Product Life Cycle (PLC)

Basic Idea
A company’s positioning and
differentiation strategy must change
as
the product,
the market &
the competitors change
over the product life cycle.
 4 important asserts of the PLC
 Products have 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 PLC.
 Products require different marketing,
financial, manufacturing, purchasing and
human resource strategies in each life cycle
stage.
 Product Life Cycles

(portrayed usually as a
bell-shaped curve)
 X-axis – TIME
 Y-axis – SALES & PROFIT Sales
Profit

4 – Stages
 INTRODUCTION STAGE
 GROWTH STAGE Introductn. Growth Maturity Decline

 MATURITY STAGE
 DECLINE STAGE
 The 4 Stages of the PLC
 Introduction – A period of slow sales growth as the
product is introduced in the market. Profits are nonexistent
because of heavy expenses of the product introduction .

 Growth – A period of rapid market acceptance and

substantial profit improvement.

 Maturity – A slowdown in sales growth because the

product has achieved acceptance by most potential buyers.
Profits stabilize or decline because of increased competition.

 Decline – Sales show a downward drift and profits erode.

Common Alternate Patterns of the
PLC
Growth–Slump
Maturity Pattern
The sales grow rapidly,
when first introduced
and fall to a petrified Sales

level that is sustained.

E.g.: Kitchen Appliances

Common Alternate Patterns of the
PLC
Cycle – Recycle
Pattern
Aggressively promotes the
new product producing the
first cycle and when sales
decline, another Sales

promotional push giving the

second cycle.

E.g..: Sales of new drugs.

 Common Alternate Patterns of the
PLC
Scalloped Pattern
Succession of life cycles
based on the discovery
of new product
characteristics. Sales

E.g.: Shirts, Cell

Phones, Automobile
Tyres.
 Three Special Categories of the PLC :
STYLE Life Cycle
Basic and distinctive
mode of expression
appearing in a field of
human endeavor.

Sales
E.g.:
Clothing ( Formal,
Casual, Funky)
Art ( Realistic,
Surrealistic, Abstract)
 Three Special Categories of the PLC :
FASHION Life Cycle
Currently accepted or
popular style
4 stages:
 Distinctiveness

 Emulation
Sales
 Mass Fashion

 Decline

E.g.: Automobile – smaller –

less comfort – customers
preferring larger cars.
Three Special Categories of the PLC:
FAD Life Cycle

Fashions that come

quickly into public
Sales
view, adopted with
great zeal, peak early
and decline very fast.
 Marketing Strategies :
Introduction Stage
Companies that plan to introduce a new
product must decide when to enter the market.
To be first it can be rewarding (if the firm can
bring superior technology, quality and brand
strength) but risky and expensive.
 Inform potential customers.
 Induce product trials.
 Secure distribution & retail outlets.
 Marketing Strategies :
Growth Stage
 Improve product quality, product features and
styling.
 Add new models & flanker products (e.g.:
different sizes / flavors)
 Enter new market segments.
 Increase distribution coverage and enter new
distribution channels.
 Shift from product awareness advertising to
product difference advertising
 Lower prices to attract next layer of price
sensitive buyers.
 Marketing Strategies :
Maturity Stage
 Market Modification
(expand the market for its mature brand by working with two factors that
make up the sales volume)
Volume = no. of brand users * usage rate per user
 Product Modification
Quality Improvement – Products functional performance.
Feature Improvement – Products new features like size,
weight, etc.
Style Improvement – Products esthetic appeal.
 Marketing Program Modification
Prices / Distribution / Advertising / Sales Promotion /
Personal selling / Services
 Marketing Strategies :
Decline Stage
 The appropriate strategy depends on the
industry’s relative attractiveness and the
company’s competitive strength in the
industry.
If unattractive and possessing competitive
strength - should consider shrinking selective.
If attractive and possessing competitive strength
– should consider strengthening its investment.
Product Line and Product Mix
Product
Anything that can be offered to a market
to satisfy a want or need

It may include physical goods, services,

experiences, events, persons, places,
properties, organizations, informations and
ideas.
 Product Levels

In planning the market offering, the

marketer needs to think through five
levels of the product.

Each level adds more customer value and

the five constitute the customer value
hierarchy.
Product Levels
Core benefit
Basic Product
Expected Product
Potential Product
Augmented Product
 Product Levels
 Core Benefit – the fundamental service or benefit that
the customer is really buying.
 Basic Product – The core benefit is turned out to be the
basic product.
 Expected Product – A set of attributes and conditions,
buyers normally expect when they purchase the product.
 Augmented Product – Exceeds customer satisfaction.
 Potential Product – Encompasses all possible
augmentations and transformations that might undergo in
the future (customer delight)
 Product Hierarchy
Each product is related to certain other products. The
product hierarchy stretches from basic needs to particular
items that satisfy those needs. There are basically seven
levels:
1. Need Family : The core need that underlies the existence
of a product family.

2. Product Family : All the product classes that can satisfy

a core need with reasonable effectiveness.

3. Product Class : A group of products within the product

family recognized as having a certain functional coherence.
 Product Hierarchy
4. Product Line : A group of products within
a product class that are closely related because
they perform a similar function, are sold to the
same customer groups, are marketed through
the same channels or fall within given price
ranges
5. Product Type : A group of items within a
product line that share one of the several
possible forms of the product
 Product Hierarchy
6. Brand : The name, associated with one or
more items in the product line, that is used to
identify the source or character of the items.
7. Item (also called as Stock keeping Unit
or Product Variant) : A distinct unit within
a brand or product line distinguishable by
size, price, appearance, or some other
attribute.
 Product Mix
 Also called as the Product Assortment
 It is the set of all products and items that

a particular seller offers for sale.

1. The WIDTH of a product mix refers to
how many different lines the company
carries.
2. The LENGTH of a product mix refers to
the total number of items in the mix
 Product Mix
3. The DEPTH of a product mix refers to
how many variants are offered of each
product line.
4. The CONSISTENCY of the product mix
refers to how closely related the various
product lines are in end use, production
requirements, distribution channels, or
some other way.
Product-Mix Width and Product-Line Length for Procter
&Gamble Products (Including Date of Introduction)

Product-Mix Width

Detergents Toothpaste Bar Soap Disposable Paper

Diapers Tissues
Ivory Snow Gleem 1952 Ivory 1879 Pampers 1961 Charmin 1928
1930 Crest 1955 Kirk’s 1885 Luvs 1976 Puffs 1960
Dreft 1933 Lava 1893 Banner 1982
Tide 1946 Camay 1926 Summit 1992
PRODUCT Cheer 1950 Zest 1952
-LINE Oxydol 1954 Safeguard
LENGTH Dash 1954 1963
Bold 1965 Coast 1974
Gain 1966 Oil of Olay
Era 1972 1993
 Brand

Definition:

The name, associated with one or

more items in the product line, that is
used to identify the source or
character of the items.
 Brand – 6 levels of Meaning

 Attribute (characteristics)
 Benefits (functional to emotional benefit)
 Values (producer’s value)
 Culture (e.g.: manufacturer’s culture)
 Personality (an extra-ordinary feeling)
 User (the kind of user)
 Brand Equity
It is the added value endowed on products and
services. It may be reflected in the way
consumers think, feel and act with respect to the
brand as well as in the prices, market share and
profitability the brand commands for the firm.

Important terms
 BRAND AWARENESS

 BRAND PREFERNCE

 BRAND LOYALTY
 Branding Decisions

Branding Brand – Brand – Brand – Brand –

Decision Sponsor Name Strategy Repositioning
Decision Decision Decision Decision
•Individual
names •Line
extension
•Manufacturer’ •Blanket
s brand family name •Brand •Repositionin
•Brand extension g
•Distributor •Separate
•No Brand (private) brand family •Multi-brands •No
names •New brands Repositioning
•Licensed
brand •Company – •Cobrands
individual
names
 Packaging
Includes the activities of designing and
producing the container for a product.

 Primary Package – Bottle

 Secondary Package – Cardboard box
 Shipping Package – Corrugated box
 Packaging – A marketing tool
 Self – service (shopping at a supermarket)
 Consumer affluence (consumer’s
willingness to pay)
 Company & brand image (instant
recognition of the company or brand)
 Innovation opportunity (large benefit to
consumers and profits to producers)
 Lay
The New Product Development Decision Process Future
Plans

Y Y Y Y Y Y Y Y

1.Idea 2.Idea 3.Concept 4.Marketing 5.Business 6.Product 7.Market 8.Comme-

Generation Screening development strategy analysis development testing rcialization
and testing development
Is the idea Is the Will this Have we Have Are
worth product Can we Can we find product developed product product
considerin idea find a a cost meet our a sales sales
g? compatible good effective profit technically met
with concept for affordable goal? and expectat- meeting
company’s the product marketing commerciall ions? expectatio
objectives, that strategy? y sound ns?
strategies, consumers product?
and say they Y N N
Y
resources? would try?
Should we Would it
send the help to
idea back modify
for product the
N N N N N N
developme product
nt? or
marketing
N N
program?

DROP
 Pricing Strategy
PRICE:
 One of the marketing – mix element that produces revenue - Others
produce costs.
 Most flexible can be changed easily unlike other elements

No. 1 problem faced by all companies.

Most common mistakes:-

 Cost oriented
 Not revised as to capitalize on marketing changes
 Set independent of the rest of the marketing mix
 Not verified for different product items marketing segment & purchase
occasions.
Nine - Price Quality Strategies

PRICE

High Medium Low

2. High – 3. Super –
1. Premium
High value value
Strategy
PRODUCT Strategy Strategy
QUALITY 4. Over 5. Medium – 6. Good –
Medium changing value value
Strategy Strategy Strategy
8. False
7. Rip – off 9. Economy
Low economy
Strategy Strategy
Strategy
Setting Pricing Policy
1. Selecting the
pricing objective

2. Determining
demand

3. Estimating
costs

4. Analyzing
competitor’s costs
prices and offers

5. Selecting a
pricing method

6. Selecting the
final price
 Selecting the pricing
objective
(decides where to position its product in the
market)
Some times , the companies set price to
 Maximize current profits
 Maximize market state
High sales volume reduce the unit costs.
Non profit & public organization adopt other pricing
objective
• Partial cost recovery
• A social pricing
 Determining “Demand”
Price Sensitivity
Unique – value effect:
Buyers are less price sensitive when the product is
more distinctive.
Substitute-awareness effect:
Buyers are less price sensitive when they are less
aware of substitutes.
Difficult-comparison effect :
Buyers are less price sensitive when they cannot
easily compare the quality substitutes.
Determining “Demand”
Total – expenditure effect:
Buyers are less price sensitive the lower the
expenditure is as a part of their total income.
End – benefit effect:
Buyers are less price sensitive the smaller the
expenditure is to the total cost of the end
product.
Shared – cost effect:
Buyers are less price sensitive when part of the
cost is borne by another party.
Determining “Demand”
Sunk – Investment effect:
Buyers are less price sensitive when the
product is used in conjunction with assets
previously bought.
Price – Quality effect:
Buyers are less price sensitive when the
product is assumed to have more quality,
prestige, or exclusiveness.
Inventory Effect:
Buyers are less price sensitive when they
cannot store the product.
 Estimating Demand Curve
 Statistically analyzing past prices,
quantities sold, to estimate their
relationship.
 Conduct price experiments.

 Asking buyers to state how many

units they would buy at different
proposed prices.
 Estimating Demand Curve
1. Inelastic Demand

Rs.15

Price
Rs.10

100 105

Quantity demanded per period

 Estimating Demand Curve
2. Elastic Demand

Rs.15

Price Rs.10

100 200

Quantity demanded per period

 Estimating Costs
Types of Costs & Levels of Production
1. Fixed Costs (Overhead costs)

e.g.: rent, EB bill, salaries, interest

regardless of output
2. Variable Costs

Costs that vary with level of production

3. Total Cost
Sum of fixed and variable costs for any
level of production
4. Average Cost
Average cost / unit Total Cost
@ that level of = ___________
production Production
 Estimating Costs
Accumulated
Production
Cost per unit decreases 14

gradually as the no. of 12

10
units being produced 8 Experience
increases gradually 6 curve

4
2

x- axis : Accumulated 0
100000 200000 300000 400000
Production
y-axis : Cost per unit
 Estimating Costs
Differentiated Marketing Offers:

To estimate the real profitability of

dealing with different retailers the
manufacturers need to use Activity-Based
Cost (ABC) accounting instead of
standard cost accounting.
 Estimating Costs
Target Costing:
1. First a market research to establish
new product’s desired functions.
2. Then determine the price at which the
products will sell given its appeal and
competitor’s prices.
3. Deduct the desired profit margin from
this price and this leaves the target cost
to be achieved.
Analyzing Competitor’s costs,
prices and offers.
From the range of possible prices
determined by market demand
and company’s costs, the firm
must take the competitor’s costs,
prices and possible price reactions
into account.
 Selecting a Pricing method
 Considering 3C’s, namely,
Customer demand schedule
Cost function
Competitor’s prices
the companies select a pricing method.

Some of the price setting methods are as

follows:
 Price setting Methods
 Mark-up Pricing
Adding a standard markup profit to the
product’s cost.
 Target-Return Pricing
The firm determines the price that would
yield its target rate of return on Rate of
Investment (ROI)
 Price setting Methods

 Perceived-Value Pricing
The buyer’s perception of value is considered
as the key to pricing and not the seller’s cost.

 Value Pricing
The company charges fairly a low pricing for
a high quality offering.
 Price setting Methods
 Going-Rate Pricing
The firm usually bases its pricing largely
on competitor’s prices.
 Sealed-Bid Pricing
The firm bases its price on expectations of
how competitor’s will price rather than on a
rigid relation to the firm’s costs or demand.
 Selecting the Final Price
In selecting the final price the company
must consider additional factors, including
- psychological pricing
- the influence of other marketing
mix elements on price
- company pricing policies
- impact of price on other parties
 Adapting the Price
 Geographical Pricing
Barter
Direct exchange of goods, no money, no
third party
Compensation deal
Seller receives some % of payment in
cash and the rest in products
Buy back arrangement
The seller sells and agrees to accept as
partial payment products manufactured
with supplied equipment.
Offset
Seller receives full payment & agrees to
spend a substantial amount of that money
in that country within a stated time
period.
 Adapting the Price
Price Discount and Allowances.
Cash Discounts
A price reduction to buyers who pay their
bills promptly.
Quantity Discounts
A price reduction to buyers who buy
large volumes
Functional Discounts (Trade Discounts)
Discounts offered by manufacturers to
trade channel members who perform
functions such as selling, storing and record
keeping.
Seasonal Discounts
Price reduction for buyers who
merchandise or services out of season.
Allowances
Extra payments designed to gain reseller
participation in special programs.
 Adapting the Price
 Promotional Pricing (companies use these
techniques to stimulate early purchase)
Loss-leader pricing
A drop on prices of well-known brands to
stimulate additional store traffic at super
markets and departmental stores.
Special-event pricing
Sellers will establish special prices in certain
seasons to draw in more customers.
Cash Rebates
Companies offering cash rebates to
encourage purchase of the products
within a specified time period.
Low-interest Financing
The company offers a low interest
finance instead of cutting down the price.
Longer Payment Terms
Stretching of loans over longer periods
and lowering of monthly payments.
Warranties and Service Contracts
Promotion of sales by adding a free or
low-cost warranty or service contract.

Psychological Pricing
This strategy involves setting an
artificially high price and then offering
the product at substantial savings.
 Adapting the Price
Discriminatory Pricing
the pricing done by a company when its
products or services are sold at two or
more prices that do not reflect a
proportional difference in costs.
Customer segment pricing
Different customers are charged different
prices for the same product or service.
Product-form pricing
Different versions of the products are
priced differently but not proportionately
to their respective costs.

Image pricing
Pricing of the same product at two
different levels based on image
differences.
Location Pricing
The same product is priced differently at
different locations even though the cost
of offering the product at each location is
the same.
Time Pricing
The prices are varied by season, day or
hour.
 Responding to Competitor’s
Price Change
(Consider the type of market – whether
homogeneous or non homogeneous)
 Maintain Price
 Maintain Price and Add Value
 Reduce Price
 Increase Price and Improve Quality.
Thank you !