Lec 02 Product Life-Cycle

Lec 02 Product Life-Cycle


welcome to the second lecture on our course
on product design and development if you remember in the first lecture we have seen the introductory
part of product design and development today we are going to study or we are going to discuss
a second important part that is the product life cycle why we are discussing the product
life cycle because it has a strong bearing or strong influence on the product design
and development in the last lecture if you remember we have just finished with the diagram
of product life cycle so we have not considered the various phases of the product life cycle
but today we will discuss that what are the various stages or phases of the product life
cycle and we will try to understand that how these phases influence the various strategies
the various decisions of any organization which is involved in producing products for
making profits so let us go one by one and quickly try to understand the basic philosophy
the basic decision making process based on the product life cycle
now let us see this slide was shown yesterday also the product life cycle you can see is
the course that a product sales and profits take over its lifetime we will see with the
help of a diagram that how the product sales vary with respect to time and based on this
time what are the various phases of product cycle or the product life cycle so we will
try to understand that with the help of a diagram
so first point is is the course or the trajectory that a product sales and the profits take
over its lifetime the second point is it shows the stages that products go through from development
to the decline from the market so we need to understand somebody may question that what
do you understand by product life cycle many a time student start start answering from
conceptualization of the idea then testing of the idea and then coming up with the concept
design then detailed design of the products all those things are not considered in the
life cycle life cycle is that the product is born it
is developed and then it declines or may be the sales of the product decline over a period
of time it attains a maturity level means a sales of the product attains a maturity
level and finally it declines or the sales or the profits related to the product decline
so it is a starting phase is the development many a times in many different books you will
find that the even development stage is not considered in the product life cycle
basically they will show the introduction of the product into the market how the sales
are effected during that stage then the growth of the demand or the growth of the sale how
the sales are influenced at that particular time finally the maturity level and the decline
so majorly it is the behaviour of the product when it has been lost in the market at the
trajectory is drawn based on the data that is the sales data or the revenue data or the
profit data based on the product so let us quickly see that what are the various
ah stages of ah or the various phases of product life cycle but before going to that let us
see one important slide that why do we need to study the product life cycle our course
is on product design and development so why we need to understand the product life cycle
so these are the few points which have been or you can say complied for this purpose
now plc or the product life cycle determines the revenue earned so suppose our revenue
is declining over a period of time what do we need to do we need to have a relook at
that product we need to redesign that product so that the revenues may increase no company
wants to do business for loses so each company would like to make as much profit as possible
and that is only possible if you revenue that you are earning from the product increases
over a period of time but suppose your plc will help us that how
much revenue we are earning and suppose during the drawing the product life cycle we see
that is the sales are declining the profits are going down at that time we need to take
a very hard decision to either shelf that product to leave to stop the production of
that particular product or to come up with the relatively new or a redesigned or a innovative
product to replace the old product for which the revenue is decreasing
so point number one is plc determines the revenue earned in a way it helps us in decision
making related to the product design second point contributes to strategic marketing planning
so we need to see that how the sales are for the last six months for the last one year
and it can help us to make our marketing plans the advertisement policy that discounts all
those decisions can be taking based on the product life cycle
next point it helps to the firms or the companies or the organizations to identify when a product
needs support redesign withdrawal etcetera so it completely helps the companies to make
a product policy that at what particular time interval they will withdraw the product from
the market or they will launch a redesigned product in the market or they will support
the product with some aggressive or proactive marketing policy like giving some discounts
or giving some additional benefits to the customer so the product life cycle will help
the company to identify all these things related to the timing of reintroduction of the product
related to the withdrawal of the product related to the redesign of the product
so therefore also product life cycle becomes important for this course on product design
and development because a redesigning part is coming into picture i think i have told
in the last class that there are two types of innovations incremental innovation and
breakthrough innovation so incremental innovations are always possible when why that the product
life cycle will be able to tell us that when do we need to redesign our product
next point on your screen the product life cycle helps in planning for the new product
development so the timing as well as the policy related to the new product can easily be decided
based on the product life cycle and the last point see last point is helps in forecasting
and managing the cash flow how this will help you because suppose you have a product life
cycle you know that initially the sales are maybe some number maybe x after six months
the sales are x plus delta x after maybe ah one year or one and a half year the sales
at x plus three delta x now when you know that how much is the demand
in the market or how much is the sale in the market you can make your policies procurement
policies of the raw materials which are being used for making the product accordingly and
that will help you to manage your cash flow so it will help in forecasting also it will
help in managing the cash flow also so you can procure the materials you can hire the
people accordingly because you know that this is going to be the behaviour of the product
when it is going to be launched in the market so all these points and there can be additional
points also that we may not be able to discuss because of the paucity of time but these are
the most important points which help us in decision making related to this topic or related
to this ah you can say overall product life cycle of a product now in todays class our
major focus is to understand that what are the various stages of product life cycle and
what decisions we can take based on the various stages of this plc
now the various phases these are the most common phases in all the different books you
will find majorly these phases only first is the product development usually in the
beginning of product life cycle then the introduction or launch of the product into the market then
you have ah growth maturity and the decline so you have four you ah majorly five phases
but in most common product life cycles you will see the four phases only or the four
stages from introduction to the decline so let us see with the help of a diagram on
your screen you can see a more simplistic diagram for the product lifecycle this is
sales and profits on y axis and the time on the x axis similar diagram i have shown in
lecture number one also so you can see first phase is product development second stage
is introduction growth maturity and decline so you can see here red color graph i think
it is clear on your screen is for sales and the blue color graph is for the profits so
clearly evident that during the development of the product you do not make much profit
therefore you have a negative product ah ah negative graph for the profits
but once the product is introduced into the market the profits start to increase and you
can see there is a area in which the profits are maximum this stages when the product has
reached the maturity stage so at the maturity stage the profits are maximum so here we can
see that introduction stage this product starts to grow the sales of the product starts to
grow and in the growth stage you see an incremental increase in the sales of the product and finally
in the decline stage the product dies down the sales of the product completely dies down
so we need to understand the importance of all these phases phase number one two three
four and five majorly we will focus on these four stages in this lecture because we are
focusing on product life cycle the product development part may be we will
focus in the other lecture in which we will talk about the product development process
in totality so today our focus will be on introduction growth maturity and decline so
here you can see in the maturity stage the sales are maximum similarly the profits are
also maximum so it is a kind of good feeling for the company when the product has achieve
achieved a maturity level but it is a it sends a word of caution also because after the maturity
when your profits are maximum profits are maximum sales are oxo also maximum the product
sales decline as well as the profits as evident also declined
so our focus has to be in this area and ah we have to take decisions accordingly so that
we do not go into this declining stage and we come up with the innovative or a new product
or advanced version of the existing product in order to maintain the supremacy in the
market so let us see analyze each one of these stages one by one
now first one is a product development stage we will just have ah overview of this stage
what happens in the power development stage there are new ideas market surveys are done
product development and refinement test marketing is done analysis of the test marketing results
and preparation for launch publicity and marketing campaign so more or less whatever product
we have conceptualized we have done the initial design the detailed design the prototyping
the testing most of the things are already done now in this stage we have maybe the market
service the product development and refinement where the initial test marketing is done for
example many times you see with a magazine you get a very small sachet of ah hair gel
or a hair oil or a hair ah shampoo and you just test it so that kind and then you can
give your feedback online back to the company so that kind of test marketing is done in
order to understand that how the customers are ah accepting this product in the market
or how they are reacting to a new product in the market
so all that is done during the product development stage and you can see analysis of the test
marketing result the example that i have given with a feedback that is received from the
customers is analyzed during the test marketing results and finally when you get good reviews
for the product it is then asked it maybe it is then lost into the market and then the
real test of the product starts as soon as it enters a completely new market
so this is product development stage and in one of our lectures in week number one only
we will focus on the product development process and we will see what are the important stages
for designing a new product and in that way will see that how a idea is conceptualized
what are the problem areas related to the idea generation then how the ideas are tested
for various criteria and then how the prototyping is done and finally how the product is launched
into the market so all those answers we will try to find out
during the product development process and it will it is a long process and may i have
told you that in many cases it may take maybe six years to fifteen years for the complete
product to be developed and launched in the market but right now we are considering that
the product or the prototype is already ready and we are now launching going to launch it
into the market and then plot the sales of the product ah with respect to time in the
product life cycle and each stage is going to give us some input related to our decision
making regarding the design of the product so let us quickly see the second stage that
is the introduction or launch so we already have the technology for producing the product
we have done the test marketing and finally we are launching the product in the market
now let us see what do we do in the introduction or in the introduction stage what are the
factors to be taken care off or how to take a decision related to ah the product life
cycle in launching of the product so first thing is introduction of the product
into the market it is evident i have told you already it may be a new product or an
old product to the new market so sometimes there may be product for example these days
the economies have opened up there are multinational products entering into different countries
so may be you are taking example of india we may not be using a particular brand of
car or a particular model of a car so the companys already launched has already launched
number of car models but may there may be a new model which that company is bringing
to india which was not being used here and but that model was already existing in some
other countries so when that is being launched that will fall under the old product the product
is new to india but it is a old product of the company and it is into the new market
so indian market is a new market for that product of the car
so sometimes a company may be coming up with a completely new product of the company has
designed a prodigious fabricated model tested and it is being launched so all situations
different product life cycles will be there if it is a new product the product life cycle
will be drawn for that maybe some data will be required to draw the life cycle why because
in this point it is important to understand that we are plotting the sales data so there
should be some input regarding the sales data if you try to understand that if we are drawing
a product life cycle for a specific product which has been launched in two hundred two
thousand and fifteen so january two thousand and seventeen we have the data of sales of
that product which was launched in january two thousand fifteen so two year data is available
with us so based on the two year data we can draw
a product life cycle that how the sales have varied for the last two years similarly the
come same company is going to launch a similar type or a modified version of that product
so they already have the data of two years that how the product has behaved in the market
so all that data is useful to us when we are going to draw a product life cycle for a new
product and then we can as we have seen there was a word which is very important in products
in production planning and control that is forecasting so we can make use of that ah
forecast that how the product is going to behave based on the plc of a similar product
which has already been launched and we have the actual sales data for that product
so that will be helpful to us in our decision making related to managing our cash flow and
other things so you can see we in the introduction stage we may be launching a new product and
or an old product but into a completely new market so in this case the demand is going
to be low if you have seen the diagram let me go back to the diagram you can see introduction
stage the demand of the sales is low so this completely explains that the demand is low
then the cost is high high cost for any product if you see especially in electronics market
when you have new products you have products like mobile phones all of us have experienced
this whenever a new mobile phone is launched the product cost is high but over a period
of time the cost is then stabilizes and even comes down
so during the introduction stage the cost is high sales are low sorry as it is clear
advertisement and promotion is done very vigorously and then we the companies monitor the initial
sales of the product there may be teething troubles there may be a software problem in
the product there may be some service requirements in the very initial stage of the product
so all these are the characteristics of the introduction stage which we need to understand
in a product lifecycle so once again i will read it for you so in the introduction stage
introduction of a new product into the market it may be a new product or a old product to
the new market i have tried to explain with the help of a car example then the demand
is low in this period high costs are therefore the product advertisement and promotion is
foremost and most important part and then the company usually monitors the initial sales
of the product in order to take the decisions related to how vigorously they need to advertise
and market the product in the market and these are the ah summary of characteristics
and objectives you can see sales are low costs or high profits are negative as we have seen
in the diagram and then the marketing objectives are create product awareness and trial so
we have seen stage number one that is product development stage number two that is introduction
and a launch now let us go to the third stage that is growth
now usu if you remember the product life cycle in the growth stage the sales increase and
when the sales will increase automatically the profits will also increase so let us see
what are the characteristics in this period this period is the time to improve the efficiency
and product availability as well as service so when the sales are increasing it means
there is demand in the market so we need to ensure the product availability
as well as the service that if there are some initial problems there may be tackled and
the product performs reliably because the pot thats in the growth stage by word of mouth
the auto marketing is also done and many people may like to adopt this new product which has
been launched in the market the service also is important availability of the product is
also important and it is a time to improve the efficiency i am emphasizing on the time
to improve the efficiency because we will be discussing in week two the value concept
of value engineering or the value engineering principles as applied to product design the
at that point this thing will become all the more important that why do we need to improve
the efficiency of the product during the growth stage and there i will explain that it is
important because the competition will start to set in and here also we will see sales
growth rate increases because of limited or no competition
but as soon as the growth stage reaches its pinnacle value or the highest value the computation
steps to certain or it comes up with all the other companies also venture into the similar
area and therefore there is competition at the end of the growth stage during the growth
stage there is no computation and therefore the sales ah sales increased unilaterally
so first thing is this is a period or this is the time to improve the efficiency and
product availability as well as service so improve efficiency we will discuss during
value engineering cost efficiency time to market pricing and discount policies are the
major factors in gaining the customer confidence so all these four parameters the cost efficiency
as compared to the competitors time to market means suppose today i want to buy a motorbike
there was a monopolistic type of your business environment few years back if you want to
buy a bike you have to go just book the bike you may get it after two months but that is
not the scenario today a customer wants to the bike if he goes makes the payment through
check or through transfer he wants the bike at the same moment only so the time to market
has become very very important that the company should be able to satisfy the demand of the
customer with there and then only if he comes to the showroom and he wants to buy the bike
the bike should be available there so that is the time to market has to be minimum
similarly the pricing and discount policies of the company also play an important role
during the growth stage suppose the company is not able to tap the increase in the sales
volume then or the demand that the product has created because of the success at the
introduction stage the growth will only come if the product is successful during the introduction
stage now suppose the product fails during the introduction
stage there are many problems related to the product the product sales will never increase
during the growth stage so all those things if the product has satisfied all the requirements
the specifications and it has tested positive for the customers requirement only then we
will go to the growth stage and once we are in to the growth stage in order to maintain
that increase in the growth we need to satisfy the pricing and the discount policies so that
that trajectory that the product sales have taken after the introduction stage continues
for a longer period of time so the second point is very very clear these
are the parameters or the factors or the criteria to be taken care of during the growth stage
then the increased customer awareness we have to ensure that that is a marketing strategy
the sales growth rate increases because of limited or no competition which i have already
told that there is no competition usually during the growth stage there is ah but as
soon as you reach the top point of the growth stage there may be some competition which
may start to set in then the revenue also increases so we have
seen the profit graph also deliberately we have drawn the sales and the profit graph
in order to justify the increase in the revenue so when the sales will increase the revenue
earned will also increase so most of the companies want their product to be always in the growth
stage because the revenue is high the cost that we the price that we can keep can be
high because of the many because of the monopolistic nature ok
so this is growth ah that is a phase three so this is summary of growth phase sales you
can see sales rapidly rising cost cost per customer is average so the costs usually should
come down during the growth stage as we will we are going to reinvent our ah pricing policies
during this period profits are rising and marketing objective should be to maximize
the market share by proper advertisements and by giving proper customer awareness
so this is stage three and then the last ah fourth stage not the last last stage is decline
the fourth stage is the maturity stage in maturity this period is the period of the
highest returns from the product because if you remember if you have seen the product
life cycle ah with a little bit of interest you will see the top portion is the highest
sale and that comes during the maturity stage so the sales are highest therefore the profits
that we gain are also highest sales reach the peak so highest sales at the maturity
level marketing cost of the product declines now
the company customers have already got all the information related to the product so
the company does not want to do too much of aggressive marketing and they want to stick
with increasing the efficiency of making the profit increasing the effectiveness of converting
the raw materials into the final product so they are not much bothered about the marketing
because the marketing is already from the word of mouth at the maturity stage so marketing
cost of the product declines ratio of revenue to cost is high yes that is true sales growth
likely to be low because sales growth is merely constant only if the top you have reached
to the top portion so your sales growth is likely to be low computation likely to be
greater as i have told you after the growth stage the competition in starts to set in
the competition increases during the maturity stage and the company needs to monitor the
market changes and you can see there is a question mark here they have to think of the
new strategies why because the sales have reached the top point and for a period of
time there is no increase further in the sales so the company has to rethink their strategies
now they have to see that at what point of time they should withdraw the product from
the market or at what point of time they should launch a new product into the market so that
again they go into the growth stage and start making profit so although the profits are
maximum here you can see the ratio of revenue to cost is high and the highest returns are
there during this phase but because of the competition many a times
the organizations or the companies will have to compromise on their profit component they
may have to come up like most of the times we see one plus one free or two plus one free
or maximum up to fifty percent discount so what the companies are doing we are trying
to compromise on their profit to keep their sales high so at that point we need to think
very strategically that should we continue with the same product for which the sales
have almost become stagnant or we should try to launch a new product or design a new product
so that we are able to further push the sales of the product or further increase the revenue
with the existing product by a little bit of redesigning or repackaging or rethinking
so we need to at that time develop our strategy accordingly so this is the most important
phase and the new strategy development or the new product development is most important
during this stage then the summary of the maturity phase sales are at its peak costs
are low per customer profits are high and marketing objectives so we maximize the profits
while defending the market share so that is you can see marketing objective we need to
maximize the profits while defending the market share
so if you do not have proper pricing policies if you do not have proper decision making
related to the product there may be chances that our market share may fall down and it
generally happens that we can see in the last stage that is decline stage so if we are not
careful enough to plan our strategy according according to the market environment that sales
are definitely going to go down and if the sales are going to go down what else a star
ah will also go down the profit curve will also start to go down
so in the decline stage the competitors enter the market with better product features what
does that mean the company has a better product design and therefore we are talking of the
features so our product is facing competition from the product of their competitors so they
may have come up with the advanced technology they may have come up with the reduced prices
therefore our the size of our product are now falling flat or are coming down sales
start declining as i have already said marketing cost of product increases rises and decision
to withdraw may be may be dependent on availability of new products and whether the fashion trends
will come around again so in case of in in many cases we have we
know that the fashions may come again or trends may come again so this may be related to one
particular segment of industry but in most of the cases if the product sales decline
the company has to reject their product or redesign their product or reinvent their product
in order to be competitive in the market so there are a number of strategies that the
company has to adopt at various stages of the product product life cycle
so let us see now the decline phase sales declining costs low cost per customer it it
was achievable in the maturity stage also profits also starts to decline and marketing
objectives are reduced the expenditure and milk the brand so maybe just they want to
take advantage of the brand value and keep the product in the market but the sales are
not increasing so the sales are declining last is the strategies based on the product
life cycle so we have seen that there are four or five important stages in the product
life cycle and at each stage we can have different types of policies or strategies but maybe
since we are talking of a product that is our courses on product design and development
therefore we can see based on the product at the introduction stage they usually companies
offer the basic product during the growth stage they offer the product extension service
warranty in the maturity stage they diversify the brands or the models may be redesigned
reinvent the design and during the decline stage they phase out the weak products maybe
the whatever profits are not performing well can be phased out and whatever products are
performing well they can be redesigned reinvented or certain incremental innovations can be
used to that the product again into the wish list of the customers
so these are the four you can say stage wise strategies related to the product similarly
the marketing and advertisement people can take care of the other four criteria that
is the price the distribution the advertisement or the advertising and the sales promotions
this may be the marketing policy of any organization but related to the product these are the decisions
which any engineer or engineering professional has to take in the company
so in todays class we have seen in detail the product life cycle what are the various
stages of the product life cycle and what are the important decisions characteristics
objectives at each stage of the product life cycle our focus in the next class would be
the product development process and the selection of profitable products and how or what criteria
we should keep in mind when we are going to come up with the product ideas and how those
products success can be ensured by using the systematic planning as well as ah execution
so with this we come to an end of todays lecture so we will discuss maybe the product development
process in our next lecture thank you

6 comments

Leave a Reply

Your email address will not be published. Required fields are marked *