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PRODUCT LIFE CYCLE

PROJECT WORK SUBMITTED TO THE UNIVERSITY OF MUMBAI IN
FULFILLMENT OF THE COURSE IN MARKETING STRATEGIES &
PLANS FOR THE AWARD OF DEGREE IN

MASTER OF COMMERCE
IN
(MANAGEMENT)

BY
YUGANDHARA SUDHAKAR PATIL

UNDER THE GUIDANCE OF
PROF. GATTING KOLI



ST. JOSEPH COLLEGE OF ARTS & COMMERCE
SATPALA, VIRAR (WEST)
ACADEMIC YEAR: 2013-2014



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CERTIFICATE

I certify that the Project entitled PRODUCT LIFE CYCLE submitted to Mumbai University in
partial fulfillment for the award of degree of MASTER OF COMMERCE (MANAGEMENT) is a
record of original research work done by YUGANDHARA SUDHAKAR PATIL, during the period of
study 2013-14 in the Department of Commerce, Mumbai University under my Guidance and
Supervision and the dissertation has not formed the basis for the award of any Degree/ Diploma/
Association/ Fellowship or other similar title to any other Candidate of any University.




Project Guide: External Examiner:










Coordinator: Principal:







College Seal










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DECLARATION

I, YUGANDHARA SUDHAKAR PATIL, hereby declare the Project Work entitled
Multinational Corporations submitted to Mumbai University in partial fulfillment of
the requirement for the award of the degree of MASTER OF COMMERCE
(MANAGEMENT) is original work done by me under the supervision and guidance of
PROF. GATTING KOLI it has not formed the basis for the award of any Degree/
Diploma/ Association/ Fellowship or other similar title to any Candidate in any
University.




Signature

YUGANDHARA .S. PATIL

Place:
Date:





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INDEX





1. Introduction of Product Life Cycle


2. Stages of Product Life Cycle


3. Product Development
4. Introduction Stage
5. Growth Stage
6. Maturity Stage
7. Decline Stage


8. Changing the Marketing Mix


9. Premium and Gifts
10. Coupon
11. Entertaining Advertising




12. Analysis of Product Life Cycle Model


13. Strategies of Product Life Cycle
a. Product Life Cycle Phases Some real life Examples

14. Conclusion

15. References






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INTRODUCTION OF PRODUCT LIFE CYCLE

All products possess life cycles. A product's life cycle, abbreviated PLC, the life cycle refers to the period
from the products first launch into the market until its final withdrawal and it is split up in phases. Since an
increase in profits is the major goal of a company that introduces a product into a market, the products life
cycle management is very important. The understanding of a products 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 products success or failure.
The products life cycle - period usually consists of five major steps : Product Development, Introduction
Stage, Growth Stage, Maturity Stage and finally Decline Stage. 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 products sales performance.
All products and services have certain life cycles. The life cycle refers to the period from the products 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 products life cycle management is very important. Some
companies use strategic planning and others follow the basic rules of the different life cycle phase that are
analyzed later.

The understanding of a products 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
products success or failure.
For a company to fully understand the above and successfully manage a products life cycle, needs to develop
strategies and methodologies, some of which are discussed later on.










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STAGES OF PRODUCT LIFE CYCLE:

The products 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 products sales
performance.




Product Development:

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. We now make the product do something it did
not do in the past. This is a more significant product modification. Examples might be model changes in cars
where significant components like air conditioning or theft protection devices have been added. These are
important additional benefits that have been added to the product. Personal computers are undergoing rapid

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advances in which significant new functions (benefits) are constantly added. Similar advances are occurring in
software development.


Introduction Stage:

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.
This period can be described as a money sinkhole. 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

The introduction stage has more recently been termed the product development process. Rapid change,
increasing competition, complexity, organizational stress and high customer expectations have combined to
support a process for reducing product development time. With time as a critical factor in todays market,
speed to market can create a competitive advantage. Instead of being viewed as a single stage, the
introductory stage has become the product development process with as many as seven different parts..

Idea generation is the first step, with input gathered from customers, users, market research, outside inventors,
competitors, other markets and employees. The mortality rate for ideas is extremely high. It takes a huge
amount of input in the idea generation phase to ensure a flow of new product ideas that actually make it to the
commercial start-up phase.

Each new idea goes through an idea evaluation or screening process. This can range from a very informal
review by one or two people to a more formal review by a new product development team. It usually involves
determining whether the product fits with the objectives of the company. The strengths and weaknesses of the
product are evaluated. The idea is reviewed in light of current or expected market trends. Eventually the
products volume and revenue potential are estimated.

An idea that survives preliminary evaluation will be passed along for a technical and market evaluation. Can
it be produced and marketed? Does the concept make sense to potential customers? Rough estimates are
generated for costs, required investment, sales and profit margin. The fall-out in these first two stages is
tremendous.

Ideas that make it through the first two evaluations are usually turned over to the companys engineers for
product and process design work. This involves a great deal of liaison work between marketing and
engineering with a lot of input from prospective customers.

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If the design looks good and the processes make sense, the idea moves into the early development stage. Here
prototypes are developed, marketing plans are undertaken and a business plan is developed. Frequently
prototypes are shown or tested by prospective customers. Test markets are conducted, and the plans are
revised as needed. Once completed, the prototypes and plans are reviewed again against expected objectives.
If everything is on track, the new product moves into final development. Financial estimates are reviewed
against the objectives. The tooling begins, and advertising and promotion programs are finalized and initiated.
A good example of such a launch is the launch of Windows XP by Microsoft Corporation.
Windows XP is a line of proprietary "http://en.wikipedia.org/wiki/Operating system" operating systems
developed by Microsoft for use on general-purpose computer systems, including home and business
desktops, notebook computers, and media centers. The letters "XP" stand for eXPerience. Windows XP is
the successor to both Windows 2000 and Windows Me, and is the first consumer-oriented operating system
produced by Microsoft to be built on the Windows NT kernel and architecture. Windows XP was first
released on October 25, 2001, and over 400 million copies are in use, according to a January 2006 estimate
by an IDC analyst. [3] It is succeeded by Windows Vista, which was released to volume license customers
on November 8, 2006, and worldwide to the general public on January 30, 2007.




The most common editions of the operating system are Windows XP Home Edition, which is targeted at
home users, and is also targeted at power users and business clients. Windows XP Media Center Edition
has additional multimedia features enhancing the ability to record and watch TV shows, view DVD
movies, and listen to music.

Videophones certainly are in the introductory stage of the product life cycle. Limited numbers of consumers
can afford this technology. As prices come down for videophones, and as consumers recognize the relative
advantage of this form of communication over existing communication products, sales may begin to grow
and the videophone should transition into its growth stage.

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Growth Stage:

The growth stage is where the rising tide of consumer interest lifts the boats of all participants. If there were
no competitors in the introduction stage, they are now a factor. Consequently, additional product features and
support may be needed. Prices are steady to declining, as every participant in the industry is focused on
market share and becoming the low-cost producer. Costs are declining with increasing volumes, and profits
are improving. Distribution is increasing as well. Competitors are attracted to enter the market.

Usually this is the stage that requires the heaviest investment in marketing to educate, build share and support
sales activity. While a marketing plan was developed in the introduction stage, adjustments to the marketing
mix are usually required in the growth stage.

The marketing mix includes the four Ps: product, price, place (distribution) and promotion. During the growth
stage place becomes a hot bed of activity. Frequently this involves or will in the maturity stage changes to
product, price and promotion. The product may need modifications for new markets with different packaging,
warranty and service requirements. Price may come into play not just as list price but in discounts, financing,
terms and other options. Promotion activities such as advertising and public relations will change as new
channels of distribution are entered and need to be supported.

As additional competitors enter the market, two things happen that begin to slow the increase in profits as
maturity is approached. First, as the number of competitors increases, so does the intensity of competitive
interaction. Coping with increased competition generally translates into increased spending on strategies
aimed at generating selective demand. Selective demand is demand for the firms brand. This means that
firms, in their battle for market share, will spend larger and larger sums to "buy market share" from
competitors. Moreover, increased competition naturally drives prices down. Second, as maturity approaches,
the growth in sales naturally slows. This slowing is primarily a result of the declining pool of new adopters for
the product category. This transition to market saturation further intensifies competitive interactions and
generates additional price reductions. This, of course, ultimately translates into even greater spending as firms
fight more intensely for market share.

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Walls Ice Cream growth was an outstanding 40%, achieved through an exciting stream of innovations,
aggressive market penetration, 360 Degree Communication (TV Commercials, Outdoor, Print and Visibility
activation) and constant attention to consumer affordability. During the year, 25 new products were launched;
some examples are: Kulfi, Moo, Super Twin, Magnum Caramel & Nuts Bar, Cornetto Super relaunch, In
Home premium range, Cornetto Junior, Magnum premium range and Donut.



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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. 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 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.




















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Maturity Stage:

The market maturity stage occurs when the market has become saturated. Sales growth rate tends to decrease.
Efforts are focused on differentiation of the product. Pricing may be lower because of increased competition.
More internal pressure is placed on reducing costs. Margins begin to shrink as marginal competitors are
forced out of the market. Distribution is maxed, and promotions come into play as a way to encourage
preference over competing products.

Market share becomes the main focus in the maturity stage. The market is well established. There are
numerous players, although some have started falling by the wayside, and the competitive pressures are
building. If your profits are steady or increasing, regardless of where you are on the product life cycle, you are
well positioned. On the other hand, if profits are flat or decreasing, then it is time to take action.
Sales reach their peak, while pressure remains on reducing price. The product must be defended against
competitors and promoted to build stronger retail relationships. Distribution is intensive, and profits start out
high but can drop quickly. The company works to maximize profits while defending market share. Instead of
dealing with the president or merchandise manager, the salesperson is relegated to dealing with the buyer. It is
a relationship that the buyer controls and constantly looks for more from the supplier. This takes a salesperson
who is a strong negotiator, flexible and persistent. It requires relationship-building and problem-solving skills.

Everyone looks for new markets, more models and ways to increase usage or diversify. In the low-to-no-
growth stage, there are two types of players. Cash cows are what everyone hopes for, but few attain. They
have a high relative share in a low-growth market, and they harvest the profits.

The other position is that of the dogs. They have low market share in a low-growth market. It doesnt usually
make sense to invest heavily to gain market share unless there is some reason to believe that the market might
once again move into a growth stage. It might also have some strategic importance and might be considered a
guard dog. More than likely, it may be something that you want to divest if possible and reinvest where
there is more opportunity.

Lipton continued to be the star brand, carrying the premium image that it has established over many years.
With strong on-ground activation and successful consumer promotions the brand had double digit growth.
Lipton tea bags are the market leader.

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During this period new brands are introduced even when they compete with the companys existing product
and model changes are more frequent (product, brand, and model). This is the time to extend the products
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.
A successful product maturity phase is extended beyond anyones timely expectations. A good example of
this is Tide washing powder, which has grown old, and it is still growing.
















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Decline Stage:

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 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 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. For an example, a 0800 telephone line with
shipment by a reliable delivery company, paid by the customer is worth keeping.

Declining sales define the decline stage. Profits are also declining. Costs will remain steady or decline. Now is
the time to prune unprofitable distribution. Advertising should be reduced unless there is some hope of
repositioning the product in an effort to prolong its life and the potential for profits. At this point your product
has become a commodity. The salesperson ends up dealing with a re-buyer and often is responding to requests
for quotes. The type of salesperson needed is a harvester, someone who can handle quotations, is good at
prospecting, has good organization skills and is well disciplined. The buyer owns the relationship.

While two strategies are commonly followed in the decline stage -- close up shop or milk the cash cows --
there are a number of other good strategies that can extend the lifecycle and increase the return on the original
investment in the product, brand or company. Some examples of decline products are: BioAmla and Insta
Excite.





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CHANGING THE MARKETING MIX

Product sales can be substantially improved during both growth and maturity by making changes to non-
product components of the marketing mix. Most such changes usually affect how the brand is promoted, but
changes can also be made to the product's price and its distribution channels. We'll focus mainly on changes to
promotion.


Premiums & Gifts:

Premiums and gifts are excellent tools for inducing initial trial, brand switching, and repeat purchases. These
tools have been effectively employed by breakfast cereal manufacturers for decades. When kids are little, like
most kids, they insist to buy some breakfast cereals just for the gifts or premiums that are offered. Premiums
and gifts, as well as coupons and other forms of sales promotion are effectively employed to 'buy' market
share from competitors.

Sales promotions can be so effective at generating incremental sales that some major consumer goods
producers, such as Procter and Gamble, have channeled more money into this form of promotion than into
advertising.



Coupons:

Coupons are a type of sales promotion and can be even more effective than gifts or premiums for generating
added sales for brands. If you are a "coupon clipper," you are are considered to be in a" coupon-elastic"
market segment. In contrast, those people who generally don't redeem coupons are considered to be "coupon
inelastic." It's basically a waste of money for marketers to target this latter group. Firms that rely heavily on
couponing seek to determine who these coupon elastic are and "coupon inelastic" customers. Marketers are
very interested in stretching their promotional dollars as far as possible. If coupon elastic customers possess

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unique demographics and / or media graphics, marketers can find ways to efficiently target their couponing
dollars and avoid wasted coverage on the inelastic segment of the market.



Entertaining Advertising:

Probably one of the best things that you can do at any stage of the product life cycle is to have entertaining
advertisements that attract and hold people's attention. Many people watch TV for the entertaining
commercials.

In fact, based on a recent survey of Super Bowl viewers, a substantial proportion of viewers watch the game
to see the commercials, not the game itself! The logic advocated by many advertising executives is simply
that, if consumers like the ads, they are more likely to like the brand!




















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Product Life Cycle Decline Strategies:



ExtendTechnology Jell-o utilized its knowledge about raw gelatin to create puddings,
colored gelatins and snacks.
Re-Packaging A common practice in retail markets is introducing new labels,
different container types and different sizes. Coca-Cola went
from 6-oz. glass bottles to 8-oz. cans to plastic liter bottles,
all helping increase consumption.
















Strategy Use

New Uses Arm & Hammer produced baking soda for many years, extending

the life of the product by turning it into a deodorizer.

New Markets Home Depot and Lowes expanded business by providing do-it-

yourself training on projects within their stores. Other examples

Variations
might include overseas markets.

Coca-Cola took an old product and added variations, including

Cherry Coke, Vanilla Coke and Diet Coke.


Re-Branding Costly but may be well worth the expense. We saw this with the new
consulting company Accenture. Other examples include
Datsun/Nissan and GTE/Verizon.
Use More Used by many companies with consumable products, as in Miller
Time suggesting different times when drinking its product is
appropriate.
Re-Position Oldsmobile was perceived as an older persons car until GM initiated
the This isnt your father's Oldsmobile campaign. This was an
attempt to reposition a brand in the decline stage of the life cycle.
Not all re-positioning strategies work.
Co-Brand Attempts to capitalize on the association between strong brands and
products. A variation is licensing a name or brand for use on
another product. An example might be the Eddie Bauer Explorer
or the L.L. Bean Subaru.
Price Price can always influence sales, as in rebates and zero interest from
Automakers.

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Analysis of Product Life Cycle Model


There are some major product life cycle management techniques that can be used to optimize a products
revenues in respect to its position into a market and its life cycle.

These techniques are mainly marketing or management strategies that are used by most companies worldwide
and include the know-how of product upgrade, replacement and termination. To comprehend these strategies
one must first make a theoretical analysis of the model of product life cycle.

Nevertheless, a product manager must know how to recognize which phase of its life cycle is a product,
regardless of the problems in the model discussed above. To do that a good method is the one, suggested by
Donald Clifford in 1965, which follows.
Collection of information about the products behavior over at least a period of 3 5 years (information will
include price, units sold, profit margins, return of investment ROI, market share and value).

Analysis of competitor short-term strategies (analysis of new products emerging into the market and
competitor announced plans about production increase, plant upgrade and product promotion). Analysis of
number of competitors in respect of market share. Collection of information of the life cycle of similar
products that will help to estimate the life cycle of a new product.

Estimation of sales volume for 3 5 years from product launch.

Estimation of the total costs compared to the total sales for 3 5 years after product launch (development,
production, promotion costs). The estimate should be in the range of 4:1 in the beginning to 7:1 at the stage
where the product reaches maturity.









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Strategies of Product Life Cycle







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Product Life Cycle


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Some Other Examples of Product Life Cycle

Set out below are some suggested examples of products that are currently at different stages of the product
life-cycle:

INTRODUCTION GROWTH MATURITY DECLINE
Third generation Portable Personal Typewriters
mobile phones DVD Players Computers
E-conferencing Email Faxes Handwritten
letters
All-in-one racing Breathable Cotton t- Shell Suits
skin-suits synthetic shirts
Fabrics
Iris-based Smart cards Credit cards Cheque
personal identity books
Cards







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CONCLUSION

Without an understanding of the product lifecycle, marketers are flying blind. Strategic decisions made under
these circumstances tend to be short-term and not much more than guesses. Using the product lifecycle as a
tool for evaluating your current business situation facilitates a longer-term perspective and can point out
options for future strategic decisions.

Managing a product must not be taken as a part time job or function. It requires continuous monitoring and
review. Having said that, it is not clear why many companies do not consider product management as a
discipline. The answer lies in the fact that product management is not taught as engineering or accounting i.e.
does not have formalized training.

The product manager as the person that will make a new product to work, needs to understand and have a
strong grasp of the needs of the customer / market and therefore make the right decisions on market
introduction, product life cycle and product cannibalization. To achieve the above he must balance the needs
of the customers with the companys capabilities. Also he needs to balance product goals with company
objectives. The way a products success is measured depends on where the product is in its life cycle. So the
product manager must understand the strategic company direction and translate that into product strategy and
product life cycle position.

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BIBLEOGRAPHY


http://www.barringer1.com

http://www.learn.co.uk

http://www.genesisstrategies.com

http://www.cim.pe.u-tokyo.ac.jp

http://www.questteam.com

http://www.marketinginc.com



Aaker D. Strategic Market Management, Willey, 1995. Avlonitis G. Strategic Industrial
Marketing, Stanoulis, 2001.