hi this is proj of plc
CHAPTER-1
1.1 INTRODUCTION
All products and services have certain life cycles. The life cycle refers to the period from the product’s first launch into the market until its final withdrawal and it is split-up in phases. During this period significant changes are made in the way that the product is behaving into the market i.e. its reflection in respect of sales to the company that introduced it into the market. Since an increase in profits is the major goal of a company that introduces a product into a market, the product’s life cycle management is very important. Some companies use strategic planning and others follow the basic rules of the different life cycle phase that are analyzed later.
The understanding of a product’s life cycle, can help a company to understand and realize when it is time to introduce and withdraw a product from a market, its position in the market compared to competitors, and the product’s success or failure. For a company to fully understand the above and successfully manage a product’s life cycle, needs to develop strategies and methodologies, some of which are discussed later on.
1.2 CONEPT OF PRODUCT LIFE CYCLE (PLC)
A product passes through certain distinct stages during its life. This cycle of stages is called the “product Life Cycle (PLC)”.The PLC is normally presented as a sales curve of the PLC concept lies in the fact that each stage in the product life cycle is characterized by a typical market behavior and consequently each stage lends itself to the application of a certain specific marketing strategy. Understanding the PLC concept and managing it effectively can help prolong the profitable phases of the span of a product.
1.3 MEANING
A product introduced in the market by a firm has move through different stages of growth till the product goes out of market. These stages constitute product life cycle (PLC).This life cycle of a product starts with the introduction of product (birth of a product) in the market and comes to an end when the product finally goes out of the market (exist of the product).Product life cycle (PLC) Indicates distinct stages through which a product passes in its sales history since its introduction in the market. Product life cycle theory is similar to lifeline/life cycle of a human being which starts with birth and ends with the similar to life cycle may be of 70 to 100 years during which human moves from one stage to the other. It also moves from one stage to the other-starting with product introduction and ending final withdrawal.
Introduction growth, Maturity, decline and withdrawal are five stages in the product life cycle. These stages come in the life cycle of all products. However, the span of each stage may have life cycle of 20 to 30 years while some others may have life cycle of 80 to 100 years. This product life cycle is projected through product’s sales volume and sales revenue collected the product life cycle is presented as a sales curve taken by a product.
According to Philip Kotler, The product life cycle is an attempt to recognized distinct stages in the sales history of the product. The life cycle is a fact of existence for every product and is similar to the human life cycle. The stages in the life cycle are uniform in the case of all products. However, the length of the Growth and decay occur in the case of each product and the product finally goes out of the market. This is similar to human life and the life of every individual. Management of a firm is aware that each product will exhibit a life cycle, although the exact shape (and duration) is not easily known is advance.
Human life cycle theory is applicable to product life cycle. For example, birth childhood life cycle theory is applicable to ageing process are the normal stages in the life cycle of every individual. Similarly, there are different stages in the life cycle of a product. They include introduction, growth, maturity, decline and finally withdrawal. In theory cannot be applied to human being as human life is not mechanical like the life of a product. Many events (personal and social) give positive/negative turn to the life moves through more or less uniform stages.
Product life cycle is actually product market life cycle as it is based on the marketing performance of a product the product life cycle suggests that a product normally moves through successive stages and finally goes out of the market. This is a universal rule applicable to all products. Even in our normal life, we noticed that some products introduced some 30 or 40 years back were extremely popular in the market for some years and finally they are out of the market due to gradual decline in the sale. However, understanding the product life cycle (PLC) concept and in the sale effectively can help in prolonging the profitable phases of the life span of a product life cycle is the heart of marketing strategy it is possible to the extend period of product life cycle through the use of appropriate strategies during the different stages of life cycle of a product of a product. The following figure shows typical life cycle (with stages) of a product (i.e. consumer item)
PRODUCT LIFE CYCLE
1.4 PRODUCT LIFE CYCLES
Most product life – cycle curves are portrayed as bell-shaped. This curve is typically divided into four stages: introduction, growth, maturity, and decline.
(1)INTRODUCTION: - A period of slow sales growth as the product is introduced in the market. Profits are nonsexist because of the heavy expense s of product introduction.
(2)GROWTH: - A period of rapid market acceptance and substantial profit improvement.
(3) MATURITY: - A slow down in sales growth because the product has achieved acceptance by most potential buyers. Profits stabiles or decline because of increasing competition.
(4) DECLINE: - Sales shows a down ward drift and profit erode.
The plc concept can be used to analyze a product category (liquor), a product form (white liquor), a product (vodka), or a brand (Smirnoff).not all products exhibits a bell shaped PLC.Three alternates patterns are shown in diagram.
In figure (a) shows a growth-slump- maturity pattern, often characteristics of small kitchen appliances such as handled mixers markets. Sales grow rapidly when the product is first introduced and then fall to “petrified” level that is sustained by late adopter buying the product for the first time and early adopters replacing the product.
The cycle recycle in figure (b) often describes the sales of new drugs .the pharmaceutical company aggressively promotes its new drug and produces the first cycle. Later, sales starts declining and company gives the drug another promotion push, which produces a second cycle (usually of smaller magnitude and duration).
Another common pattern is scalloped PLC in figure(c). Here sales pass through a succession of life cycles based on the discovery of new –product characterizes uses, or users. the sales of nylon , for example , show a scalloped pattern because of the many new uses –parachutes , hosiery,shirts,carpenting, boat sails , automobile tires , -that continue to be discover over a time.
1.5 STYLE, FASHION, FAD LIFE CYCLES
We need to distinguish three special categories of product life cycles – style, fashion, and fad. A style is a basic and distinctive mode of expression appearing in a field of human endeavor. Style appears in homes (colonial, ranch, Cape Cod) clothing (formal, casual, funky); art (realistic, surrealistic, abstract). A style can last for generation and go in out of vogue. a fashion is a currently accepted or popular style in a given field . Fashion pass through four stages: distinctiveness, emulation, mass fashion, and decline.
The length of fashion cycle is hard to predict. One point of view is that fashion end because they represent compromise, and consumers start looking for missing attributes. For example as automobiles becoming smaller, they become less comfortable and growing number of buyers starts wanting large cars. Furthermore, too many consumers adopt the the fashion, thus turning others away. Another observation is that the length of particular fashion cycle depends on the extent to which the fashion meets a genuine need is consistent with other trends in the society, satisfy societal norms and values, and does not exceed technology limits as it develops.
STYLE, FASHION, FAD LIFE CYCLES
Fads are fashion that come quickly into public view, are adopted with great zeal, peak early, and decline very fast. Their acceptance cycle is short, and they tend to attract only a limited following of those who are searching for excitement or want to distinguish themselves from others. Fads do not survive because they do not normally satisfy strong need. The marketing winners are those who recognize fads early and leverage them into products, with staying power. Here is a success story of a company that managed to extend a fads life span.
CHAPTER-2
2.1 PRODUCT LIFE CYCLE MODEL DESCRIPTION
The product’s life cycle - period usually consists of six major steps or phases: Product development, Product introduction, Product growth, Product maturity, product saturation and finally Product decline. These phases exist and are applicable to all products or services from a certain make of automobile to a multimillion-dollar lithography tool to a one-cent capacitor. These phases can be split up into smaller ones depending on the product and must be considered when a new product is to be introduced into a market since they dictate the product’s sales performance.
2.2PRODUCT LIFE CYCLE PHASES
1. PRODUCT DEVELOPMENT PHASE
Product development phase begins when a company finds and develops a new product idea. This involves translating various pieces of information and incorporating them into a new product. A product is usually undergoing several changes involving a lot of money and time during development, before it is exposed to target customers via test markets. Those products that survive the test market are then introduced into a real
Market place and the introduction phase of the product begin. During the product development phase, sales are zero and revenues are negative. It is the time of spending with absolute no return.
EXAMPLE: NANO TECHNOLOGY
2. INTRODUCTION PHASE
The introduction phase of a product includes the product launch with its requirements to getting it launch in such a way so that it will have maximum impact at the moment of sale. A good example of such a launch is the launch of “Windows XP” by Microsoft Corporation.
This period can be described as a money sinkhole compared to the maturity phase of a product. Large expenditure on promotion and advertising is common, and quick but costly service requirements are introduced. A company must be prepared to spend a lot of money and get only a small proportion of that back. In this phase distribution arrangements are introduced. Having the product in every counter is very important and is regarded as an impossible challenge. Some companies avoid this stress by hiring external contractors or outsourcing the entire distribution arrangement. This has the benefit of testing an important marketing tool such as outsourcing.
Pricing is something else for a company to consider during this phase. Product pricing usually follows one or two well structured strategies. Early customers will pay a lot for something new and this will help a bit to minimize that sinkhole that was mentioned earlier. Later the pricing policy should be more aggressive so that the product can become competitive. Another strategy is that of a pre-set price believed to be the right one to maximize sales. This however demands a very good knowledge of the market and of what a customer is willing to pay for a newly introduced product. A successful product introduction phase may also result from actions taken by the company prior to the introduction of the product to the market. These actions are included in the formulation of the marketing strategy. This is accomplished during product development by the use of market research. Customer requirements on design, pricing, servicing and packaging are invaluable to the formation of a product design. A customer can tell a company what features of the product is appealing and what are the characteristics that should not appear on the product. He will describe the ways of how the product will become handy and useful. So in this way a company will know before its product is introduced to a market what to expect from the customers and competitors. A marketing mix may also help in terms of defining the targeted audience during promotion and advertising of the product in the introduction phase.
EXAMPLES: Lounge Bars, Commodities Exchange.
3. GROWTH PHASE
The growth phase offers the satisfaction of seeing the product take-off in the marketplace. This is the appropriate timing to focus on increasing the market share. If the product has been introduced first into the market, (introduction into a “virgin” market or into an existing market) then it is in a position to gain market share relatively easily. A new growing market alerts the competition’s attention.
The company must show all the products offerings and try to differentiate them from the competitor’s ones. A frequent modification process of the product is an effective policy to discourage competitors from gaining market share by copying or offering similar products. Other barriers are licenses and copyrights, product complexity and low availability of product components.
Promotion and advertising continues, but not in the extent that was in the introductory phase and it is oriented to the task of market leadership and not in raising product awareness. A good practice is the use of external promotional contractors.
This period is the time to develop efficiencies and improve product availability and service. Cost efficiency and time-to-market and pricing and discount policy are major factors in gaining customer confidence. Good coverage in all marketplaces is worthwhile goal throughout the growth phase. Managing the growth stage is essential. Companies sometimes are consuming much more effort into the production process, overestimating their market position. Accurate estimations in forecasting customer needs will provide essential input into Production planning process. It is pointless to increase customer expectations and product demand without having arranged for relative production capacity. A company must not make the mistake of over committing. This will result into losing customers not finding the product “on the self”.
A good example of a “virgin” market can be considered the market of China. This market was closed to most western companies and their products and is slowly opening up to new products and services.
EXAMPLES: MP3 Players like IPOD
4. SATURATION PHASE
Marketers often debates which tools are most effective in saturation stage. For examples, would the company gain more by increasing its advertising or its sales promotion budget? Sales promotion has more impact at this stage because consumers have reached an saturation in their buying habits and psychological persuasion (advertising ) is not as effective as financial persuasion (sales promotion deals)many consumer packed goods companies now spend over 6o percent of their total promotion budget on sales promotion to support saturated product . Other marketers argued that brand should be managed as capital assets and supported by advertisement. Then company starts new entrants likely to mean market is ‘flooded’. The necessity to develop new strategies becomes more pressing for company. Company start Searching out new markets. Marketers start linking to changing fashions. The company Seeking new or exploiting market segments and also take steps for linking to joint ventures – media/music, etc.Marketrs starts following changes in the company at saturation stages:
(1) Developing new uses of products.
(2) Focus on adapting the product.
(3) Re-packaging or format.
(4) Improving the standard or quality.
(5) Developing the product range.
EXAMPLES: Audio Cassette
5. MATURITY PHASE
When the market becomes maturity with variations of the basic product, and all competitors are represented in terms of an alternative product, the maturity phase arrives. In this phase market share growth is at the expense of someone else’s business, rather than the growth of the market itself. This period is the period of the highest returns from the product. A company that has achieved its market share goal enjoys the most profitable period, while a company that falls behind its market share goal, must reconsider its marketing positioning into the marketplace.
During this period new brands are introduced even when they compete with the company’s existing product and model changes are more frequent (product, brand, and model). This is the time to extend the product’s life.
Pricing and discount policies are often changed in relation to the competition policies i.e. pricing moves up and down accordingly with the competitor’s one and sales and coupons are introduced in the case of consumer products. Promotion and advertising relocates from the scope of getting new customers, to the scope of product, differentiation in terms of quality and reliability.
(1) The battle of distribution continues using multi distribution channels
(2) A successful product maturity phase is extended beyond anyone’s timely expectations. A good example of this is “Tide” washing powder, which has grown old, and it is still growing.
EXAMPLES: Film cameras
6. DECLINE PHASE
The decision for withdrawing a product seems to be a complex task and there a lot of issues to be resolved before with decide to move it out of the market. Dilemmas such as maintenance, spare part availability, service competitions reaction in filling the market gap are some issues that increase the complexity of the decision process to withdraw a product from the market. Often companies retain a high price policy for the declining products that increase the profit margin and gradually discourage the “few” loyal remaining customers from buying it. Such an example is telegraph submission over facsimile or email. Dr. M. Avlonitis from the Economic University of Athens has developed a methodology, rather complex one that takes under consideration all the attributes and the subsequences of product withdrawal process.
Sometimes it is difficult for a company to conceptualize the decline signals of a product. Usually a product decline is accompanied with a decline of market sales. Its recognition is sometimes hard to be realized, since marketing departments are usually too optimistic due to big product success coming from the maturity phase.
This is the time to start withdrawing variations of the product from the market that are weak in their market position. This must be done carefully since it is not often apparent which product variation brings in the revenues.
The prices must be kept competitive and promotion should be pulled back at a level that will make the product presence visible and at the same time retain the “loyal” customer. Distribution is narrowed. The basic channel is should be kept efficient but alternative channels should be abandoned. For an example, a 0800 telephone line with shipment by a reliable delivery company, paid by the customer is worth keeping.
EXAMPLE: VCR
2.3 ANALYSIS OF PRODUCT LIFE CYCLE MODEL
There are some major product life cycle management techniques that can be used to optimize a product’s revenues in respect to its position into a market and its life cycle. These techniques are mainly marketing or management strategies that are used by most companies worldwide and include the know-how of product upgrade, replacement and termination. To comprehend these strategies one must first make a theoretical analysis of the model of product life cycle. In the mid 70’s the model of product life cycle described, was under heavy criticism by numerous authors. The reasons behind this criticism are described bellow:
(A) The shift changes in the demand of a product along a period of time makes the distinction of the product life cycle phase very difficult, the duration of those almost impossible to predict and the level of sales of the product somewhat in the realm of the imagination.
(B) There are many products that do not follow the usual shape of the product life cycle.
(C) The product life cycle does not entirely depend on time. It also depends on other parameters such as management policy, company strategic decisions and market trends. These parameters are difficult to be pinpointed and so are not included in the product life cycle. The model of product life cycle also depends on the particular product. There would be different models and so different marketing approaches. There are basically three different types of products: a product class (such as cars), a product form (such as a station wagon, coupe, family car etc of a particular industry) and a product brand of that particular industry (such as Ford Escort). The life cycle of the product class reflects changes in market trend and lasts longer than the life cycle of the product Form or brand. In the other hand the life cycle of a product form or brand reflects the competitiveness of a company (i.e. sales, profits) and therefore follows more closely the product life cycle model.
Nevertheless, a product manager must know how to recognize which phase of its life cycle is a product, regardless of the problems in the model discussed above. To do that a good method is the one, suggested by Donald Clifford in 1965, which follows.
(1) Collection of information about the product’s behavior over at least a period of 3 – 5 years (information will include price, units sold, profit margins, return of investment – ROI, market share and value).
(2) Analysis of competitor short-term strategies (analysis of new products emerging into the market and competitor announced plans about production increase, plant upgrade and product promotion).
(3) Analysis of number of competitors in respect of market share.
(4) Collection of information of the life cycle of similar products that will help to estimate the life cycle of a new product.
(5) Estimation of sales volume for 3 – 5 years from product launch.
(6) Estimation of the total costs compared to the total sales for 3 – 5 years after product launch (development, production, promotion costs). The estimate should be in the range of 4:1 in the beginning to 7:1 at the stage where the product reaches maturity. Strategies that must be applied as soon as the phase of product life cycle is recognized.
2.4 STRATEGIES OF EACH PRODUCT LIFE CYCLE
INTRODUCTI-ON PHASE DEVELOPMENT PHASE GROWTH
PHASE MATURITY
PHASE DECLINE
PHASE
Strategic Goal
Make your
product
known and
establish a test
period.
Acquire a
strong market
position.
Maintain your
market
position and
build on it.
Defend market
position from
competitors
and improve
your product.
“Milk” all
remaining
profits from
Product.
Competition
Almost not
There.
Early entry of
aggressive
competitors
into the
market.
Price and
distribution
channel
pressure.
Establishment
of competitive
environment.
Some
competitors
are already
withdrawing.
Product
Limited
number of
variations.
Introduction
of product
variations and
models.
Improvement
– upgrade of
Product.
Price decrease.
Variations and
models that
are not
profitable are
withdrawn.
Price Goal
High sales to
middle men.
Aggressive
price policy
(decrease) for
sales increase.
Re-estimation
of price policy.
Defensive
price policy.
Maintain price level for small
profit.
Promotion
Goal
Creation of
public –
market
product
awareness.
Reinforcement
of product
awareness and
preference.
Reinforcement
of middle men.
Maintain loyal
to middle men.
Gradual
Decrease.
CHAPTER-3
3.1 MARKET MODIFICATION
A company might try to expand the market for its mature brand by working with the two factors that make up sales volume.
Volumes =numbers of brands users * usage rate per users
It can try to expand the number of brand users by converting non users. The key to the growth of air freight service is the constant search for new users to whom air carriers can demonstrate the benefits of using air freight rather than ground transportation.
It can try to expand the number of brand users by entering new market segment .when Goodyear decide to sell its tires via wal-mart , sears , and discount tire, it boosted market share from 14to 16 percent in the first year . In recent years AARP (American association for retired person) has tried the tack of reaching out to new market segments.
A third way to expand the number of brand users is winning competitors customers. Examples of this approach abound. Marketers of puffs facial tissues are always wooing Kleenex customers. Volumes can also be increased by convincing current users to increase their brand uses.
(1) Use the product on more occasions. Take serve Campbell’s soup for a snack. Use Heinz vinegar to clean window. Take Kodak pictures of yours pets.
(2) Use more of the product on each on each occasion. Drink a larger glass of orange juice.
(3) Uses the product in new ways. Tums antacid as calcium supplement.
3.2 PRODUCT MODIFICATION
Managers also try to stimulate sales by modifying the products characteristics through quality improvement, features improvement, or style improvement.
Quality improvement aims at increasing the products functional performance. A manufacturer can often overtake its competition by launching a “new and improved “product. Grocery manufactures call this a “plus launch “and promote a new additive or advertise something as’ stronger,” “bigger” or “better”. This strategy is effective to the extent .That the quality is improved, buyers accept the claim of improved quality, and a sufficient number of buyers will pay for higher quality. In the Case of the canned coffee industry, manufacturers are using “freshness”. To better position their brands in the face of fierce competition from
Premium rivals, such as store brands where customers grind their own
Beans in the store, Kraft’s Maxwell house will tout coffee sold in its new
New fresh seal packaging and P&Fs flogger’s ads will show how its aroma seal
Canisters – plastic , peel-top ,resalable and easy –grip packages – will make its ground canisters – plastic, peel – top ,resalable and easy – grip packages – will make its grounds beans fresher .
However, customers are not always willing to accept and “improved” product , as the classic tale of new coke illustrates.
Features improvement aims at adding new features (for example size, weight, materials, additives, accessories) that expand the product’s performance, versatility, safety, or convenience.
This strategy has several advantages. New features build the company image as an innovator and win the loyalty of market segment that value features. They provide an opportunity for free publicity and they generate sales force and distributor’s enthusiasm. The chief disadvantages is that features improvement are easily imitated , unless there is permanent gain from being first , the features improvement might not pay off in the long run.
Style improvement aims at increasing the product esthetic appeal. The periodic introduction of new car models is largely about style competition, as is the introduction of new packaging for consumer’s products. A style strategy might give the product a unique market identifies. Yet style competition has a problem. First, it is difficult to predict whether people and which people –will like new style. Second a style changes usually requires discontinuing the old style, and the company risks losing customers.
CHAPER-4
PRODUCT LIFE CYCLE TECHNIQUE EXAMPLE PRODUCTCANNIBALISM
Product cannibalization occurs when a company decides to replace an existing product and introduce a new one in its place, regardless of its position in the market (i.e. the product’s life cycle phase does not come into account). This is due to newly introduced technologies and it is most common in high tech companies. As all things in life there is negative and positive cannibalization. In the normal case of cannibalization, an improved version of a product replaces an existing product as the existing product reaches its sales peak in the market. The new product is sold at a high price to sustain the sales, as the old product approaches the end of its life cycle. Nevertheless there are times that companies have introduced a new version of a product, when the existing product is only start to grow. In this way the company sustains peak sales all the time and does not wait for the existing product to enter its maturity phase. The trick in cannibalization is to know when and why to implement it, since bad, late or early cannibalization can lead to bad results for company sales.
(1) UNFAVORABLE CANNIBALIZATION:
Cannibalization should be approached cautiously when there are hints that it may have an unfavorable economic effect to the company, such as lower sales and profits, higher technical skills and great retooling. The causes of such economic problems are given bellow.
(A) The new product contributes less to profit than the old one: When the new
Product is sold at a lower price, with a resulting lower profit than the old one, and then it does not sufficiently increase the company’s market share or market size.
(B) The economics of the new product might not be favorable: Technology changes can force a product to be cannibalized by a completely new one. But in some cases the loss of profits due to the cannibalization is too great. For example a company that produced ready business forms in paper was forced to change into electronic forms for use in personal computers. Although the resulting software was a success and yield great profits, the sales of the paper forms declined so fast that the combined profit from both products, compared to the profits if the company did not cannibalize the original product showed a great loss in profits. (See table bellow)
“Software”
Revenue
“Software”
Profit Lost “Forms”
Revenue
Lost “Forms”
Profit
Change
Profit
$10 $5 $15 $10 -$5
(C) The new product requires significant retooling: When a new product requires a different manufacturing process, profit is lower due to the investment in that process and due to the write-offs linked to retooling the old manufacturing process.
(D) The new product has greater risks: The new product may be profitable but it may have greater risks than the old one. A company cannot cannibalize its market share using a failed or failing product. This can happen in high-tech companies that do not understand enough of a new technology so that to turn it into a successful and working product. As a result a unreliable product emerges and replaces a reliable one, that can increase service costs and as a result decrease expected profits.
(2) OFFENSIVE CANNIBALIZATION STRATEGIES:
Cannibalization favors the attacker and always hurts the market leader. For companies that are trying to gain market share or establish themselves into a market, cannibalization is the way to do it5. Also cannibalization is a good way to defend market share or size. A usual practice is the market leader to wait and do not cannibalize a product unless it has to. It is thought that a company should acquire and develop a new technology that will produce a newer and better product than an existing one and then wait. Then as competitor’s surface and attack market share, cannibalization of a product is ripe. Then and only then quick introduction of a new product into the market will deter competition, increase profits and keep market share.
But this strategy does not always work since delays will allow the competition to grab a substantial piece of the market before the market leader can react.
(3) DEFENSIVE CANNIBALIZATION STRATEGIES:
Controlled cannibalization can be a good way to repel attackers as deforesting can repel fire. A market leader has many defensive cannibalization strategies that are discussed bellow.
(A) Cannibalize before competitors do: Cannibalization of a company’s product(s) before a competitor does, is a defensive strategy to keep the competitor of being successful. Timing is the key in this strategy. Do it too soon and profits will drop, do it to late and market share is gone.
(B) Introduction of cannibalization as a means of keeping technology edge over competition: A good strategy is for a company that is the market leader, to cannibalize its products as competitors start to catch up in terms of technology advancements. (For example “Intel Corporation” cannibalized its 8088 processor in favor of the 80286 after 2 ½ years, the 80286 in favor of the 386 after 3 years, the 386 in favor of the 486 after 4 years, the 486 in favor with the Pentium after another 4 ½ and so on).
So the market leader dictates the pace and length of a product’s life cycle. (In the case on Intel the replacement of 486 to Pentium took so long because competitors had not been able to catch up)
(INTEL and AMD are companies that use cannibalization as an offensive strategy tool. Amd uses it to grab a bite of Intel’s market share of CPUs and Intel uses it to defend its market share as market leader. Another example is the “war” waging between Sega and Nintendo as one company after the other cannibalize its products, introducing new ones, in an effort to keep and gain market share.)
(C) Management of cannibalization rate through pricing: When cannibalization of a product is decided, the rate at which this will happen depends on pricing. The price of the new product should be at a level that encourages a particular mix of sales of the old and new product. If the price of the new product is lower than the price of the old then cannibalization rate slows down. If the opposite happens then the cannibalization rate is increased. Higher prices in new products can reflect their superiority over the old ones.
(D) Minimization of cannibalization by introducing of the new product to certain market segments: Some market segments are less vulnerable to cannibalization to others. This is because there is more or less to lose or gain for each of them. By choosing the right segments to perform the cannibalizations of a product a company can gain benefits without loses and acquire experience on product behavior.
CHAPTER-5
PRODUCT LIFE CYCLE IN RESPECT TO THE TECHNOLOGY LIFE CYCLE
As a new technology matures so is the product or service that uses this technology. The change that occurs during a technology life cycle has a unique reflection on the customers and so on the product life cycle.
In the early days of a new technology, early adopters and technology enthusiasts drive a market since they demand just technology. This drive and demand is translated as the introduction phase of a new product by many companies. As technology grows old, customers become more conservative and demand quick solutions and convenience. In this case a product usually enters in the realm of its growth and as time passes its maturity.
CHANGE IN CUSTOMER AS TECHNOLOGY MATURES
The “chasm” shown in the graph above depicts the difference between the early and late adopters. Each needs different marketing strategies and each is translated to a product’s different phase of its life cycle. One should note that the late adopters hold the greatest percentage of customers in a market. This is why most products begin their life cycle as technology driven and change into customer driven as time passes by. A good example of this is the computer market. In one hand customers ask for ease of use, convenience, short documentation and good design. On the other hand customers rush out to purchase anything new regardless of its complexity. This is why companies in the computer industry withdraw their products long before they reach their maturity phase. This is the moment that a product reaches its peak i.e. the time that both early and late adopters buy the product.
(Intel Corporation is one of the companies that usually withdraw products during their peak to replace them with other ones of better and newer technology)
CHAPTER-6
PRODUCT MANAGEMENT FOR SUCCESSFUL PRODUCT LIFE CYCLE
Product management is a middle level management function that can be used to manage a products life cycle and enables a company to take all the decisions needed during each phase of a product’s life cycle. The moment of introduction and of withdrawal of a product is defined by the use of product management by a Product Manager. A Product Manager exists for three basic reasons. For starters he manages the revenue, profits, forecasting, marketing and developing activities related to a product during its life cycle. Secondly, since to win a market requires deep understanding of the customer, he identifies unfulfilled customer needs and so he makes the decision for the development of certain products that match the customers and so the markets needs. Finally he provides directions to internal organization of the company since he can be the eyes and ears of the products path during its life cycle. To improve a product success during each of its phase of its life cycle (development - introduction – growth – maturity – decline), a product manager must uphold the following three fundamentals.
(A) Understand how product management works: When responsible for a given new product, a product manager is required to know about the product, the market, the customers and the competitors, so that he van give directions that will lead to a successful product. He must be capable of managing the manufacturing line as well as the marketing of the product. When the product manager has no specific authority over those that are involved in a new product, he needs to gather the resources required for the organization to meet product goals. He needs to know where to look and how to get the necessary expertise for the success of the product.
(B) Maintain a product / market balance: The product manager as the person that will make a new product to work, needs to understand and have a strong grasp of the needs of the customer / market and therefore make the right decisions on market introduction, product life cycle and product cannibalization. To achieve the above he must balance the needs of the customers with the company’s capabilities. Also he needs to balance product goals with company objectives. The way a product’s success is measured depends on where the product is in its life cycle. So the product manager must understand the strategic company direction and translate that into product strategy and product life cycle position.
(C) Consider product management as a discipline: Managing a product must not be taken as a part time job or function. It requires continuous monitoring and review. Having said that, it is not clear why many companies do not consider product management as a discipline. The answer lies in the fact that product management is not taught as engineering or accounting i.e. does not have formalized training.
CHAPTER-7
PRODUCT LIFE CYCLE QUICK REFERENSES
INTRODUCTION STAGE
PRICE High, customers willing to pay premium for new product.
Early adopters
PROMOTION Limited. Highly targeted promotional efforts aimed at
specific customers
DISTRIBUTION Direct (factory to customer) or limited distribution through
specific strategic partners
SALES Small team of highly skilled salesmen with good knowledge
of the market.
DEVELOPMENT Focus on time to market and uniqueness
MANUFACTURING High expenditure for new production capacity
SERVICE High level of service for targeted customers
SUPPORT Direct factory support. Engineering involvement is required
TRAINING Focused on new product features, benefits, differentiation,
pricing and functionality
TECHNOLOGY New and innovative
COMPETITION Limited. May be offering different solution for the same
Problem or application.
MARKET SHARE Low overall
PROFITS Negative
GROWTH STAGE
PRICE 10% of market level. – 10% if the brand name is weak and
competition is severe, + 10% if sales are good and
competition does not have similar product to offer
PROMOTION Heavy. Targeted promotions, trade shows, direct mail, sales
seminars, articles and press releases
DISTRIBUTION Highly skilled. Focused channels with strong technical skills
if needed, complementary products and services
SALES Everywhere possible. Retail shops, telephone, internet
DEVELOPMENT Complete development. Market penetration is sustained with
variations and improvements of the product
MANUFACTURING Addition of capacity and automation.
SERVICE Local and regional, fully staffed
SUPPORT Phone support.
TRAINING Transition to newer version of product
TECHNOLOGY Newer and leading edge
COMPETITION New appearing worldwide.
MARKET SHARE High growth. All out market warfare with competitors
PROFITS Rising profits.
MATURITY SATGE
PRICE Stable.
PROMOTION Focused on reliability, quality, predictability, new
enhancements.
DISTRIBUTION Many distributors, alternative channels, offshore sales
SALES Direct sales focused on hi-volume, high profit
DEVELOPMENT Focused on cost reductions
MANUFACTURING Focused on increasing yield and productivity
SERVICE Distributors take over the service efforts
SUPPORT Local channels lead support
TRAINING Competition differentiation
TECHNOLOGY Aging
COMPETITION Well established.
MARKET SHARE Predictable market share every year. Limited opportunities
for quick gains.
PROFITS High profits
DECLINE STAGE
PRICE High compared to the demand
PROMOTION Limited – no promotion or advertising efforts
DISTRIBUTION Use of existing channels
SALES Maintenance and repair orientated for high-tech products
DEVELOPMENT Focused on cost reduction.
MANUFACTURING No capital expenditures, outsourcing
SERVICE High prices on spare parts
SUPPORT Phone support
TRAINING None
TECHNOLOGY Old and outdated
COMPETITION Limited.
MARKET SHARE Shrinking fast
PROFITS Declining profits.
CHAPTER-8
PLC CONCEPT AS A TOOL IN FORMULATING AND IMPLEMENTING MARKET
It is not as though the PLC is an independent phenomenon evolution in a vacuum it is the market’s reaction to the product that largely decides when one stage in the life cycle will taper off and the next stage set in. For example, immediately after product launch, if consumers are indifferent to the product and unwilling to try it out, obviously, the pioneering stage has to be sustained for a longer time Similarly in the maturity stage the consumers interest in the product can be deliberately aroused and retained the maturity stage can be prolonged This only means that each stage of the product life cycle is the direct result of the market behavior, So with prior knowledge of this linkage, The market behavior can be manipulated with appropriated strategies, so that the particular stage in the life cycle can be manipulated to the firm’s advantage it is this linkage makes the PLC concept a tool in marketing strategy formulation.
THE UTILITY OF PLC IN THIS REGARDS ARISES OUT OF FOLLOWING FACTS:
(1) A product has to necessarily pass through certain stages during its life.
(2) What’s happen to it in each stage depends on the market behavior.
(3) By manipulating market behavior the life cycle stage of the product can
Also be manipulated in the desired way.
The PLC concept can be help in different ways-in preplanning the new product launch in prolonging the profitable life phase of an already existing product in reacting to competition in a planned way in deciding the long term investment in product and it can even help decide the right time to exit from a market and minimize the damages and costs of exit
CHAPTER-9
LINKAGE BETWEEN THE PLC CONCEPT AND THE ENTRY STRATEGY
As a new product travels through its life, different firms join the market with their respective versions of the product at different stages the specific stage in the PLC of the product at witch a given firm enters with its brand, will influence the entry strategy the product at Which a given firm enters with its brand, Will influence the entry strategy of the firm Some join in the early stages some others join midway and some others join still later, Basically four distinct entry postures are possible for firm seeking entry into the market.
(1) As an innovator at the introduction stages in the life cycle of the product.
(2) An early follower in the early stage of growth.
(3) As a segmented in the late growth stage.
(4) As a me too in the maturity stage.
Success is possible with all these entry position provided the has needed capabilities to handle the market characteristics peculiar to the respective stages in the product life cycle.
ENTRY AS INNOVATORSE
Innovators should have large resources at their disposal to innovate and introduce new products in the market. They must have the capacity to absorb the cost of product failures. They those who have high caliber people on the R&D and on the marketing front. Only those who have all these plus point can afford to take the position of an innovator. In the preceding chapter we discussed the problem of the innovator and we saw that there are but a few innovators in any market.
ENTRY AS FOLLOWER
Those who join the life cycle as followers in the early stage have to be good market watchers. They must closely watch the innovators programmes and if their market intelligence shows that a product produced by the innovators is picking up well they should quick join with version of the product. They need not invest heavily in R & D because they essentially copy the innovator. They must however have an organization capable of putting a new product into the market at short notice.
ENTRY AS A SEGEMENTERS
The segmenter enters with their brand still later, when the product enters the late growth stage. They identify certain market segment characterized by less competition and concentrate on those segments; they are highly cost conscious in their manufacturing extra costs.
ENTRY AS ME –TOO’S
The me-too firm’s entry with their various at a time when the product enters the maturity stage of its cycle. These firms do not need any Research and Development. Extent of cost advantages the competitors will have due to copying and what pricing strategies they may follow to undercut the pioneer. This does not mean that with PLC plans prepared and kept in advance. The actual position may from what is available for keeping strategic options ready in advance. The actual position may very from what is predicated and expected. But the elaborate exercise at preplanning and the lead time market, Make the marketing man better equipped to charter the course of a product for example if he does a through job at the preplanning stage, he will be worked and reworking the possible life similar products life in different countries and markets, He can use those trends in understanding the life cycle of his product.
FACILITIES PROLONGING OF PROFITABLE PHASE
Similarly, in prolonging the profitable life phase of a product, The PLC concept can be of help to the marketing man. Some product get into trouble in their maturity stage powerful retaliation from competitors may threaten the product with a no-more growth and no-more-maturity situation and push it on to decline.
Normally, the following are the strategic routes available to a firm for extending the profitable stages of the life cycle of a product.
(1) Finding out new users for the product.
(2) Find out new uses for the product.
(3) Popularizing more frequent use of the product.
(4) Making the product more distinctive to the consumers.
(5) By adding real and/or psychological value to the product.
CHAPTER-10
10.1 WHY CHANGES OCCCUR IN THE PRODUCT LIFE CYCLE?
As may be evident, the most important factors leading to changes in a product’s life cycle are:
(A) Changing customer’s need and,
(B) Better and more efficient user friendly products.
(A) CHANGING THE CUSTOMER’S NEED
The most fundamental of all the environmental factors is the customers’ needs that shape the product’s life cycle over a period of time. These needs change as customers become more aware and have higher disposable incomes leading to a change in their life-styles and aspirations. Today, we are noticing this change occurring all over the country, largely because of the wider reach of television-a single source of mass media that has revolutionized markets and products. Satellite communication, dish antenna, cable T.V, “Video-on-wheels” and other telecommunication products are changing customers’ needs and expectation all over India and consequently many of the products that saw their sales stagnating now find spurt, in their sales-largely coming from hitherto unexplored markets. While customers in metro cities are looking for more sophisticated products, the urban and other rural customers are seeking basic product versions. Firms that are sensitive to these changing customer needs are able to incorporate them in their (firms) product strategies. The most interesting example is provided by Sony’s Chairman Akio Morita in his book “Made in Japan.” Giving the example of walkman’s development, Morita say that he got product idea from his young daughter for whom music was more important than being with him and her wife. He had seen a large number of people in New York hang large portable music systems on their back with music blaring from them. The same sight was visible all over the world capitals and major towns. So, Sony decided to develop a personal portable music system-now known to world generically as walkman.
Further, needs get developed over a period of time as customer uses the product and finds that there are other situations too in which he or she can use it.
(B) BETTER AND MORE EFFICIENT USER FRIENDLY PRODUCTS
Today technology offers phenomenal opportunities to firms to develop more user friendly, low priced and attractive looking products. A development in packaging is one such example that Parle Bottling used to successfully launch their mango drink Frooti. Tetra pack did wonder for fruity. This made the product convenient, easy to use and carry and also more attractive than just a mango drink in a glass bottle. The product caught customers’ fancy and was successful. Likewise, using computers and user friendly packages in retail banking made Hong Kong Bank’s Any Time Money (new phrase for Automated Teller Machine concept) successful in all major cities in India. Likewise, we find that success of other products, be they agricultural like nitrogen based fertilizers or more urban products like credit cards, can be explained by technology that has been used to serve customers more efficiently.
10.2 PLC-A CRITICAL ASSESSMENT
PLC is an important strategic tool in marketing. However, in their article “Forget the Product Life Cycle”, Dhalla and Yuspeh argued that the concept was essentially descriptive and if the management used it as perceptive tool, it will be making a grievous mistake. A firm could commit blunders which may affect its bottom-line too. Some of these blunders are:
(A) Too much of emphasis on new product development as against continuing the revitalization process of existing brands. As we mentioned earlier, more than 95% of new products fail. Hence, pursuing the path of new product development at the cost of building current brands can be a costly and risky affair. Besides, all new products are going to have shorter lives as competitors catch and imitate the pioneer firm. Existing brands and products may still have several unexplored uses and users groups. Firms that blindly follow the PLC concept may find them selves in a strategic trap.
(B) Arising out of the above and an obsession for PLC, may lead a firm to kill its product or brand in the belief that it has reached the decline phase. Stagnation in sales or negative growth rates in sales may lead management to belief so. What is important is to look at the background or backdrop of the product, i.e. the market and explore new uses and users for the product. But most firms ignore this aspect and hence get trapped in their own self-fulfilling prophecies.
But Levitt believes that PLC is a planning tool and not just a descriptive tool. To view the concept of PLC as a fixed pattern for all product types or brands is an error in marketing thinking. It should be seen as a trend of sales over time that suggests different opportunities at different phases of a product’s existence. The goal of the marketer should be to alter the shape and duration of the life cycle curve by:
(A) Promoting more frequent usage of the product among existing
customers.
(B) Developing more uses or varied usage of the product among current
users.
(C) Creating new users for the product by expanding the market; and
(D) Finding new uses for the product.
Depending the strategy of new product development or extension strategy, Levitt believes that the planning for extension should begin at the pre-launch stage itself. For, such planning can be useful in three ways:
(A) It generates a proactive rather than a reactive product policy.
(B) It lays out a long-term plan designed to infuse new life into the product at the right time, with the right degree of care and with the right degree of care and with the right amount of effort.
(C) Extending or market stretching can help a firm take a wider view of the nature of product it is dealing with and in turn help fight myopia.
Thus, PLC is indeed an important planning tool and firms need to use it. As we mentioned, PLC should be seen as providing opportunities to a firm. To do so, it is important for the marketer to examine his or her brand’s fit with the industry’s product life cycle. For, it is not necessary that the brand be in the same phase of its life cycle as the industry’s product.
10.3 FACILITIES INVESTMENT DECISION ON PRODUCTS
In the corporation’s long - term planning to the PLC can be help in modern days product profitable planning is becoming a crucial subject. PLC is a tool that can help anticipate product successes. This in turn facilitates investment decision on products investment can be given to the right products and committing heavy resources on wrong products can be avoided.
In short practicing the PLC concept mean that one is substituting stop-gap arrangement in product management with a structured long-term product monitoring plan it is a conceptual framework in which one can formulate corporate strategy and marketing strategy in more meaningful way. Efforts But they need a strong marketing organization to compete with the already established competitors. They normally compete on price keeping their as low as on product features and product design are dominated by the concern to reduce the firm’s distinctive capabilities to attune to the demands of the particular stage.
CHAPTER-11
11.1 PLC CAN BE AN EFFECTIVE TOOL IN MANAGING CUSTOMERS
Customer experience with the company changes as the product passes through its PLC as such PLC can be an effective tool in managing customer of the product also is moving through the various phases of its life cycle the consumer of the product also is moving in certain path in relation to his experience of the product. Through this change for the marketing man to know what actually happens to the consumer during this process this change in the experience level of the consumers has some implications for the company consumers’ relationship and consequently, knowledge of this change would help effective management of customers.
Buyers of various products, especially hi-tech products, evolve from a stage inexperienced generalists to experienced specialist. As the experience level of customers changes the benefits they seek from the company with them in India right now this phenomenon of product is in its early growth stage of and dozens of manufacturers are already there with fast becoming experienced specialists When they were totally novice buyers they were not bothered about the performance price ratios of different product offers. They were primarily concerned about proven comprehensive solutions to their problems. They wanted solely by the offers of companies with un assayable reputations for reliability they wanted total service even at a very high price Since the product complexities could not be handlers low But slowly things changed The corporate buyers of large computer systems today do not expects a total and comprehensive package of benefits in the product they have passed that stage they can now compare systems of two companies assess them and evaluate them they can even buy unbundled product different components from different sources have less cost and greater efficiency they are more interested in the total price performance trade off than in merely buying safe and easy to handle systems
The seller of the product has to understand when how a transition is taking place in the experience level of the customer as his product understand when and how transition is taking place in the experience level of the customer as his product moves along its life cycle the changing expectation and demand of the customers can be handle through different strategy routes strengthening the company customer relationship augmenting the product improving service support modifying the pricing approaches.
11.2 PLC OPERATES AT THREE LEVELS
1. THE PRODUCT LEVEL.
2. THE PRODUCT SUB CATEGORY LEVEL.
3. THE BRAND LEVEL.
While studying the concept of product Life Cycle, it is essential to understand what the term ‘product’ signifies. Let us explain through an illustration. Taking the computer business again, computer as a product category is in the early stage of growth in its life cycle. The product category involves all configurations of computers - supercomputers, mainframes, micro/mini and personal computers. Personal computer is a sub-category within computers. This sub-category is evolving in a particular pattern within the overall category of computers. Within the sub-category of PCs, HCL is one brand, WIPRO is another brand and Siva is a third brand. At the brand level, WIPRO, HCL and Siva are evolving on their on their own paths. Thus the product category of computers has a life cycle of its own; the product sub-category of PCs has a life cycle of its own and the WIPRO brand of personal computers has a life cycle of its own. In other words, when WIPRO attempts to project the life cycle of its cycle of its PC, it cannot make a realistic analysis unless it studies the life cycle at the brand level cannot evolve totally independent of the other brands of PC’s in the market The strategies put forward by the competing brand of PC’s and the market reaction to those strategies will leave an impact on the course of WIPRO To cite another example The Scissors case study in the next chapter explains how the life cycle of scissors got radically affected by the strategy of its competitor panama. When Scissors was the only brand of cigarette available in the market, the life cycle of the brand Scissors and the life cycle of the product category cigarettes were one and the same But when Panama Entered the situation changed The product category And in the earlier days the product cigarettes did not have any product sub category Today Plains and Filters can be cited as product sub categories within the product cigarettes.
So, when the life cycle of a brand is assessed it is essential to study the life cycle of the product category and the product sub category as well Usually the product sub category and the product sub category as well usually the product sub category is of greater relevance then the basic product category in the example of computers while studying the project life cycle of WIPRO or save the life cycle of product sub category of PC’s is more relevant then the life cycle of the main product category of computers is helpful in understanding the course the PC sub category may take The relevant point is that the life cycle of a brand cannot be project and studied independent of the product sub category/product category to which it belongs life cycle studies quit often go wrong mainly because companies try to plot a life cycle for their brand without trying to foresee and evaluate what is likely to happen to the life cycle of the product category and sub-category in which their brands falls. Even when a brand enjoys a predominantly high market share, it cannot ignore the life cycle of the product category. When the life cycle at the brand level alone is investigated without reference to the life cycle at the sub-category or product category level, the exercise fails to take into account important market factors like competitor entry and exit. The resource commitments of competitors, the strategies they implement and the cumulative impact of these elements on the market potential are ignored. So to get a meaningful picture of the brand is taking, it has to be studied in the context of the life cycle of the product sub-category and product category.
11.3 THE PRODUCT LIFE-CYCLE CONCEPT: CRITIQUE
The PLC concept helps marketers interpret product and market dynamics. It can be used for planning and control, although it is useful as a forecasting tool. PLC theory has its share of critics. They claim that life-cycle patterns are too variable in shape and duration. Critics charge that marketers can seldom tell what stage the product is in. A product may appear to be mature when actually it has reached a plateau prior to another upsurge. They charge that the PLC pattern is the result of marketing strategies rather than an inevitable course that sales must follow.
Suppose a brand is acceptable to consumers but has a few bad years because of other factors-for instance, poor advertising, delisting by a major chain, or entry of a “me-too” competitive product backed by massive sampling. Instead of thinking in terms of corrective measures, management begins to feel that its brand has entered a declining stage. It therefore withdraws funds from the promotion budget to finance R&D on new items. The next year the brand does even worse, panic increases. Clearly, the PLC is a dependent variable which is determined by marketing actions; it is not an independent variable to which companies should adapt their Marketing programs.
CHAPTER-12
CASE-STUDY
INTRODUCTION TO PARLE BISLERI
M.R RAMESH CHAUHAN is the vintage boss of the 250 crore PARLE BISLERI LIMITED. The brand has some 18 manufacturing locations spread across the country. The mainstream competition is in the form of coca-cola India’s Kinley, Acquafina from Pepsi foods and nestle India’s pure. Bisleri continues to lead in the Rs 700-1,000 crore organized, packaged water market with an estimated 40 per cent market share, followed by Kinley at 28 per cent and Aquafina with an 11 per cent share. In terms of volumes, the North and West remain Bisleri's biggest performing markets, despite the brand's sustained national-level presence.
OPERATION OF BISLERI
The Bisleri bottled water range comprises the conventional 500 ml, one litre, 1.2 litre and two litre bottles; five litre and 20 litre jars for the home segment, and smaller packs sizes of 250 ml cups and 330 ml bottles, though in very limited numbers for now. Among all pack sizes the brand straddles, it is the one-litre non-returnable bottles priced at Rs 10 each, and the 20-litre jars for Rs 40 aimed at the home segment that are Bisleri's bestsellers at present. While the 20-litre jar comprises about 40 per cent of overall Bisleri sales, the one-litre bottles account for approximately 25 per cent brand sales. The main source of water is bore wells from where they get thee water. Then the raw materials required for the bottle is PET i.e. poly ethylene terephatalable. There are 250 workers working in mumbai and 3000 all over India. The production process adopted by bisleri is batch production. The time taken to fill one bottle is approximately 5 minutes. The workers work in 3 shifts which comprises of 60-70 workers per shift. The maintenance of the machines is done every month and every 45 days there is sanitation and cleaning of the machine
INTRODUCTION STAGE
Parle Bisleri's Bisleri brand launched in 1971 was the leader with 70% market share. After 1993, the branded mineral water industry saw some hectic activity. In the early 1990s, the branded mineral water industry was worth Rs 3 billion, producing around 95 million liters in 1992On an average, every three months, a new brand was launched and another died. In the late 1990s, many international brands were planning to enter the mineralwatermarket.
According to some analysts, the main reason for the boom in branded water was the fact that people were becoming more health and hygiene conscious. Branded mineral water which sold in only 60 towns in 1993 was available in 250 towns in 1997. In 1998, Bisleri's market share came down to 60%, while Parle Agro's Bailley3 had 20%. The remaining 20% was shared by regional players.
GROWTH STAGE
In 1995 Bisleri launched a 500ml bottle and sales shoot up by 400 percentage. In 1998 Bisleri introduced a tamper proof and tamper evident seal. In 1998, the branded mineral water market had grown to a 424 million litre business, valued at Rs 4 billion2. There were 200 brands available in the country. In their bid to garner greater market share, many companies, including Parle Bisleri tried to make quality and the purification processes they used their unique selling proposition (USP).The following diagram represents the price range in different segments of mineral water companies are given below:
SEGMENT COMPANY BRAND PACKS PRICE (Rs)
Popular
Parle Bisleri
Bisleri
250 ml 3
500 ml 5
1.2 litres 12
Parle Agro
Bailley
330 ml 3.5
500 ml 5
Pepsi
Aquafina
750 ml 10
1 litre 11
Coca Cola Kinley 1 litre 10
Bulk
Parle Bisleri Bisleri 5 litres 25
Parle Bisleri Bisleri 20 litres 60
750 ml 90
Danone Evian 1 litre 85
MATURITY STAGE
In 2000, Bislery introduced the 20 litre container to bring prices down from Rs 10 to Rs 2 a litre. In 2000, the branded water market had grown to Rs 7 billion. New players like Pepsi's Aquafina, Coca-Cola's Kinley and Nestle's Pure Life entered the market. The market was segmented into premium, popular and bulk segments The premium segment was the least crowded with just four brands: French transnational-Danone's Evian and Ferrarelle and Nestle's Perrier and San Pellagrino. The popular segment was where most of the action was. Bisleri, Bailley, Aquafina, and Kinley were some of the dominant brands in this segment. In the bulk segment (5, 12 & 20 litres), Bisleri was a major player with Kinley and Aquafina stayingout of this segment.
In August 2000, Coca-Cola India launched its bottled water brand, Kinley. Some analysts said that it would be difficult for Kinley to make a dent in the branded water market in India because it was already overcrowded and highly competitive. Commenting on Kinley's launch, Ramesh Chauhan (Chauhan), CEO of Parle Bisleri Ltd said, "It will be tough for anyone to beat us in this game. We will remain market leaders”.
According to analysts the bulk segment had vast potential, and was expected to grow fast. In 2000, 40% of the branded water consumption was in eateries, homes and restaurants. Large shops and commercial complexes were fast emerging as attractive targets for mineral water marketers and Bisleri wanted to be the first to establish itself in the bulk pack segment
DECLINE STAGE
As product differentiation on the basis of quality became increasingly difficult, with each company claiming that its brand was safe and pure, companies began to use packaging to differentiate their products. Bisleri introduced a tamper proof seal in the 500 ml bottle. However, analysts felt that Bisleri's efforts to reinforce its pure and safe image with a tamper proof seal may not be all that effective as competitors also had similar tamper proof sealed bottles. They felt that it was companies with strong distribution channels that would do well in the long run. Pepsi's Aquafina was strongly placed because it had the backing of Pepsi's distribution network in the country.
By 2001, the mineral water market was worth Rs 10 billion and was growing at the rate of 40% a year. Kinley and Aquafina made inroads into the market and by March 2001, Kinley had a 10% market share, Aquafina had 4% and the share of Bisleri had come down to 51%. By June 2001, Bisleri's market share was 47% and Aquafina and Kinley together accounted for over a third of the market.
In 2001, both Kinley and Aquafina were making huge investments in bottling plants and distribution. By 2002, Coca-Cola India planned to double the number of water bottling plants to 16 and Pepsi announced that it would add seven more plants to the existing five. In contrast, Bisleri had only 15 bottling plants and three franchisees. Kinley had 500,000 outlets compared to Bisleri's 350,000. Analysts felt that Kinley and Aquafina had an edge over Bisleri because of their strong distribution network.
However, one area in which Bisleri seemed to have an advantage over Kinley and Aquafina was the bulk segment. In 2000 Bisleri's 5 and 20 litres packs accounted for 20% of its sales. In 2001, the company planned to have 75% of its sales from bulk packs of 5 and 20 litres.Bisleri reportedly wanted to focus on the bulk segment because Pepsi and Coca-Cola seemed to be strong in the retail segment and would take some time to strengthen their presence in the bulk segment. According to some analysts the competition between Pepsi and Coca-Cola in India would shift to branded mineral water. With the cola market having remained stagnant for the past few years, the branded water market, with 40% growth would be an attractive option for these companies. Coca-Cola planned to invest Rs 700-750 million in its water business by 2005 and Pepsi around Rs 800 million to Rs 1 billion. In 2001, Kinley contributed 5% to Coca-Cola's revenues in India and Pepsi claimed that by 2002, Aquafina would contribute 7% of Pepsi's revenues in India. Analysts felt that with the cola giants shifting their focus to branded water in India, Bisleri would be the worst sufferer. Chauhan was already planning to sell a 49% stake in Bisleri. However, according to some analysts; he would wait till 2004 when Bisleri was likely to touch a turnover of Rs 10 billion, before selling out the 49% stake. Others felt that given the pace at which Kinley and Aquafina were eroding Bisleri's marketshare, 2004could be too late.
Parle Bisleri's aggressive marketing was aimed at making Bisleri a Rs 10 billion brand. However, new entrants into the branded water market like Pepsi and Coca-Cola were equally aggressive in marketing their brands.
Due to competition in the market with competitors Bislri’s sales is decreasing, but still Bisleri have been the market leaders in India as far as mineral waters is concerned, Bisleri product has never reached the decline stages timely steps or modification of product is done to suit the latest requirement, it launch different- different varieties in the water bottle according to market situation, and which suits to consumers need. As a result Bisleri has been successful in maintaining market leadership.
However the from starting when the Bisleri was launched, it was number one in the market in respect of mineral water. The journey of Bisleri till now is given as:
The journey till now
1969: Buys Bisleri bottled water from an Italian company, Felice Bisleri. It was bottled in glass bottles then
1971: Parle Bisleri's Bisleri brand launched in the market.
Early-1980s: Shifts to PVC bottles. Sales surge (increases).
Mid-1980s: Switches to PET bottles, which meant more transparency and life for water.
1993: Sells carbonated drink brands like Thums Up, Gold Spot and Limca to Coca-Cola for Rs 400 crore.
1995: Bisleri launches a 500 ml bottle and sales shoot up by 400 per cent.
1998: Introduces a tamper-proof and tamper-evident seal.
2000: Introduces the 20-litre container to bring prices down from Rs 10 a litre to Rs 2 a litre.
2000: BIS cancels Bisleri's licence of water bottling in Delhi since some of the bottles did not carry ISI label; the licence is restored one-and-a-half months later.
2002: Kinley overtakes Bisleri. The national retail stores audit by ORG-MARG show Kinley's marketshare at 35.1 per cent compared to Bisleri's 34.4 per cent.
2003: Bisleri says it plans to venture out into Europe and America to sell bottled water.
2007: recently in 2007 Bisleri launched Bisleri soda in the market.
FUTURE PLANS OF BISLERI
Bisleri have been the market leaders in India as far as mineral waters are concerned. Every time their bottle and waters are checked and rechecked for its purity. Their main aim is to stay ahead of the main rivals i.e. Pepsi and Coca Cola. Their raw material comes from reliance industries limited who are their main suppliers of the raw material i.e. PET.
Bisleri was the first to market bottled water in a totally virgin market and naturally people associate the brand with bottled water. Now Bisleri is perhaps already ten steps ahead of its competitors and will endeavor to widen its gap in the times to come. Bisleri's brand positioning stresses on pure, clean and safe drinking water in the market.
Some of the future plans to maintain the top spot that Bisleri commands in Indian market.
(1) Bisleri planning to introduce new pack sizes in bottles and cups.
(2) Increase the distribution network with an investment of over 200 crores.
(3)Strengthen presence in traditionally weak areas by setting up 12 new bottling facilities at a cost of Rs. 150 crores.
(4)At present, the bulk segment constitutes 60 to 70 per cent of our sales and it intends to increase it to 80 per cent in the next two years. With water scarcity in several cities, even households are demanding bottled water now.
(5) Bisleri is trying to increase its number of outlets in the market. (Recently it has 200000 outlets in the market).
RECOMMENDATIONS
(1) During Development stage every company should first analyze the market. Company should arrange the market research in a most efficient and manner effective because the company's whole future depend upon the proper analyses of the market.
(2) Every company should plan effectively to enter into the market. Company should focus on all the aspect like social environment, political environment, cultural environment, demographical environment etc.
(3) When company introduces its product in the market it should first try to achieve break even paint. Initially the profits are negative or low at the introduction stage company should develop promotional expenditure because of following needs.
(a) Inform potential consumers
(b) Induce product trail
(c) Secure distribution in retail Outlets Company should focus on those buyers who are the most ready to buy.
(4) During growth stage when the product clicked in the market, then marketer should build intensive distribution centers and build awareness and interest in the mass market and offer product extension, service warranty because numbers of competitors get increased .during this stage company should use several strategies to sustain rapid market growth.
(a) Company should improve its product quality and adds product features and improving styling.
(b) Company should add new model and flanker products (i.e. product of different size, flavors, and so forth that the main product.)
(c) Company should lower prices to attract the next layer of price sensitive buyers.
(5) During maturity stage company should try to diversify brand and items models, and try to edge over the competitors .at this stage company should try to influence non- users into users to increase profit as well as try to modify the product according to market requirements and build more intensive distribution channels.
(6) During decline Stage Company should focus on the new product .as sales and profits decline, some company withdraw from the market .Those remaining may reduce the number of products offer. They may withdraw from smaller market segment and weaker trade channels, and they may cut their promotion budget and reduce price further. And at this stage company should strongly focus on new product to remain in the market and to maintain profit in the market.
CHAPTER-13
CONCLUSIONS:
(1)Organization must develop new products and services. Their current products face limited life spans and must be replaced by newer products. But new products can fail-the risks of innovation are as great as the rewards.
(2)The key to successful innovation lies in a total-company effort, strong planning, and a systematic new-product development process.
(3)The new-product development process consists of eight stages: idea generation, idea screening, concept development, business analysis, product development, test marketing, and commercialization. At this stage, decision must be made on whether the idea should be further developed or dropped.
(4) The company wants to minimize the chances of poor ideas moving forward or good ideas being rejected.
(5)Each product has a life cycle marked by a changing set of problems and opportunities. The sales of the typical product follow an S-shaped save made up of five stages.
(6)The cycle beings with the product-development stage when the company finds and develops a new-product idea.
(7)The introduction stage is marked by slow growth and low profits as the product enters into distribution to the Market.
(8)If successful, the product enters a growth stage marked by rapid sales growth and increasing profits. During this stage, the company tries to improve the product, enter new market segments and distribution channels, and reduce its prices slightly.
(9)Then comes a maturity stage in which sales growth slows down and profits stabilize. The company seeks strategies to renew sales growth, including market, product, and marketing-mix modification.
(10) Finally, the product enters a decline stage in which sales and profits dwindle. The company’s task during this stage is to identify the declining product and decide whether it should be maintained, harvested, or dropped. If dropped, the product can be sold to another firm or liquidated for salvage value.
