Article on PLC relevance & scope

Product Life Cycle Relevance and Scope

Written by: Shilpa Kamath. A. Lecturer, Management & Commerce, SMU DDE

The following Article presents information regarding The concept and meaning of a Product Life Cycle Products life stages Business and marketing strategies ideally required during the life cycle phases Benefits and drawbacks of PLC study, Exceptions to PLC with suitable examples and A Case in reference to Social Networking Sites

Marketing strategies usually revolves around the product and it should be that way because product offerings determine a companys strength or weakness in the market. Even, other marketing mix elements such as Price or Promotion are formulated around the product. We are all consumers and we need different kinds of products for different purposes as well. In this article, we will seek answers for the following product-oriented questions: What is the time frame for a particular product in the market place? Where do the products end up if they are not at all consumed? How do new products originate and when they become old? Will competition determine the life of a product? What happens to the product if it is no longer used by consumers or not sold in the market?

All of the above questions can be framed in a simpler way and we can put it across as What is the lifecycle of a product and how to determine it? For any thing or any being there is a beginning and an end. Change is a constant force and everything changes with time. Even for a given product, it has to go through the journey which in marketing terms is called as Product Life Cycle or PLC. When we say a product has a life cycle, it means: Products have limited life - each product goes through different life cycle stages at different times. Products have different stages of rise and fall. Products sell at different levels in different stages. Products face different challenges, problems, opportunities, threats at different stages. Products have to be managed appropriately through different strategies marketing, financial, production, purchasing & other business strategies at different stages.

Concept of PLC: A product life cycle refers to the passage of time through which a new product has to travel right from manufacturing till its decline in the market. The gaps in between these two points show how the product lives in the market like for instance facing competition, dominating prices or resulting into sales. Generally, a product goes through five life stages 1. 2. 3. 4. 5. Research & Development stage Introduction stage Growth stage Maturity stage Saturation & Decline stage

Article on PLC relevance & scope

Profits &

PLC GRAPH

Measuring the product life stage: The concept of the product life cycle has become central to market forecasting. The stages of the life cycle form a framework that you can use to analyze the dynamics and the primary factors that can impact a market segment and product sales. The basic stages of the product life cycle can be expanded into a more-comprehensive model that better explains the various parts of the life of a product in the market. Following will outline the various stages of the expanded product life cycle concept. Stages of the Expanded Product Life Cycle 1. 2. 3. 4. Research and development Product introduction Development of the market Exploitation

Whats my PLC?

5. 6. 7.

Market maturation Market saturation Market decline

To calculate or measure at what stage of its life cycle a given market is, the following parameters need to be measured and monitored for the given time frame say per annum/year:

Investment in R&D p.a. Number of competitors in the market p.a. Number of competitors that entered the market p.a. Number of competitors that left the market p.a. 2

Article on PLC relevance & scope

Market growth rate and sales growth p.a. Market size or segments p.a. Industry profitability p.a. Investment in marketing (such as advertising, trade shows, direct sales forces) p.a.

The measurement of these parameters over time will help to determine what stage a given market is in. Product Age measurability by identifying the features in different stages of the Product Life Cycle Market Size or no. of customers
0 Small Small Modest Largest Stable Declining

Life Stage

No. of Competitors
Unknown Few Growing Fast Moderate Growth Stable Stable Reducing

Market Growth or potential

0 Highest High Good Low None Negative

Profits or revenue
0 0 Low Growing High Lowering High & Low

Investment or Funding required

Growing High High High Stable Declining Stopped

R&D Product Introduction Development Exploitation Maturation Saturation Decline

Marketing Strategies usually adopted for a Product during the Life stages PR Testing Sales Personal activities Distribution Advertising promotion promotion selling & effectiveness Publicity
Nil Nil Nil Nil Medium Nil

Life Stage

Pricing

R&D

Cost involved Depends on product category premium/Skimming pricing OR Penetration/low pricing

Product Introduction

Medium

Less

Nil

Medium

Medium

Test on target market

Development Competitive pricing Exploitation Maturation Saturation

Competitive pricing Reasonable pricing Low pricing

More More Medium Depends on

Aggressive Aggressive Medium More

Medium More More Medium

Medium More Medium Less

More More More More

Medium More More Less

Article on PLC relevance & scope

demand (reminder ads) Medium Medium Less Less Nil

Decline

Low pricing

Less

Is it essential to know about PLC? It is important to analyse the products performance in the market. For that, products position, status, life stage and the way it exists in the market is required. PLC stages not only determine the specific stages of a products market existence but also help the marketers to know about these aspects: Expected returns or cash flows in a particular PLC stage Investment required on strategy implementation during a PLC stage Marketing strategies to establish brands and become market leader by making the product prominent and gaining maximum market share Remain competitive and making product offerings innovative Balancing the available organisational resources with the demands or requirements in the particular PLC stages

Apart from that, knowledge about PLC will also benefit marketing management in these ways: As a marketing tool to analyse products As a guide by providing relevant information for marketing research As a map to know about a products expected journey and deviations it takes in the market place As a reference point to indicate how different products have different life cycle patterns

Limitations of PLC study: Although knowing about PLC has its benefits, there are a few drawbacks as well that are given below: It is difficult to predict or analyse the length or time frame of each stage in PLC. For example, a marketer will be unable to estimate the maturity period for a product or even if it has entered the maturity stage. Constant change and with so many product choices in the market, PLC stages are shortening and so, it may not be applicable to study PLC in anyways. For example, smaller companies may not mind how short the products PLC stages are because they maybe more interested in developing niche markets or segments. Companies cannot always go by the PLC stages as sometimes it becomes necessary to ignore the PLC stage and carry out those marketing activities that are more important or suitable. For example, if a company decides to expand its markets abroad, then the PLC stage of a product in domestic markets may not even be considered or given importance when compared to lucrative foreign markets. Companys profitability and sales are not dependent on PLC alone. There are many other factors that contribute to the success of the company and its performance such as workforce efficiency, management leadership, consumer behaviour, competitive factors and other business aspects. PLC may or may not be helpful to the company at a given time.

Article on PLC relevance & scope Exceptions to PLC: PLC stages are not a standard or a rule for a given product. PLC is a generally observed pattern for a product which can have as many exceptions in the form of unpredictable or unexpected ways. Some exceptions to the PLC are as follows: a) There are different types of PLC as well which makes it difficult to trace the PLC stage for a specific product. Example 1 Product category PLC: A particular product category or a product class say wooden furniture may be replaced by rubber or plastic furniture. So, the entire wooden furniture category will have a declining phase in PLC and not just a wooden table or chair. But, there may still be demand for wooden chairs if not for other wooden stuff. Example 2 Product Vs. brand PLC: A particular product for instance toothpastes will probably have similar PLC stage irrespective of brands. It doesnt matter if marketers aggressively advertise or differentiate their brand, it may not help the product in its PLC stage. Example 3 Brand PLC: Products say for instance Ganga a Soap brand (that featured Hindi film actor Govinda in ads), belonging to Godrej consumer goods may go through a PLC stage but the brand Godrej may not follow the PLC successively. So, in this case, brands have a consistent life and its PLC cannot be estimated.

(Source: www.godrej.com) (Source:http://marketingpractice.blogspot.com/2006/11/ganga-soap-rip.html)

b) As there are different types of products and product categories, it is not always feasible or acceptable that all products follow similar PLC stages. A product in a given product category may show a separate pattern than some other product in the same category. Similarly, 2 different products belonging to diverse categories may show like features in PLC stages. Example 1: Dishwasher liquid and dishwater soap bar may have different PLC stage even if their usage is for the similar purpose and the same brand offers both forms of the product. For instance, PRIL dish wash bar competes with its own counterpart PRIL liquid cleaner.
(Source: http://archives.chennaionline.com/events/business/2004/05pril.asp)

Example 2: A chocolate brand and a shampoo brand may follow the same PLC stage even if they are not related in any manner. But, marketing strategies for both may be entirely different since the products cater to different consumer needs and wants. So, in this case, the same PLC stage will not help either brand to evaluate or compare strategies. c) Some products continue to be in fixed stage while some other products follow cyclical PLC stages. They dont go to decline stage and keep fluctuating between maturity and saturation stage or 5

Article on PLC relevance & scope between growth and maturity stage or may enter the decline stage and when it does, company will re-launch it again to the Introduction stage. Example 1: Nirma washing powder as soon as it is observed that it may enter a decline stage, the company instantly positions the brand once again in the minds of the consumers using the same, established and popular advertising jingle that uses these Hindi words excluding the brand name Washing Powder Nirma, Doodh Se Saphedi...... Sabki pasand Nirma...... Some advertising experts believe that Nirma is in Maturity stage of PLC for a long time.

(Source: http://www.nirma.co.in/detergents.htm)

Example 2: Products such as Salt or Sugar will always be in maturity stage irrespective of the brand. Example 3: Some products are recognised as extinct after it undergoes the Decline stage but the company may re-launch it in a new way with new innovative features and offers. It may take time for re-launching a product or brand but there is every chance that it will gain acceptance in the market and become more popular than before. Onida TV sets are believed to be in the decline stage but talks are that company is planning to re-launch the brand once again. Example 4: Fashion accessories and fashionable products or garments are always cyclical. It is said that Fashion never goes out of Fashion, so, a fabric design or a particular jeans which is outdated now may once again be in fashion in near future. d) Some products may not follow the order in the stages of PLC. They may directly enter the decline stage after it is introduced in the market or they may enter back to the maturity stage from saturation stage. Example 1: Blue Pepsi launched in 2002 by Pepsi during was not welcomed in the market especially in Indian markets and it straight away entered the decline stage although it is still available in a few countries.

(Source: http://en.wikipedia.org/wiki/File:Pepsi-blue_bottle.gif)

Example 2: Even though the demand for mobile phones is constantly increasing, it is believed that mobiles have entered the maturity stage. But, the landline connections are still in the growth stage especially in India.

Article on PLC relevance & scope e) A product such as public utilities and facilities may never have a PLC stage even though marketing activities are carried out for such products. For example, basic necessities such as water or electricity will have consistent demand even if the sources or way it is offered may change.

Case in reference
Concept and Evolution of Social Networking sites: Social Networking Sites or SNS are web-oriented services that provide users with the required facilities to open an individual space or profile or an account in the respective networks that has a user name and unique password for access. Once the web page or user account is created, it will let the user to connect, establish and maintain friends, contacts and interact with them whenever they access their account. Similarly, it allows the users friends also to respond, interact and give comments to the users account. Online communities are more group oriented and permits the users or individuals to join such communities that interest them. In Marketing, Service is also regarded as a product and thats why SNS will be referred to as a Product. A Social Network

SNS are networks established through technology and internet sites that allow users to connect and interact with their friends, family, colleagues and other people within their individual networks. It focuses on building and establishing relationships with people who share similar interests, hobbies and as a medium of keeping in touch. Photos, videos and messages are also shared through the sites. The first recognizable SNS launched in 1997 was SixDegrees.com that enabled users to create profiles and maintain friends list. Although, SixDegrees had the necessary features of SNS, it failed eventually and its founder says it was launched much before and people got accustomed to Social Networking only later. Model PLC for Social Networking Sites (SNS): Today, technology and internet are playing key roles in communication and interactions. One is able to connect to people living in different parts of the world instantly. E-mails, messaging, Instant chatting, blogging, social networking are happening on the internet and rising as well. Although, most communication technology and web-based services were started with business objectives in mind, these facilities gained popularity among common people as a way to connect to far away friends and relations. With reference to PLC, and without particularly mentioning any specific Social Networking Site, a model PLC showing the present PLC stage of SNS service is as follows:

Article on PLC relevance & scope

2009 2008 2006

Time / Year

42

2004 2002 2000 1998 1996

2 3 R&D 9 10 0 Introduction Growth Maturity 0 Saturation 25

No. of users No. of sites

Roughly estimated figures in Percentage

0 Decline

PLC stages Currently SNS at Growth stage

In the above chart, it is fairly clear that in the period between 1996 till 2002, there was a slow increase in the usage of the SNS that were available. But, after 2002 there was rapid increase in the number of SNS as well as a further increase in the number of users. A rough estimate is as follows: Before the inception stages of SNS that is during the research and development of the networking protocol system structure and its necessary features, it was considered as a never before used medium of communication. Businesses were using such types of networking for purely professional reasons. So, during the initial phase say from 1996 to 2000, markets were tried with a few SNS that were launched but no on really took much notice of it and there were hardly any users. Service providers for SNS sites were themselves unsure about the SNS features and how to go about its development. Slowly, progress was seen after 2001 and the numbers began to increase in terms of number of SNS and users. Once, the market potential, need and its scope for growth was certain, it was recognised in the market and many IT enabled facilities supported the products growth. Developers and system administrators cam forward with ideas and new features to make product user-friendly and popular. Thereafter, SNS gained a respectable market position and the years 2003 to 2006 saw an upward movement in the number of SNS and its usage rate. Although, it would be rather difficult to tell the exact number of users even through market research, it is clear that SNS usage will be much higher in the years to come. Since, the product itself is growing along with the usage, its a constant rise for both - SNS and its users. Timeline/year of the launch dates of major SNSs and when community sites re-launched with SNS features is as follows:

Article on PLC relevance & scope

SNS on the Rise... (Such as WAYN, ibibo, interactive gaming sites such as Zapak, so on)

(Source: http://jcmc.indiana.edu/vol13/issue1/boyd.ellison.html)

The most popular SNS in the recent times are Orkut, Facebook, Linkedin, My Space and Twitter apart from others which are gaining popularity. Besides, a user may have his/her profiles in two or more of the SNS and may update them as and when required or depending upon the interest.

Article on PLC relevance & scope

(Source: www.orkut.com)

(Source: www.twitter.com)

Marketing Relevance of SNS: In Indian scenario, SNS has a mixed response from users. Some are addicted to it and have n number of friends on their friends list while some have just started to open up new accounts in the sites. But, the influence of SNS on people is vividly seen across the media channels and as a Word-of-Mouth. Whether it is Shashi Tharoors political remarks on Twitter or HImesh Reshammaiyas dialogues in a Hindi Movie regarding relationship status Its Complicated which was derived from Facebook or whether it is the new words popping out as a result of these sites such as Unfriend or Scrap is getting enough recognition atleast from the youth market. From hobbies, photos, games to discussing movies, TV channels, movie stars, sports through online communities all these are happening things on the SNS. Following is a briefly presented SWOT analysis of SNS with respect to its founders, users and the businesses:Parties concerned Makers/Founders of SNS SWOT analysis
New & innovative methods will provide Competitive edge More usage will result into more revenue Development in IT systems, wide spread of Internet will result into more usage Patents, copyrights & other protection laws will help in differentiation & making SNS unique Low connectivity factors, Internet usage, illiteracy cannot be overcome by SNS Lack of interest by the founders or inability to meet requirements will lead to closure of the SNS Inability to convince people about the usefulness of SNS

Marketers/Other Companies
Easily sponsor products on the sites Acts as an advertising medium Viral marketing or W-O-M More Exposure & Easy recognition by the users Platform to use different kinds of promotional tools Increased popularity of the SNS will lead to more advertising

Users of SNS
Better and instant interactions with other people More connectivity and economical than other mediums comparatively High accessibility Time & distance barriers are overcome Establishing contacts & maintain online relationships

Strengths

Ads usually ignored by users Hidden visibility on the sites will be a waste High fee charges by SNS for advertisements

Weakness

Improper knowledge on dealing with SNS or using it will be a demerit Complicated or technical details will be hard to figure out Forgetting passwords or inability to log in Lack of safety or security of data

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Article on PLC relevance & scope

Scope for newer & user friendly ways can attract more users as SNS is still in its PLC Growth stage Time & distance between people provides scope for more usage Constant Technological change will hamper growth & may even lead to closure of the site People could be bored or remain inactive users on SNS Privacy issues, cyber crimes, bad publicity can have a negative impact on SNS Can lead to Customised communication with users Ads could be more interactive on the sites Can result into contractual agreements with SNS for fixed time durations Scope to extend contacts & business relations Chance to meet new people & create positive influences or revolutionary changes in the world Privacy issues & cyber crimes can influence users to withdraw from SNS Wrong W-O-M can affect users interest in involving themselves in SNS

Opportunities

Threats

Closure of networking sites will cause less exposure It can create a highly competitive environment between products Users are prone to avoid any links on the sites, so it may threaten interactiveness or participation from users

No matter how much popularity SNS gains in future and whether its PLC stage remains in the Growth status for long, marketers will continue to tap these avenues for promoting their products and reaching out to more people. As for the users of the SNS, privacy of information and account details especially passwords are riskier since anything is not considered safe on the internet. As is the fact, social networking is also subject to virus attacks, hacking, and cyber crime can negatively affect the users. Therefore, most of the networking sites are issuing safety guidelines, caution messages and certain net principles or advices to the users so as to stay safe on the net. SNS guide the users by providing them information and constantly advising the users: To use strong and uncommon passwords To watch out for suspicious links To ensure correct Log in page To avoid any unnecessary contacts or friendliness with strangers To maintain secrecy of the passwords and not to reveal any important or confidential information this can be termed as Privacy issues.

Conclusion: The future of SNS and its usage is still underway. How soon SNS enters the Maturity phase of PLC is quite hard to determine. But, the question remains how soon is too soon as the scope for Growth is tremendous.

References:
http://en.wikipedia.org/wiki/Product_life_cycle_management http://www.frost.com/prod/servlet/mcon-mktmeasures-life-cycle.pag

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Article on PLC relevance & scope

http://courses.unt.edu/kt3650_9/sld001.htm http://jcmc.indiana.edu/vol13/issue1/boyd.ellison.html nd The Hindu - Business Line dated March 22 2010

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