PRODUCT LIFE CYCLE

All products and services have certain life cycles. The life cycle refers to the period from the product’s first launch into the market until its final withdrawal and it is split up in phases. During this period significant changes are made in the way that the product is behaving into the market i.e. its reflection in respect of sales to the company that introduced it into the market. Since an increase in profits is the major goal of a company that introduces a product into a market, the product’s life cycle management is very important.

The understanding of a product’s life cycle, can help a company to understand and realize when it is time to introduce and withdraw a product from a market, its position in the market compared to competitors, and the product’s success or failure. For a company to fully understand the above and successfully manage a product’s lifecycle, needs to develop strategies and methodologies.

All products have a life cycle; the concept of the product life cycle has been based on the life cycle of biological organisms, and like the different life stages of biological organisms, products too have definite life stages. Each stage of the life cycle poses different challenges and opportunities to the company, because of which products require different marketing, financial, manufacturing, and purchasing and resource strategies at each stage.

The life cycle curve is portrayed as bell-shaped curve, representing the product sales over a period of time. The curve is divided typically into five stages: introduction, growth, maturity, decline and obsolescence.

The PLC concept is used to analyze the life cycle of a product category (mobile phones), product form (monochrome handsets) or a technology (CDMA). The PLC concept cannot be effectively used to analyze a brand’s life cycle, which is a completely different concept. A product’s lifecycle curve i.e. the sales curve of the product represents the combined sales for the entire category, not the sales of an individual firm’s product. A brand’s life cycle on the other hand, represents the sales of a particular brand and may not follow the product category’s life cycle curve. The brand’s sales curve is dependent on the strategic actions of the individual firm; a brand may have gone into decline even though the product category is in the growth phase, because of incorrect strategies employed by the company.

PRODUCT LIFE CYCLE MODEL DESCRIPTION

The product’s life cycle - period usually consists of five major steps or phases: Product development, Product introduction, Product growth, Product maturity and finally Product decline. These phases exist and are applicable to all products or services from a certain make of automobile to a multimillion-dollar lithography tool to a one-cent capacitor. These phases can be split up into smaller ones depending on the product and must be considered when a new product is to be introduced into a market since they dictate the product’s sales performance.

PRODUCT DEVELOPMENT PHASE

Product development phase begins when a company finds and develops a new product idea. This involves translating various pieces of information and incorporating them into a new product. A product is usually undergoing several changes involving a lot of money and time during development, before it is exposed to target customers via test markets. Those products that survive the test market are then introduced into a real marketplace and the introduction phase of the product begins. During the product development phase, sales are zero and revenues are negative. It is the time of spending with absolute no return.

INTRODUCTION PHASE

The introduction phase of a product includes the product launch with its requirements to getting it launch in such a way so that it will have maximum impact at the moment of sale. A good example of such a launch is the launch of “Windows XP” by Microsoft Corporation.This period can be described as a money sinkhole compared to the maturity phase of a product. Large expenditure on promotion and advertising is common, and quick but costly service requirements are introduced. A company must be prepared to spend a lot of money and get only a small proportion of that back. In this phase distribution arrangements are introduced. Having the product in every counter is very important and is regarded as an impossible challenge. Some companies avoid this stress by hiring external contractors or outsourcing the entire distribution arrangement. This has the benefit of testing an important marketing tool such as outsourcing.Pricing is something else for a company to consider during this phase. Product pricing usually follows one or two well structured strategies. Early customers will pay a lot for something new and this will help a bit to minimize that sinkhole that was mentioned earlier. Later the pricing policy should be more aggressive so that the product can become competitive. Another strategy is that of a pre-set price believed to be the right one to maximize sales. This however demands a very good knowledge of the market and of what a customer is willing to pay for a newly introduced product.A successful product introduction phase may also result from actions taken by the company prior to the introduction of the product to the market. These actions are included in the formulation of the marketing strategy. This is accomplished during product development by the use of market research. Customer requirements on design, pricing, servicing and packaging are invaluable to the formation of a product design. A customer can tell a company what features of

the product is appealing and what are the characteristics that should not appear on the product. He will describe the ways of how the product will become handy and useful. So in this way a company will know before its product is introduced to a market what to expect from the customers and competitors. A marketing mix may also help in terms of defining the targeted audience during promotion and advertising of the product in the introduction phase.

GROWTH PHASE

The growth phase offers the satisfaction of seeing the product take-off in the marketplace. This is the appropriate timing to focus on increasing the market share. If the product has been introduced first into the market, (introduction into a “virgin”1 market or into an existing market) then it is in a position to gain market share relatively easily. A new growing market alerts the competition’s attention.The company must show all the products offerings and try to differentiate them from the competitors’ ones. A frequent modification process of the product is an effective policy to discourage competitors from gaining market share by copying or offering similar products. Other barriers are licenses and copyrights, product complexity and low availability of product components.Promotion and advertising continues, but not in the extent that was in the introductory phase and it is oriented to the task of market leadership and not in raising product awareness. A good practice is the use of external promotional contractors.This period is the time to develop efficiencies and improve product availability and service. Cost efficiency and time-to-market and pricing and discount policy are major factors in gaining customer confidence. Good coverage in all marketplaces is worthwhile goal throughout the growth phase.Managing the growth stage is essential. Companies sometimes are consuming much more effort into the production process, overestimating their market position.Accurate estimations in forecasting customer needs will provide essential input into production planning process. It is pointless to increase customer expectations and product demand without having arranged for relative production capacity. A company must not make the mistake of over committing. This will result into losing customers not finding the product “on the self”.

MATURITY PHASE

When the market becomes saturated with variations of the basic product, and all competitors are represented in terms of an alternative product, the maturity phase arrives. In this phase market share growth is at the expense of someone else’s business, rather than the growth of the market itself. This period is the

period of the highest returns from the product. A company that has achieved its market share goal enjoys the most profitable period, while a company that falls behind its market share goal, must reconsider its marketing positioning into the marketplace.During this period new brands are introduced even when they compete with the company’s existing product and model changes are more frequent (product, brand, and model). This is the time to extend the product’s life.Pricing and discount policies are often changed in relation to the competition policies i.e. pricing moves up and down accordingly with the competitors’ one and sales and coupons are introduced in the case of consumer products. Promotion and advertising relocates from the scope of getting new customers, to the scope of product differentiation in terms of quality and reliability.The battle of distribution continues using multi distribution channels2. A successful product maturity phase is extended beyond anyone’s timely expectations. A good example of this is “Tide” washing powder, which has grown old, and it is still growing.

DECLINE PHASE

The decision for withdrawing a product seems to be a complex task and there a lot of issues to be resolved before with decide to move it out of the market. Dilemmas such as maintenance, spare part availability, service competitions reaction in filling the market gap are some issues that increase the complexity of the decision process to withdraw a product from the market. Often companies retain a high price policy for the declining products that increase the profit margin and gradually discourage the “few” loyal remaining customers from buying it. Such an example is telegraph submission over facsimile or email. Dr. M. Avlonitis from the Economic University of Athens has developed a methodology, rather complex one that takes under consideration all the attributes and the subsequences of product withdrawal process.Sometimes it is difficult for a company to conceptualize the decline signals of a product. Usually a product decline is accompanied with a decline of market sales. Its recognition is sometimes hard to be realized, since marketing departments are usually too optimistic due to big product success coming from the maturity phase.This is the time to start withdrawing variations of the product from the market that are weak in their market position. This must be done carefully since it is not often apparent which product variation brings in the revenues.The prices must be kept competitive and promotion should be pulled back at a level that will make the product presence visible and at the same time retain the “loyal” customer. Distribution is narrowed. The basic channel is should be kept efficient but alternative channels should be abandoned.

MARKETING RESEARCH

Research is the only tool an organization has to keep in contact with its external operating environment. In order to be proactive and change with the environment simple questions need to be asked:

• How are customers needs changing? Can you meet these changing needs? What do your customers think about existing products or services?

• How are competitors operating within the environment? Are their strategies exceeding or influencing yours? What should you do?

• How are macro and micro environmental factors influencing your organization? Again how will you react?

As witnessed with the UK retail clothing group C&A, failure to react to the changing needs of its customers within its environment has resulted in C&A closing all their UK retail stores. Marks and Spencers also face an uncertain future. Research tells them that customers feel that the stores and clothes are outdated. M&S are now rushing out new lines and experimenting with new concept stores to retain existing and attract potential new customers. In the world of credit it is just recently that M&S are excepting credit cards!

Market Research and Marketing Research a difference:

A common mistake by many students, lecturers and textbooks is that there is no understanding of the clear distinction between market research and marketing research.

Market Research: Involves researching specific industries or markets. Researching the computer industry to discover the number of competitors and their market share will be an example of market research.

Marketing Research: Marketing Research goes further. Marketing Research analyses a given marketing opportunity or problem, defines the research and data collection methods required to deal with the problem or take advantage of the opportunity, through to the implementation of the project. In essence marketing research aims to discover the root cause for a specific problem within an organization (eg. declining sales) and put forward solutions to that problem.

TATA MOTORS

HISTORY

Tata Motors is a part of the Tata and Sons Group, founded by Jamshetji Tata and J. Baker. The company was established in 1945 as a locomotive manufacturing unit and later expanded its operations to commercial vehicle sector in 1954 after forming a joint venture with Daimler-Benz AG of Germany. Early years Tata Motors launches its first truck in collaboration with Mercedes-Benz. Tata Motors started its commercial vehicle operations in 1960 with the manufacturing of first commercial vehicle (a copy of a Daimler Benz model) in Pune. It took five years for the company to begin the commercial production of heavy commercial vehicles. Considering the road infrastructure of the country which does not support heavy vehicles, the company adopted a route for light commercial vehicles (LCV). It came out with its first LCV, Tata 407, in 1986. Post liberalization, in order to expand rapidly, the company adopted the route to joint ventures. In 1993, it signed with Cummins Engine Co., Inc., for the manufacture of high horsepower and emission friendly diesel engines. It was an effort made to reduce the pollution in the existing Tata engines and to produce more environmentally friendly engines. Furthering the trail of JVs it signed a joint venture agreement with Tata Holset Ltd., UK, for manufacturing turbochargers to be used on Cummins engines.

INTRODUCTION

Tata Motors Limited is India’s largest automobile company, with revenues of Rs. 35651.48 Crores (USD 8.8 billion) in 2007-08. It is the leader in commercial vehicles in each segment, and among the top three in passenger vehicles with winning products in the compact, midsize car and utility vehicle segments. The company is the world’s fourth largest truck manufacturer, and the world’s second largest bus manufacturer. The company’s 23,000 employees are guided by the vision to be “best in the manner in which we operate best in the products we deliver and best in our value system and ethics.” Established in 1945, Tata Motors’ presence indeed cuts across the length and breadth of India. Over four million Tata vehicles ply on Indian roads, since the first rolled out in 1954. The company’s manufacturing base in India is spread across Jamshedpur (Jharkhand), Pune (Maharashtra), Lucknow (Uttar Pradesh) and Pantnagar (Uttarakhand). Following a strategic alliance with Fiat in 2005, it has set up an industrial joint venture with Fiat Group Automobiles at Ranjangaon (Maharashtra) to produce both Fiat and Tata cars and Fiat powertrains. The company is establishing two new plants at Dharwad (Karnataka) and Sanand (Gujarat). The company’s dealership, sales, services and spare parts network comprises over 3500 touch points; Tata Motors also distributes and markets Fiat branded cars in India. Tata Motors, the first company from India’s engineering sector to be listed in the New York Stock Exchange (September 2004), has also emerged as an international automobile company. Through subsidiaries and associate companies, Tata Motors has operations in the UK, South Korea, Thailand and Spain.

In 2004, it acquired the Daewoo Commercial Vehicles Company, South Korea’s second largest truck maker. Today two-thirds of heavy commercial vehicle exports out of South Korea are from Tata Daewoo. In 2005, Tata Motors acquired a 21% stake in Hispano Carrocera, a reputed Spanish bus and coach manufacturer, with an option to acquire the remaining stake as well. In 2006, it formed a joint venture with the Brazil-based Marcopolo, a global leader in body-building for buses and coaches to manufacture fully-built buses and coaches for India and select international markets. Tata Motors is also expanding its international footprint, established through exports since 1961. The company’s commercial and passenger vehicles are already being marketed in several

countries in Europe, Africa, the Middle East, South East Asia, South Asia and South America. It has franchisee/joint venture assembly operations in Malaysia, Kenya, Bangladesh, Ukraine, Russia and Senegal.

The foundation of the company’s growth over the last 50 years is a deep understanding of economic stimuli and customer needs, and the ability to translate them into customer-desired offerings through leading edge R&D. With over 2,500 engineers and scientists, the company’s Engineering Research Centre, established in 1966, and has enabled pioneering technologies and products. The company today has R&D centers in Pune, Jamshedpur, Lucknow, in India, and in South Korea, Spain, and the UK.

It was Tata Motors, which developed the first indigenously developed Light Commercial Vehicle, India’s first Sports Utility Vehicle and, in 1998, the Tata Indica, India’s first fully indigenous passenger car. Within two years of launch, Tata Indica became India’s largest selling car in its segment. In 2005, Tata Motors created a new segment by launching the Tata Ace, India’s first indigenously developed mini-truck In January 2008, and Tata Motors unveiled its People’s Car, the Tata Nano, which India and the world have been looking forward to.

The years to come will see the introduction of several other innovative vehicles, all rooted in emerging customer needs. Besides product development, R&D is also focusing on environment-friendly technologies in emissions and alternative fuels. Through its subsidiaries, the company is engaged in engineering and automotive solutions, construction equipment manufacturing, automotive vehicle components manufacturing and supply chain activities, machine tools and factory automation solutions, high-precision tooling and plastic and electronic components for automotive and computer applications, and automotive retailing and service operations.

True to the tradition of the Tata Group, Tata Motors is committed in letter and spirit to Corporate Social Responsibility. It is a signatory to the United Nations Global Compact, and is engaged in community and social initiatives on labour and environment standards in compliance with the principles of the Global Compact. In accordance with this, it plays an active role in community development, serving rural communities adjacent to its manufacturing locations. With the foundation of its rich heritage, Tata Motors today is etching a refulgent future.

HISTORY OF TATA INDICA

In September 1995, Ratan Tata, Chairman of Tata Motors Ltd., had a dream. A dream he believed he shared with every Indian. "We'll have a car with the Zen's size, the Ambassador's internal dimensions, and the price of a Maruti 800". In December 1998 Tata Motors Ltd., pioneer in Indian automobile industry, launched Tata Indica - India's first indigenously designed & manufacture hatchback cars. Tata Indica car was the epitome of the vision for every Indian that Ratan Tata had. Ease of maneuverability, small-size with large space, comfortable with safety of passengers are the striking features that are accredited to Tata Indica. Since its launch Tata Indica saw number of changes in its technology combined with the state-of-the-art features. Tata Indica has been launched in three upgraded versions as Indica V2 (in year 2002), Indica V2 Turbo (in year 2005) & Indica V2 Xeta (in year 2006), Available for sale in sizzling colors and competitive price these upgraded versions of Tata Indica are going neck-to-neck with its rivals like Chevrolet Spark, Hyundai Santro Xing, Hyundai Getz Prime, Maruti Zen Estilo and Maruti Suzuki Wagon-R.

PRODUCT LIFE CYCLE OF TATA INDICA

INDICA is a brand that is an epitome of persistence. Tata Motors through Indica has demonstrated how to manage product lifecycle effectively. The brand which was launched in 1998 has passed through many hurdles.

Product Life Cycle Graph

1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-20070

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TATA INDICA

TATA INDICA

INTRODUCTARY 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.

In 1998, Tata Motors developed the first indigenously developed Light Commercial Vehicle, India’s first Sports Utility Vehicle, the Tata Indica, India’s first fully indigenous passenger car. Within two years of launch, Tata Indica became India’s largest selling car in its segment. The brand successfully transcended the initial flaws, bad customer /expert reviews and brickbats to become one of the largest selling cars in the Indian auto industry.

GROWTH STAGE

The brand survived and thrived because of the constant focus of Tata Motors to improve the product continuously. More than the product innovation, it was the value proposition that forced customers to choose Indica despite all those nagging troubles. You can see lot of Indica customers cribbing about the bad service and constant trip to the service centers but sticking to the brand because of the value proposition. You cannot get a diesel car with that much space at the price at which Indica is selling (so far).Tata Motors has been continuously tweaking the brand over these years sometimes making quantum leap in the quality and refinement of the product.

MATURITY STAGE

When first launched, the Indica prompted many complaints from early purchasers, who claimed that the vehicle did not deliver horsepower and gas mileage as promised.  In response to the customer complaints, Tata Motors re-engineered the internals of the car and launched it as Indica V2 (version 2), which solved most of the complaints and emerged as one of the most sought after cars in the Indian automobile industry sing the Product Strategy. Later, it was again updated, now marketed as the "Refreshingly New Indica V2". This was followed by the next variant of Indica, current in early 2008, called the Indica V2 Xeta Petrol.

The Product Strategy at this stage aims at reviving the life cycle of the product through either a major technological innovation or by expanding usage of the existing product through new uses and use situations.

Presenting here in brief the different Tata Indica models:

TATA INDICA V2 (LAUNCHED IN 2002) - More Car per Car the Indica V2 was the revamped version of Tata Indica. Indica V2 was launched with lots of exciting features like: new front grille, clear lens head & tail lamps, muscled sporty look, designer alloy wheels, refurbished interiors combined with micro processor based engine to deliver superior fuel efficiency. Refreshing Colors of Tata Indica V2 Salsa Red, Odyssey Blue, Pastel Green, Satin Glow, Arctic Silver, Cavern Grey, Carbon Black, Mint White. Versions of Tata Indica V2 DL-BS III, DLE-BS III, DLS-BSIII INDICA V2 TURBO (LAUNCHED IN YEAR 2005)- More Power Per Car The Indica V2 Turbo was launched with turbo engine to offer turbo charger that make turbo diesel engine more advanced with power output of 68PS@ 4500 rpm. Indica V2 Turbo was launched with lots of new features like: Chrome-plated strip on hood, internally adjustable Outer Rear View Mirror, plush fabric used in interiors, adjustable head rest and rear seat, new electronic instrument cluster, power Steering, power Windows. The new Indica V2 Xeta promises to make much more car sense with its eXtra Efficiency Torque Advantage (XETA) petrol engine that delivers 12.4 kgm torques.

To sustain in a highly competitive market for more than 9 years is no child's play. Tata Motors has invested heavily in both product and brand development over these years. The new launch is yet again another proof of the company's resilience.Indica Vista is Tata's entry into the luxury hatchback segment. The segment is dominated by Maruthi Swift. Indica Vista replaces seven variants of the original Indica V2.Over the last few months, the sales of Indica were showing a decline: a classic case where the product reaches the declining maturity stage. And as theory says one strategy is to go for product modification.Vista comes with a new style, more space and a new set of engines. The car sports Quadrajet and Safire engines which was build jointly by Tata Motors and Fiat. The new Indica Vista comes in the price range of Rs 3.50 - 4.50 lakh price range. The original Indica is also retained in the product line. Now Indica offers a

wide choice to the customers from price points of Rs 2.80 lakh to Rs 5 Lakhs.The brand Vista sports a refreshing next generation look. Indica had the weakness of not looking peppy or sexy. That put off many young customers. The new Indica Vista is curvier and looks pretty cool, but not as sexy as its competitors like Swift or Getz.

The brand made a quantum leap in 2008 with the launch of Indica Vista. The entire brand personality changed with the launch of Vista. The product's looks and feel had changed completely and it was a rebirth for Indica.The changes in the product were not limited to exteriors. Indica began sporting different types of engines from Fiat which gave a new perception of quality to the brand.At the pricing also, Tata Motors consciously raised the Vista brand to a higher level. The Vista is pricier than the original V2 thus reducing the attractiveness of the brand to the Taxi segment. At a price range of Rs 4 - Rs 5 Lakh, Indica Vista is not a cheap diesel car. It was an upward stretch by the brand.

The Indica brand portfolio consists now of three sub-brands V2, VISTA and XETA.

V2 is the most economical of the lot and is the original Indica. This product is retained because there is still huge demand for V2 at that price point. Within the V2 range, there are three variants which include the Indicab which is for the Taxi segment. Price of this sub-brand ranges from Rs 3,50,000 - Rs 3,95,000.

XETA is the petrol variant of Indica V2. I am not sure about the future of Xeta since the petrol segment is heavily competitive and compared to Maruti and Hyundai, Indica Xeta's value proposition is not that attractive as the diesel option. Prices range from Rs 2,72,000- Rs 3,00,000).

Next sub-brand is the VISTA. Vista is the new generation Indica and Tata Motors would like this brand to take over the leadership position from V2 in future. The brand is targeting the discerning Indian consumer with its value proposition and good looks. Vista has lot of variants satisfying the various needs of the customer. The Indica Vista Aura is the premium range that sports many goodies that premium brands claim like ABS, Airbags etc. Vista also comes in Petrol version

sporting the Saphire engine. Prices range from Rs 3,90,000 - Rs 4,90,000 (apprx). Within the Vista range, customers are given lot of engine option including engines from Fiat.

The positioning across the brand portfolio remains the same. All the brands focus on the value proposition. But these sub - brands sports different taglines

Indica V2- “More car per car”Indica Vista- “Changes Everything” (“Surprise Yourself” is the new tagline)Indica Xeta – “Makes much more car sense”

Vista recently launched itself with Drivetech 4 technology and is now sporting a new tagline “Surprise Yourself”.

Indica in a way is an example of good marketing practice. The brand continues to evolve and is a pleasure to watch.

The Indica Brand portfolio is given below:

DIVYA JAIN

ADVERTISING, PR & BUSINESS STUDIES

ONE YEAR

MARKETING ASSIGNMENT – 1

PRODUCT LIFE CYCLE – TATA INDICA

LESSONS FROM THE PRODUCT LEFE CYCLE CONCEPT

The critical concept of the life cycle is the management of profits and sales through the life cycle. A fact that challenges most managers is that the profit curve does not follow the sales curve. Profits peak before sales mainly because competition and mainly the intensity of rivalry between firms, brings down the possibility of the industry. Most competition follows the imitation route and tends draw customers away from the pioneering firms with better prices, services, product features, distribution networks and marketing communication. To compete and retain market share, a pioneer firm needs to increase market expenditure, which puts a downward pressure on profitability. On the other hand, the pioneer firm may have to retain price levels or even reduces prices to remain competitive. This puts further pressure on profitability of the firm. Hence although sales revenue may be rising due to the marketing efforts of the firm, profitability gets eroded due to increased marketing expenditure and competitive pressure. Another reason is shifting consumer preferences and loyalty. A competition intensifies; better and more efficient products become available, thereby shifting customer preferences.

The key lesson from this is that firms have to evolve product strategies and manage for profitability as the product moves through the life cycle. The firms have to start early in product modification and adapting to newer technologies. Most progressive and market driving firms follow this route. Market driving firms anticipate competition, develop competitive advantages and evolve strategies to pre-empt competitive moves.