Relevance of the Product Life Cycle for Modern Marketers - Essay Example

Marketing Relevance of the Product Life Cycle for Modern Marketers Introduction: Without a product there is no marketing and hence it is the foremost of the 4P’s of marketing. The creation of new products to meet customer needs and managing them towards organizational objectives are the essential features related to a marketer. It is in the managing of products that the product life cycle emerged as an important framework. Products need to be managed for several reasons including the fact they are similar to living things in that they are born, encouraged to live and grow, mature, turn old and then meet their demise at some time in the future. The framework of the product life cycle assists in managing a product through the processes involved from birth to its demise. It is possible to look at the product life cycle in the management of a product, as providing the guidelines that a good parent would like to have in the bringing up of a baby and sending it out face the challenges of a competitive world and providing input to meet these challenges. However in recent times the validity of the relevance of the product life cycle to the modern marketers is facing a challenge. Development of the Product Life Cycle: Groucutt, 2005, p. 198, suggests that the product life cycle may be taken as a concept that “is used to predict the strategic needs associated with products as they age within the market place. It allows for the development of strategies appropriate to the life cycle stage and anticipate the need for changes in strategy as progression from one stage to another occurs” (1). Even though the origins of the product life cycle concept are rooted in economic theory as shown by Schumpeter in 1934, the credit of the origin of the product life cycle is normally attributed to Dean in 1950. It was however Levitt, T., who popularized the product life cycle concept from the early to the mid-1960’s, from where it came to be an established framework to assist in the analysis of the product portfolio of an organization. (1). The theory behind the product life cycle was presented in a simple manner by Kotler in 1967 as a classical model in marketing management for the explanation of the life of a product in the market. The classical model of the product life cycle is an S – shaped curve, as seen in Figure -1 consisting of four stages namely the introduction phase, the growth phase, the maturity phase and the decline phase, showing the four stages of a product in a market. A saturation element was later added on to the maturity phase making the third phase consist of maturity and saturation. The classical model of the product life cycle explained in simple terms starts with the introduction phase, when the product is introduced into the market and awareness and acceptance of the product are at the minimum. The second is the growth stage, wherein sales of the product begins to grow as a result of sales Figure – 1 Classical Model of the Product Life Cycle (Figure taken from Product Life Cycle, Trump Business Meetings ) activities consisting of introductory sales promotion, distribution and the influence of word of mouth experience. The third stage is the maturity or saturation stage, wherein sales continues to grow, but the rate of growth diminishes during the maturity stage and continues to diminish till it reaches the plateau of the saturation stage, reflecting the diminishing number of potential customers unaware of the product, or who have not taken action. Sales at the end of this stage are marked by the level of replacement demand. The final stage is the decline phase, wherein sales of the product diminishes as a result of competition from better products or substitutes. The key utility of the product life cycle thus is a predictive tool to forecasts marketing requirements and provide assistance for the long-term planning of product strategies before the end of the life of the product in the market is reached. The product life cycle framework provides a marketer with the information that the life of a product is limited, the transition from one stage to the other usually occurs in a transitional manner. At each stage of the product life cycle the profit levels differ, the opportunities and threats are different, and present different strategies for the organization. (2). Taking the pharmaceutical products product category to examine product life cycle, let us examine the product tetracycline. Tetracycline derived from the bacterium occurring in nature was the second antibiotic to be available in 1947, after the advent of penicillin as the first antibiotic. The broad spectrum of activity of tetracycline gave a definite edge over penicillin and its use grew in a short period of time. However the development of resistance to tetracycline by bacteria was to be the downfall of tetracycline with its use going into dramatic decline within a couple of decades of its advent. (3). The life of tetracycline in the market corresponds to the classical framework of the lifecycle of a product going through the four stages of introduction, growth, maturity/saturation, and decline, representing different levels of profit from the product, opportunities because of its broad spectrum of activity, and threats from resistance. Yet the product has refused to die, for this versatile, naturally occurring molecule has been rejuvenated into forms that offer stronger anti-bacterial activity, anti-inflammatory activity, and anti-autoimmunity activity (3). This resilience of the pharmaceutical product tetracycline from a product perspective suggests that there is something missing to the classical product life cycle. This brings into the picture the rejuvenation phase of some products, which occurs during the decline phase, where the product is modified to provide new properties that are attractive to the customers or increase the efficiency like in the case of the tetracycline molecule or new applications are found for the product. The product life cycle of the pharmaceutical product acetyl salicylic acid (aspirin) is a typical example of the rejuvenation of a product through finding new applications for the product. Aspirin was introduced as a non-steroidal anti-inflammatory agent and the first product in this class and the product use grew as a result of its efficacy. However the undesirable side effects of severe gastrointestinal distress saw the product go into a decline stage in its life cycle and the demise of Aspirin as a product was a matter of time. However this did not take place and instead the product entered a new growth phase, when its blood thinning or anti-platelet effects were discovered leading to its use in low doses to prevent commonly occurring heart attacks and strokes. (4). The necessity of the additional rejuvenation phase on the product life suggests that the product life cycle could consist of more stages and that products could behave differently in the market place. In reality there are different opinions as to the number of stages that may occur within the product life cycle of a product and that there a various patterns to the shape of the product life cycle, with the classical S – curve one of these several patterns. For example the product life cycle of a fad would look like an inverted V with a sharp growth followed by sharp decline, with hardly any maturity or saturation phase. (1). A look at the product life cycle of the pharmaceutical product rofecoxib (Vioxx) of Merck & Co would show a similar pattern. The drug was introduced in 1999 as the second of a new kind of non-steroidal anti-inflammatory agent and its growth was sharp due to its efficacy. In 2004 Merck & Co withdrew the product from the market not because of decline in sales, but due to the increased risk for serious cardiovascular events that included heart attacks and strokes. (5). Groucutt, 2005, suggests a seven stage product life cycle to cover the full span of life of a product. This product life cycle consists of product development phase that includes all the activities prior to introduction of the product into the market like research and development and market planning. This stage also takes into consideration the possibility of changes in the product prior to introduction that may affect the focus of the product or the termination or killing off of the product prior to introduction of the market, for several reasons that may include failure of the product or changes within the macro environment. Such occurrences of termination or killing off of the product are a frequent occurrence in the case of pharmaceutical products. Product development in the pharmaceutical sector involves the identification of a viable molecule and testing in animals for efficacy and safety. Once these have been established, then trials to establish the translation of efficacy and safety in human beings are a requisite for approval for introduction to the market. Failure at any of these stages will see the termination of the product prior to introduction of the product. The second phase is the introductory phase, which may also be taken as the pioneering phase. The third stage is the growth stage and the fourth the maturity stage. The fifth stage is the decline stage, which also takes into account the senility of the product, which means that the product has remained too long in the market and its profitability has been affected. In the pharmaceutical such decisions become necessary, when the period of royalty for the organization that introduced the product comes to an end making it possible for other players to enter the market and cause erosion of profitability. The final stage is the rejuvenation stage and is the stage at which some transformation in the product takes place (tetracycline) or new applications for the product are found (aspirin). (1). Though the Groucutt product life cycle frame work takes into consideration the significant aspects of the phases of the life of a product it is not necessarily the final word in the product life cycle. Kotler in 1998 suggested that market researchers had identified a range of different product life cycle patterns from six to seventeen. (5). This observation suggests that the product life cycle pattern is not sacrosanct and that there is every possibility of further developments in the patterns of the product life cycle and more so when the focus is placed on specific products instead of on generic products. (1). Using the Product Life Cycle: Marketing is considered to be a core element of corporate strategy, with the emphasis on keeping abreast of changes that occur in the market place. Irrespective of the possible variety of patterns in the product life cycle the various stages of the product life cycle do represent different opportunities and threats to the organization through the product. The comprehension of the characteristics of the significant stages of the product life cycle enable an organization to be more efficient and effective in the setting forth of its objectives and the formulation of its strategies, as well as developing the required action plans for making use of the opportunities presented by the stage of the product life cycle or offsetting threats that arise from the stage of the product life cycle. (6). Cheverton, 2006, suggests that for a marketer the product life cycle offers three distinct uses namely the comparative use, the advisory use and the dynamic use. In the comparative use the product life cycle can be used as a strategic tool to plot the product against a set of benchmarks, other products offered by the organization, competition, and the market cycle. The last factor is the most critical as it allows for a marketer to assess performance of the product in the arena that is the most significant to a marketer. For example the knowledge that the product is performing unsatisfactorily, when the market is up for such a product, results in taking the necessary choice of corrective actions. In the absence of such knowledge a marketer would just blunder on. Using this perspective in the pharmaceutical category of products, currently the market is up for treating HIV/AIDS with the awareness of its damaging aspects both to the individual and society as a whole, and hence the thrust to minimize its impact. A pharmaceutical organization with a drug for the treatment or prevention of HIV/AIDS should see sales for the product growing in keeping with the demand for drugs for the treatment or prevention of HIV/AIDS. On case this is not the case, then the assessment of the cause for this and the choice of the necessary corrective action for the organization to regain lost market share can be taken. (7). Every product is unique and the environment in which it operates is variable infinitely. Yet, the product life cycle in its advisory use provides helpful guidelines to the marketer to navigate through this difficult terrain. Let us take the example of a pharmaceutical product entering the decline phase. The difficulty encountered by a marketer in this situation is the choice between raising prices to milk a product on the way to its demise, or to lower prices to encourage more price conscious users to continue use of the product. However the guidelines that the product life cycle provides in competitor activities, market stand, and the volume required to keep the product efficient impinge on the planning of action during the decline of the product. (7). The dynamic use of the product life cycle involves its use by a marketer to choose the right time to act in the right manner with regard to a product. In theory no product need go into the decline phase or the maturity phase can be postponed indefinitely through actions of the marketer. Continual growth is possible, if the marketer chooses the right actions at the right time. Even if maturity and decline are unavoidable, then there is the opportunity of rejuvenation for continued growth of the product. The product life cycle enables the marketer to decide when to implement the chosen market intervention strategy. Let us consider a pharmaceutical organization with a product that was its leading light with spectacular growth for a few, but the product is now showing signs of reaching maturity with growth rate slipping, as a result of the entry of more powerful products containing revolutionary and more powerful pharmaceutical molecules. There are four market intervention strategies available to the marketer. The first is to do nothing. This action is acceptable if the changed market scenario is just a temporary market blip or the market is no longer attractive. Such action is also possible in organizations that are resistant to change and as a result lose their competitive edge. Take action to revive the existing pharmaceutical product. This appears the most attractive option, as it operates at a level of effort within the current capabilities and comfort zone of the organization. The product life cycle enables the marketer whether such action is sufficient or even if warranted. The third option is to find a new application for the product or reposition the product. Sounds easy but is a challenging proposition and along with an assessment of the capabilities of the product life cycle provides input whether this would be a meaningful exercise. The final choice is develop and launch a new pharmaceutical product in place of the mature product. This is a dramatic and move and the product life cycle indicates if this action has come too late. As such the product life cycle provides the marketer with the information of what action to take and when to take it in its dynamic function. (7). Relevance of the Product Life Cycle: In keeping with the pattern observed with all theories and models, the product life cycle also has its flaws that have led to years of controversy between its supporters and detractors. The flaws of the product according to its detractors are many. Empirical research of the product life cycle could have put an end to the controversy between the supporters and the detractors of the product life cycle, but two factors have prevented this. The first factor is the lack of the definition of which life is exactly being evaluated, and the second factor that complicates empirical research is that through the tracking of sales trends over time there is the definitely possibility of observing the strategies of the management on the product life cycle, which emanates from the perspective that the product life cycle is a reflection of the capability of strategic marketing management intervention at different stages of the life of the product, rather than the product life cycle being a predictive tool for strategic marketing decisions and action. (2). The collection of varied market segments into one market is essential to the product life cycle. This could lead to misleading conclusions, where market boundaries are not easily and accurately identified. There is the problem of identifying when the turning points occur within the product life cycle, making it a difficult prescriptive tool to apply in the case of specific strategies. The concept of the product life cycle does not give room for accommodation of the impact or influence of external environmental forces like the changing economic conditions that might have an influence on short term buying decisions, and might reflect as artificial turning points or blips in the product life cycle. The product life cycle may not provide clarity as to when, how or if at all the marketing strategies have an influence on the product life cycle for all organizations, and may be relevant only to the pioneering organizations or dominant organizations of the product. The length of the different stages of the product life cycle is variable within and across markets, thus making it difficult to pinpoint with precision the length of any stage. The life span of a new product is very difficult to predict, as it is variable from being quite long to relatively short. Even in these days of enhanced information means as a result of the advances in information technology and despite the use of computers, the actions of competitors are not easy to predict. Actions of competitors may be the primary factor that leads to the extended life of a product, irrespective of the real or perceived position of the product life cycle. High level of marketing skills required within the organization for the purpose of the analysis of trends and level of resources available. It is not necessary that all products die. The decision to terminate a product at any stage of the product is essentially a management decision. The marketplace may offer opportunities for repeated extension of product life expectancy. The product life cycle is not static, but rather dynamic and fluid, which calls for the availability of a high level of skills in the marketing department to understand the dynamics of a market from a predictive as well as a reactive perspective. (1). In modern times the dramatic developments in the fields of science and technology have caused an increase in the rate of change than was the case when the product life cycle became popular more than forty decades ago. Over time the simplistic product life cycle has become more complex and yet unable to meet effectively the demands of the various life cycles identified through Demand Life Cycles, Demand Technology Life Cycles, Industry Life Cycles, Product Category Life Cycles, Product Class Life Cycles, Product Form Life Cycles, and Brand Life Cycles. Detractors of the product life cycle thus point out that the continued use of the product life cycle in modern times provides encouragement for unhealthy myopia and focus on brand or product by marketers. (2). In spite of these criticisms of it detractors the concept of the product life cycle has remained a focal framework for marketing and planning literature. This continued appeal may be the derivation of its simplistic and intuitive logic, even though some of the features of the product life cycle appear as anything but simple. The detractors have called for forgetting the product life cycle by modern marketers, as such product life cycles do not exist. However review of existing research literature tends to disprove such an assumption. The general perspective from such an exercise is that in the case of many products the growth in markets is related to time and looking at the exceptions to categorize the product life cycle is splitting hairs. However, it needs to be acknowledged that this relationship between the growth of products over time in markets has not been fully determined and that it is not uniform across all products. This suggests limits to the current use of the product life cycle as a forecasting tool. (8). Another feature of the product life cycle that has led to its endurance is that it is highly normative. It is possible to make clear and definite statements regarding strategies that need to be followed given the stage at which the product is in the product life cycle. In comparison other marketing concepts are seldom so definitive and tend to prescribe only the relevant variables for management to take in to consideration at the time of taking strategic decisions. The strategic importance of the product life cycle even in modern times can be gauged from the large quantity of literature available on the changes required in marketing strategy based on product life cycle wherein it has even been suggested that “the most fundamental variable in determining an appropriate strategy is the stage of the product life cycle. (8). The difficulty in getting the required information for determining the stages of the product life cycle is cited as a drawback with the product life cycle, which is reflected in many companies not knowing the profitability of their products, have no review to identify weak products, lack of comparison of prices with competitors and evaluation of sales and sales promotional efforts. (2). This is hardly a reflection of a drawback in the product life cycle for in the modern age of highly evolved information technology, this is more suggestive of a lackadaisical attitude of the marketer rather than a drawback of the product life cycle. There is no doubt that the product life cycle is not uniform for all products, but the product life cycle is not a rigid curve that marketers need to follow, rather it provides a framework for planning of marketing strategies. Marketing management is not to be constrained by a strict and dogmatic adherence to a theoretical course of events. Successful results can be expected when there is the ability to adapt and react to market conditions. The product life cycle continues to remain relevant to the modern marketer because it is easy to understand as a concept, has an intuitive appeal, and product life cycle patterns have been established for some products in certain industrial sectors including the pharmaceutical category of products. (9). Conclusion: The product life cycle as a framework for marketers to manage a product from its nascent stage through its lifespan has evolved over time. In spit of the severe criticism that the concept has faced it continues to remain as an effective tool for planning to the modern marketer. Works Cited 1. Groucutt, Jonathan. foundations of marketing. New York: Palgrave MacMillan, 2005. 2. Wood, Laurie. “The End of the Product Life Cycle? Education Says Goodbye to an Old Friend”. Journal of Marketing Management 6.2 (1990): 145-155. 3. Nelson, M., Hillen, W., and Greenwald, R. Tetracyclines in Biology, Chemistry and Medicine. Basel: Birkhauser, 2001. 4. Phillips, Tracy, and Leeuwenburgh, Christiaan. “Lifelong Aspirin Supplementation as a Means to Extending Life Span”. Rejuvenation Research 7.4 (2004): 243-252. 5. Kotler, Philip. “Marketing Management: Analysis, Planning, Implementation and Control”. Ninth Edition, New Jersey: Prentice Hall, 1998. 6. Mullins, W. John, Walker, C. Orville, Boyd, W. Harper, and Larreche, Jean-Claude. MARKETING MANAGEMENT: A Strategic Decision-Making Approach. Fifth Edition. Boston: McGraw Hill Irwin, 2005. 7. Cheverton, Peter. Key Marketing Skills. Second Edition. London: BookPower, 2006. 8. Thorelli, B. Hans and Burnett, C. Stephen. “The Nature of Product Life Cycles for Industrial Business Goods”. Journal of Marketing 45.4 (1981): 97-108. 9. Lancaster, Geoff and Massingham, Lester. ESSENTIALS OF MARKETING: Text and Cases. Third Edition. London. McGraw-Hill Publishing Company, 1999. Read More