7 – New Product Development and Product Life Cycle Strategies

Introduction

It has been discovered that between 40 and 50 percent of products sold in the Indian market did not exist ten years ago. Many new products, including plasma televisions, dishwashers, more powerful and elegant motorcycles, and next-generation cars, have hit the market. As a result, given the available resources, corporations develop new products regularly to fulfil changing consumer demands and desires.

When a product is created, it goes through a process known as the product life cycle. In its most basic form, the product life cycle illustrates the market response to a new product brought into the market through time. The concept of a product life cycle is adopted from biology, and a parallel with the life of an organism is formed. As a living organism goes through birth, growth, maturity, decline, and death, so does a product during its market introduction and obvious exit.

7.1 New Product Options

The phrase “new product” can have a variety of meanings. Most definitions of new products show that new products provide unique benefits. According to Everett M. Rogers, some researchers have preferred a consumer-oriented approach to defining new products. According to a survey conducted by the consulting company Booz, Allen, and Hamilton, products produced by 700 US companies during five years were not uniformly “innovative.” The study identified six new product categories based on the company’s perceived degree of novelty and customers’ perceived degree of novelty in the target markets.

‘New to the World’ Products: 10% were actual innovations, not simply new to the company. Such products open up an entirely new market.

New Product Lines: 20 percent represented a new product category for the firm launching it. However, the products were not new to buyers in the target market, as one or more competing brands already existed.

Additions to Existing Product Lines: 26 percent were new items introduced to current product lines. These things may be relatively new to the corporation and its existing product markets. They may assist in broadening the market categories to which the product line appeals.

Improvements in or Revisions of Existing Products: 26% of items introduced to replace existing products provide greater performance or increased perceived value. These things may confront the organisation with some additional marketing and production issues. Customers will likely regard these items as comparable to the products they replace unless they represent a technologically new generation of products.

Repositioning: 7% of items are being repositioned for new uses and market niches.

Cost Reductions: 11% of the goods are modifications that provide comparable performance at a lower cost.

 

7.2 New Product Development Process

A new product goes through numerous separate phases before it is released to the market, and the process may differ between companies.

New Product Development Phases

Phases	Marketing Activities
Idea Generation	Searching for new product ideas from internal and external sources.
Idea Screening	Select the most promising ideas and discard those with limited potential. Study potential buyers’ needs, wants, environment, and competition.
Concept Testing	Describe or show product concepts and their benefits to potential customers and determine their responses. Identify and drop poor product concepts. Gather helpful information from product development and its marketing personnel.
Business Analysis	Assess the product’s potential profitability and suitability for the marketplace. Examine the company’s research, development, and production capabilities. Ascertain the requirements and availability of funds for development and commercialization. Project ROI.
Product Development	Determine the technical and economic feasibility of producing the product. Convert the product idea into a prototype. Develop and test various marketing mix elements.
Test Marketing	Conduct market testing, determine target customers’ Reactions, measure sales performance, and identify product or marketing mix weaknesses.
Commercialization	Make necessary cash outlay for production facilities. Produce and market the product to the target market and effectively communicate its benefits.

7.2.1 Idea Generation

During this first stage, the emphasis is on generating new product concepts. At this level, few ideas are excellent enough to be commercially successful. New product concepts emerge from a multitude of sources. Customers are a great source of new product ideas. Fundamentally, customer demands and desires are the most fruitful and natural area to begin exploring for fresh product ideas. This is equally significant for both individual and industrial customers. Scientists, resellers, marketing workers, researchers, salespeople, engineers, and other company personnel also produce innovative product ideas.

Manufacturers of technological products occasionally study customers who use products most sophisticatedly, recognising the need for upgrades.

Brainstorming, Synectic, attribute listing, forced relationships, and reverse assumption analysis are creative approaches businesses use to generate new product ideas.

New product ideas don’t always ‘happen.’

For example, many people are familiar with Akio Morita’s account of the development of the Walkman. He used to see a worker lugging a bulky stereo record player with headphones. This motivated Morita to come up with the concept of a portable personal stereo.

No one was optimistic about the proposal. The doubts stated included the market potential and the inability of such a stereo to record, but Morita was quite hopeful about such a stereo’s sales potential. When the experimental device was completed, marketing personnel were unimpressed and predicted it would not sell.

As everyone knows, Sony’s Walkman was a big hit. “I do not believe that any amount of market research could have predicted the success of the Sony Walkman; yet, this small object truly revolutionised the music listening habits of millions of individuals all over the world,” Morita says. Such a fresh product concept often appears to us as a natural occurrence.

Made in Japan, by Akio Morita, Penguin, 1986.

Despite the requirement for a market-driven corporation, product ideas can sometimes emerge quite by accident in laboratory research.

For instance, researchers were heavily involved in developing an angina medication (a heart ailment). However, the medicine’s unfavourable side effects resulted in the invention of a drug with a massive commercial opportunity. As a result, the anti-impotency medicine Viagra (sildenafil citrate) was born and went on to become a great marketing success because it solved a major problem for a large number of consumers.

7.2.2 Idea Screening

Because new product development expenses continue to rise dramatically with each succeeding development phase, screening aims to reject wrong concepts as early as feasible. Many organisations utilise a standard style for expressing new-product ideas by the review committee, which includes descriptions of the new-product idea, its target market, anticipated competition, market potential evaluation, pricing, development time, costs, and ROI.

Each promising idea is researched to determine its viability. Committee members categorise the ideas into promising, marginal, and rejects. The suggestions are evaluated by the committee using a set of criteria. The criteria look for responses to queries like:

1. Does the product address a genuine need?
2. Would it provide a better value to customers?
3. Can it be communicated uniquely?
4. Does the organisation have sufficient know-how and financial resources?
5. Will the new product generate the anticipated sales volume, growth, and ROI? These criteria vary from company to company.

The extent to which a company responds to new product ideas is heavily influenced by its financial resources, production capacity to meet expected demand, suitably trained personnel, and raw materials and components needed to manufacture the new product.

Another essential factor to consider is time, as the development process might take a lengthy period from idea genesis to production and market launch. Some advancements can be completed in months, while others necessitate years of work before the product is released to the public. This is especially true when safety testing, such as new medications, takes a long time. Screening should be done to ensure that the new product will not compete with existing firm items. The latest product should complement the company’s overall marketing strategies.

The screening or filtering stage is depicted here as a purely rational process. D. Forlani, J. W. Mullins, and O. C. Walker discovered evidence indicating the ultimate selection of ideas for future development is often influenced by intuitive and emotional variables, and non-analytical judgement processes were found to have a substantial influence. The company must guard against drop-and-go errors while screening the idea. A drop error occurs when a firm eliminates an otherwise promising concept from further consideration because it is easy to find flaws in other people’s ideas. A go error occurs when a firm allows an otherwise lousy idea to go to the development and commercialization phases.

7.2.3 Concept Testing

A more thorough form of a new product idea is called concept testing. It entails discussing the product concept and benefits to a small group of potential buyers and assessing their reactions to the product. A corporation can test one or more conceptions of the same product for a single product idea. It is a low-cost process that assists the organisation in deciding whether to invest significant resources in research and development. Positive consumer response to product concepts also aids in determining which specific product qualities and benefits are most essential from the perspective of a potential customer.

Concept testing is effective in most circumstances but may not be acceptable in others. Concept testing frequently fails when the primary advantage of a product is intangible and subjective. It is tough to express the concept of such a thing in such a way that respondents can visualise it. Similarly, it is impossible to test a new service until it can be proven to be in use. For example, testing the concept of a fax machine would have been extremely difficult since potential users would not have been able to visualise and comprehend its technology. As a result of these difficulties, some concepts with high potential for success are destroyed before they are considered further. Customers have no experience with such an idea, making concept testing difficult for substantial innovation.

The more clearly stated the concept is and how closely it resembles the final product or lets consumers visualise their experience with it, the more trustworthy its testing will be. Some businesses utilise rapid prototyping (a computer-aided design application) to create plastic models of small appliances. This makes it easier for potential buyers to examine the model and understand the concept. Some companies use virtual reality to test new product concepts, and the questions those respondents answer after the new product concept is presented to them focus on a product’s ability and degree of meeting a consumer need, clarity of benefits and their extent of believability, whether the product sounds superior to existing solutions, perceived value relative to proposed price, and the respondent’s purchase intention. The questions that are asked vary greatly based on the type of product proposition that is being tested.

Customer preferences for different concepts can be examined via conjoint analysis, which asks respondents to rank various product qualities to discover the most appealing product offer.

7.2.4 Business Analysis

It is an assessment to determine the potential contribution of the new product to the company’s sales, costs, and profits, so a financial analysis is required. An income and spending statement must be generated, necessitating collecting secondary and primary market data from consumer surveys. This economic study aims for the new product to at least break even over time. Any estimates can be based on rough approximations of expected sales volume, selling price, distribution, and production costs. This is a complex and speculative stage of the process, and it is especially difficult for inventive and new-to-the-world items.

The review process answers several questions: Does the product fit within the company’s current product mix? Is the market demand expected to be strong and long-lasting enough to warrant its introduction? What type of changes in the environment and competition can be expected, and what impact will they have on future product sales, costs, and profits? Are the company’s R&D, engineering, and production capabilities adequate? If new facilities are required, how quickly can they be created, and what would the expenses be? Is the funding accessible, or can it be obtained with a favourable ROI?

At this level, accurate sales forecasting is challenging. Companies employ break-even analysis to determine how many units must be sold to customers before profits can be realised. They also utilise payback analysis to assess the time it takes to repay investments. Companies frequently employ sensitivity analysis to examine the impact of changes in underlying assumptions on overall profitability.

7.2.5 Product Development

This is the stage at which the new product concept is tested. The corporation decides whether creating it at a low enough cost to sell it at an acceptable price is technically feasible. If the answer is no, the costs incurred thus far are lost, while the corporation may receive some helpful information. This phase necessitates a significant increase in resource investment. It is transformed into a prototype/working model to assess the acceptance of the product concept. In certain rare circumstances, prototype development can take several days or years. The use of advanced modern virtual-reality technology substantially aids in the development process.

The amount of quality to build into the product is a vital consideration at this stage. Higher quality frequently necessitates higher-grade materials and more expensive processes, raising the product’s costs and, as a result, its selling price. Establishing target customers’ opinions on the product’s acceptable price range is vital. In this regard, the quality of existing competitor brands should be considered. Product development is costly, and only a few product concepts make it to the development stage.

The prototype should expose the tangible and intangible characteristics consumers may associate with it to suit their needs and desires. Marketing research and idea testing reveal essential product features in consumers’ eyes. The product should be designed to communicate these traits.

The product’s performance, convenience, safety, and other functional features are tested in laboratories and the field. Testing consumer reactions to intangible aspects of a new product is challenging. This is especially problematic when building new services. The product should be subjected to rigorous and lengthy testing to validate its functioning qualities. The phrase alpha testing relates to laboratory tests, whereas beta testing refers to a sample of users using the product prototype and providing feedback. Many computer firms let consumers download new or modified software for testing, which is only effective for a limited time.

For example, Apple Computer puts its PowerBook through numerous rigorous tests, including heating the computer notebook in ovens to 140 degrees. Every day, 200 Gillette employees evaluate corporate items such as razors, blades, shaving creams, or aftershave under the supervision of technicians and then fill out a questionnaire.

If the product is deemed sufficiently successful and eligible for test marketing, marketers will make judgments concerning branding, packaging, labelling, pricing, and promotion throughout the test period.

7.2.6 Test Marketing

Test marketing is essentially a limited introduction in a carefully chosen geographic area that is thought to represent the desired market. A test marketing campaign is a trial run of the whole marketing mix. The goal is to determine the market size and the reactions of customers and resellers in a realistic setting. Most businesses utilise test marketing to reduce the chance of product failure. Test marketing can provide valuable insights into buyers, dealers, and the efficiency of promotional campaigns.

Test marketing is a time-consuming activity that must be carried out for an extended time to obtain relevant data. The testing period could last anything from a few months to a year. Much depends on the company’s investment level, risk attitudes, and time constraints. A lot of decisions must be made while designing a test marketing programme:

1. Where and how many markets should test marketing be conducted? The markets should represent the target markets well. Marketers typically evaluate two to six markets for test marketing.
2. How long should a test marketing campaign last? Much depends on the product’s nature. For non-durable consumer products, the average repurchase period should be included.
3. What should be tested? Marketers want to know consumer responses to promotions, trial rates, usage, satisfaction levels, repurchase, and reseller reactions.
4. What criteria should be utilised to judge whether or not a project is successful? Decisions would be made about the trial rate, repurchase rate, adoption rate, and purchase frequency.

Businesses use various testing methods. Some of the more well-known examples are:

Consumers are supplied with free samples to try and may also be exposed to one or more advertisements. As a result, they are provided with the product at a lower price—it may be three to five times more. The number of customers who choose the product again and their level of happiness is tracked.

Controlled Test Marketing: An impartial research firm is recruited and asked to test the product by placing it in a specific geographic area and number of stores. The research firm determines the product’s price, promotion, and store displays, among other things. Finally, at the checkout point, electronic scanning data is captured. The research agency also interviews a sample of customers to obtain their responses.

Simulated Test Marketing: Simulated test marketing involves interviewing thirty or more customers to establish their familiarity and brand preference in a specific product area. This sample is then given a random selection of commercials or print advertisements for the company’s test product and competing brands. The consumer is then given a small sum of money and invited to purchase any item inside a store. The researcher observes how many consumers purchase both the test and competitive brands. This highlights the advertisement’s relative efficacy compared to competing adverts from other brands. Following that, consumers are interviewed to learn why they bought or did not buy the company’s goods. Consumers who did not purchase the test product are given a free sample of the company’s goods and are interviewed over the phone a few weeks later to learn about their happiness and purchase aspirations. This is an excellent way to assess the effectiveness of advertisements and the trial rate of a company’s product.

Test Market: The corporation test-markets the new product in a few locations representing target markets, using all final national launch promotional tactics, such as advertising and sales promotion. It also uses its sales force to urge resellers to keep the product. It’s like a mini-national launch, and it’s rather pricey.

Businesses also use test marketing to perform laboratory tests and demonstrations and exhibit products at exhibitions and trade shows.

Some test marketing strategies expose a product to a natural marketing environment to assess its acceptability to target consumers and sales performance. By testing a product in a small area, the corporation can learn about any flaws in the product or other aspects of the marketing mix. This benefits the marketer because it allows them to remedy any deficiencies. A product failure after a nationwide launch can be tremendously costly to a firm. A corporation can use test marketing to experiment with different pricing, advertising and promotional mixtures, as well as other styles of packaging.

Test marketing also involves risks. Aside from being costly, competitors may try to interfere by expanding advertising and other promotions and cutting costs, which may impact the accuracy of test results. If the product appears to be a success, competitors may duplicate it without investing significant resources and launch their product while the original product is still in the testing stage. Simulated test marketing provides relative safety because of its faster speed, reduced expenses, and greater security.

7.2.7 Commercialisation

The choice to commercialise is the most expensive for a corporation. A new product frequently replaces an old one that may still have a consumer base, and errors can occur.

Example: This happened when Coca-Cola switched to a new Coke formulation. Because of an error in interpreting the marketing research results, the corporation was forced to reissue the previous form as ‘Classic’ Coke.

Following an assessment of the test marketing outcomes, it is assessed whether any changes to the marketing mix are required before full-scale implementation. According to Cyndee Miller, just 8% of new-product proposals make it to the commercialization stage. During this stage, full-fledged manufacturing and marketing plans must be improved and established, as well as funds for the new product. The scale of the production facility would be an important consideration. Marketing is another essential factor to consider. To launch packaged consumer items nationwide, the corporation must invest heavily in advertising and promotion for at least a year. The timing of a new product’s market launch is also critical.

Companies do not typically launch new items overnight but instead use the rollout strategy. They roll out the product in stages. It is first presented in a region (for global players, it might be a country) and then in neighbouring territories, states, or countries. As a logical continuation of test marketing, cities where test marketing has been undertaken are sometimes chosen as the initial marketing region. The main advantage of this technique is that if the product fails, the corporation will suffer fewer losses. Furthermore, if the organisation does not already have an extensive network, establishing a distribution network will take a long time.

7.3 Concept of Product Life Cycle

The product life cycle (PLC) idea is founded on the following facts:

1. The product has a limited lifespan.
2. A product sale goes through several stages.
3. Profits fluctuate during the Product Life Cycle.
4. Distinct stages of the product’s life cycle necessitate different marketing, finance, manufacturing, purchasing, and human resource strategies.

The Life Cycle Model

 

7.4 Stages of Product Life Cycle

Every product’s lifespan is often divided into four stages:

1. Introduction: A period of slow sales growth while the product enters the market. Profits are non-existent due to the high costs associated with product introduction.
2. Growth: A period of quick market acceptance and significant profit growth.
3. Maturity: Maturity is a phase in which sales growth slows because the product has gained acceptance from most potential buyers. Profits are either stable or drop due to rising competition.
4. Decline: When sales decrease and profits begin to erode/plateau.

7.4.1 Strategies at the Introduction Stage

Following the successful test marketing of a new product, the corporation launches the product into the market with a full-scale marketing campaign. The initial stage is considered relatively risky and expensive because substantial sums of money are spent on advertising and other marketing communications instruments to build enough consumer awareness and promote testing. For genuinely new products, direct rivalry may be little or non-existent, and the company’s primary goal is to stimulate demand for the category rather than its brand. Profits are generally negative at this point or maybe negligible in some extreme circumstances.

Marketing Mix Elements During Introductory Stage:There is a significant distinction between establishing a product category and a sub-category. Introducing a new product category is difficult, expensive, time-consuming, and hazardous.

For instance, introducing computers would have been far more complex than introducing its subcategory, PCs. This is obvious from Thomas Watson, Chairman of IBM, who stated, “I think there is a world market for maybe five computers.” Similarly, introducing a telephone would have been more difficult than introducing cellular phones (sub-category).

The introduction phase will likely be lengthy, even for simple product categories like packaged goods. In general, product sub-categories and brands enter the market late in the growth and maturity cycle and thus are likely to have shorter introduction and growth periods. Every company’s goal is to proceed fast through the introduction stage; for this, research, engineering, and production are vital to ensuring the availability of quality products. The company must provide timely post-purchase servicing and spare parts if needed. Consumer goods corporations utilise a combination of TV demos, samples, special introductory rates, and discounts to encourage trial and repeat purchases. In addition, the company seeks distribution and shelf space with retailers.

At this point, the product range is nearly always limited to one or a few items to reduce production and inventory expenses. During this stage, the company strives to differentiate and position its new product to achieve a competitive advantage over solutions that customers previously purchased to satisfy target needs and demands.

Pricing considerations for a new product are influenced by various factors, including consumers’ perceived value of the product, the speed with which competitors can imitate it, the availability of near replacements, and the effect of price on sales volume and costs. Generally, firms choose a high-price, high-promotion strategy for a ground-breaking or significantly improved new product. However, depending on the aims, a corporation can employ two significant pricing strategies when launching a new product: skimming or penetration pricing.

Skimming Pricing: Product awareness must be low for this strategic decision to be effective; those who are aware or become aware are willing to pay a premium price to acquire the product. This method may also be appropriate when the market is vast and there isn’t much time until competition arises. Similarly, this method can succeed in niche sectors where customers are highly price-insensitive and possessing the product is crucial, such as when Apple debuts a new product and keeps its prices high. This has typically been the case with computers, printers, the Internet, new software, and cell phones, among other things. These durables and Internet services were once relatively expensive. The company aims to earn as much profit per unit as feasible. This enables the corporation to recoup its new product expenditure reasonably quickly.

Penetration Pricing: This strategy enables the organisation to pursue rapid market development while focusing on long-term goals such as market share and profit maximisation. The price is kept low, and the promotion is aggressive. The market is considered broad and competitive, and consumers who are aware or become aware are eager to purchase reasonably priced goods. The market is thought to be price-sensitive.

In India, for example, Nirma and a few other companies used this method, which is used by most Japanese and Korean businesses.

This method can also be used when the market is significant and no major competition is expected. In this day and age of rapid advances in science and technology, competition is almost always around the corner, and such an opportunity is unusual. This can work for me – too, for product launches. Still, a company that has invested millions in creating a new product would undoubtedly prefer to return its investment and earn profits as soon as possible.

Promotion expenses for advertising, sales promotion, and sales force are significant in percentage of total sales at introduction, particularly for mass-market, low-value products. The primary communication job at this stage is to raise awareness of the product’s distinctive characteristics and benefits while ensuring product availability. This is costly, but persuading buyers to try the product is required.

The relevance of distribution setup is especially important for consumer goods companies. Given the significant amounts spent on advertising to make consumers in the target market aware and induce new-product trials among customers, the availability of consumer items in inaccessible areas where consumers typically buy such products is highly important. Most companies rely on their existing distribution network when launching a new product.

7.4.2 Growth Stage

A fast increase in sales distinguishes the growth stage of the life cycle. Only a tiny fraction of newly released items reach the growth stage. Significant product advancements continue but at a slower pace. Increased brand uniqueness is achieved mainly through the addition of new features. The product line is being expanded to attract new customer categories. Competition rises, and consumers have more features, packaging, and pricing options.

Toward the conclusion of the growth stage, market share leaders work hard to extend the time of growth by increasing product quality, introducing new features, lowering costs, adding new segments, and attempting to boost product usage rate. The market expanded due to the combined efforts of all competing companies, and more people began purchasing the product. As a result of the increased demand, more resellers are ready to carry the goods, and prices are often dropped.

Near the end of this period, the overall growth rate slows, and prices typically fall significantly. Weaker companies begin to quit the market while strong competitors gain market share. This has a significant impact on the competitive structure of the industry. Strong organisations examine their product portfolios, eliminating inferior items, launching promotional prices, and strengthening their reseller partnerships. What happens to a company during this phase is heavily influenced by how well the product has been positioned relative to target customers, the health of the distribution system, and relative costs per unit.

In India, for example, Chevrolet is still in its early stages of development.

Marketing Mix Changes During Growth Stage: At the product level, the line expands by making available goods with varying features and pricing. The primary emphasis now is developing meaningful and persuasive differences from competing brands. Prices tend to fall, especially during periods of competitive volatility due to price competition.

In general, pricing discrepancies between brands are narrow. The degree of price reduction would be determined by the cost-volume relationship, the level of concentration in the business, and raw material cost variations. Promotional expenditures include advertising, sales promotion, staff selling, and other activities intended to raise demand for the company’s brand (selected demand) rather than building category demand (primary demand).

Companies work hard to foster positive consumer views toward their brand by highlighting distinctive features and benefits. Another goal of communications is to reach out to newly targeted segments. Promotional costs often drop as a percentage of sales. However, promotion expenses may rise as the expansion stage progresses, particularly for low-share consumer product companies seeking to sustain their distribution system through consumer and trade incentives.

Companies work hard to expand their distribution network. This is true for consumer and industrial businesses to provide increased product availability and service at the lowest possible cost. Many companies attempt to develop a direct sales strategy to increase their market share. If a corporation is successful in doing so, it will undoubtedly place competitors at a disadvantage. Before reaching the maturity stage, some degree of success at the distribution level is required. During the maturity stage, channel members frequently disinvest in less profitable brands.

7.4.3 Maturity Stage

Most products enter maturity after surviving competitive fights, gaining client trust, and successfully navigating the growth phase. The sales plateau and this flattening of sales usually last a while because most items in the category have attained maturity, and demand, technology, and competition are stable. Sales are slowing, competition is fierce, price and promotional battles ensue, and earnings decline.

Demand for the category is at its peak during maturity. Strong market leaders achieve significant profits and sizeable positive cash flows because they benefit from cheaper costs and do not need to expand their facilities. In general, a corporation cannot overlook the likelihood of changes in the marketplace, the product, distribution, production processes, and the type and structure of competition if the maturity period is prolonged.

Maggi, Ponds, Lux, Maruti Suzuki Alto, and other brands have reached maturity but are still going strong.

Marketing Mix Changes during Maturity Stage: Because of technical maturity, different brands in the same product area tend to be more comparable. Companies utilise every tactic available to grow the number of users or the pace of usage to gain volume. Some businesses attempt to carve out a niche in a market segment to become niche specialists and earn significant revenues.

Attempts to change products are becoming increasingly important, and only a significant breakthrough in R&D or engineering can help differentiate the product or lower product costs, which can have a considerable payoff. One option is to offer value that benefits the consumer to make the product easier to use.

For example, consumers like Internet connectivity for laptop computers or voice-activated dialling for cell phones.

Characteristics	Introduction	Growth	Maturity	Decline
Market Growth Rate	Moderate	High	Insignificant	Negative
Technical Change in Product Design	High	Moderate	Limited	Limited
Market Segments	Few	Few to many	Few to many	Few
Competitors	Few	Many	Limited	Few
Profitability	Negative	High	High for Market- share leaders	Low
Company’s Standard Responses	Stimulate primary demand	Gain market share	Gain market share	Harvest
Product	Improve quality	Continue quality improvements	Concentrate on features	No change
Product Line	Narrow	Broad	Hold line length	Reduce line length
Price	Skimming or Penetration	Reduce	Hold or reduce	Reduce
Promotion	High	High	High or reduce	Reduce
Distribution	Selective	Intensive	Intensive	Selective

Product Life Cycle Stages, Characteristics and Standard Responses

Firms are increasingly utilising supplementary services to differentiate their offerings. During the maturity stage, prices and promotional expenditures are generally stable. However, the emphasis on promotion transfers from advertising to other sales promotion methods, such as discounts, coupons, premiums, and shop promotions. The impact of experience on costs and prices becomes more limited. The intensity of rivalry to win or maintain market share leadership drives prices to fall. Distribution and shelf space are becoming increasingly important for consumer products companies.

7.4.4 Decline Stage

The decline stage begins when customers’ preferences change due to the availability of technologically superior items and consumers’ shifts in attitudes, beliefs, and tastes toward products that give more value. The number of rivals is dwindling, and few product varieties are often available. Those who remain may slash their promotional budgets and lower their prices even further. The commencement of the decline stage can be gradual or sudden. A small residual portion of customers may still commit to the product.

Sales plummet, costs rise, and profits are nearly non-existent. All of these causes contribute to overcapacity. Many enterprises depart the market if the industry has minimal exit barriers. This may enhance the sales volume of remaining enterprises to the point where their exit may be postponed, and strong challengers may even prosper for a short period.

Marketing Mix Changes during Decline Stage: Prices tend to remain stable at this stage if the decrease is modest and exit obstacles are low because there are still some enduring profitable areas, customers are fragmented and have little bargaining power, and there are few single-product competitors. When exit barriers are high, the decline is rapid and irregular, price cuts are severe, there are no enduring segments, only a few large single-product competitors exist, and customers have strong bargaining power. Consumer goods businesses attempt to persuade distributors to keep the product in stock. Companies weigh the pros and cons of harvesting or divesting the product.

7.5 Implications and Limitations of Product Life Cycle Concept

The product life cycle idea demonstrates a framework for identifying opportunities and dangers in a product market and industry. This can assist businesses in evaluating their objectives, strategies, and other marketing programme features.

A new product introduction necessitates a significant expenditure of resources, and most businesses must deal with substantial short-term losses. Sales expand rapidly during the expansion stage, as does competition, and considerable investments are necessary. Because of economies of scale and experience, the company with the most significant market share should have the lowest per-unit cost. If the market-share leader lowers the price, it discourages aspiring new entrants and enterprises with a low market share. Such low-share enterprises and new entrants must invest to capitalise on market growth and raise market share. The “first starter” company will likely lose some market share during this stage, but its sales will continue growing.

Companies with a more significant market share reap the benefits of their previous investments during the mature phase. Product pricing is adequate to keep even high-cost enterprises afloat because they do not require investments, as was the case during the growth stage. Most competitors are comfortable with their current position and do not attempt to enhance their market share. The market leader continues investing to improve the product and increase production, marketing, and physical distribution efficiency.

The main shortcoming of the product life cycle idea is that it is prescriptive and focuses on tactics based on assumptions about various life cycle stages. Furthermore, it is difficult to determine the product’s stage. A product may appear to have attained maturity, but this could be a transitory period before it undergoes another boom. It ignores that the PLC is driven by market forces that reflect customer choices, technology, and competition. Mary Lumpkin and George Day believe that focusing more on competitive challenges and understanding the dynamics of competitive behaviour can help them better understand how product-market systems evolve.