Amity Business School

Product Life Cycle

Amity Business School 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

Amity Business School 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.

Amity Business School Product Life Cycle Stages

Amity Business School 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….

Amity Business School 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…

Amity Business School 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….

Amity Business School 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

Amity Business School 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.

Amity Business School 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.

Amity Business School 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.

Amity Business School 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.

Amity Business School 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

Amity Business School 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.

Amity Business School Technological Innovations personal Computers, Photo copiers Here early entrants enjoy the major market leadership.

Amity Business School New Product Development Transfer of Technology Penetration of New Market New Product Lines Product Line Extensions Cost Reduction Repositioning or New Product Launch

Amity Business School 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

Amity Business School Diversification Eg. ITC venturing into Paper Products, FMCG Etc. Bombay Dieing Venturing into Real Estate Business.

Amity Business School 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.

Amity Business School 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.

Amity Business School Cost Reduction New product which provides similar performance at lower cost. Classic Eg. Nirma

Amity Business School Product Re-launch Some times old products are re-launched with little improvements. Eg. Tata Tea, Maggie

Amity Business School New Product development process Idea Generation Screening Business Analysis Prototype Development Test Marketing Commercialization

Amity Business School Home Assignment: Details of New Product Development Submitted on 8 th of September. Individual Assignments only. Will be marked Hand written

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