Everything you need to know about the Stages of Product Life Cycle!
Everything you need to know about the Stages of Product Life Cycle
It is important to understand the Product Life Cycle (PLC) as it provides insights on the competitive dynamics of the product being marketed. The PLC also exhibits the distinct stages in the sales history of a product.
The PLC comprises four stages known as introduction, growth, maturity and decline. In the stage of introduction of the product in the segmented market the profit remains almost non-existent and product sales also remain slow.
However, the expenditure in pushing the product into the market is found heavy for the marketing firm. The product passes into the next stage of PLC – growth, with improved sales and profit conditions observing the rapid acceptance of the product in the market.
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The product remains in the growth stage till the competition increases and pulls back the sales of the existing product. At this juncture the product moves into the stage of maturity where it faces setback on the volume of sales but succeeds in sustaining the profit level. While passing, into the stage of decline the product faces downward trend in both the volume of sales and profit.
Hypothetically all the products in the market move through these stages of life cycle but there could always be some exceptions.
Some of the products get out of the market in the stage of introduction itself while few are thrown out of competition at the growth stage. During the stage of maturity the strategy for product diversification begins and some products fall out of the main stream of the product categories in the market.
Thus the marketer should develop sustainable marketing strategies for his products to survive at each stage of the PLC. The possible ways to develop marketing strategy in the stage of introduction of the product. The product requires high promotion at the time of introduction but the price of the product should be kept low as compared to its competing brands.
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Such strategy is known as high penetration strategy. Once the brand becomes popular in the market, the expenditure on the promotion may be reduced and the product can be pulled to high-price-low- promotion bracket following the low skimming strategy.
A marketer has to make more crucial decisions at the growth stage of the product.
The major strategies drawn at this stage to provide adequate support to the product in the market are as under:
i. Rationalizing the product line and width.
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ii. Innovative promotional approaches.
iii. Identifying new market segments.
iv. Evolving comprehensive distribution policy.
v. Changing the strategy of product awareness, advertising to the product preference advertising and launching advertising campaigns accordingly.
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It is essential at this stage of PLC to rationalize the product portfolio in the company and develop strategies to promote only such categories of product, which had gained considerable response from the consumers.
Such product categories need to be promoted through innovative promotion approaches and giving more emphasis on the product preference based advertisements and advertising campaigns. However, the possibilities of exploring new market segments and comprehensive coverage of distribution need also to be worked out in the same stage of PLC.
The stage of maturity is the sustainable stage in the PLC. As there will not be encouraging growth in the profit through product marketing, there exists enormous scope for developing the business relationships and renovating the product attributes.
At the last stage of PLC – stage of decline, the strategies need to be built to re-launch the product in the same or new market segments. The more important need at this stage of PLC is to sustain the brand image and rebuild the same through product and institutional advertising.
Stages of Product Life Cycle:
Products have a certain length of life, during which they pass through different stages. For some the life cycle may be as short as a month, while for others it may last for a sufficiently long period. A product goes through the various phases of its development from the time the product idea is born, developed, and up to the time it is launched in the market. Its life begins with its market introduction.
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Next it goes through a period during which its market grows rapidly. Finally, it reaches marketing maturity after which its market declines and the product dies. The duration of each of these stages is different among products. Some takes years to pass through the introductory stage, while others may be accepted in a few weeks.
Then all products as not go through all stages, some fail in the initial stages, others reach the maturity stage after a long time. As Stanton puts it- “In virtually all cases decline and possible abandonment are inevitable because (i) the need for the product disappears; (ii) a better or less expensive product is developed to fill the same need; or (iii) a competitor does a superior marketing job.”
1. Introduction-pioneering or development stage.
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2. Growth or the market acceptance stage.
3. Maturity stage.
4. Decline stage.
Stage – 1. Introduction Stage:
During this stage the product is put in the market with full-scale production and marketing programme. The product has gone through the embryonic stages of idea screening, pilot models, and test marketing. The entire product may be new or the basic product may be well known but a new feature or accessory is in the introductory stage. In this stage, there is virtually no competition.
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The innovating company sets out to inform that target market segment and the intervening middlemen of the product’s existence, through personal selling and advertising. The distribution is limited to a small area and sales rise slowly, since the product is usually offered to the higher income people. In the later stages of the life cycle, demand filters down to lower income groups.
During this stage technical defects often appear in the product due to insufficient prior testing. These defects may be detected and eliminated. The pioneering stage is most risky and expensive as there is a high percentage of product failures during this period.
Operations in this stage are characterised by high costs, low sales volume, limited distribution, and heavy promotion. The type of the product rather than the sellers’ brand is emphasised.
Stage – 2. Growth or the Market Acceptance Stage:
In this stage, the product is produced in sufficient quantity and immediately sold in the market. The demand generally continues to outpace the supply. The sales and profit curves rise, often at a rapid rate. If the profit outlook appears to be very attractive competitors enter the market in large number.
The number of distribution outlets increase and economies of scale start operating, and as a result, prices may come down slightly. Sellers shift to brand promotion rather than product promotion. Though products still continue to appeal to the elite class, middle-income consumers also begin to become important.
Stage – 3. Market Maturity Stage:
During this stage, sales continue to increase though at a decreasing rate. The firm reaches its highest level of profitability during maturity. After a level however, the profits of both the manufacturers and the retailers start to decline because of rising expenditure and lowering prices.
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Hence, marginal producers are forced to drop out of the market. Price competition becomes increasingly severe. In order to retain his dealers, the producer assumes a greater share of the total promotional efforts.
New models are introduced as manufacturers broaden their lines. Supply exceeds demand for the first time, making demand stimulation essential through advertising and salesmen’s efforts. Product development becomes heavily style-oriented.
Stage – 4. The Decline Stage:
The decline stage is characterised by either the product’s gradual replacement by some new innovation or by an evolving change in consumer buying behaviour. The buyers do not buy as much as they did before, as superior products are being introduced to the market many of which meet the consumer’s demand and needs more closely.
The sales drop off and many of the competitors withdraw from the market. Cost control becomes increasingly important. Advertising and other promotional expenditures are drastically curtailed as costs are directed more towards obtaining business. It lays emphasis on efficient distribution at lowest cost.
It becomes concentrated within a relatively few large and efficient mass distributors. Most managements shift their attention to other products, gradually phasing out the declining product as its future grows increasingly dark.
Some stay with the dying product a little longer and try to review the market, though usually with disappointing results. Despite the variation in the life-span of products the concept of product life cycle is useful in deciding the marketing strategy.
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The pioneering state would need heavy advertising, extensive selling and introductory inducements. In the growth stage the sales pick up. Subsequently, a large number of producers enter the market with the gaining of greater acceptance by the consumer of the product.
Now, marketing strategy is shifted to emphasise price appeals and product improvements. Finally, when the sales begin to level off, the Management may only try to recover costs. In the meantime new product may have been placed in the market through research.
Management of Product Life Cycle:
The shape of a product’s sales and profit curves can be controlled and managed by timely and effective implementation of specific marketing actions such as through new packaging, re-pricing or product changes.
The life cycle of the product may be extended or stretched out. The key to life cycle management is to forecast the profile of the proposed product’s cycle even before it is introduced.
Then at each stage, the management should anticipate the marketing requirements of the following stage:
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I. Introduction Stage:
(i) The company introduces one or a few new products in the market.
(ii) For new products the organization may use the skimming price strategy (high price for high profit margin) or penetration strategy (low price for attracting more customers).
(iii) At this stage, the product is distributed only at a few selected outlets scattered over a small geographical area.
(iv) Advertising and sales promotion is aimed at creating brand awareness. The company may also distribute free samples to attract potential buyers.
II. Growth Stage:
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(i) As the product enters this stage, new features and utilities are added to it and quality improvements are made.
(ii) The pricing strategy depends on the product’s performance in the market. A high price may be maintained if there is high demand, while prices may be reduced if the demand is not so high.
(iii) The product is distributed more extensively over larger geographical areas using a variety of distribution channels.
(iv) Advertising and sales promotion are increasingly used to grow the customer base.
III. Maturity Stage:
(i) More improvements are made to the product and innovative features are added to differentiate it from those of competitors.
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(ii) The presence of competitors in the market makes it necessary for the firm to reduce the product’s price.
(iii) The company provides incentives to wholesalers to stock their goods. Otherwise the wholesalers may start stocking competitors’ products thereby disrupting the firm’s sales.
(iv) The firm resorts to retentive advertising in order to reinforce their brand image in the customer’s mind. Promotional efforts are made to pull the competitor’s customers towards the firm’s product.
IV. Decline Stage:
(i) The company may withdraw the unprofitable products from the market. Attempts may be made to rejuvenate the surviving products.
(ii) The prices are drastically slashed in order to sell the remaining stock of unprofitable products.
(iii) Only selective distribution channels are used as the product is no longer in demand.
(iv) Advertising and promotional expenditures are lowered to a minimum for the declining product.
Stages of Product Life Cycle (What are the Stages of Product Life Cycle)
1. Introduction Stage:
This is a period of slow sales growth as the product is introduced in the market. The operational costs are high due to low production levels or bottlenecks, high learning time, unwillingness of the trade to deal in the product, high promotion and advertising expenditure, absence of credit facility offered by suppliers etc. At this stage, the need for cash is very high as all expenses have to be met. The marketer has to incur testing expenses, bear heavy promotion expenses and set up distribution channels.
The market awareness of customers is pretty low. They are unwilling to try the product. Even if they buy, they buy in uneconomical lots. The number of customers buying small lots is also low. Competition may come in the form of close substitutes, in most cases, competition may not exist. When it exists, other firms might be doing the job efficiently since they have been able to establish themselves firmly.
Since the market size is not known, the firm can only come out with a limited product version. To woo customers away from rival products, a firm has to literally burn its candle of energies day and night. The firm needs to nurture new product launches and monitor everything carefully. The danger of losing steam and going off the track is very high.
The strategies that can be followed at this stage may be listed thus:
a. Rapid Skimming:
If the product in question is novel, unique and distinct (I Phone, IPod, Tablets etc.) the firm can hit the road with a high price. A strategy of high price and high promotion would work when awareness for the new product is not very high. When awareness levels are high (remember Apple’s Macintosh personal computer) customers should be willing to buy the product at any price, when the firm wants to make a fast buck, this strategy helps.
b. Slow Skimming:
When the firm has sufficient time to recover its pre-launch costs, this strategy is applied. This works best when the firm has grip over technology (market size is also not very big initially enticing many rivals to jump into the field) and rivals are not in a position to invest in technology in a big way in the near future. Firms engaged in petro chemicals, laser technology, renewable energy resources have sufficient time to recover their costs through slow skimming.
c. Rapid Penetration:
Firms spend heavily on promotion—where the market is characterized by intensive competition and try to recover the same by keeping the price low so that they can hit the nail in the head. Nirma and T-Series followed this strategy so that they can gain market share quickly and make profits in the long run—pushing rivals to the wall in the interim.
d. Slow Penetration:
This strategy delivers results when the threat from competition is minimal, market size is fairly large, the market is predominantly price sensitive and majority of the market is familiar with the product. The firm seeks to maximize sales and profits in the long run.
2. Growth Stage:
This is a period marked by faster sales and increased profits. Sales and profits improve due to rapid market acceptance and repeat purchases. Customers are aware of the product and are convinced about its usefulness. To meet demand, companies need to invest heavily in expanding their manufacturing facilities.
New distribution channels are opened. New segments of the market are explored. The pioneer firms works to improve the product continually. It is able to enjoy economies of scale as well. To get a share of the cake, a large number of competitors step into the arena.
Profits may hit a plateau eventually as rivals play the catch up game and weaker players begin to look for cover. To entice customers, the pioneer firm may indulge in product differentiation. Brand building exercises are put in place. To encourage repeat purchase, firms are forced to reduce the price bit by bit.
The pioneer firm is now compelled to take a decision regarding which segments of the market it wants to serve profitably. If it wants to serve all segments, like it did during the introductory stage, it may have to live with cut throat competition. It is always a good idea to pick up lucrative segments in market and concentrate effort over there, guarding its territorial space carefully.
Distribution plays a key role in ensuring adequate support to the efforts put in by the pioneer firm. As it begins to lose its first mover advantage, there is constant search for making the product available in different retail formats—such as company owned stores, departmental stores and discount stores simultaneously. The marketing strategy now shifts to price appeals and product improvements. At the end of this phase, prices normally fall and profits reach their peak. Development costs would have been recovered fully.
3. Maturity Stage:
Most products that survive the heat of competition and gain customers’ approval enter the maturity stage. This phase is characterised by slowing down of sales and profits. Whoever wanted to buy the product would have certainly bought the same resulting in a saturated market. Flat sales would make life tough for each participant. Weaker players may exit the market, as there is very little juice left.
Survivors may have to fight it out through constant product modifications/improvements, advertising and sales promotion, dealer discounts, price cutting exercises. Since sales have hit a plateau, excess capacity builds up slowly but steadily. Companies with stronger brands may emerge as survivors.
Strategies:
Important decisions and strategies, therefore which characterize this phase would include the following:
i. Quality Improvement:
Firstly, the expenses of research and development have to be increased to find new uses of old products or an improved quality of the product and this will further reduce profits.
ii. Market Modification:
Secondly, the new or improved product has to be introduced in the market just at the time the sales begin to decline ; as for example, new uses (like tea being positioned as a health drink, you have now ginger tea, lemon tea, etc.) have been found for paper such as paper bags, paper cups paper napkins, etc. Similarly, research on cloth has produced cloth that does not shrink, that does not require ironing, and so on.
iii. Marketing Programme Modification:
Thirdly, the firm may stimulate sales by cutting the prices, increasing product support and display in existing outlets, increasing the advertisement expenditure, offering rebates/gifts/warranties etc., increasing the number of salesmen so as to have a close face to face interaction with customers, and can even think of speeding up delivery.
4. Decline Stage:
In the decline stage, the market is shrinking and sales decline—sometimes slowly as in the case of sewing machines or suddenly as in the case of floppy disks. Sales decline for a variety of reasons due to technological advances, or change in customers’ tastes and preferences. Most of the time, the decline cannot be arrested because it is beyond the control of any one firm.
If customers have found a better way of satisfying the need that the company was serving, or when the need no longer exists it is better to accept the reality and start preparing for a decent exit at a right time, a company should read the writing on the wall and send such products to the burial ground.
Companies can prolong the process a bit through aggressive advertising and price cutting but it does not help improving the prospects of a dying product. The best way to deal with the situation is to expect it and make suitable adjustments. The weak and marginal firms, in any case, will be forced to quit the arena. The stronger ones will also be pushed to the wall if they fail to get out quickly.
It is actually an uphill task to work with aging and weak products that have fallen out of favour. They consume lot of time, require frequent price and inventory adjustments, and more dangerously such products may dent the image of the firm negatively. When the firm finds itself at the receiving end for fairly long periods, the options are pretty clear. It is better to abandon the product that’s not being favoured by customers and that seems to have outlived its usefulness.
Stages of Product Life Cycle – Product Life Cycle – 5 Stages
The product life-cycle concept derives from the fact that a product’s sales volume and sales revenue follow a typical pattern of five-phase cycle. The life-cycle is a fact of existence for every product. It is similar to the human life-cycle. The length of the life-cycle, the duration of each phase and the shape of the curve vary widely for different products.
But in every instance, obsolescence or decay eventually occurs when the need disappears or a better, cheaper and more convenient product may suit the same need or a competitive product due to superior marketing strategy suddenly gains a decisive advantage.
The PLC concept is very useful. It helps a marketer in preplanning the entry of a new product in a market, in prolonging the profitable stage, in meeting competition and in long- term decisions on investment on products. The PLC indicates that product is born or introduced, grows, attains maturity in a particular market and then sooner or later it is found to enter its declining stage, i.e., decay in its sales and ultimate death.
The PLC should be termed as product market life-cycle as it is related to a given particular market. For example, a matured product (in the market of USA or UK) will have a new life-cycle when it is introduced in India, e.g., Frostfree Freeze. The PLC of a product is depicted in Fig. 11.4.
Every product moves through a life cycle having five stages- introduction, growth, maturity, saturation, and decline (some authors include saturation into maturity). The life-cycle gives the sales revenue and profit margin-history of a product over a time frame.
1. Introduction:
In the early stage when the product is introduced in a market, sales revenue begins to grow but the rate of growth is very slow. Profits may not be there as we have low sales volume, large production and distribution costs. We may require heavy advertising and sales promotion.
Products are bought cautiously on a trial basis. Weaknesses may be revealed and they must be promptly removed. Cost of market development may be considerable. In this stage product development and design are considered critical.
2. Growth:
It is the period during which the product is accepted by consumers and the traders. During the growth stage, the rate of increase of sales turnover is very rapid. Profits also increase at an accelerated rate. In spite of competition, we may have rising sales and profits. The firm gives top priority to sales volume and quality maintenance may have secondary preference.
For marketing success, manufacturing and distribution efficiency are vital factors. In mathematical terms, the end of the growth period is at the inflection point on the sales curve. In this stage effective distribution and advertising are considered as key factors. Word-of-mouth advertising leads to more new users. Repeat orders are secured.
3. Maturing:
During this stage, keen competition brings pressure on prices. Increasing marketing expenditure and falling prices (in the battle for market share) will reduce profits. Additional expenditure is involved in product modification and improvement or broadening the product line.
Marketers have to adopt measures to stimulate demand and face competition through additional advertising and sales promotion. Overall marketing effectiveness becomes the key factor in the stage of maturity. Low prices, increasing competition, rising marketing costs, and declining profits are the features in this stage.
4. Saturation:
The saturation point occurs in the market when all potential buyers are using the product and we have only replacement sales. Consumption achieves a constant rate and the marketers have to concentrate exclusively on a fight for market share (with higher marketing expenses). Prices may fall rapidly and profit margins may become small unless the firm makes substantial improvements and realises cost economies.
5. Decline Stage:
Once the peak or saturation point is reached, product inevitably enters the decline stage and becomes obsolete. It may be gradually displaced by some new innovation. Sales drop severely, competition dwindles, and even then the product cannot stand in the market. It may be priced out of the market by other new innovations.
A marketer is expected to keep new products ready to fill up the gap created by the demise of existing products. At this stage, price becomes the primary weapon of competition, and we have to reduce considerably expenditure on advertising and sales promotion. Cost control becomes the key to generate profits.
In real life, many products do not follow the life-cycle curve given above. Time interval for each stage varies widely from product to product. For example, salt remains in maturity stage for ever. Table radios have now moved into declining stage after achieving maturity and saturation. With the introduction of mobile phones, pagers are in declining stage in our country.
HUL’s products such as Annapurna Salt and Atta are in declining stage (2010) and the company is planning to revive these products. Marketers can alter the product life cycle primarily through product improvement (alterations in product offering) and the changes in the rest of the marketing mix. New products are the real solutions to the problems of maturity and decline.
Stages of Product Life Cycle (Product Life Cycle Examples)
Life cycles are the most common way to describe the evolution of markets, products — product class, product form, product line, product item. Figure 3.2 shows the classic S-shaped curve depicting sales trajectory.
Understanding life cycles helps the firm predict future market conditions and develop robust market strategies. Typically, we partition life cycles into five stages (phases) — introduction, early growth, late growth, maturity, decline.
The several life cycles fall into a simple hierarchy based on longevity/demand. Market life cycles last longest — generally, the firm has little impact. Product-class and product-form life cycles are each shorter than market life cycles. Product line and product item life cycles significantly influence product line and product item performance. Firm actions greatly impact these life cycles; they are shorter than product-class and product-form life cycles; furthermore, they come in many different shapes. But, because they provide little insight into competitor activity, they are not very helpful for drawing strategic implications.
The firm gains greatest insight into market, product evolution by examining product forms. Product classes compete with one another, but competition within/across product forms is typically more intense. Whereas actual life-cycle curves often depart from the idealized shape — Figure 3.2 — across product forms, life-cycle stages follow one another in a remarkably consistent fashion. Hence, product-form life-cycle stages can provide important strategic insights.
Stage 1- Introduction:
Sales are initially low. Product introduction frequently follows many years of R&D; it reflects the first market entry/entries by leading firms.
Example- Honda launched the first gasoline/ electric hybrid car in 1999, but modern-day research started in the mid-1970s! Uncertainty characterizes introduction.
The firm explores questions like- Will the product perform adequately? What is the best technology? What segment(s) should we target? What market strategy is optimal? Will customer demand be sufficient? What specific benefits/values do customers require? Which competitors will enter? When? What resources are necessary to succeed? What are our chances of success?
In the introduction stage, firms struggle to build profitable sales. Typically, the firm offers a single product design, but prices may not cover total costs. Managers expect unit costs to fall as sales increase, so the firm ultimately earns profits. Introduction requires significant market education.
Firms use advertising/personal selling to show product value to consumers/end users/distributors. But production problems, product failures, inability to expand capacity may cause delays.
Sometimes the first product version has quality issues, and performs poorly; yet it may possess the seeds of an important breakthrough. Smartphones, iPads, other handheld electronic devices are now widely popular, but owe success, in part, to the Apple Newton — failed pioneer (launched 1993/withdrawn 1998).
The introduction stage may last many years, but fierce competition, increased innovation, customer willingness to try new products are shortening this stage.
Stage 2- Early Growth:
Sales grow at an increasing rate. Many products do not reach early growth, but survivor sales revenues grow quickly. Hybrid cars, taxi service apps — Uber, Ola — are in early growth. Increasing sales, high profit margins attract new entrants. These players often bring capacity, resources, loyal customers to fuel market growth. As competitors struggle for market position, new distribution channels open up; promotional efforts remain high.
Previous advertising/promotion emphasized generating primary demand — buy a hybrid car. Now, focus shifts to differentiation, selective demand based on customer perceptions, features, functionality — buy a Ford Fusion hybrid.
Firms secure production/marketing efficiencies; price becomes a competitive weapon. Many firms increase sales revenues; they also work at managing costs. Caution- Firm sales may increase, but market share decreases if competitors grow faster.
Stage 3- Late Growth:
Sales grow but at a decreasing rate. By late growth, the many uncertainties from introduction/early growth are largely resolved. Sales continue to increase, but growth rate slows. Strong competitors initiate tough actions to force weaker entrants to withdraw. Firms differentiate products by introducing, promoting design/packaging variants.
The distribution infrastructure is usually well developed, but outlets are more selective about brands/ product items. Price is a major competitive weapon, squeezing distributor margins. Purchase terms — credit, customer service, warranties — become more favorable to purchasers.
Stage 4- Maturity:
Sales grow similarly to GNP. Most sales are to repeat customers/loyal users. Examples- everyday products/services — detergents, many consumer packaged goods. Because competitive situations vary widely, the firm must secure deep market insight. Some markets are concentrated; others are fragmented.
i. Concentrated Markets — Aka Oligopolies:
A few major players enjoy most sales; niche firms make up the rest. Market leaders often enjoy entry barriers — scale economies, brand preference, distribution-channel dominance. Firms that become market leaders by early maturity often survive for many years.
Examples- Amul — butter; IBM — mainframe computers; Tata — trucks. Increasingly, firms focus on value-added services. They streamline operations/distribution to reduce costs, then price competitively. Leaders get in trouble when they fail to innovate new products/ processes, and to reduce costs.
ii. Fragmented Markets:
No firm has large market share. Fragmentation generally results from some combination of low entry barriers, high exit barriers, regulation, diverse market needs, high transportation costs. Examples- Personal services — dentistry, education, home plumbing, electrical contracting.
Stage 5- Decline:
Maturity may last many years, but eventually sales turn downward. Products in decline- Carbon paper, chemical-film cameras, videotape. Sometimes decline is slow, but may be precipitous — overcapacity often leads to fierce price competition. Managing costs is a high priority — firms prune product lines, reduce inventories, cut marketing expenses.
Strong firms may increase sales as weaker competitors exit. Firms often raise prices to cover costs as sales drop, but sales decline further, in a vicious cycle. Firms with good cost management and a core of loyal price-insensitive buyers can be quite profitable.
Stages of International Product Life Cycle
Theory of international product life cycle propounded by Raymond Vernon emphasizes that every product has to pass through different stages. Conceptually, the life cycle consists of four stages—introduction, growth, maturity and decline.
To understand the concept very clearly the international product life cycle starts from the location where the products originates. The introduction stage is marked by innovation. Innovation is an outcome of research and development. According to product life cycle theory, the production location for a specific product moves from one country to another at different stages.
Generally, the life cycle movement starts from advanced countries where considerable amount is spent for research and development. Many occasions failures may occur. Still they pursue innovation. Out of ten innovations, two may be commercially viable for which they do not hesitate to spend money other eight innovations.
1. Introductory Stage:
New products are generally developed after observation of demand, utility and benefits of a group of customers enjoy in a given market. It is a normal practice that Japanese company develops a new product for Japanese market first and US Company develops a product for US market first.
The Research and Development group creates a new product and predominantly the company concentrates on the domestic market and gradually starts export to other countries. By way of getting constant market feedback the company modifies or alters or adds new features to match international markets.
Importance of Innovation and Decisions of Locations:
Over the past 50 years all the new products have been developed either in US or in Europe or in Japan. The industrialised countries are having advantage of research, technological infrastructure, and manpower. Companies like Merck, Siemens, Sony, Honda Motors, General Motors and Matsushita allotted huge funds for such development.
Those companies are capable of taking the risk on new product development in anticipation of long term gainful results. Innovations are taking place in such companies on continuous basis. Few companies concentrate more on technological innovative products. Few companies are making improvements in the existing products. Few companies modify methods of manufacturing and process.
Even though the debate is going on that developing countries and less developed countries have lacunae in research capabilities, currently innumerable innovations are taking place in developing and less developed countries also. In future, the industrialised countries will locate innovation centers or R&D intensive operations in developing countries.
Movement of Labour and Products:
In the first stage of the product life cycle a minimum percentage of the total production may be exported. Labour intensive items are not standardised in the initial stage. Rapid change in the production process may not take place. Obviously, production with standardisation will be a Herculean task.
At the same time, since cost of production is not known to the customer, there is a possibility of adding comfortable margins. For example, entertainment electronic items innovated by Sony made a windfall gain right from the beginning. Dell is enjoying the same kind of benefit for its laptop.
The major challenge in this stage is to educate and enhance the skill levels of labour force until the standardisation is achieved. Once the labour force is trained and competitive, the organisation can perform well.
International Product Life Cycle and Decision Process:
2. Growth Stage:
Growth stage has few salient features:
(i) It increases in export to many countries by which the company generates huge revenue.
(ii) More competitive forces crop up from a country by innovation, country of entry and any other third country.
(iii) The organisation becomes high capital intensive.
(iv) The innovator resorts to foreign production units in order to bring down the cost and close to the customer.
Since the customers are aware of the products and the demand is likely to grow substantially, setting up manufacturing units becomes inevitable. While Sony products have huge demand in South East Asia and the Middle East, the company started manufacturing products in Malaysia.
Hewlett Packard started setting up units in South East Asia due to rapid growth in sales in the whole region. The innovating company will increase its quantum of exports and is prepared to incur small loss in the export markets where the manufacturing subsidiary unit will commence its operations.
3. Maturity Stage:
This stage has the following features:
(i) There is a gradual fall in the quantum of exports from innovating country.
(ii) Standardisation and quality aspects are pre-requisites.
(iii) Sophisticated machineries are used; hence investment is huge.
(iv) Price war is inevitable due to many players.
(v) Production facilities are available in many developing countries at a low labour cost.
Though the demand is growing in few countries, specially in the less developed ones it declines in all the developed and few developing countries. Cost cutting is the only strategy available for the innovator to sustain. Few of the companies shift their focus to get products manufactured wherever per unit cost is low.
It is a general trend that innovating countries no longer enjoy production advantage. Since many physical, fiscal and infrastructural incentives are offered by developing countries such innovators are lured and increase their production in developing countries. Today, we see such manufacturing units in Indonesia, Thailand, Malaysia and Brazil. India is also emerging as a strong production centre for automobiles health care and consumer products.
4. Declining Stage:
(i) The main feature of the declining stage is that maximum production takes place in less developed countries.
(ii) The innovating country starts importing from other countries.
(iii) The days of keeping high margins are over.
(iv) It is the stage of survival and no prosperity for the innovator.
(v) The innovator may completely deviate from a specific product and go in for a completely new product.
The industrial countries disappoint the innovator because the affluent customer demands more and more. New products are flooded in the market with so many features. Since cost factor is the only weapon, production from less developed countries will win. The innovator of the product cannot depend on the first production unit which gave the first product for launching.
International Product Life Cycle:
Limitations of Product Life Cycle:
The theory is having application in few specific sectors such as, entertainment electronics, man-made fibre, household articles and certain medicinal items.
The movement of production centre at different stages may not be applicable in the following circumstances:
(i) A vast majority of the products are having very short life cycle such as computers, tape recorder, musical discs and fashion items. Shifting production from one country to another may not achieve cost reduction. The very nature of the product itself is subject to obsolescence.
(ii) Cost involved in perfumes, cosmetics and other essential oils which fall under luxury category do not make any impact on the customer because brand is important to them.
(iii) Wherever costs of logistics costs are high the export is minimal at any stage. At the same time, few countries are producing certain essential bulk cargo. Irrespective of life cycle stages, they export all the time. Articles like bitumen from Iran, sulphur from Jordan and coal from China. They cannot shift production facilities to other countries.
(iv) Many multinational companies are using aggressive marketing promotion such as advertising, personal selling and sales promotion. Any other competition will not be a great concern for such products.
(v) Few products are very much associated with outstanding services and specialised knowledge. More than product life cycle stages, customers need assured technical support. Lifts and escalators will be accepted by customers provided service is given top priority. Same concept is applicable to life saving medical equipment’s produced in Germany.
Irrespective of the types of products the companies are all the time introducing new products simultaneously, both in the domestic market and overseas markets. It is obvious that in the globalisation era companies develop different products, to different segments and at different prices. They cannot wait for an opportunity to start in the domestic market first and going to other markets later on.
Multi-domestic operations are very common among the multinationals. Innovations are carried out to launch products in many countries at a time especially health care items and industrial consumables. Hence, product life cycle theory has very limited applications in the current globalised era.
Stages of Product Life Cycle (Introduction, Growth, Maturity and Decline)
The life cycle of human beings can be divided into childhood, adolescence, youth and old age. Similarly, every product has a life cycle that starts from its entry into a market and ends with falling sales. The product life cycle is an attempt to recognise distinct stages in the sales history of the product, because a product’s sales position and profitability will change over time.
The sales history of a typical product follows an S – shaped curve, as shown in the following diagram 3.2. This curve is typically divided into four stages known as, introduction, growth, maturity and decline. The length of the life cycle, the duration of each phase and the shape of the curve, vary widely for different products.
The product life cycle is also termed as product market life cycle, because it is related to a given particular market and also because an old product, when introduced into a foreign market, will have a new life cycle. For example- Pepsi and Coke, old products are well established in foreign countries, faced a new life cycle when introduced in India.
Introduction is a period of slow growth. The firm may not get any profits at this stage due to the heavy expenses of introducing the product in the market. Growth is a period of rapid market acceptance and substantial profit improvement. The maturity stage faces keen competition, pressure on prices, increased marketing expenditure, less profits, etc. At this stage the product has achieved acceptance by most of the potential buyers. At the last stage of decline, it is the period when sales fall considerably and profits become negligible.
These stages are explained in detail below:
1. Introduction:
This is the stage when a new product is first introduced into the market. Prior to introduction, the product might have been test marketed in a few cities, but it would not have been a full – scale launch. At this stage, profits may be either negative or very low, due to heavy distribution and promotion expenses. Sometimes free samples are also distributed to popularise the product and to create an awareness about the new product in the market. In this stage the weakness of the product may be revealed and they must be promptly removed.
This stage can be explained with the success story of Nirma soap, now claiming an 18% market share in the soap and detergents market. Mr. Patel, who developed this product, was working as a lower level employee in Mumbai. The meager salary was not sufficient to make both ends meet. He then worked as a salesman for some detergent company and selected a few flats in Mumbai to sell the detergent. He asked the housewives who purchased the detergent about the drawbacks and merits of the product he sold to them.
On that basis, he developed a detergent using the basic knowledge he gained with a chemistry graduation. Then he met the same housewives with his product and collected information about the product. On this basis, he developed and improved the product over a period of time and finally introduced it in the Mumbai market.
2. Growth:
This is the stage when sales will increase considerably due to the popularity of the new product. Similarly, profits also increase at an accelerated rate. New competitors will enter the market, expecting opportunities for large scale production and profit. This will force the firm to introduce new features in the product, to increase the number of distribution outlets, etc.
This was true in the case of Nirma also. The product had a good response in the Mumbai market and popularity increased by word of mouth. The cheap price strategy adopted by Mr. Patel was an added advantage and the product is now available throughout the country.
3. Maturity:
During this stage, keen competition puts pressure on prices and may in turn reduce profits. So, at this stage additional expenditure is involved, in product modification, improvement or broadening the product line, etc. The firm is forced to stimulate demand and face competition, through additional advertising and sales promotion.
4. Decline Stage:
This is the last stage in the product life cycle, when the product enters the decline stage and becomes obsolete. The product may be completely displaced from the market due to a new invention. At this stage the firm is forced to reduce considerably, the expenditure on advertising and sales promotion. The only method to increase profits at this stage is through cost control.
In real life, many products do not follow the life cycle curve. The time interval for each stage varies widely from product to product. For example salt, sugar, tea, coffee, milk, petrol, diesel, etc. remain in the maturity stage forever. Table radios, ink pens, Ambassador Cars, etc., have moved into the declining stage, after achieving the maturity stage. A product life cycle may be used as a management tool. Marketing strategies must change as the product goes through the life cycle. For example- in case of declining products, the management has to decide whether to maintain or terminate the product.
Stages of Product Life Cycle – PLC (4 Phases)
There are four distinct phases in the product life cycle (PLC) as shown in the figure 3.4.
1. Introduction Phase:
Research and engineering skill leads to product development. The product is put on the market and its awareness and acceptance are minimal. Promotional costs will be high, sales revenue low and profits probably negative. The skill that is exhibited in testing and launching the product will rank high in this phase as critical factor in securing success and initial market acceptance.
Sales of new products usually rise slowly at first. When a product is newly introduced and accepted by the market, the company expects to attain a significant market share. This is done by selling the products at a competitive price and by adopting an aggressive selling strategy. In introduction phase, since the product is new, the company will find it difficult to reach customers.
In this stage, the product has to prove its worth in the market. This is a difficult stage and many products like infants, don’t survive. Generally the advertising expenditure is high and sales are low at this stage. The company will also face teething troubles as regards technology at this stage. The product for the time being is a loss maker. It would require more capital investment to grow at rapid rate and for capturing a higher market share.
In this phase, cost plus profit basis is adopted for the pricing of the product. Further cash outflows will be more than the cash inflows. New entry at this stage is based on access to key technological know-how. Rivalry among companies is not so much on price. Each tries to capture new customers, open up distribution channels and improve the design of the product.
Depending upon the degree of product newness, retarding factors are as follows:
(a) A small number of innovative customers most cannot afford the new product e.g., the prices of the first colour TV sets and electronic calculators were very high.
(b) Consumers prefer the security of tried brands.
(c) Difficulties in building up effective distribution.
(d) Technical problems of assuring product quality and reliability characterize the introductory stage.
(e) Production capacity is limited.
Profits are negative or low despite little competition so far. This is owing to high unit costs resulting from low output rates, and heavy promotional investments incurred to stimulate growth. The introductory stage may last from a few months to a year for consumer goods and generally longer for industrial products.
2. Growth Phase:
In the growth phase, product penetration into the market and sales will increase because of the cumulative effects of introductory promotion and distribution. In this phase, consumers become familiar with the product, prices drop because of experience and scale economies attained. Distribution channels are gradually developed.
Competition reaches peak level as new companies enter the industry. Rapid growth in demand enables companies to expand revenues without taking market shares away from competitors. The sales start picking up as early adopters enter the market and repeat purchases also start taking place. Further, a heavy marketing expenditure may have to be incurred at this phase.
The cash inflows will start increasing. Since costs will be lower than the product will start to make a profit contribution. Following the consumer acceptance in the launch phase it now becomes vital or secure wholesaler/retailer support. But to sustain growth, consumer satisfaction must be ensured at this stage.
If the product is successful, growth usually accelerates at some point, often catching the innovator by surprise. In growth phase the growth of the product becomes significant and the company can gain a significant market share. In this phase, the sales starts picking up, as more and more people become aware of the product. The company also starts to spend a lot of money on heavy advertisement.
The acceleration results from the following four factors:
(a) The larger pool of imitators or conventional consumers begin to follow the lead of the innovators.
(b) The market is broadened by market segmentation, product differentiation and higher levels of promotion as competitors increasingly seek to jump on the ‘bandwagon’.
(c) Product improvements take place.
(d) The number of distributors increase and the consequent filling up of the distribution pipelines cause an exaggerated jump in factory sales.
Profit margins peak during this stage as ‘experience curve’ effects lower unit costs and promotion costs are spread over a larger volume.
3. Maturity Phase:
This stage begins after sales cease to rise exponentially. The rate of sales growth slows down and the product reaches a period of maturity which is probably the longest period of a successful product’s life. In this stage, the sales reach their peak level and thereafter try to stabilize.
The new customers will not come for buying the product, thus a firm can be profitable only by acquiring market share of the competitors, the firms will indulge in price-cuts, offer incentives etc. to ensure that they capture the maximum share of the market. Most demand is limited to replacement demand. Rivalry between companies turns intense. Companies find it difficult to utilize its full capacity and it leads to excess productive capacity.
The market gets saturated; these is the appropriate time for making improvements in the product or develop new products. In this phase the company identifies lot of customers and technology will be perfected and the product will be offered at highly competitive prices. The causes of the declining percentage growth rate the market saturation – eventually most potential customers have tried the product and sales settle at a rate governed by population growth and the replacement rate of satisfied buyers.
In addition there were no new distribution channels to fill. This is usually the longest stage in the cycle, and most existing products are in this stage. The period over which sales are maintained depends upon the firm’s ability to stretch the cycle by means of market segmentation and finding new uses for it.
Profits decline in this stage because of the following reasons:
(a) The increasing number of competitive products.
(b) The innovators find market leadership under growing pressure.
(c) Potential cost economies are used up.
(d) Prices begin to soften as smaller competitors struggle to obtain market share in an increasingly saturated market.
Sales growth continues but at a diminishing rate because of the diminishing number of potential customers who remain last of the unsuccessful competing brands will probably withdraw from the market. For this reason sales are likely to continue to rise while the customers for the withdrawn brands are mopped up by the survivors. In this phase there will be stable prices and profits and the emergence of competitors.
There is no improvement in the product but changes in selling effort are common. Profit margin slip despite rising sales. As the market becomes saturated, pressure is exerted for a new product and sales along with profit begin to fall. Intensified marketing effort may prolong the period of maturity, but only by increasing costs disproportionately.
4. Decline Phase:
Eventually most products and brands enter a period of declining sales. In this stage, the original product dies out and disappears from the market. Changes in consumer tastes and introduction of better substitutes render the original product obsolete. Sales and profits decline rapidly. Ideally a new product should be introduced at this stage and original product should be gradually be phased out of the market.
In this stage, only those firms which have substantial resources or a larger market share will remain in the market. The weak and the inefficient firms will leave the market at the earliest opportunity, so as to have minimum losses. The greater the exit barriers, the harder it is for companies to reduce capacity and the greater is the threat of severe price competition.
Most of the products reach a stage of decline which may be slow or fast. Eventually sales will begin to decline so that there is overcapacity of production in the industry. Severe competitions occur, profits fall and some producers leave the market. The remaining producers seek means of prolonging the product life by modifying it and searching for new market segments.
This may be caused by the following factors:
(a) Technical advances leading to product substitution.
(b) Fashion and changing tastes.
(c) Exogenous cost factors will reduce profitability until it reaches zero at which point the product’s life is commercially complete.
Sales begin to diminish absolutely as the customers begin to tire of the product and the product is gradually edged out by better products or substitutes. Cost control is especially important in the period of decline in order that the product may be deleted before it begins to incur losses.
Conventional strategies for companies in decline are either to divest or harvest. This is, to generate maximum cash flow from existing investment. However, these strategies assume that the declining industries are inherently unprofitable. However, sometime there is considerable profit potential is found within a declining industry. In such situation strategies like Leadership, Niche, Harvest may be followed.
Stages of the Product Life Cycle (With Strategies and Problems)
Today’s product life cycle management achieving product development breakthroughs.
In response to changing capital market demands, “want it now” customer demand and fast-moving competition, companies are under unprecedented pressure to generate profitable products at high speed.
This relentless pressure leaves little-if any-room for error. Customers are now conditioned to expect the rapid availability of an alternative product-most likely from a competitor-if one company’s new product has problems or is delayed. That means products need to be right the first time-on time and defect free.
On a related front-Capital markets place a majority of a company’s valuation on expectations that forward earnings will be driven by successful innovation at a highly predictable rate.
It may all seem overwhelming, but Accenture believes these demands on product development have met their match with new processes, organizational adaptations and technologies. Enabled by a new class of product life cycle management applications, companies today can reduce development cycle times by half and accelerate new product market success by factors of two or more.
Why the dramatic impact? To put the importance of product life cycle management in perspective-Product life cycle management is to product information what enterprise resource planning is to enterprise resource information or customer relationship management is to customer information. It represents a new way to plan, organize, manage, measure and deliver new products or services.
1. Knowing which Product to Pursue:
Without the tracking, analysis and planning of product features and customer requirements, companies often expend resources on dead-end ideas before they get the right product completed. By aggregating key insights and capturing known facts, dramatic new approaches to what to do and when to do it are possible.
2. Long Product Cycle Times:
Margin erosion, excessive discounting and erratic materials management and inventory profiles are common signs that product delivery performance is too far behind a market window. The only answer is to do it right the first time d get it done faster. This requires an unprecedented degree of enterprise-wide synchronization, concurrent development, work management, and data and configuration control.
3. High Product-Development and Launch Costs:
High recurring and non-recurring product costs often indicate an over-reliance on internal solutions, squandering of resources on developmental dead-ends and not managing evolving insights in a way that allows the true enterprise costs of certain decisions to be determined.
Appropriate responses include earlier and more effective collaboration with third parties, integration with enterprise resource information and the enhanced integration of product- engineering tools. Product life cycle management provides a foundation for building these vital links.
4. Substandard Product Quality:
Excessive failure rates often point to a breakdown in requirements definition at the front end and weak engineering change-order mechanisms after the problem has surface. Product life cycle management provides access to key insights early, facilitates bringing the right parties to the table at the right time, and accelerates by factors of 10 the ability to process a change when it is required.
Faster Introductions, Better Products:
Product life cycle management fundamentally changes the nature of product development. All parties work collaboratively-particularly while the product’s design is still in a position to be influenced Product life cycle management helps companies
i. Repeatability by leveraging intellectual property assets and enforcing standardized, repeatable and dependable work methods.
ii. Lower and steeper learning curves through access to the right information for a multitude of enterprise wide participants, not just engineering.
iii. Concurrent work efforts on different product components by synchronizing development around object configurations and ongoing changes and updates, something that is impossible to do at any scale without technology enablement.
Abilities with Deep and Widespread Impact:
Product life cycle management works in an enterprise by:
i. Providing a single, virtual workspace in which product content, process information and program status information are fully integrated and under configuration and version control.
ii. Enabling the precise status of a product at any stage of its life to be accessed and modified through appropriate security protocols, both within and external to the company.
iii. Integrating resource information with content creation processes through the connection of workflow and cost information with the product’s developmental state.
As these abilities point out, product life cycle management is ultimately about even more than getting better products to market faster. Product life/cycle management can deliver cost-management and revenue- generating benefits as well.
Perhaps the most profound change from a design standpoint is a marked reduction in the number of engineering change orders. Because product design and development are sequenced virtually and the information managed concurrently, collaborations between design, engineering and production can be accomplished significantly earlier and at near real- time speed thus eliminating the causes of most change orders. Change orders that do need to be processed benefit from increased data integrity and linkages to other enterprises and applications.
In addition to greater speed and more data integrity, Accenture sees a number of innovative ways companies can apply product life cycle management- linkages to enterprise resource management and customer relationship management can result in new insights into what products or product configurations the company should be selling and at what cost.
Similarly, building upon insights from prior products, platform-based product families and reusable objects further yields dramatic reductions in spending on wrong product solutions or needless reinvention.
Shifting business requirements and technological achievements have aligned to produce the need for- and the means to attain-an integrated approach to product development. Product life cycle management means that the core capabilities of multiple functions and organizations are leveraged across the extended enterprise at the right time. The ramifications are profound in speed, effectiveness and cost.
Progress Software Corporation has developed a Product Life Cycle document that outlines the product development and technical support resources available during a product’s life span. This document details the different product stages starting from the First Commercial Shipment (FCS) of the product to eventual product retirement, and provides the life cycle status for each Progress Software product. This information is designed to help you develop your product plans within the context of Progress Software’s product life cycle plans.
Russell Research Concept & Positioning Tests provide comprehensive approaches to learning whether concepts for new products/services or a new positioning of existing products/services have appeal to potential users. Through in-depth diagnostic analysis, these tests determine whether there is room for improvement in what concepts are telling potential users about products/services.
Believe it or not the Product Life Cycle (PLC) is based upon the biological life cycle. For example, a seed is planted (introduction); it begins to sprout (growth); it shoots out leaves and puts down roots as it becomes an adult (maturity); after a long period as an adult the plant begins to shrink and die out (decline).
In theory it’s the same for a product. After a period of development it is introduced or launched into the market; it gains more and more customers as it grows; eventually the market stabilises and the product becomes mature; then after a period of time the product is overtaken by development and the introduction of superior competitors, it goes into decline and is eventually withdrawn. However, most products fail in the introduction phase. Others have very cyclical maturity phases where declines see the product promoted to regain customers.
Strategies for the Differing Stages of the PLC:
1. Introduction:
The need for immediate profit is not a pressure. The product is promoted to create awareness. If the product has no or few competitors, a skimming price strategy is employed. Limited numbers of product are available in few channels of distribution.
Competitors are attracted into the market with very similar offerings. Products become more profitable and companies form alliances, joint ventures and take each other over. Advertising spend is high and focuses upon building brand. Market share tends to stabilize.
Those products that survive the earlier stages tend to spend longest in this phase. Sales grow at a decreasing rate and then stabilize. Producers attempt to differentiate products and brands are key to this. Price wars and intense competition occur. At this point the market reaches saturation. Producers begin to leave the market due to poor margins. Promotion becomes more widespread and use a greater variety of media.
At this point there is a downturn in the market. For example more innovative products are introduced or consumer tastes have changed. There is intense price-cutting and many more products are withdrawn from the market. Profits can be improved by reducing marketing spend and cost cutting.
Problems with PLC:
In reality very few products follow such a prescriptive cycle. The length of each stage varies enormously the decisions of marketers can change the stage, for example from maturity to decline by price-cutting. Not all products go through each stage. Some go from introduction to decline. It is not easy to tell which stage the product is in. Remember that PLC is like all other tools. Use it to inform your gut feeling.
The Stages in the Product Life Cycle:
1. Development Stage:
This is the stage in which the product and the marketing for the product are researched and developed. Nothing will have been sold to consumers at this stage; Chill out Coffee team are currently at this stage.
This is the stage in which the product is launched and the sales grow rapidly (hopefully). Consumers try out the product for the first time. Producers spend a lot on marketing to raise awareness of the product.
At this stage sales growth has slowed down, it is more difficult to find new consumers, but there is steady demand from the existing market.
At this stage demand for the product levels off and even begins to decline – perhaps consumers are bored of the product or have found a better alternative. If the producer does not develop the product at this stage then it may go into decline to the point that it is not worth producing it any more.
Businesses can develop the life of their product further if they use “extension strategies”. For example, Kit Kat have developed the life of their product by offering chunky Kit Kats, Kit Kat ice cream, white chocolate Kit Kats and so on. The result is that the Kit Kat brand appeals to a much wider consumer group and existing consumers are buying more Kit Kat branded snack foods.
In response to changing capital market demands, “want it now” customer demand and fast-moving competition, companies are under unprecedented pressure to generate profitable products at high speed.
This relentless pressure leaves little if any room for error. Customers are now conditioned to expect the rapid availability of an alternative product most likely from a competitor if one company’s new product has problems or is delayed. That means products need to be right the first time on time and defect free.
On a Related Front:
Capital markets place a majority of a company’s valuation on expectations that forward earnings will be driven by successful innovation at a highly predictable rate.
It may all seem overwhelming, but Accenture believes these demands on product development have met their match with new processes, organizational adaptations and technologies. Enabled by a new class of product life cycle management applications, companies today can reduce development cycle times by half and accelerate new product market success by factors of two or more.
Why the dramatic impact? To put the importance of product life cycle management in perspective- Product life cycle management is to product information what enterprise resource planning is to enterprise resource information or customer relationship management is to customer information. It represents a new way to plan, organize, manage, measure and deliver new products or services.
Improving Endemic Supply Chain Problems:
Equally important, this kind of rigorous product life cycle management means companies are better able to rationalize the design, development and overall management of their product portfolios.
Accenture’s experience teaming with clients points to four particular areas in which product life cycle management can help resolve long-standing hurdles to innovation, productivity and profitability.
Knowing which product to pursue. Without the tracking, analysis and planning of product features and customer requirements, companies often expend resources on dead-end ideas before they get the right product completed. By aggregating key insights and capturing known facts, dramatic new approaches to what to do and when to do it are possible.
Long product cycle times. Margin erosion, excessive discounting and erratic materials management and inventory profiles are common signs that product delivery performance is too far behind a market window. The only answer is to do it right the first time and get it done faster. This requires an unprecedented degree of enterprise-wide synchronization, concurrent development, work management, and data and configuration control.
High product-development and launch costs. High recurring and nonrecurring product costs often indicate an over-reliance on internal solutions, squandering of resources on developmental dead-ends and not managing evolving insights in a way that allows the true enterprise costs of certain decisions to be determined. Appropriate responses include earlier and more effective collaboration with third parties, integration with enterprise resource information and the enhanced integration of product-engineering tools. Product life cycle management provides a foundation for building these vital links.
Substandard product quality. Excessive failure rates often point to a breakdown in requirements definition at the front end and weak engineering change-order mechanisms after the problem has surfaced. Product life cycle management provides access to key insights early, facilitates bringing the right parties to the table at the right time, and accelerates by factors of 10 the ability to process a change when it is required.
Faster Introductions Better Products:
Product life cycle management fundamentally changes the nature of product development. All parties work collaboratively particularly while the product’s design is still in a position to be influenced.
Product life cycle management helps companies achieve:
i. Repeatability by leveraging intellectual property assets and enforcing standardized, repeatable and dependable work methods.
ii. Lower and steeper learning curves through access to the right information for a multitude of enterprise wide participants, not just engineering.
iii. Concurrent work efforts on different product components by synchronizing development around object configurations and ongoing changes and updates, something that is impossible to do at any scale without technology enablement.
Abilities with Deepened Wide Spread Impact:
Product life cycle management works in an enterprise by:
i. Providing a single, virtual workspace in which product content, process information and program status information are fully integrated and under configuration and version control.
ii. Enabling the precise status of a product at any stage of its life to be accessed and modified through appropriate security protocols, both within and external to the company.
iv. Integrating resource information with content creation processes through the connection of workflow and cost information with the product’s developmental state.
As these abilities point out, product life cycle management is ultimately about even more than getting better products to market faster. Product life/cycle management can deliver cost-management and revenue- generating benefits as well.
Not Business as Usual:
Product life cycle management means the method and speed with which information is shared and accessed is fundamentally altered: Employees view and interact with relevant information sooner and more clearly, thus giving them the opportunity to provide input and feedback in a manageable way.
This greater access to information and improved ability to collaborate enables companies to utilize concurrent engineering teams. These teams can now share a controlled workspace and leverage their content contributions in a highly parallel and synergistic manner.
Doing so changes the serial mess often associated when marketing gives requirements to engineering and engineering, in turn, releases impossible-to-build designs to manufacturing, resulting in late shipping products that cannot be effectively supported without major changes.
Perhaps the most profound change from a design standpoint is a marked reduction in the number of engineering change orders. Because product design and development are sequenced virtually and the information managed concurrently, collaborations between design, engineering and production can be accomplished significantly earlier and at near real-time speed thus eliminating the causes of most change orders. Change orders that do need to be processed benefit from increased data integrity and linkages to other enterprises and applications.
In addition to greater speed and more data integrity, Accenture sees a number of innovative ways companies can apply product life cycle management- linkages to enterprise resource management and customer relationship management can result in new insights into what products or product configurations the company should be selling and at what cost.
Similarly, building upon insights from prior products, platform-based product families and reusable objects further yields dramatic reductions in spending on wrong product solutions or needless reinvention.
Shifting business requirements and technological achievements have aligned to produce the need for-and the means to attain-an integrated approach to product development. Product life cycle management means that the core capabilities of multiple functions and organizations are leveraged across the extended enterprise at the right time. The ramifications are profound in speed, effectiveness and cost.