Banking Marketing Aptitude Product Life Cycle (PLC) Marketing Aptitude - Product Life Cycle

Product

A product may be defined as a bundle of utilities consisting of various features and accompanying services. The bundle of utilities or the physical and psychological satisfactions that the buyer receives is provided by the seller when he sells a particular combination of product features and associated services.

• Importance of Product
• Product is the central point of all kinds of marketing activities.
• Any marketing activity is not possible without any product.
• Sales, advertisement, sales promotion, etc depend only on product.
• Price of a product, its distribution and policies related to it, are based on it.
• Product planning and its development affects the life of a product.
• Many persons get employment due to the product.
• Decisions related to any product are the main causes of the prosperity or failure of any business.
• Classification of Product

Products or goods can be classified into two broad categories depending upon the use for which they are meant. These categories are

• Consumer Goods

                  Consumer goods can be classified as follows

                  (i) Convenient Goods e.g., cold drinks, cigarettes, magazines and newspapers, etc.

                  (ii) Shopping Goods e.g., furniture items, dress materials, shoes, etc.

                  (iii) Speciality Goods e.g., fancy goods, stamps, coins, etc.

• Industrial Goods

                  Industrial goods can be classified as follows

      (i) Fabricating Goods e.g., pig iron going into steel, yarn being woven into cloth, etc.

      (ii) Equipment Goods e.g., portable drills, hand tools, etc.

(iii) Supplies Goods e.g., floor wax, pins, pens, etc. Electrical goods such as TVs, video, stereo systems, etc. used for home entertainment are known as Brown goods.

The goods which are used for their production, are called capital goods.

            Difference between Consumer Goods and Industrial Goods

• Qualities of a Product

• Product Life Cycle (PLC)

The Product Life Cycle (PLC) is the life span of a product from the stage of development through testing, promotion, growth and marketing, to the stage of decline and perhaps regeneration.

• Characteristics of Product Life Cycle

1. The life cycle of each product begins with its introduction in the market and passes through the   phases   of   market development, maturity, becomes leader and ultimately declines.
2. The speed of movement through various stages of life cycle, cannot be same for all kind of goods.
3. Profits in the business enterprise, grow quickly in the introduction stage and decline/decrease in the maturity stage due to competitive conditions. However, there is overall increase in sale during the maturity stage.
4. With the decrease in profits in the maturity stage, changes such as research and development, production pattern, marketing and financial control activities, etc become essential.

• Stages in Product Life Cycle

            The product life cycle comprises of five stages

• Market introduction
• Market growth
• Market maturity
• Market saturation
• Market decline

Stage 1

Market Introduction In this stage, some innovative products may be launched.    Innovation    means product designing, new ideas and creativity. This stage of the cycle could be the most expensive for a company. The cost of things like research and development, consumer testing and the marketing needed to launch the product can be very high, especially if it is a competitive sector,

Stage 2

Market Growth This stage is typically characterised by a strong growth in sales and profits. As the company can start to benefit from economies of scale in production, the overall profit margins will increase. Price stabilises or falls slightly, depending on how fast demand increases. The category of consumers in the growth stage of product is somewhat more price sensitive, more risk averse and therefore, somewhat more hesitant to adopt the product,

Stage 3

Market Maturity Sales continue to grow during the early part of maturity, but at a much slower rate than experienced during the growth phase. At some point, sales reach at the peak. This peak may last for extended periods of time. In fact, the maturity phase of the life cycle is the longest phase for most products.

Stage 4

Market Saturation In this stage, the arnout of product provided in a market has been maximised in the current state of market place and selling price has been constant. At the point of saturation, further growth can only be achieved through product improvements, market share gains or a rise in overall consumer demand.

Stage 5

Market Decline This is the last stage of Product Life Cycle (PLC). At this stage, there is a down turn in the market. Profit margins touch a low level, competition becomes severe and customers start using newer and better products.

• Importance of Product Life Cycle

            Following are the importance of product life cycle

• Life of a Product is Limited

According to this concept, the product will die out over a period of time irrespective of the fact that the product had made tremendous progress during the post. Knowing this fact, management always try to improve its existing product or to develop a new product.

• Estimation of Profits

The quantum and rate of profits increases or decreases with the quantum of turn over. In introductory stage, profits are negligible, then they go up and after sometime they begin to fall and gradually they move to nil. Thus, the management can well predict the firm’s profits in different stages of the life cycle of the product.

• Marketing Programme

Different policies, procedures and strategies are followed in the different stages of the life cycle of a product. So, management can prepare the marketing programmes accordingly and may get success.

Importance of Product Life Cycle also includes

(i) Help in promotional decision.

(ii) Help in product control.

(iii) Facilitates sales forecasting.

• Factors Affecting Product Life Cycle
• Development of substitute products.
• Product regulatory system.
• Rate of technical change and market acceptance.
• Competitive entry.
• Legal law and government protection.
• Goodwill of the organisation.
• Patent, copyright and trademark.
• Quality of raw material and product.
• Material mix ratio.

• Style, Fashion and Fad Life Cycles

            We need to distinguish three special categories of product Life cycles; styles, fashions and fads.

• A style is a basic and distinctive mode of expression, appearing in a field of human endeavour. Styles appear in homes, clothing and art. A style can last for generations.
• A fashion is currently accepted or popular style in a given field. Fashion pass through four stages. It is always based on some style. Distinctiveness, emulation, mass fashion and Decline.
• Fads are fashions that come quickly in public view, are adopted with great zeal, peak early and decline very fast.

• Product Related Policy Decision

Decisions taken by the producers on the given three aspects

1. Product Item A detailed description of a product in a list of a producer or seller is called product item.
2. Procut Line It means group of product, which are closely related to each other e.g., Lakme, Maybline, etc. In product line decision, the marketer has to make decision regarding the product line length which means the number of product in the product line.
3. Product Mix It means the complete set of product line produced and bold by the company, e.g., Nestle produces milk powder, Maggie, ghee, etc.

• Product Development Steps

The new-product planning involves a series of steps from idea generation to commercialisation

Step 1

Idea Generation It is a continuous, systematic search for new product opportunities. It involves delineating sources of new ideas and methods for generating them.

Step 2

Product Screening After the firm identifies potential products, it must screen them. In product screening, poor,   unsuitable or otherwise unattractive ideas are weeded out from futher actions.

Step 3

Concept Testing A firm needs to acquire consumer feedback about its product ideas.  Concept testing presents the consumer with a proposed product and measures attitudes and intentions at this eary stage of development.

Step 4

Business Analysis Business analysis for the remaining product concepts is much more derailed than product screening. These are some of the factors considered in this stage of planning-demand projections, cost projections, competition, etc.

Step 5

Product Development It converts a product idea into a physical form and identifies a basic marketing strategy. It involves   product   construction, packaging branding, etc.

Step 6

Test Marketing It involves placing a product for sole in one or more selected areas and observing its actual performance under the proposed marketing plan.

Step 7

Commercialisation After testing is completed, the firm is ready to introduce the product to its full target market, commercialisation involves impleting a total marketing plan and full production.

 Tit-Bits

• Product planning means the act of making out and supervising the search, screening, development and commercialisation of new products, the medification of existing lines and the discontinuance of marginal or unprofitable items.
• Product development includes guarantee and condition to the product, branding, labelling and packaging.
• Reasons behind product innovation are competition and market change, market strategy and risk.
• A phase out approach can be best described as immediately dropping the product from the product mix.
• Price strategies become more mixed during the maturity stage of the PLC.