution Direct or limited distribution through specific Direct or limited distribution through specific strategic partners.strategic partners.

ServiceService High level of service for targeted customers.High level of service for targeted customers.

SalesSales Small team of highly skilled salesmen.Small team of highly skilled salesmen.

SupportSupport Direct factory support. Engineering Direct factory support. Engineering involvement.involvement.

TrainingTraining Focused on new product features, benefits, Focused on new product features, benefits, differentiation, pricing and functionalitydifferentiation, pricing and functionality

CompetitionCompetition Limited. Limited.

Technology Technology New and competitiveNew and competitive

Market shareMarket share Low Overall.Low Overall.

Product Growth PhaseProduct Growth Phase

Product takeoff in market.Product takeoff in market. Focus on increasing market share.Focus on increasing market share. Introduce differentiated products.Introduce differentiated products. Impose barriers by means of IPRs, Impose barriers by means of IPRs,

product complexity and low product complexity and low availability of product components.availability of product components.

Develop 1)cost efficiency 2)time-to-Develop 1)cost efficiency 2)time-to-market 3)pricing and discount policymarket 3)pricing and discount policy

Don’t be over committing.Don’t be over committing.

Growth PhaseGrowth PhasePricePrice 10% of market share – 10% if weak brand 10% of market share – 10% if weak brand

name and severe competition; +10% if good name and severe competition; +10% if good sales.sales.

DevelopmentDevelopment Complete development to sustain market Complete development to sustain market penetration.penetration.

PromotionPromotion Heavy. Targeted promotions, trade shows, Heavy. Targeted promotions, trade shows, press releasespress releases

ManufacturingManufacturing Addition of capacity and automation.Addition of capacity and automation.

DistributionDistribution Highly skilled. Focused channels with strong Highly skilled. Focused channels with strong technical skills.technical skills.

ServiceService Local and regional, fully staffed.Local and regional, fully staffed.

SalesSales Everywhere possible. Retail shops, telephone, Everywhere possible. Retail shops, telephone, internet.internet.

SupportSupport Phone supportPhone support

TrainingTraining Transition to newer version of product.Transition to newer version of product.

CompetitionCompetition New appearing worldwide.New appearing worldwide.

Technology Technology Newer and leading edge.Newer and leading edge.

Market shareMarket share High growth.High growth.

Product Maturity PhaseProduct Maturity Phase

““Period of highest returnsPeriod of highest returns.”.” Introduce new brands.Introduce new brands. Try to extend product’s life.Try to extend product’s life. Focus on maintaining quality Focus on maintaining quality

and reliability.and reliability. Multi distribution channels.Multi distribution channels.

Maturity PhaseMaturity PhasePricePrice StableStable

DevelopmentDevelopment Focused on cost reduction.Focused on cost reduction.

PromotionPromotion Focused on reliability, quality, predictability, Focused on reliability, quality, predictability, new enhancements.new enhancements.

ManufacturingManufacturing Focused on increasing yield and productivity.Focused on increasing yield and productivity.

DistributionDistribution Many distributions, alternative channels, Many distributions, alternative channels, offshore sales.offshore sales.

ServiceService Distributors take over the service efforts.Distributors take over the service efforts.

SalesSales Direct sales focused on hi-volume, high-profit.Direct sales focused on hi-volume, high-profit.

SupportSupport Local channels lead support.Local channels lead support.

TrainingTraining Competition differentiation.Competition differentiation.

CompetitionCompetition Well established.Well established.

Technology Technology AgeingAgeing

Market shareMarket share Predictable market share every year. Limited Predictable market share every year. Limited opportunities for quick gains.opportunities for quick gains.

Product Decline PhaseProduct Decline Phase

Difficult to conceptualize the decline Difficult to conceptualize the decline signals of a product.signals of a product.

High price policy to 1)increase profit High price policy to 1)increase profit margin 2)gradually discourage the margin 2)gradually discourage the “few” loyal customers.“few” loyal customers.

Start withdrawing variations of the Start withdrawing variations of the product from market.product from market.

Pull back promotion.Pull back promotion. Narrow down distribution.Narrow down distribution.

Decline PhaseDecline PhasePricePrice High compared to the demandHigh compared to the demand

DevelopmentDevelopment Focused on cost reductionFocused on cost reduction

PromotionPromotion Limited. No promotion or advertising efforts.Limited. No promotion or advertising efforts.

ManufacturingManufacturing No capital expenditure. Outsourcing.No capital expenditure. Outsourcing.

DistributionDistribution Use existing channels.Use existing channels.

ServiceService High price on spare parts.High price on spare parts.

SalesSales Maintenance and repair oriented for hi-tech Maintenance and repair oriented for hi-tech products.products.

SupportSupport Pone support.Pone support.

TrainingTraining None.None.

CompetitionCompetition Limited.Limited.

Technology Technology Old and outdated.Old and outdated.

Market shareMarket share Shrinking fast.Shrinking fast.

Strategies of each product lifecycle phaseStrategies of each product lifecycle phase

DevelopDevelop IntroIntro GrowthGrowth MaturityMaturity DeclineDecline

Strategic Strategic goalgoal

Make Make your your product product known known and and establish establish a test a test periodperiod

Acquire a Acquire a strong strong market market position.position.

Maintain Maintain your your market market position position and build and build on it.on it.

Defend Defend market market position position from from competitors competitors and and improve improve your your product.product.

““Milk” all Milk” all remaining remaining profits from profits from product.product.

CompeitionCompeition Almost Almost not there.not there.

Early entry Early entry of of aggressive aggressive competitorcompetitors into s into market.market.

Price and Price and distribution distribution channel channel pressure.pressure.

EstablishmeEstablishment of nt of competitive competitive environmenenvironment.t.

Some Some competitors competitors are already are already withdrawing.withdrawing.

CompeitionCompeition Almost Almost not there.not there.

Early entry Early entry of of aggressive aggressive competitorcompetitors into s into market.market.

Price and Price and distributiodistribution channel n channel pressure.pressure.

Establishment Establishment of competitive of competitive environment.environment.

Some Some competitors competitors are already are already withdrawing.withdrawing.

ProductProduct Limited Limited number number of of variationsvariations..

IntroductioIntroduction of n of product product variations variations and and models.models.

ImproveImprovement – ment – upgradatiupgradation of on of poduct.poduct.

Price Price decreases.decreases.

Variations Variations and models and models that are not that are not profitable are profitable are withdrawn.withdrawn.

Price goalPrice goal High High sales to sales to middle middle men.men.

Aggressive Aggressive p[rice p[rice policy.policy.

Re-Re-estimatioestimation of price n of price policy.policy.

Defensive Defensive price policy.price policy.

Maintatin Maintatin price level price level for small for small profit.profit.

Promotion Promotion goalgoal

Creation Creation of public-of public-market market product product awarenesawareness.s.

ReinforcemReinforcement of ent of product product awareness awareness and and preference.preference.

ReinforcemReinforcement of ent of middlemen.middlemen.

Maintain Maintain loyalty to loyalty to middlemen.middlemen.

Gradual Gradual decrease.decrease.

Distribution Distribution goalgoal

Exclusive Exclusive and and selective selective distributiodistribution through n through certain certain channels channels and and creation of creation of high profit high profit margins margins for middle for middle men.men.

General General and and reinforced reinforced distribution distribution through all through all channels channels available.available.

General General and and reinforced reinforced distribution distribution with good with good supply to supply to the middle the middle men but men but with low with low margins of margins of profit for profit for them.them.

General General and and reinforced reinforced distribution distribution with good with good supply to supply to the middle the middle men but men but with low with low margins of margins of profit for profit for them.them.

Withdrawal Withdrawal from most from most channels of channels of distribution distribution except except those used those used in the in the developmedevelopment phase.nt phase.

ReferencesReferences

Strategic Management – Hugh Strategic Management – Hugh Macmillan, Mahen TamporeMacmillan, Mahen Tampore

Strategic Management – Strategic Management – Building and sustaining Building and sustaining competitive advantage – Robert competitive advantage – Robert A. Pitts, David LeiA. Pitts, David Lei

Product lifecycle management – Product lifecycle management – URENIO, Aristotle University of URENIO, Aristotle University of Thessalonites.Thessalonites.