A major use of the product life cycle concept in strategic marketing is in managing the product line and identifying the need for, nature of and timing of product development plans. The premise of this use of the concept is underpinned by the term ‘life cycle’. In the absence of suitable strategies, especially if a company does not take steps to prevent it, the dynamics of the life cycle are such that over time, sales and profits will be eroded and eventually disappear. What is required is a constant programme of carefully planned strategies to ensure that long-run profit and sales objectives are met. In particular, the planner must consciously seek to develop a ‘portfolio’ of products to maintain long-run success. Using the concept in this way means the planner must undertake four steps:
Company objectives and the range of product strategies
The first task of the marketing planner is to locate the respective life cycles positions of the various products the organization markets. Obviously information is vital here. Unless the marketer has accurate and up-to-date information on where products are in their life cycles it is impossible to implement effective product life cycle management. Yang et al.9 have proposed a life cycle information acquisition and management system. Jain10 suggests that the following should be analysed for each product:
Based on this analysis it is possible to relate the information to known characteristics of each stage of the cycle and pinpoint the position of each product in its life cycle curve, which is difficult as a dip in company sales and profits may be simply a result of poor marketing effort rather than a sign that the life cycle curve has peaked. The next step in the process is more difficult still.
The planner must now attempt to forecast the future shape of the life cycle curve. We examine forecasting techniques, but critics have suggested that forecasting the life cycle curve is dangerous as the stages can vary enormously in their duration and there are several possible shapes for the life cycle curve itself. The view taken here is to concur with suggestions that forecasting life cycle curves is difficult, but that this should not deter the planner from making some attempt to forecast. After all, planning decisions reflect some view of the future so it is better to make some systematic attempt to predict what this future might be.
Not only must the planner attempt to forecast future sales curves of products, but it is important to forecast the associated profit curves. The relationship generated between product life cycle sales curves and product life cycle profit curves
The profit life cycle lags the sales life cycle for reasons discussed earlier. For example, in the introductory stage of the life cycle, losses and not profits are likely to occur, due to research and design, initial launch costs, etc. In addition, profits are likely to peak in the growth phase, as competition becomes fiercer and prices are cut to remain competitive.
Once present and forecast future sales and profits curves have been established, results of this analysis can be compared with future corporate objectives for sales and profits. In particular, we should identify discrepancies between forecast and required sales or profit levels. This ‘gap analysis’
Based on current and forecast profit life cycles compared to objectives for future profits, there exists a gap between what is required and what is forecast to be achieved. In the absence of any action to prevent it, projections of future sales and profit life cycles suggest that this gap will grow. Many other factors give rise to such ‘planning gaps’ such as adverse economic and other environmental trends and increased costs. However, product life cycle analysis will at least enable the planner to assess how much of this gap is attributable to life cycle forces and hence the ‘balance’ within the product range.
The final step is the delineation and assessment of possible strategies to counter the underlying life cycle dynamics for the product range. In other words, we must determine how any gaps, if forecasted, are to be filled. Forecasted sales and profit gaps can be filled in many ways, e.g. we might determine that part of a profit gap can best be filled by reducing manufacturing costs or by diversification or exporting.
Which of the many strategies likely to be available when we eventually choose is dependent on a set of complex factors, including:
Specifically, we need to consider ways of extending the life cycle of products that are beginning to mature or decline or the need to innovate and introduce new products, which we discuss shortly. As Hines et al.11 show, product life cycle analysis provides a useful way of focusing new product development. We conclude our discussion of this use of the PLC concept by considering product life cycle extension strategies. The concept, and anticipated results of product life extension strategies.
Product life cycle extension strategies aim not simply to delay the seemingly inevitable onset of terminal decline, but to initiate a period of further sales growth. As can be seen, this process can be repeated, giving a series of enveloping curves, each one extending sales further. A number of strategies can be used to extend the product life cycle. Kotler and Keller12 suggest some possible ways of extending the life cycle.
A popular electronic consumer product to hit the market in recent years has been the iPod. This is an example of how the product life cycle for a product/technology can be extended; in this case, from traditional means of recording music. An earlier example was video recording machines that were first launched in the 1970s. Over a period of 20-plus years they penetrated most households.
Eventually then, other than replacement sales, the market was virtually saturated by the mid-1990s with comparatively few late product adopters still remaining to come on board. In an effort to revitalize sales, many manufacturers including companies like Sony, Panasonic and Philips looked to new technology to extend the life of their products. The DVD became the replacement technology for the VHS video. Launched in the late 1990s, DVD recorders quickly moved to the maturity stage of the life cycle and the majority of sales are now replacement sales. This technology was superior and offered several consumer benefits over its predecessor technology. Perhaps most important of all in the growth of this new technology, was the desire of many customers to appear to be up to date and fashionable by having the latest electronic technology in their home.
Not surprisingly, as the DVD recorder reached maturity, a successor technology was developed in the form of digital TV (e.g. the Sky plus product) which is simpler and more convenient for recording programmes. The Sky plus product is not a direct replacement for the DVD recorder as it will not play DVD discs. However, it is likely that it will be increasingly adopted as a convenient alternative for those who simply want to record programmes to watch them later.
Extending product life cycles
Life cycle extension
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