Transcript The Product Life Cycle and New Products

The Product Life Cycle and New Products
Instructor:
Dr. Ravi Shanker
Objectives
 Introduce
the product life cycle
 Introduce the marketing Objectives at
each stage of the life cycle.
 Identify the Marketing Mix options for each
stage.
 Strategies to operationalize PLC.
 New Products: Concepts and Strategies
Product Life Cycle
S
a
l
e
s
Introduction
Growth
Maturity
Time
Decline
Product Life Cycle
Sales and Profits Over the Product’s Life From
Introduction to Decline
Sales and
Profits (Rs)
Sales
Profits
Time
Product
Development
Losses/
Investments (Rs)
Introduction
Growth
Maturity
Decline
Product Life Cycle

Products tend to go through different
stages, each stage being affected by
different competitive conditions.

The length of a product's life cycle is in no
way a fixed period of time. It can last from
weeks to years depending on the type of
product.
Product Life Cycle

The degree of adjustment to the competitive
environment, determines the success of its
life.

Different marketing, financial manufacturing,
purchasing, HRM strategies are required in
each stage of the life cycle.

Elements of MM need to be adjusted at various
stages of PLC.
Product Life Cycle: Introductory Stage
Characteristics
Sales
Low Sales
Costs
High cost per
customer
Profit
Negative
Customers Innovators
Competitors Few
Product Life Cycle: Introductory Stage
Marketing Objectives
Create Product Awareness & Trail
Product Life Cycle: Introductory Stage
Strategies
Product
Price
Offer a basic
product
Use cost plus
Distribution Build selective
distribution
Advertising Build product
awareness in early
adaptors & dealers
Sales
Use Heavy sales
Promotion
promotion to entice
trail
Product Life Cycle: Growth Stage
Characteristics
Sales
Profit
Rapidly Rising
Sales
Average Cost Per
Customer
Rising Profits
Customers
Early Adapters
Competitors
Growing Number
Costs
Product Life Cycle: Growth Stage
Marketing
Objectives
Maximize Market
Share
Product Life Cycle: Growth Stage
Strategies
Product
Price
Offer product extensions,
service, warranty
Price to penetrate market
Distribution Build intensive distribution
Advertising Build awareness & interest
in the mass market
Sales
promotion
Reduce to take advantage
of heavy consumer demand
Product Life Cycle: Maturity Stage
Characteristics
Sales
Peak Sales
Costs
Profit
Low Cost Per
Customer
High Profits
Customers
Middle Majority
Competitors
Stable Number
Beginning To
Decline
Product Life Cycle: Maturity Stage
Marketing
Objectives
Maximize Profits
While Defending
Market Share
Product Life Cycle: Maturity Stage
Strategies
Product
Diversify Brands &
Models
Price
Price To Match Or
Beat Competitors
Distribution
Build More Intensive
Distribution
Advertising
Stress Brand
Differences &
Benefits
Sales
Promotion
Increase To
Discourage Brand
Switching
Product Life Cycle: Decline Stage
Characteristics
Sales
Declining Sales
Costs
Low Cost per
Customer
Profit
Declining Profits
Customers
Laggards
Competitors
Declining
Number
Product Life Cycle: Decline Stage
Marketing
Objectives
Reduce Expenditure &
Milk the Cow
Product Life Cycle: Decline Stage
Strategies
Product
Price
Distribution
Advertising
Phase Out Weak
Items
Cut Price
Go Selective Phase
Out Unprofitable
Outlets
Reduce To Level
Needed To Retain
Hard Core Loyal
Sales Promotion Reduce To Minimal
Level
How Motorola Stumbled in China
Setting: 2005
China is one of the
biggest markets for
American
mobile
phone manufacturer
Motorola.
What Happened: In 2004:
Motorola launched Razr, a sleek flip phone.
Which went on sale across the globe.
The phone did particularly well in China.
By 2006, the Razr had sold 50 million.
But then, Motorola was unable to come up
with a successor to the Razr.
Competitors like Nokia, LG and Samsung
launched competitive products which began
to eat into Razr's success.
Motorola's problems were compounded by
disastrous advertising campaigns;
featuring models in Mohawk hairdos and
punk clothes, not exactly the look Chinese
customers hankered after.
Disappointed Chinese were looking for
sleeker phones from Motorola.
By 2007, Motorola's China sales fell to $2.6
billion (7% of global sales) from $4.7 billion
(11% of global sales) in 2006.
After a few horrible years, Google acquired
Motorola's mobile manufacturing operations
in August 2011.
What It Means:
As product life cycles get shorter, one
winning product isn't enough to sustain
leadership.
Operationalizing PLC
1.
Units Of Analysis
Product
Class
Product
Line
Form
Brand
2.
Market Segment
-
Aggregate
Segmented
3.
Shape Of The Curve
3.
Identify The Stage
3.
Unit Of Measurement
Sales (Vol.)
Time
(Year/Quarter/Month)
Mobile Phones in India 2011
657 mobile devices were launched in India in 2011.
The 881 million mobile subscribers in India, in 2011,
had numerous mobile devices to choose from with
models varying from the cheapest tablet of the
world, Aakash, for Rs 2,500, to the latest sensation
iPhone 4S which is available for around Rs 50,000.
The year 2011 saw the launch of 657 mobile devices
( mobile phones and tablets) by Indian as well as
MNC handset players in the country.
Operation system
The year saw growing demand for high-end handsets that
use a mobile operating system, but Java emerged a clear
winner. 525 were based on Java.
100 mobile devices including smart-phones and tablets were
launched this year running different versions of Android
operating system.
Nokia's operating systems - S40, Anna and Symbian bagged the third slot with 13 new launches.
The fourth spot was jointly shared by iOS and BlackBerry
with seven devices each launched by Apple and RIM
respectively.
The latest entrant in the OS space, — Windows, bagged the
Brands
Max Mobiles: 52 mobile phones
Fly Mobiles: 41 new devices including one tablet and
40 feature phones
Samsung: 39 devices including the Galaxy series of
smartphones and tablets
Spice (S Mobility): 39 devices including a dual SIM
Android smartphone.
Videocon; 35
Karbonn Mobiles. 35
Intex: 26 mobile phones and India’s first projector
phone — IN 8809.
Micromax: 23 including three Android devices this year
Beetel: 23
Brands
LG with 17
Onida with 16
Nokia 15 which forayed into the dual SIM segment
Chinese player Huawei (Ideos range of
smartphones): 15
G'Five: 14
Red: 14
Sony Ericsson which had launched its Xperia range
of phones: 13
HTC: 12
Airphone: 12, Motorola 11, Maxphone: 11, Philips:
10
The key factors that contributed to this phenomenal
growth in mobile phones
Rapid advancements in technology, both hardware and software; the rise of
dual-SIM handsets; launch of 3G services
Introduction of innovative features with sophisticated technologies that
have potential to live up to customers' growing expectations has become
more of an industry norm
Decrease in the average price of mobile devices
Growing appetite of Indian consumers and because of local advantages
such as good commission agreement with distributors, low cost of
manufacturing and strong links with small retailers especially in tier two
and tier three cities, they have been able to strive in a highly competitive
mobile space.
Focus is shifting towards the rural sector, where they have a good presence
and customers are highly price sensitive.
Most buying decisions are taken at the point of sale, that is, retail shops
where the salesman will try to push products that get him the maximum
commission.
Good resale market create opportunities for replacement with existing
customers
Strategies for New Products
ESSENTIAL FEATURES OF
MARKETING:
1.
2.
3.
4.
STARTS WITH THE CUSTOMER
A LONG-RUN PERSPECTIVE
FULL USE OF ALL THE CO’S
RESOURCES
INNOVATION
CASE : Hajmola
Year
Market
Hajmoloa
%
1975
150
20.0
13%
1976
180
28.8
16%
1977
187.5
39.6
21%
1978
195
42.4
22%
1979
216
54.0
25%
1980
232
62.5
27%
1981
248
64.6
26%
1982
279
68.3
24%
1983
386
130.2
33%
1984
422
169.6
40%
1988
27.9%
56%
13%
25%
6%
Total
N
E
W
S
Hajmola
27.9
32.4
43.0
12.3
17.8
Swad
23.4
18.1
18.5
33.0
47.1
Chatpat
12.4
12.7
3.9
18.0
NA
Pachnol
4.7
4.8
7.4
3.3
0.6
Churyam 2.7
1.3
1.3
4.4
18.9
NPD&L SOME REMARKS

New products are a way of getting new &
keeping old customers.

New products are an effective way of
obtaining a competitive advantage

New products are a source of both growth &
hope in the perceptions of employees &
stakeholders as an innovative organization is
more exciting than the conservative one.
NPD&L SOME REMARKS
Good marketing research and ongoing marketing
intelligence are a prime source of new product ideas,
as generated from consumers in the market place.

–
–
–
–

MR is about diagnosis,
it helps to understand what makes consumer tick,
what motivates consumers,
how they think about their problems for which your product
may provide a solution.
MR should give information about what your
competitors are doing & what your customer
think about them.
NPD&L: SOME REMARKS



Technical & marketing development should move
along. One should never lead the other for very
long. The market place is dynamic, a good
opportunity defined yesterday needs to be retested
tomorrow.
Never lose sight of the target market, your defined
competitive advantage, the customer benefit you
intend to provide & promote.
Therefore, Positioning is critical.
NPD&L: SOME REMARKS


The ultimate test is repeat purchase rate,
not one time trials.
Test marketing is an attractive insurance
policy. Test marketing exposure means that
your competitors will know exactly what you
are up to.
NPD&L: SOME REMARKS

Implementation is crucial.

A good idea can be ruined by poor
implementation.

The opportunity created by implementation is
significant as it may not be created again.

Attention to each detail in launch make it harder
for competitors to jump in – leave them no
opportunity that you could have exploited
Product & Market Planning
Existing Products
Existing
Market
Segments
New
Market
Segments
New Products
Product & Market Planning
Existing
Market
Segments
New
Market
Segments
Existing Products
New Products
Core Product Focus
Product Development
maintain, expand,
or harvest current
products
improve products;
add to product line
Market Development
Diversification
add new market
segments
add new product
lines; expand into
unrelated
businesses
Consumers’ Perspectives on “New” Products
Discontinuous
Innovation
Breakthrough
Dynamically
Continuous
Innovation
Continuous
Innovation
Major change
Ongoing
alteration
CATEGORIES OF NEW PRODUCTS
1.
New-to-the-world products: new
products that create an entirely new
market.
CATEGORIES OF NEW PRODUCTS
2. New-product lines: new products that
allow a company to enter an
established market for the first time
3.
Additions to existing product lines:
new products that supplement a
company’s established product lines.
3.
Additions to existing product lines:
new products that supplement a
company’s established product lines.
4. Improvements in/revisions to existing
products: new products that provide
improved performance or greater
perceived value & replace existing
products.
Techno- No
Improved
logy Technological Technology
Change
Market
No Market
Change
Existing
Product
New
Technology
Reformulation Replacement
/ Redesign
Strengthened Re-launch
Market
Improved
Product Line
Product With
Wider Appeal
New Market
Market
Extension
With Minor
Product
Change
New Uses
For Same
Product
Total
Diversification
5.
6.
Re-positioning: existing products that
are targeted to new markets or market
segments.
Cost reductions: new products that
provide similar performance at lower
cost.
New Product Failures
New Products
That Succeed
New Products
That Fail
After Introduction
80%: New Product Ideas
Fail
Characteristics of Success

Relative advantage
–
–
–
–
–
Lower costs
Faster
Easier
Longer lasting
More fun
Characteristics of Success

Compatibility with existing habits and
behaviors
Characteristics of Success

Trialability
–
–
–
–
–
Sample size
Easily tested
Low risk
Inexpensive
No special equipment
Free samples or coupons
Demo days
Characteristics of Success

Observability
– Visible cues
– Communicate hidden qualities
Characteristics of Success

Simplicity
–
–
–
–
User friendly
Understandable
Logical extension
Easy to grasp
Characteristics of Success
 Level
–
–
–
–
–
of perceived risk
Performance risk
Financial risk
Physical risk
Social risk
Time-loss risk
REASONS FOR ABANDONMENT OF
INNOVATIVE PROJECTS
(A)
Environmental Factors
–
–
–
–
–
Market Too Small
Very Few Buyers
Severe Competition
Supplier Uncertainty
Obsolescence
REASONS FOR ABANDONMENT OF
INNOVATIVE PROJECTS
(B)
Organizational Factors
–
–
–
–
Lack Of Skills
Lack Of Production Capacity/Skills
Faulty Communications
R&D Cost Escalations and shortage Of resources
New Product Development Process
New Product Strategy
Idea Generation
Idea Screening
Business Analysis
Prototype Product Development
Market Test
Commercialization
New Product Development
IDEA GENERATION
SCREENING
BUSINESS ANALYSIS
DEVELOPMENT
COMMERCIALIZATION
NEW PRODUCT
A product idea is an idea for a possible product that
the company can see offering to the market
A product concept is an elaborated version of the
idea expressed in meaningful consumer terms
A product image is the particular picture that the
consumer acquire of an actual or potential product
New Product Development
 Idea
–
–
–
–
–
generation
Ongoing
ID target market needs
Technology driven
Marketing research
Global vision
New Product Development
 Screening
–
–
–
–
–
–
Reasonable
Pertinent
Appropriate
Real consumer need
Magnitude of potential
Corporate criteria / hurdle rates
New Product Development
 Business
analysis
– Qualitative evaluation
Features
 Resource needs
 Basic marketing plan

– Quantitative evaluation
Market demand
 Costs
 Investment
 Competitive activity
 Break-even analysis

New Product Development

Product development
–
–
–
–
Prototype
Total product (packaging, branding, etc.)
Preliminary testing
Concept Testing

Present product to potential customers
– Test Marketing


Field testing
Laboratory testing
New Product Development
 Commercialization
–
–
–
–
Launch decision
Marketing mix
Establish production capacity
Supply chain & partner
relationships
New Product Failure
 Insufficient
superiority or
uniqueness
 Inadequate/inferior planning
 Poor execution
 Technical problems
 Poor timing
Strategies to Modify Existing Products
Product Modification
Cost
Reductions
Repositioning
Total Quality
Management
Product Line Strategies
Full Line Strategy
Limited Line Strategy
Single-Product Strategy
What WSL did when launched Charms and thereafter King and Mini-king
PRODUCT CATEGORY
Existing
BRAND NAME
Existing
New
New
Modifying Products for International
Markets
Standardization
Globalization
Strategy
•McDonalds
Adaptation
Customization
Strategy
•Consumer goods
Sales Excellent
Launch the Product
Sales Ex.
Test
Marketing
Fair Sales
Organise New Mkt.
Test
Modify Product
Poor Sales
Modify Product
Drop the Product
Sales Fair
Sales Poor
Mkt. Test
Mkt. Test
Right to Safety
Product
Obsolescence
Product
Ethics
Quality of Life and Ecology
Right to be
Informed
Review
 Introduce
the product life cycle
 Introduce the marketing Characteristics,
Objectives and strategies at each stage of the
life cycle.
 Strategies to operationalize PLC.
 New Products: Concepts and Strategies
 ID elements of successful new products
 Overview stages of new product development
 Understand possible reasons for new product failure
 Review product line management