INTRODUCTION
All product and services have certain life cycles. The
life cycle refers to the period from the product’s 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 on increase in profits is the major goal of a company
that introduces a product into a market, the product’s life cycle management is
very important. Some companies use strategic planning and others follow the
basic rule of the different life cycle phase that analyzed later.
The understanding of a product life cycle
can help a company to understand and realize when it is time to introduce and
withdraw a product form a market, its positron in the market compared to
competitors, and the products success or failure.
PRODUCT DEVELOPMENT STAGE
Product development stage 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 money and time
during development, before it is exposed to target customers.
Those products that survive the test
market are then introduced into a real market place and the introduction phase
of the product begins. During the product development phase, sales are zero and
revenues are negative. It is the time of spending with absolute no return.
INTRODUCTION PHASE
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 as the moment of sale. A good example
of such a launch is the launch of “WINDOWS XP” by Microsoft corporation.
This period can be described as a
money sinkhole compared to the maturity phase of product large expenditure on
promotion and adversity is common, and quick but costly service requirements are
introduced. A company must be prepared to spent 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 on impossible challenge. Some companies avoid this stress by hiring
external contractors or outsourcing the entire distribution arrangement. This
has the benefit of testing on important marketing tool such as out sourcing.
Pricing is something else for a
company to consider during this phase. Product pricing usually follows one or
two well structured strategies. Early customers will pay a lot for something
new and this will help a bit to minimize that sinkhole that was mentioned
earlier. Later the pricing policy should be more aggressive so that the product
can become competitive. Another strategy is that of a pre-set price believed to be right one to
maximize sales. This how ever demands a very good knowledge of the market and
of what a customer is willing to pay for a newly introduced product.
A successful product introduction
phase may also result from actions taken by the company prior to the
introduction of the product to the market these actions are included in the
formulation of the marketing strategy. This is accomplished during product
development by the use of market research. Customer requirements on design,
pricing, servicing and packaging are invaluable to the formation of a product design.
A customer can tell a company what
features of the product are appealing and what are the characteristics that
should not appear on the product. He will describe the ways of how the product
will become handy and useful. So in his way a company will know before its
product is introduced to a market what to expect from the customers and
competitors. A marketing mix may also help in terms of defining the targeted
audience during promotion and advertising of the product in the introduction
phase.
GROWTH PHASE
The growth phase offers the
satisfaction of seeing the product take-off in the market place. This is the
appropriate timing to focus on increasing the market share. If the product has
been introduced first into the market, (introduction into a “Vigm” market or
into on-existing market) then it is in a position to gain market share
relatively easily. A new growing market alerts the competition attention.
The company must show all the
product offerings and try to differentiate them form the competitors ones. A
frequent modification process of the product is an effective policy to
discourage competitors form 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 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.
The 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
customers confidence. Good coverage in all market places is worth while goal
throughout the growth phase. Managing the growth stage is essential. Compares
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. This will result into losing customers not finding the product “on
the self”.
MATURITY PHASE
When the market becomes saturated
with variations of the basic product,
and all competitors are represented in terms of an alternative product. The
maturity phase arrives. In this phase market share growth is at the expense of
someone else’s business, rather than the growth of the market itself. This
period is the period of the highest returns form the product. A company that
has achieved its markets share goal enjoys the most profitable period. Period.
While a company that falls behind its market share goal, must reconsider its
marketing positioning into the market place.
During this period new brands are
introduced even when they compete with the company’s existing product and model
changes are more frequent (product, brand, model). This is the time to extend
the product’s life.
Pricing and discount policies are
often changes 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 product. Promotion and advertising relocates form 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 channels of successful product maturity phase is
extended beyond anyone’s timely expectations. A good example of this is “ride”
washing power, which has grown old, end it is still growing.
DECLINE PHASE
In the decline stage the market is shrinking, reducing
the overall amount of profit that can be shared amongst the remaining
competitors. At this stage, great care has to be taken to manage the product
carefully. It may be possible to take out some production cost, to transfer
production to a cheaper facility, sell the product into other cheaper markets,
care should be taken to control the amount of stocks of the product ultimately,
depending on whether the product remains profitable, a company may decide to
end the product.
CONCLUSION
For a company to fully understand
the above and successfully manage a product’s life cycle, the need to develop
strategies and methodologies. Which is
the first phases which has already mentioned, the product development, product
introduction, product growth, product maturity and finally product decline:
These phases exist and are applicable to all producers or services form a
certain make of automobile to a multimillion –dollar lithography tool to a
one-cent capacitor-thee phases can be spoilt 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 product’s sales performance.
REFERENCES
Aaker D.
strategic market management, Wiley, 1995
Business studies “The product life cycle”, on-line<http://www.learn.co.uk
Clifford D. “managing the product life cycle”, European business Journal, July 1969.
Life cycle strategies inc.” Three fundamentals for
effective product management. A practical guide for improving product success”,
1999.
Twiss B.C. Forecasting market size and market growth
rates for New products”.
DEPT.: MARKETING
FACULTY: MANAGEMENT
SCIENCES
COURSE CODE: MKT 363
COURSE TITLE: DISTRIBUTION MANAGEMENT