The Product Life Cycle(2nd Assingment

Table of ContentsSr. Title Page No.

1 Product Introduction 2

2 Product Classifications 33 The Product Life Cycle

New Product Development

Introduction Stage

Growth Stage

Maturity Stage

Decline Stage

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7-8

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4 Cyber Net – A Case Study

Introduction

Visions for the Future

Customer Oriented Company

Superiority over the other IPS’s

Services and Solutions ISO Certifications Patrons Deficiencies Recommendations

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11-13

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5 Summary of Product Life-Cycle

Characteristics

Marketing Objectives

Strategies

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6 Limitations 15

7 Conclusions 15

PRODUCT LIFE CYCLE STRATEGIES

Product Introduction

In marketing, a product is anything that can be offered to a market that might satisfy a want or need. However it is much more than just a physical object. It is the complete bundle of benefits or satisfactions that buyers perceive they will obtain if they purchase the product. It is the sum of all physical, psychological, symbolic, and service attributes.

A product is similar to a good. In accounting, goods are physical objects that are available in the marketplace. This differentiates them from a service, which is a non-material product.

A "product" can also be an "experience", which like a service is intangible. However an experience is unique to the receiving individual, based upon their history. Example: amusement parks offer rides (product), acceptance of credit cards (service), and audience participation at the dolphin show (experience). My value of the dolphin show is different from yours, and to the extent I value it more, will trade more for it (money).

Three Aspects

There are three aspects to any product or service:

1 - Core Benefit

in-use benefits psychological benefits (e.g., self-image enhancement, hope, status, self worth) problem reduction benefits(e.g., safety, convenience)

2 - Tangible Product or Service

product attributes and features quality styling packaging protection and label information brand name

3 - Augmented Product or Service

warranty installation delivery credit availability after-sale service and maintenance

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http://en.wikipedia.org/wiki/Service

http://en.wikipedia.org/wiki/Service

http://en.wikipedia.org/wiki/Accounting

http://en.wikipedia.org/wiki/Good_(accounting)

http://en.wikipedia.org/wiki/Market

http://en.wikipedia.org/wiki/Marketing


Classifying Products

Product management involves developing strategies and tactics that will increase product demand (referred to as primary demand) over the product's life cycle.

One useful technique in understanding a product is the Aspinwall Classification System. It classifies and rates products based on five variables:

1) replacement rate - how frequently is the product repurchased

2) gross margin - how much profit is obtained from each product (average selling price less average unit cost)

3) buyer goal adjustment - how flexible are the buyers' purchasing habits in regards to this product

4) duration of product satisfaction - how long will the product produce benefits for the user

5) duration of buyer search search behaviour - how long will they shop for the product

Types of Products

There are several types of products:

1. consumer products - used by end users 2. industrial products - used in the production of other goods 3. convenience goods - purchased frequently and with minimal effort 4. impulse goods - purchase stimulated by immediate sensory cues 5. emergency goods - goods required immediately 6. shopping goods - some comparison with other goods 7. specialty goods - extensive comparisons with other goods and a lengthy

information search 8. unsought goods - e.g., cemetery plots, insurance 9. perishable goods - goods that will deteriorate quickly even without use 10. durable goods - goods that survive multiple use occasions 11. non-durable/consumption/consumable goods - goods that are used up in one use

occasion 12. capital goods - installations, equipment, and buildings 13. parts and materials - goods that go into a finished product 14. supplies and services - goods that facilitate production 15. commodities - undifferentiated goods (e.g., wheat, gold, sugar) 16. by-products - a product that results from the manufacture of another product

The Product Life Cycle

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http://en.wikipedia.org/wiki/Product_Life_Cycle_Management

http://en.wikipedia.org/wiki/Product_management


The course of a product’s sales and profits over its lifetime. It involves five distinct stages: product development, introduction, growth, maturity, and decline. A product's life cycle (PLC), the course that a product’s sales and profits take over its lifetime. The product life cycle has five distinct stages:

Product Life Cycle Curve

1. Product development begins when the company finds and develops a new-product idea. During product development, sales zero and the company’s investment cost mount.

2. Introduction is a period of slow sales growth as the product is introduced in the market. Profits are nonexistent in this stage because of the heavy expenses of product introduction.

3. Growth is a period of rapid market acceptance and increasing profits.

4. Maturity is a period slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profits level off or decline because of increased marketing outlays to defined the product against competition.

5. Decline is the period when sales fall off and profits drop.

The life cycle concept may apply to a brand or to a category of product. Its duration may be as short as a few months for a fad item or a century or more for product categories such as the gasoline-powered automobile.

Product development is the incubation stage of the product life cycle. There are no sales and the firm prepares to introduce the product. As the product progresses through its life

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cycle, changes in the marketing mix usually are required in order to adjust to the evolving challenges and opportunities.

The PLC concept also can be applied to what are known as styles, fashions and fads. Their special life cycles are shown in figure as shown below:

1. Style is a basic and distinctive mode of expression. For example, styles appear in homes (colonial, ranch); clothing (formal, casual); art (realist, surrealist, abstract). Once a style invented, it may last for generations, coming in and out of vogue. A style has a cycle showing several periods of renewed interest.

2. Fashion is a currently accepted or popular style in a given field. For example, the “preppie look” in the clothing of the late1970s and 1980s gave way to the casual and layered look of the 1990s. Fashions trend to grow slowly, remain popular for a while, then decline slowly.

3. Fads are fashions that enter quickly, are adopted with great deal, peak early, and decline very quickly. They last only a short time and tend to attract only a limited following. “Pet rocks” have become the classic example of a fad. Other examples of fads include Rubik’s Cubes, Hula Hoops, lava lamps, and Benie Babies. Fads do not survive for the long because the normally do not satisfy a strong need or satisfy it well.

Using the PLC concept to develop marketing strategy also can be difficult because strategy is both a cause and result of the product’s life cycle. The product’s current PLC position suggest the best marketing strategies, and the resulting marketing strategies affect product performance in later life-cycle stages. Yet, when used carefully, the PLC concept can help in developing good marketing strategies for different stages of the product life cycle.

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http://www.NetMBA.com/marketing/mix/


Introduction Stage

When the product is introduced, sales will be low until customers become aware of the product and its benefits. Some firms may announce their product before it is introduced, but such announcements also alert competitors and remove the element of surprise. Advertising costs typically are high during this stage in order to rapidly increase customer awareness of the product and to target the early adopters. During the introductory stage the firm is likely to incur additional costs associated with the initial distribution of the product. These higher costs coupled with a low sales volume usually make the introduction stage a period of negative profits.

During the introduction stage, the primary goal is to establish a market and build primary demand for the product class. The following are some of the marketing mix implications of the introduction stage:

Product - one or few products, relatively undifferentiated Price - Generally high, assuming a skim pricing strategy for a high profit margin

as the early adopters buy the product and the firm seeks to recoup development costs quickly. In some cases a penetration pricing strategy is used and introductory prices are set low to gain market share rapidly.

Distribution - Distribution is selective and scattered as the firm commences implementation of the distribution plan.

Promotion - Promotion is aimed at building brand awareness. Samples or trial incentives may be directed toward early adopters. The introductory promotion also is intended to convince potential resellers to carry the product.

Growth Stage

The growth stage is a period of rapid revenue growth. Sales increase as more customers become aware of the product and its benefits and additional market segments are targeted. Once the product has been proven a success and customers begin asking for it, sales will increase further as more retailers become interested in carrying it. The marketing team may expand the distribution at this point. When competitors enter the market, often during the later part of the growth stage, there may be price competition and/or increased promotional costs in order to convince consumers that the firm's product is better than that of the competition.

During the growth stage, the goal is to gain consumer preference and increase sales. The marketing mix may be modified as follows:

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Product - New product features and packaging options; improvement of product quality.

Price - Maintained at a high level if demand is high, or reduced to capture additional customers.

Distribution - Distribution becomes more intensive. Trade discounts are minimal if resellers show a strong interest in the product.

Promotion - Increased advertising to build brand preference.

Maturity Stage

The maturity stage is the most profitable. While sales continue to increase into this stage, they do so at a slower pace. Because brand awareness is strong, advertising expenditures will be reduced. Competition may result in decreased market share and/or prices. The competing products may be very similar at this point, increasing the difficulty of differentiating the product. The firm places effort into encouraging competitors' customers to switch, increasing usage per customer, and converting non-users into customers. Sales promotions may be offered to encourage retailers to give the product more shelf space over competing products.

During the maturity stage, the primary goal is to maintain market share and extend the product life cycle. Marketing mix decisions may include:

Product - Modifications are made and features are added in order to differentiate the product from competing products that may have been introduced.

Price - Possible price reductions in response to competition while avoiding a price war.

Distribution - New distribution channels and incentives to resellers in order to avoid losing shelf space.

Promotion - Emphasis on differentiation and building of brand loyalty. Incentives to get competitors' customers to switch.

Every wants to know how much and how fast Internet usage will grow. Cybercritics think the Net is fad that will soon diminish in importance. Others believe the Net is an important new communication medium that is still in the growth stage of product life cycle. Here is the example of Internet growth that day by day it is increasing and at maturity stage.

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Hosts This is the number of machine addresses on the net as reported by the name servers. Many of these addresses may not have a machine which responds to them. See the "Replied to Ping" column.

Domains These are domains such as "mit.edu" or "internic.net". Each domain is usually associated with some organization, be it a university, company or other group.

Replied to Ping This is an estimated number of machines that are actually connected to the net and responding. This estimate was made by pinging 1% of the hosts and counting responses. 'Ping' is a tool to determine if a machine is up.

The raw data as follows:

Date Hosts Domains Replied to Ping

Jan 96 9.5 million 240,000 1.7 million

Jul 95 6.6 million 120,000 1.1 million


Oct 94 3.9 million 56,000 1.0 million



Oct 93 2.1 million 28,000 NA


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Apr 93 1.5 million 22,000 0.4 million

Jan 93 1.3 million 21,000 NA

Decline Stage

Eventually sales begin to decline as the market becomes saturated, the product becomes technologically obsolete, or customer tastes change. If the product has developed brand loyalty, the profitability may be maintained longer. Unit costs may increase with the declining production volumes and eventually no more profit can be made.

During the decline phase, the firm generally has three options:

Maintain the product in hopes that competitors will exit. Reduce costs and find new uses for the product.

Harvest it, reducing marketing support and coasting along until no more profit can be made.

Discontinue the product when no more profit can be made or there is a successor product.

The marketing mix may be modified as follows:

Product - The number of products in the product line may be reduced. Rejuvenate surviving products to make them look new again.

Price - Prices may be lowered to liquidate inventory of discontinued products. Prices may be maintained for continued products serving a niche market.

Distribution - Distribution becomes more selective. Channels that no longer are profitable are phased out.

Promotion - Expenditures are lower and aimed at reinforcing the brand image for continued products.

CASE STUDY

Introduction:

Cyber.Net is the largest Internet and Data Communication Network Service Provider in Pakistan. The company offers various services to the corporate and consumer sectors and it is exploring the possibilities to extend several other unique online services to its over 80,000 valued customers.

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Since its commencement in March 1997, in the city of Karachi, having its share of trials and tribulations, Cyber.Net has made a name for itself as one of the leading ISP's in the country. A group company of the Lakson Group of Companies, Cyber.Net has maintained the tradition of dedication and service par excellence, which has been, and continues to be, its motto.

Cyber.Net offers Total Internet Solutions for the business and family alike. With ever expanding horizons, Cyber.Net aims to be the largest Internet Service Provider in the country with features and facilities like 24-hour technical assistance, 7 days a week, best modem to user ratio preventing busy signals, powerful, direct connection via satellite to the Internet backbone, firewall security features to safeguard against hackers. Cyber.Net with 36Mbps bandwidth and 6000+ dialup ports at present is completely geared towards providing customers with timely, reliable, superior services and solutions.

Vision for the Future:

Cyber.Net since its inception has helped launch Pakistan on the technology threshold and connecting it to the world. Today it stands tall as the established leader among all ISPs in Pakistan with the largest active customer base and highest number of services to the corporate and Mass consumer segments. It is poised to further launch the largest and globally resonating infrastructure arrangements in Pakistan.

The company has taken aim to further grow with a large scale of products and services. This includes application hosting outsourcing, real time secure messaging and collaboration outsourcing for business. All this is backed by the largest bandwidth and dial up ports by any single ISP in the country and will catapult the corporate and mass segment sector into a business lifestyle and convenience that challenges the best in the world.

Cyber.Net vision is that it will become a nationally and internationally acclaimed company revolutionizing the way that people perceive the Internet, and to service their expectations. To achieve this they will ensure that they deliver excellent Service to all his consumer and corporate customers, while meeting International standards in service provision.

They will always ensure their staff is well trained, accessible and respected, and that they are a part of Cyber.Net due to their own choice and pleasure. They will continually provide training and guidance to their staff, and ensure that they are always well enough equipped to ensure their own growth, and the growth of the company. They will do all they can to ensure that as many Pakistanis as possible have access to the Internet

Customer oriented company:

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As a customer-oriented company, Cyber.Net offers total Internet Solutions for the business and family alike with facilities such as 24-hour, 7 days a week technical assistance, best modem-to-user ratio to prevent busy signals, powerful, direct connection via satellite to the Internet backbone, and firewall security to safeguard against hackers.

Superiority over other ISP’s:

Although, there are more than 60 ISPs operating in Pakistan, Cyber.Net has become the country’s number one ISP and CSP due to its foresighted policies and managerial skills. Cyber.Net offers Total Internet Solutions for business and family, as it is the largest Internet and Commerce Service Provider in the country with unique features like the highest bandwidth of 12Mb, and round the clock technical support. They continue to offer their clients with unparalleled Internet/eCommerce services and Network Solutions.

Services and Solutions:

With the introduction of their very own chat server, clients have the facility of a multi-interfaced chat service through Web browser or IRC software.

To facilitate their clients for the payment of bills, Cyber.Net has successfully launched the TCS Bill Payment Service scheme through which customers have the convenience of submitting their crossed cheques for their Internet usage at a TCS Express Center nearest to them. The crossed cheques can reach them overnight. This service is quite simple as it saves the customers the hassle of coming all the way to the Cyber.Net customer service Centers. They introduce new and exciting services, they have recently launched new Internet usage plans, which have been carefully structured to meet the needs of ordinary Internet users. The Complimentary Hours Scheme is also a popular feature among our customers. Through this scheme, customers can make a present of Internet hours to their friends and family.

They have been constantly striving to provide new services to their customers. Cyber.Net Pay Online service is the first of its kind in Pakistan through which his customers can make online payments for there services rendered to them though credit cards. His services for the corporate sector such as Dedicated Dialup Port, Dedicated Router Access Port, Shared Router Access Port, Virtual Private Networks, Corporate Mail Solutions, Fiber Optic Network, Data Services for corporate clients in Pakistan, e Merchant and eCommerce hosting solutions Cyber.Net is truly the Total Internet and Commerce Solutions Provider in the country.

They don't just provide Internet connections, they make it so easy for his customers to click and surf the Internet that they don't have to be expert computer users. His network is

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designed with built-in redundancy to optimize the bandwidth while minimizing hops, congestion and point of failure, which finally translates into more speed and better reliability. Cyber.Net has introduced a comprehensive range of quality services to the Internet market, and truly linked Pakistan to the global network. Our 24-hour helpline, and easy-to-use software along with expert advices on the type of hardware required to enjoy the Internet ride are parts of our complete package.

Cyber.Net also provides services like Web hosting, domain registration, shared, leased and committed bandwidth solutions, Co-location, VPNs, and simplex services to the corporate sector. Cyber.Net has become the first Co-location and Application Service Provide in the country by providing turnkey solutions to ISPs, including messaging wholesale and billing outsourcing.

Some of the services they provide to their valued customers are:

VSATs (DAMA and SCPC) Satellite Broadband Solutions

Internet Bandwidth Solution

Virtual Private Network

Hosted Exchange

Optical Fiber Frame Relay Services for Domestic Connectivity

Corporate Leased Line Access

Internet Downlink Services

VPDNs (Virtual Private Dial Networks) Services

Network Designing for Inter-Branch Connectivity

ISDN Services

DDP – Dedicated Dialup Port services

Video Conferencing

Server co-location

Wireless Solutions

Corporate Mail Solutions

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Customized Web mail solution (POP3 Based)

Web-Hosting Services

Application Hosting

FTP Services

Real Time Branch Office Connectivity

Domain Registration and Mapping

Managed Firewall Services

Back-up Secondary Mail Solution (Pakistan/USA)

Incoming Virus Free Emails for Whole Domain (Anti-Virus Mail Guard-Trend Micro)

Incoming Virus Free Emails for Mail Boxes created on Relay (Anti-Virus Mail Guard)

VSATs (DAMA and SCPC):

To maintain and enhance company’s competitive advantage and to take its rightful place in the New Technological Order, Cyber.Net has adopted the most trendy SCPC DAMA BOD System. The main Focus is delivering the Last Mile, as delivering ubiquitous last mile is one of the biggest technical challenges in the Telecommunications Industry today, especially Pakistan where we are blessed with Poor Copper and expensive DXX / Microwave/ DSL and Satellite for majority of the services.

Satellite Broadband Solutions:

Cyber.Net offers an Asymmetric Data Service that directly connects the customer's premises of remote ISP's to the global Internet backbone via satellite. Seamlessly delivers rich multimedia content to the remotest locations at high speed.

Iso certification and quality standards:

Cyber.Net is the first Internet Service Provider in Pakistan to be ISO certified. The professionalism and quality of systems was credited with ISO 9001: 2000 certification within three years of company’s operations. It has a mission statement that reads:

"At Cyber.Net our goal is to achieve desired customer satisfaction by providing timely,

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reliable, efficient, superior services and solutions through proactive and dynamic team with state-of-the-art infrastructure."

Patrons:

Cyber.Net is the largest Customers in Pakistan for the following companies:

CISCO UNISYS MCI WCOM Above.Net PTCL Local Telco. Alcatel Lucent Portal Software Inc. Software.com The only End-to-End Fiber Optic Network customer for PTT.

Deficiencies

1) DSL line in not provided in Sialkot.

2) ISDN is not provided in Sialkot.

3) Corporate level technicians are not provided in Sialkot level.

4) Major draw back that all set up is in PTCL premises, due to which when there is power break down PTCL has low back up, thats why the consumers faced problems.

Recommendations In my point of view I recommend that Cyber Net must provide the DSL, ISDN and corporate level technicians provide in Sialkot. The other one is that they must build their own setup to facilitate the customers with good quality and uninterruptible service to their customers.

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Summary of Product Life-Cycle Characteristics, Objectives, and strategies INTRODUCTION GROWTH MATURITY DECLINE CHARACTERISTICS Sales Low Sales Rapidly rising Peak Sales Declining salesCosts High cost per Average cost Low cost per Low cost per

customer customer customer customerProfits Negative Rising Profits High Profits Declining profitsCustomers Innovators Early adopters Middle majority LaggardsCompetitors Few Growing Stable number Declining

number beginning to number decline

MARKETING OBJECTIVES

Creative product Maximize Maximize profit Reduce expenditure awareness and trial share defending and milk the brand

market share STRATEGIES Product Offer a basic Offer product Diversify brand Phase out weak

extensions, modelsservice, warranty

Price Use cost-plus Price to Price to match Cut pricepenetrate market or best competitors

Distribution Build selective Build intensive Build more Go selective: phase distribution distribution intensive out unprpfitable

distribution outletsAdvertising Build product Build awareness Stress brand Reduce to level

awareness among and interest in differences and needed to retain early adopters and mass market benefits hard-core loyals dealers

Sales Promotion Use heavy sales Reduce to take Increase to Reduce to promotion to advantage of encourage brand minimal level entice trial heavy consumer switching demand

Limitations of the Product Life Cycle Concept

The term "life cycle" implies a well-defined life cycle as observed in living organisms, but products do not have such a predictable life and the specific life cycle curves followed by different products vary substantially. Consequently, the life cycle concept is not well-suited for the forecasting of product sales. Furthermore, critics have argued that the product life cycle may become self-fulfilling. For example, if sales peak and then decline, managers may conclude that the product is in the decline phase and therefore cut the advertising budget, thus precipitating a further decline.

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CONCLUSIONS

Nonetheless, the product life cycle concept helps marketing managers to plan alternate marketing strategies to address the challenges that their products are likely to face. It also is useful for monitoring sales results over time and comparing them to those of products having a similar life cycle.

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The Product Life Cycle(2nd Assingment

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