Marketing Chapter 6 "Product Life Cycle"

Advanced 467 Reasoning Puzzles Book SBI PO 2018

Product

In simple words, the term, “Product” means an article which satisfies our wants. It is defined as a set of attributes, tangible, intangible & physical assembled in an identified manner.
Philip Kotler, defines the term product as “anything that can be offered to the market for consumption that might satisfy a need”.

Features of a Product

  • It has many utilities
  • It can either be tangible. Ex: soap, or intangible Ex: Insurance policy.
  • It is a combination, package, brand, etc
  • It is purchased because of its satisfying power.

New Product Development:

Introducing a new product is a difficult task, there is no guarantee that the new product developed is accepted in the market; hence, the risk if high. It is better to adopt a scientific approach for the development of new products. The following are the different stages of a new product development:
1) Idea Generation - New product development starts with an idea. The idea may come from any source. Ex: Competitors, Newspapers, Government, Research & Development, Department, etc.

2) Screening Analysis -  Here the company evaluates all ideas. The intention here is to avoid unnecessary expenses by stopping further processing of unwanted ideas, which do not suit the company’s requirements. An idea is evaluated with reference to various factors such as consumer needs, investments, profitability, technology, etc.

3) Concept Testing -  In the stage the concept of the new is tested. The company evaluates whether the concepts would suit the company requirements.

4) Business Analysis - Here a detail financial analysis is done. It is carried out to find out the financial marketing competitive & manufacturing viability usually, they analysis is done by the experts. The task of the management is this step is to identify the product features, estimate the market demand & the products profitability. Those ideas, which promise more profits with minimum payback are selected.

5) Product Development - In this stage, product on paper is converted into a physical product. This is done by the engineering department or by the research & development department. Proper care must be taken while developing the product, so that the new product does not become a waste. For this purpose, research reports, company’s budget, product features, etc have to be studied carefully. Undue haste in developing a new product results in the premature death. On the other hand, if the time taken is to long, the company may lose the opportunity to the competitors.

6) Test Making - After developing the product, the next stage is to test its commercial viability. This process is known as test making.
Test marketing is defined as “developing a temporary Marketing Mix & introducing the new product to a market called, the sample market to verify & analyze the market reaction for the new product”. This is one of the most important steps because for the first time, the information on the new product acceptance by the market is collected.

While, test marketing, the company changes the Marketing Mix namely, Product, Price, Promotion & Physical Distribution depending upon the test marketing results. If it is accepted, it chooses the best marketing mix for the product, otherwise the project is rejected.

Advantages of Test Marketing
  1. It helps to understand the market reaction to the new product.
  2. Customers perception on the marketing mix is understood.
  3. It avoids costly error of manufacturing, unwanted products. It reduces, the uncertainties relating to the new product.
  4. It helps in developing suitable marketing mix
  5. It helps in developing proper marketing strategies.
  6. Test marketing also highlights the weakness of the new product, which can be rectified before launching on a large scale.
  7. Test marketing gives better coordination between the company, intermediaries & the customers.
  8. It also helps to understand the intermediaries view on the new product.
  9. It brings down the overall cost of new product development by eliminating wastage.
  10. It should be remembered that the market chosen for test marketing must be proper in the sense that is should represent the entire country so that biased results are not considered.
7) Commercialization - When once is successful in test marketing, i.e., when the market accepts the new product, it is launched in other markets on a large scale in a wider market is known as commercialization. It is from this stage that a new product is really born from the customer’s point of view.

Product Life Cycle

Product also has various stages of life as human beings. From the time a product is introduced, till it is withdrawn from the market, it goes through 5 stages. Analysis of these stages for the purpose of re-positioning the product in the market is called Product Life Cycle management. The following are the stages in a product life cycle.
  1. Introduction Stage
  2. The Growth Stage
  3. The Maturity Stage
  4. The Saturation Stage
  5. The Decline Stage
Life Cycle Stages are :-

1) Introduction Stages - In this stage, a new product is introduced on a large scale for the first time. Market reacts slowly to the introduction. In other words, consumers take time to accept the new product. Initially, the company may suffer losses, sales improves gradually. Most of the products fail in this stage itself.

Following are the characteristics of this stage:
  1. Consumers do not have the knowledge of the product
  2. Consumers may or may not be strongly in need of the new product.
  3. If there is a need for the product, the company gets readymade demand. Otherwise, it increases slowly.
  4. Sales are minimum
  5. The competition is less, in fact the company, which introduces new product is called as a Market Pioneer.
  6. The cost of it is very high because the company spends money heavily on Research & Development, Sales, Promotion, etc.
Marketing Strategies during the Introduction StageA company has to prepare the policies very carefully in the stages because it has a great impact on the image of a new product. Even a minor mistake results in the premature death of a product.

The following are the strategies that the company may adopt in this stage
It may spend heavily on promotion & fix high price. This meets two objectives.
  1. Firstly, heavy promotion creates large demand & high price, brings immediate profits. This strategy also helps to create brand preference in the minds of the consumer. It is normally followed when there is a great need for the product, when the product belongs to the richer class & when products are consumer specialties.
  2. This second strategy is to fix high price but to spend less on promotion. This is preferred when the product has limited market, in which people have knowledge about the product & the competition is completely absent.
  3. Another strategy is to charge low price & spend heavily on promotion. This is preferable when consumers are sensitive to the price & market is wide enough. This strategy brings good returns in the long run.
  4. The company may charge low price & spends less on promotion. This is preferable when the consumers are informed about the product, market is very large & there is no competition for the time being.
In the introduction stage, the competitors are very cautious. They do not enter the market immediately. They study the strategies of a company & watch the reaction of the consumers. This helps them to find out the defects of the company’s strategy.

2) Growth Stage - It is called the market acceptance stage. Following are its features:
  1. Consumers & traders accept the product
  2. Sales & profit increase
  3. More competitions enter the market
  4. The focus of competition is on the brand rather than the product
  5. Competitors may introduce new features to the product
  6. Distribution network increase
  7. The price will be reduced marginally.
Marketing Strategies in the Growth Stage:
  1. The company tries to impress upon the consumers that its brand is superior
  2. It may introduce new models or improve the quality
  3. It may enter new market & sell its products with new distribution channels
  4. To attract more buyers, it may reduce the price.
3) Maturity Stage - This stage indicates the capacity to face the competition, sales increases at a decreasing rate. Competition becomes severe. It is reflected in various ways such as offering discounts, modifying products etc.

Marketing Strategies during Maturity Period/Stage - In this stage, the manufactures have to take responsibility to promote his product. This strategy aims at creating brand loyalty.

4) Saturation Stage - This is the stage when the sales reach the peak point. Competition intensifies further & profit begins to decline. Small competitors may withdraw from the market because of their incapability to face the competition.

Marketing Strategies - This is the stage where the marketing manager must try to re-position his product. Most of the strategies in this stage are offensive in nature. Each manufacture tries to cut down his competitor’s market share by aggressive promotion policy. The objective of marketing in this stage is to retain the present sales level.

5) Decline Stage - For all products, sales invariably declines as new products enter the market. In this stage, there is a sharp decline in the profits, cost increases & market share comes down. Most of the manufactures withdraw from the market. Some may reduce production & concentrate only on a limited market

Marketing Strategies - This stage offers one of the greatest challenge to the marketing manager. He has to decide whether or not to continue with the product. The main task of marketing manager is to revitalize the demand instead of discontinuing the product immediately. It is better to withdraw gradually. Those channels of distribution, which are costly & unproductive maybe removed. In the meantime, the weak points of the marketing mix maybe identified & altered as required.

Reasons for the Failure of New Product:

  1. Poor marketing research
  2. Not using the up-to-date technology
  3. High price or to costly products
  4. Poor design
  5. Inefficient marketing
  6. Non-cooperation from the middlemen
  7. Improper promotional techniques
  8. Improper timing of introduction of the new product.