The Product Life Cycle

With

Kellogg's Company

Mr Bhaskar. G. Palshikar 6201517

Introduction All products and services have own life cycles. Each Product has different life cycle in different ways. The life cycle refers to the period from the products first launch into the market until its final stage. Life cycle is split up in different phases. In these phases significant changes take place in product and the strategy of the product owner. Product owners major goal is to earn more profit from the product, hence product owner keep changing the product launch, product sales / marketing and simultaneously keep track of the product position in the market compared to the competitor and their strategies and product success / failure. Study of a product life cycle provides with information how the product is responding to the market where its introduced. Product owner always look at increase in sales and acquiring more profit from the market where the product is introduced. Products life cycle management is very important from product owner as well as product development perspective. Nowadays many companies use strategic planning during product life cycle. This helps them to understand and allow companies to follow the rules of the different life cycle phases. When companies do this they can take strategic decision when to introduce and withdraw the product from the introduced market place. To run this theory the companies have to understand this process. Further to apply this theory on the product, companies have to develop different strategies and methodologies. Some of these theories are discussed hereunder. Product Life Cycle Description with BCG Matrix The products life cycle - period usually consists of five major steps. These phases exist and are applicable to all products / services and can be split into smaller ones depending on the product and must be considered when a new product is to be introduced into a market

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1. Product Development Stages 2. Introduction Stage 3. Growth stage 4. Maturity stage 5. Decline Stage Product Life Cycle Graph

(William D.1997)

Product Development Stages This process starts when the company finds a new and unique product,which has not been in the market with certain specifications. To do this, company requires to carry out study / research for the said product. They require to identify a product which customers are looking for. On identification of the product, company require to go in the market to study the exact requirement of customer and start building the processes to manufacture such a product. However launching a innovative

product, company should collect various information on the said product and usability of such product by people / customers. After having done this study, company first introduce the product in small market for test. To complete this process, company has to involve lot of their efforts, time and money. When product is approved in the test market, they exposed product in the target marketplace as decided. When it is exposed from that time product life cycle starts. During product development stage, companys sales and revenue is zero. Main stages involve in Product Development Stage are New Product strategy, Idea generation, screening & evaluation, Business Analysis, Market information about the product and finally commercial terms of the product. Idea generation is done based on customer suggestion, observation of customer problems and competitive ideas thru market research While firming up the idea of a new product development, many areas are been considered like financial feasibility of the company, legal issues (if any), requirement of the product and sales projection Introduction Stage or Launch Stage On considering and evaluating all areas in product development, company launch the product for customers and consider the areas like, test market for product launch, pricing while product launch, product positioning with risks associated with same. In this phase distribution arrangements are introduced. The company launch the product in such a way that there has to be a good sales response. During the product launch, company normally take the support from distributors and suppliers who market the product to the end customer. When product is newly launch, company should ensure maximum availability of the product with suppliers / stores, this will lead to increase in sales volume. To attract, company do lot of promotional activities. In this stage, company carry out the awareness program by way of advertising, passing on discounts thru distributors and create demand for new product. This plays a very vital role in this stage. A company must be prepared to spend a lot of money and get only a small proportion of that back. This is bit challenging job for most of companies to access their product demand from every market place. Though the company incur the development cost but the prices of the new product are kept on lower side to create awareness and capture market share. At the same time, during this stage, product owner is able to do the new idea generation , with input gatheration from customers, users, market research, outside inventors, competitors, other markets and employees. Idea generation is extremely high in this stage. All this results into determining whether the product fits with the objectives of the company and also identifies the strengths / weaknesses of the product . These ideas are reviewed in light of current or expected market trends.(Nicoleta) Introduction stage with respect to BCG Matrix is in Question Mark.(Gilbert, 2003) Growth Stage or Accelerated Development Growth is the third stage in product life cycle. While a marketing plan was developed in the introduction stage, adjustments to the marketing mix are usually required in the growth stage.

The marketing mix includes the four Ps: product, price, place (distribution) and promotion. During the growth stage place becomes a hot bed of activity. Frequently this involves changes to product, price and promotion. The product may need modifications for new markets with different packaging, warranty and service requirements. Price may come into play not just as list price but in discounts, financing, terms and other options. Promotion activities such as advertising and public relations will change as new channels of distribution are entered and need to be supported. This stage offer satisfaction to the company that the product is approved by the target customers. This is very critical stage in product life cycle. When there is scope in the market for that product, competitors enter into the market place. Company should try to differentiate from their competitors. During this stage, sales rate is on the increasing trends hence company need to carry out lot of promotional and brand building activities. Hence company need to be more careful and to overcome competitors, company should frequently modify their strategies, rates, offers and discounts. When company adopts such a policies, competitors get discourage from sharing the marketplace. To stay in the market company should keep on taking feedback from customers, distributors and suppliers about the product. This means that firms, in their battle for market share, will spend larger and larger sums to "buy market share" from competitors. Moreover, increased competition naturally drives prices down. As maturity approaches, the growth in sales naturally slows. This slowing is primarily a result of the declining pool of new adopters for the product category. This transition to market saturation further intensifies competitive interactions and generates additional price reductions. This, of course, ultimately translates into even greater spending as firms fight more intensely for market share. Promotional activities and advertising continues during this stage. But it is not as extensive as it is in introduction stage. Company does advertising to be leader and to give awareness for target marketplace. The aim of the company in this stage is that the product should have good coverage in marketplace.(Nicoleta) Growth stage with respect to BCG Matrix is in Star.(Gilbert, 2003) Maturity Stage This stage takes place when market becomes saturated with various products with qualities, and all competitors introduce alternative product. When this situation occurs the product is in the maturity stage. In this phase market share growth is at the expense of someone elses business, rather than the growth of the market itself. In this stage the product give high revenue to the company. The firm which has achieved the high market share enjoy the profitable period. The firm try to switch the customer from other brand to their brand. While a company that falls behind the lead market share, should try to regain it's market position. In this period firms introduce new brands even when they compete with the companys existing product and model changes are more frequent. This is the perfect time to extend the product life. Pricing and discount strategies are changes according to the competitor. To attract customers to that brand they issue discounts / schemes, whereby, the price war continues among the companies. Maturity stage with respect to BCG Matrix is in Cash Cow. (Gilbert, 2003)

Decline Stage Every product life cycle goes thru this stage and this is most critical stage for any product and product owner from decision making perspective. Product owner need to carefully watch and understand when decline stage begins for any product in his product life cycle. The decision for withdrawing a product is a complex task and requires to resolve lot of issues like servicing, spare parts, maintenance before taking such decision. At times companies retain a high price policy during decline stage so that to increase the profits and discourage loyal customers from buying the product and to avoid issues after withdrawal of the product. Usually in decline stage 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 has to be done carefully by product owner. Decline stage with respect to BCG Matrix is in Dog. (Gilbert, 2003) Analysis Of product Life Cycle Without help of analytical techniques, we cannot measure the income of product. However we can see in which stage is product in PLC . This is used by management and marketing strategy and they are used all over the world. This strategy helps us to know how the product is upgradeable. To have knowledge about this people should have theoretic examination of product life cycle model. Number of authors reviews this in 70's, and reasons for this review are mention as under: a. The shift changes in the demand of a product along a period of time makes the distinction of the product life cycle stages very difficult, the duration of those almost impossible to predict and the level of sales of the product some what in the realm of the imagination. b. c. There are many products that do not follow the usual shape of the product life cycle graph as shown in fig. 1. The product life cycle does not entirely depend on time as shown in fig. 1. It also depends on other parameters such as management policy, company strategic decisions and market trends. These parameters are difficult to be pin pointed and so are not included in the product life cycle.(Barringer)

The product life cycle depends on specific product. For different product, there are different methods to follow. Some time, product does not follow the product life cycle model. For example fashion. Fashion has its own life cycle. It does not have growth and maturity stage. The model of product life cycle also depends on the particular product. For different product there are different model and also different way of marketing the product. There are three different types

of products: a product class (such as cars), a product form (such as a station wagon, couple, 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 represent some changes in market momentum and lasts longer than the life cycle of the product form or brand. However life cycle of product represents the brand of a company (i.e. sales, profits).

Nowadays, a product manager should know how to recognize the phase of the product in life cycle. Cannibalism of Product Cannibalization is defined as the extent to which one products customers are gained at the expense of customers of other products offered by the same firm.(Copulsky, 1976 cited Li 2010). Cannibalization means when the company want to replace its existing product with a new one. They do it because technology keeps on changing. To survive in the market they have to introduce a new product. As there is positive and negative in life, same way it occur in cannibalism. Some time company can cannibalise the product by improving the product version. The new product is introduced with a high price. However this helps a firm to maintain their market share. Some firms introduce the new brand when, one product is in the growth stage. This helps the company to support their sales all the time. The company should know when and where cannibalism to be use. If it is not used properly it will affect the sales of company. Unfavourable Cannibalization Company should give lot of importance to cannibalism. It has to be approach very carefully. Company who is using it should get a hint that it can affect the companys financials. The economic problems of unfavourable cannibalisation are as under: The new product contributes less to profit than the old one: When a company manufacture new product and sells it in lower cost, and the outcome is low profit that to an old one. This leads to insufficient growth in company's market share and size. The economics of the new product might not be favourable: As we are in 21th century, technology keep on changing. To survive in market companies have to do

cannibalism. One latest example is that in early days everything was on paper base, but when technology improved it got converted in electronic format. This results to cannibalise the firm who were using paper. This results to less profit due to cannibalization. The new product requires significant retooling: When any product, need another manufacturing process, this results in lower profit due to increase in investment cost incur by this process. This is due to write-offs retooling the ancient manufacturing process. The new product has greater risks: New product always gives profit to firm. But there is risk involved in former product. It is very difficult for firm to cannibalism the market with its failing product. Only high-tech firm who don't realize about develop technology cannot spin to running product. However unreal product comes and substitute unreal one. This can enhance the service expenses and reduce prospective profit.() Offensive Cannibalization Strategies: It supports the attacker, and hurt to those who are at market leader. The firm who want to become a market leader, this is the right way to settle. Cannibalization helps companies to safeguard their market place. Firm should know the right time for product cannibalism. They should study the market whether it is necessary to do it. Firm should obtain a latest technology, this help them to generate new and superior product. However this will lead to surface of competitors and assault market.(Clifford 1969)

Product Life Cycle with an Example: This case study is about Kelloggs - Nutri-Grain. It shows how Kelloggs recognised there was a problem with the brand and used business tools to reach a solution. The overall aim was to relaunch the brand and return it to growth in its market. In marketing terms the product lived its life cycle, declined & also experienced a re-birth. The five typical stages of the life cycle are shown on a graph. Here the company designs a product to meet a need in the market. The costs of market research - to identify a gap in the market and of product development to ensure that the product meets the needs of that gap

Life cycle stages of Nutri-Grain: a. Launch: Nutri-Grain did well when first brought in 1997 gaining almost 50% share of the growing cereal bar market. b. Growth - Nutri-Grains sales steadily increased until 2002 where Nutri-Grain changed from a missed breakfast product to an all-day healthy snack. c. d. Maturity Growth for Nutri-Grain stayed over several years. Saturation - By mid-2004 Nutri-Grain sales found to be declining where market continued to grow at 15%. e. Decline On decline, Kelloggs had to make a key business decision to extend life for Nutri-Grain Identification of problem and action taken to revive the product in market Kelloggs research showed that there were several issues to address as under : 1. Weak brand message 2. Un-impressed Consumers ( over competitors ) 3. Unfocused approached ( other Kelloggs products ) 4. Reduced proportion of advertising and promotion budgets. 5. Product under-laying : Promotional discounted pricing

Kelloggs re-brand and re-launch the product in 2005 with following features Changed features Make it to great taste with healthy snacks Make it to soft bake bar New packaging Improved pricing structure

Results As a result Soft Bake Bar year-on-year sales went from a decline to substantial growth, with sales increasing by almost 50%. The Nutri-Grain brand achieved a retail sales growth rate of almost three times that of the market and most importantly, growth was maintained after the initial re-launch. Conclusion Successful businesses use all the tools at their disposal to stay at the top of their chosen market. Kelloggs was able to use a number of business tools in order to successfully re-launch the NutriGrain brand. Kelloggs was able to see that although Nutri-Grain fitted its strategic profile a healthy, convenient cereal product it was under performing in the market. This information was used, along with the aims and objectives of the business, to develop a strategy for continuing success. Finally, when Kelloggs checked the growth of the re-launched product against its own objectives, it had met all its aims to: re-position the brand through the use of the marketing mix return the brand to growth improve the frequency of purchase introduce new customers to the brand. Nutri-Grain remains a growing brand and product within the Kelloggs product family

References:

Barringer,P.H. Why you need practical reliability details to define life cycle cost for your product and competitors product. available from: http://www.barringer1.com. [Accessed 18November 2011] Clifford,D., 1969.Managing The Product Life Cycle. European Business Journal. Gilbert,D., 2003. Retail Marketing Management. Second Edition, Harlow: Pearson Education Li.J. and Daniel,V.R., 2010. The Potential for Cannibalization of New Products Sales by Remanufactured Products. Decision Sciences journal, Vol. 41, No.3, pp. 547-572. Nicoleta. A.L and Cristain,D.D. The Life Cycle of Shopping Centers and Possible Revitalization Strategies. JEL code of the paper. Case Study, The Product Life Cycle. available from: http://www.thetimes100.co.uk. [Accessed 17November 2011] The Product Life Cycle. Business Studies. available from: http://www.learn.co.uk. [Accessed 19November 2011] William, D. and McCarthy,J. E., 1997. Product Life Cycle: Essentials of Marketing, Richard

Reference taken from Kelloggs company: The Kelloggs Company is the worlds leading producer of breakfast cereals and convenience foods, such as cereal bars, and aims to maintain that position. Kelloggs divides its market into six key segments and most of its brands are household names around the world and include Rice Krispies, Special K and Nutri-Grain, whilst some of its brand characters, like Snap, Crackle and Pop, are amongst the most well-known in the world. Each brand has to hold its own in a competitive market. Brand managers monitor the success of brands in terms of market share, growth and performance against the competition. Key decisions have to be made about the future of any brand that is not succeeding.