Amity Business School

Amity Business School
Product Life Cycle
Definition
Product Life Cycle (PLC) deals with the life of a product in the market with respect to business or commercial costs and sales measures
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.
Product Life Cycle Stages
Introduction
a. Costs are high b. Slow sales volumes to start c. Little or no competition - competitive manufacturers watch for acceptance/segment growth losses d. Demand has to be created e. Customers have to be prompted to try the product f. Makes no money at this stage Conti.
Growth
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
Maturity
3.
a. Costs are lowered as a result of production volumes increasing and experience curve effects b. Sales volume peaks and market saturation is reached c. Increase in competitors entering the market d. Prices tend to drop due to the proliferation of competing products e. Brand differentiation and feature diversification is emphasized to maintain or increase market share f. Industrial profits go down Conti.
Saturation 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
Strategies 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.
Growth
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.
Maturity
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.
Decline
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.
Classification 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
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.
Technological Innovations personal Computers, Photo copiers
Here early entrants enjoy the major market leadership.
New Product Development

Transfer of Technology Penetration of New Market New Product Lines Product Line Extensions Cost Reduction Repositioning or New Product Launch
Transfer 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
Diversification
Eg. ITC venturing into Paper Products, FMCG Etc. Bombay Dieing Venturing into Real Estate Business.
Additions to existing product line

Eg. Godrej extension from Durable like Refrigerators to Office equipment etc. Videocon entered into washing machine and Music Systems etc.
Improvement 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.
Cost Reduction
New product which provides similar performance at lower cost. Classic Eg. Nirma
Product Re-launch
Some times old products are re-launched with little improvements. Eg. Tata Tea, Maggie
New Product development process

Idea Generation Screening Business Analysis Prototype Development Test Marketing Commercialization
Home Assignment: Details of New Product Development Submitted on 8th of September. Individual Assignments only. Will be marked Hand written
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