UNIT NEW PRODUCT DEVELOPMENT

AND PRODUCT LIFE

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CYCLE
Structure
6.0 Objectives
6.1 Introduction
6.2 Importance of Product Innovation
6.3 New Product Development
6 3.1 Idea Generation
6.3.2 Idea Screening
6.3.3 Concept Devel~pmentand Testing
6.3.4 Business Analysis
6.3.5 Product Development and Marketing Strategy Development
6.3.6 Market Testing
6.3.7 Commercialisation
6.4 Why New Products Fa:l?
6.5 Product Life Cycle (PLC)
6.6 Marketing Strategies at Different Stages of PLC
6.7 Let Us Sum Up
6.8 Key Words
6.9 Answers to Check Your Progress
6.10 Terminal Questions

6.0 OBJECTIVES
After studying this unit, you will be able to :
stat8 tlie meaning and importance of product innovation
describe the new product development process
explain the concept and stages of product life cycle
describe the marketing strategies at different stages of product life cycle.

6.1 INTRODUCTION
In Unit 5 you have learnt the meaning of product and various other related terms
associated with it. For every company an innovative product programme is essential
for the survival and growth. However, a new product just does not happen. It has to
be contrived and the company has to plan it. In this unit we will discuss the process
of developing a new product, the concept of product life cycle, stages in the product
life cycle and marketing strategies at each stage.

6.2 IMPORTANCE OF PRODUCT INNOVATION

T o innovate means to introduce something new -to introduce novelties or to make i
changes. When we apply this meaning to a product, an innovated product may be
construed as an entirely new product or an existing product being offered with some
change or modification. A new product is, therefore, tiefitled as a product &at opens
up an entirely new market, replaces an existing product or significantly broadens the
market for an existing product.
Need for an entirely new o r an innovated existing product is obvious. No company
can completely rely on the same product mix indefinitely. Competitors are always
keen to grab-a share on others' market. It is for this reason that developing new
products is considered to be one of the most important activities of any business.
Normally companies keep on introducing new products, each promising some
additional benefits to the consumers. As a matter of fact the very justification of the
existence of a business is its ability to satisfy the customers. A business is, therefore,
responsible to provide much needed satisfaction to the customers through the medium
of its products and services, and innovation u the Keynote of this process.
 Nature has bestowed many varieties of resources to us. These resources are not New ~roduetDevelopment and
unlimited. Unless carefully used, we shall sooner o r later exhaust them. leaving the ~ m d u cLife
t CY&
future in darkness. Take the example of crude oil. Unless petroleum products are
used with care, a day may not be far off when there may not be any crude oil left in
the world. Imagine the situation afterwards, there will be .no vehicles, no industrial
activity, no cooking gas and no furnace oil. The list is endless but horrifying. It is,
therefore, important that products be carefully planned so that we make use o fnatural
resources in an oprimal manner. We simply cannot afford to waste such gifts of nature.
Similarly, ineffective use of manpower. If products arc not planned properly and fail
afrcr their introduction in the market, all human efforts go waste. Yet we find that
:i large number of products meet this fate, hence a word of caution. It is important
to assess the needs of the prospective customers and then the organisation should
make use of appropriate technology to satisfy that need by matching it with an
appropriate product or service.
A company can survive and grow only if it increases its profitability. This can be
achieved through designing new products and then backing it up with a suitable
marketing programme. It may, however, be recognised that adding a new product
involves lots of expenditure. Unless it is properly researched and monitored, the riew
addition to product/mix may not bring the desired rrsults. It may lead to productfailure
and results in loss to the company.
The consumer is becoming more and more selective in his choice of a product. With
irrtense competition to facc~,n cornpuny has no option but to seek newer and newer
iti, (1.) lcading to mere and more new products to match the situation.
70 conclude, we may quote Peter Drucker, an eminent management thinker. He said.
"hecrrlc~ieit is its purpose lo create a customer, any business enterprise has only these
I N ( 1 I)[r\icfiinctions : marketing and innovation". Ultimately it boils down to the
dictum "innovate or perish"

6.3 NEW PRODUCT DEVELOPMENT

I As you must have realised by now, it is very important to have a strategy for
developing new prodwts. Many products fail and in order to keep expanding
I
company ssles, we must have new products. Some products of Hindustan Lever have
i1 failed, but still they remain leading manufacturers because they have continuously
added to their lines and added product lines to their product mix. Their "Hima" peas
introduced in the 60s flopped, because, in the words of the Chairman of Hindustan
Lever, 'India is not yet ready for convenience foods, neatly done up in packages'
The product 'concept' requires testing before one goes into product designing and it
is very necessary to have an adequate strategy for developing new products and
introducing them.
New product development involves marking out and supervising the search,
screening, development and commercialisation. It therefore embraces decisions
regarding the type of product idea to be taken in hand, its develop~ncntand reaching
the ultimate consumer to satisfy his demand. Such a philosophy of inarketlng would
ensure the introduction of logical, well designed and individually justified products.
This will enable the company to face the competition from a position of strength.
New product development, therefore, starts with the conception of a product idea,
its due screening for its commercial and technical viability, probing its market
potential and consumer acceptance, matching it with company facilitics and
constraints, developing the product with due thought and care, and its ultimate
offering to the largest market segment. This sequence can well be described as a
customer-oriented approach to new product planning.
From the above discussion you will appreciate that introduction of a new product is
a highly sophisticated and difficult task and involves a long-term planning effort. It
has a high cost component. Even after a product is finally developed, its marketing
costs are exceedingly high and yet there is no certainty that it will succeed. It is for
this reason that a company should move from stage to stage in a careful and
systematic manner. The approach is composed of seven steps as demonmated in
 I Idea Generation

a Idea Screening

Concept Development
and testing

L.n
r
Business Analysis

Product Development
and Marketing Strategy
Development

D Product Testing

r Commercialisation

Figure 6.1 : Stages in New Product Development

We shall now discuss each stage at some detail :

6.3.1 Idea Generation

The new product approach starts with the generation of a product idea. It means
matching a perceived need with the recognition of a technical opportunity. The said
need may be new o r an oid one. It could be apparent 01 iatent. When a technical
opportunity is recognised for satisfaction of any type of needs, a product idea is
generated. The new product idea can come from any one of these sources :
1) Customer :.As marketing is aimed at-satisfaction of consumer needs, an alert
marketer can get some ideas from the customers for possible new products by
keeping his eyes and ears open, and more particularly the mind to perceive even
needs which are so far unexpresaCFo< example, in case of refrigerators,
 someone conceived the idea of having a twodoor refrigerator, another conceived New Product Development ad
Product Life cycle
the idea of the ball point which obviated the need for constantly filling fountain
pens. Thus, new ideas can come from customer needs or problems requiring
solution. A Customer may offer a suggestion or express some need that has
remained unsatisfied.
2) Competition :A new product may have been introduced by a competitor or
market intelligence may inform us that a competitor is developing a new product.
Taking a clue from such information, th'e company may get the idea and
experiment with it.
3) Company Sources : Sometime ideas are put forward by company salesman or
distribution channel members. Such ideas are worth consideration because such
people are in direct touch with the market and are capable of detecting an
unsatisfied need. Similarly, a new technological breakthrough may be announced
by the company's Researh and Development wing. New ideas can also be thought
of by company managers who keep on thinking about better products. In some
cases companies conduct brain-storming sessions to promote new idea-generation
from different levels and types of people in all branches of the organisation. This
is basically done to have a flow of ideas.
A number of people, say executives of the organisation, are called together and asked
a question for new ideas or ideas for new products. They are asked to mention it
without evaluation. None is criticised. The answers are recorded on a tape recorder
SO that the flow is not interrupted. Thereafter, the answers generated are evaluated
as will be explained in the next stage.

6.3.2 Idea Screening

After product ideas are gathered, next step is to screen them for their relative merits.
In other words, product ideas generated earlier are critically evaluated at this stage.
Poor ideas must be dropped immediately because unnecessary cost has to be incurred
to process them further. The evaluation helps us to determine which ideas are fit for
further probing and which are the ones that may be discarded. The ideas which are
not compatible with the objectives and constraints of the company obviously get
abandoned at this stage. Each idea must conform to company objectives and
marketing needs, as also the constraints and limitations of the company. For example,
a technologically sound idea may not suit the company because it may require a large
capital which the company may not afford. Similarly, a company which is known for
good products at economical prices may not find it easy to offer a high-priced new
product because of the past image limitation. So, rather than taking up all the ideas
generated, it is proper that only such ideas that come up to company and market
expectations, may be pursued further.
No company can afford to pursue all ideas simultaneously. Thus, the basic purpose
of screening is to filter the'ideas and select the most promising ones. For this purpose
you have to analyse the factors like market potential, profitability, likely sales
volume, production facilities, availability of raw materials, possibility of using existing
plant and machinery, sales force and distribution channels, financial resources the
company can commit to the proposed project, etc.

-6.3.3 Concept Development and Testing

The screened idea is now expanded into a concrete business proposal. From a mere
expression in functional terms, the idea now gets transformed into a product concept.
It means developing a fairly complete picture of the proposed company offering. It
includes, in clear terms, the specifications of target consumers, the specific need
proposed to be satisfied, the manner in which the need is to be satisfied, the benefit
the consumer would derive from it and the cost of such need-satisfaction to the
consumer. Thus, as far as possible, the concept should be exposed to target customers
so that their reactions could be obtained for further evaluation. The concept so
 Hindustan Lever is not to run down the performance of this excellent company but
to tmphasise that good companies introduce a number of products some of which
may fail.
Thc introtiuction by Parle's of the "Rig Bite" (the hamburger) did fail in some of the
regio~isIn Indian market. Was this due to Arony concept? ?'he answer probably is
tb! tlegatlvc The failure was because the customer go1 'sagp" hamburgers at the
retail end. Thus. there was lack of 'quality control' at the level ot the 12tail outlets
which dtd not supply frehly cooked hamburgers. So you can see that even if the
concept is accepted, a failure can take place in other areas resulting in the ultimate
failure of the product itself. This did not deter the company from going further.
Parle's introduced Froclti and Appy which are fruit based soft beverages. These are
offered in tetrapacks. 'l i . !hc~cis an . ,lovation. The question of whether
tetrapacks, as packaging material, will succeed In India or net is a question of concept
testing, of the package.

6.3.4 Business Analysis

As a process of continuation of concept development, at the stage of business
analysis, a fairly detailed appraisal of the proposal is undertaken. The exercise
comprises of projection of future demand, sales, costs, investments and return on
investment. Thus, a complete profile of the proposed product is developed.
It may be contended that such figures cannot be accurately predicted: For this reason
usually the company evaluates the project under different sets of assumptions about
such critical elements as sales, costs and profits. Such sensitivity analysis help the
company to appreciate the acceptable range of performance for a given product and
the possibility of achieving those levels of F :rformance.

6.3.5 *ProductDevelopment and Marketing Strategy Development

By now the idca has been thoroughly screened and analysed. The time has come to
convert the idea into a product. At this stage the idea gets transformed into a concrete
shape, with all the needed attributes as assumed at the previous stage. An attempt,
therefore, is made to develop a prototype of the proposed product. This will help us
to determine if the idea has the requisite technical potential and whether the company
can master the needed technology.
This stage requires a close co-ordination between Engineering and Mark. ting
Divisions. Engineers develop appropriate drawings, designs and build the prototype
in line with prescribed specifications. The focus of the whole job is to build up such
a product prototype that ~ approximately close to the consumer product specifications.
.-
Along with the process of product development, the marketing division of the
company develops a tentative marketing strategy. A blue-print is designed about the
price structure, promotion and distribution strategy for the proposed product. They
complete formalities regarding identification of sales force needs, advertising
programme and sales promotion tools in relation to the new products. While doing
so, the resource needs and capability of the organisation in this regard are kept in
mind. If the company finally decides to give a green signal to the product idea, the
following activities are to be taken up :
1) Establish development project.
2) If some changes have been found necessary, build the prototype with changed
specifications.

6.3.6 Market Testing

After the product idea takes shape in the form of a prototype, and tentative
marketing programme has been formulated, one may go for commercial production
and release in the market. However, a wise marketer does not expose the
organisation to undue risk and wants to re-assure himself of a positive market
 need be. Test marketing is, therefore, defined as a research technique in which the New ~ u cDevelopment
t and
Rodnct Life cycle
product under study is placed on sale in one or more selected localities or areas, and
its reception by consumer and trade is observed, recorded and analysed. The aim is to
t ~ out
y the proposed marketing programme in a well selected representative market
. segment in the expected marketing environment in which the proposed product is
eventually to be placed.
By test marketing the marketer re-assure himself about the sales volume and
profitability levels of the proposed product. Me also gets an opporturlity to ascertain
3 the nature of consumer reaction to the proposed product. Test marketing triggers off
market and cqnpetitive reaction t o the new product. With this feedback, the
marketing manager can refine the marketing strategy formulated earlier.
The following information i h gathered during test marketing :
1 ) I'olential %alesvolume generation.
2 ) Icicnt~fybuyers with innovative bent of mind.
3) <'ompal; assumed target buyers behaviour with actual behaviour of the buyers.
-1) 4cccl7tir~.~ of strong p~\intsof the new products by the buyers.
5) Evdluatron of I I I I ~ ) ; ~ L 'ofI . ~ ~ l; l\j i~i l Fi ! I I C ' ~ ~ . I ~ C
5) Competence evaluation of the proposcd d~strtbutronih,lnric.l r ~ ~ ; t l \the t product
available in the target market segment chosen.
7) Determine potential of repeat demand for the proposed product.

5.3.7 Commercialisation
3ased on the information generated during test marketing, the product is duly
r~odrt~cddud improved, and strategies about pricing, distribution and promotion are
ieveloped. Now the product is ready for introduction in the larger market. The
~roductis produced in commercial scale and offered for sale in the market. As a part
~f marketing strategy, the company may decide to introduce the product in the entire
narket at the same time; or it may be introduced in a phased manner in different
areas. This is decided keeping in mind the production level and assuring that the
~roductwould not go into short-supply soon after introduction.

6.4 WHY NEW PRODUCTS FAIL? .

Even after thorough screening at each and every stage, all the new products
introduced in the market may not succeed. Many of them fail and are withdrawn from
the market. For example, as stated earlier, Hindustan Lever failed with their Hima
Peas and Fast Foods. Similarly, Parle's hamburger 'Big Bite' was a failure in some
markets while successful in other market%.Thus, every product introduced in the
market may not succeed. Now the question is : Why do products fail in the market?
The reasons for product failure are attributed to six factors by Cundiff and Still. They

1) Product Problems : The products fail in the market due to certain problems with
the product itself as neglect of market needs or ignorance of market preferences,
defects in product function, poor technical design or external appearance, pool
packaging or inappropriate sizes, undependable performance or too high a
variation in quality, etc.
2) Distribution and Channel Problems : Products fail due to certain problems in
distribution such as inappropriate channels or outlets, lack of co-operation from
middlemen, poor system of physical distribution, etc.
3) Promotional Problems : Promotional problems that contribute to the product
failure are : inadequate or ineffective promotion, advertising directed towards
wrong market segments, use of wrong appeals, failure to co-ordinate adequately
with distribution system, improper training to sales force, etc.
4) Prlcing Problems : Pricing problems such as bad forecast of price that buyers
would pay, price not on par with product quality, poor cost estimates caused
'asking price' to be too h ~ g h inadequate
, margins for the rnrddlemen, etc., also
responsible for sometimes for product failure.
 6) Competitive Problems : Competitors' aggressive strategies with respect to product,
distribution, promotion and price may cause serious set back to the product in the
market. The company had to react defensively rather than pursuing aggressive
strategies.
The number 'and variety of the reasons for product failure suggest that success of a
new product depends on the skills and strategies not only in product innovation but
in formulating and implementing marketing strategy. Throughout the product
innovation process, management should carefully watch the target market. An
appropriate organisation is required to guide and co-ordinate the product ~nnovation
process at each and every stage. Besides introducing the product at appropriate time,
components of marketing strategy (product, distribution and marketing channels,
promotion, and price) must be combined in appropriate proportions at each stage of
the product life cycle. Skill in implementing the marketing plan is required and be

Check Your Progress A

1) What is product innovation?
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2) What are the major steps in the development of a new product?
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3) State whether the following statements are True or False :
i) Product innovation is necessary to meet the changing preferences of
consumers.
ii) Products which are thoroughly screened at the development stage always
succeed in the market.
iii) New product ideas generate from consumers only.
iv) Commercial viability of the product is tested during commercialisation stage.
v) At the stage of market testing, product is actually tested in a segment of the
target market.
vi) Product is introduced in the target market in full scale during market testing.
\ vii) New products fail only because of unreasonable price.
\ !
viii) Prototype of the proposed product is developed during concept
development and testing stage.

6.5 PRODUCT LIFE CYCLE (PLC)

Like human beings, products also have a distinct life cycle. A product generally-
passes through four stages during its entire life from birth to death. These stages are:
1) introduction, 2) growth, 3) maturity, and 4) decline or obsolescence.
Thus, product life cycle refers to the stages a product goes through from its
introduction, through its growth and maturity, to its eventual decline and death
(withdrawal from the market).
A company which introduces a new product naturally hopes that the product will
contribute to the profits and provide consumer satisfaction for a long period of time.
This however, does not always happen in practice. So, business organisations try to
remain aware of what is happening throughout-the life of the product in terms of the
sales and the resultant profits. The sales volume and profit curves varies with each
 organisations and for each new product we have to take stock of the relation between New ~roduct&wpment an^
P ~ C I ~L
UifLe~Cycld
sales volume and profit margin. The relationship of the two curves (sales volume
curve and profit margin curve) must be clearly understood before formulating
marketing policy. A company must understand and manage the various stages of life
cycle of a product to ensure marketing success.
The total length of the life cycle varies from product to product. It ranges from a few
weeks (as in the case of a fashion or a fad) to several years (as in the case of motor
cycles or refrigerators).
You should note that among various products the duration of each stage is not the
same. As a matter of fact it is different with each product. There are products which ,
remain in the introductory stage for a number of years, while some others may find
market acceptance in a few weeks and thus move on to the next stage of the life cycle.
Similarly, all products may not pass through all stages of life cycle. A product may
fail right at the stage of introduction. There may be situations where a company may
not enter a market till the product of another company gains acceptance and reaches
the growth or maturity stage.
However, all products enter the decline and possible abandonment phase. This could
be because of any of the following three reasons. Firstly, the need for the product is,
not there. Secondly, a better or less expensive product came into the market. Thirdly,
a competitor, with a better marketing effort, forces the company product out of the
market arena.
Look at Figure 6.2 carefully. It presents the relationship between the sales volume
and profit volume at different stages of the product life cycle.

Figure 6.2 'rhe Product Life Cvcle

I During this stage arrangements for full scale production are made, a marketing
programme is Bnaliscd, and the product is offered to the market. From Figure 6.2
you can assess that the sales volume shows an upward trend, but the rate of growth
is quite slow. At this stage, the product being new and has been first made available
for purchase in the market, it may not face competition in the market.
The company has to communicate with target market and inform potential customers
of the new arrival in a big way, thus incurring high promotional expenditme. The
promotional effort is also aimed at inducing the potential buyers to buy and test the
product. It also aims at securing distribution at retail outlets in the process. More
money is spent in attracting distributors for the new product. Because of this high
promotional costs and low sales volume, during this introduction stage, the profits of
There are, if at all, only a few competitors and they all offer the basic version of rhe
new product without any refinements. Selling effort at this stage is, therefore, ainicd
at those prospective buy& who can be motikated t o buy. Product at this stagc. 15
usually price high because of low level of production and high cost of promotion and
distribution.

Growth Stage
After the product gains acceptance in the market i.e., accepted by the consumers as
well as trade, it enters into the growth stage. Now the demand of the product, grows
rapidly, generally outpacing supply. In the light of increased sales volume. the
company profits also increase. Effective distribution and promotional efforts arc
considered key l'actors during this stage, so as to cash on the rising trend of d e m a ~ ~ d .
The company considers increased sales volume as a top priority.
in thc wake of rising demand, a larac nunnher of conli~ctitorsbegin to enter the
market. The competitors start :idding Itew features to the product. With the rise in
cc-)n!,.. ':tion, distribution outlets also increase in number resulting in increased
demand to "fill the pipeline"
Prices normally remain at the same level or may fall marginally. Promotional tempo
is maintained or even raised to meet the challenge of competition.

Maturity Stage
It is too optimistic to think that sales will keep shooting up. At this stage, it is more
likely that the competitors become more active. In case your product is a novel one,
by now competition would have come out with a similar product in the market to
compete with yours. Therefore, the sales are likely to be pushed downwards by the
compctifors while your promotiohal efforts would have to be increased to try and
sustain the sales. Thus, the sales reach a plateau. This is called the 'maturity stage'
or 'saturation'. At this point it is difficult to push sales up. With regard to the profit
picture, the profits are likely to stabilise or start declining as more promotional effort
has to be made now in order to meet competition. Unless of course, you have the
largest market share with your product and it needs no extra push in the market.
Decline or Obsolescence Stage
Thereafter the sales are likely to decline and the product could reach the
'obsolescence' stage Steps should be taken to prevent this obsolescence and avoid
the decline. This decline that generally follows could be due to several reasons such
as changes in consumer tastes, improvement in technology and introduction of better
substitutes. This is the stage where the profits drop rapidly and ultimately the last
stage emerges. Retaining such a product after this stage may be risky, and certainly
not profitable to the organisation. Thus, a firm has to finally choose between a total
abandonment of the product or continue it in a specialised limited market. The
decision will be based on the level of remainirg opportunity and ability of the
management in this regard.

6.6 MARKETING STRATEGIES AT DIFFERENT

STAGES OF. PLC 1
Product Life Cycle as a concept is directly linked to the overall marketing strategy of
the organisation. It not only affects the product planning exercise but also other
components of the marketing mix, viz., pricing, promotion and distribution. Now let
us study the various strategies normally adopted at various stages of PLC.
Introduction Stage
At the introductory stage, we have to increase sales and hence spend a lot on physical
distribution and promotion. This is because we have to create an awarene%sand
acceptance of our product. We must also increase its availabiIit\. . Very often in India,
it is noticed that a product is advertised but is not available at the distribution outlets.
This is a waste of promotional expenses. We must make optimum use of the available
 We have to also counter the reluctance of customers to charlge their established New ~ o d u e~evebpmtnt
t .nd
patterns and make them purchase our product, particularly if it is of a novel nature. ~ a d u e rn
t cydc
A s against this, if it is a novel one, people may even buy it out of sheer 'curiosity'.
The company can adopt skimming price strategy if it fears the entry of many
competitors in the line. Alternatively, it may adopt penetration price (low price) to
penetrate deep into the target market, thereby make the competitors' entry difficult,
if not impossible. Skimming price is more effective when the threat of competition
in the short run is not there and the company assures itself of return on investment
right from the beginning. On the other, if there is likelihood of entry of competitors,
penetration strategy is appropriate to keep competitors at bay. (You will study in
r-
detail about pricing in Block 3.)
I

Growth Stage
- During the growth stage, with mounting expenses in all phases of marketing mix, the
growth opportunity entails large investments. Such large financial outlays assure the
d
company to enlarge the market share. In view of the fact that sales graph is indicating
a rapidly rising trend, the company may have to invest sufficient sums to keep
production in pace with rising sales volume. All this, therefore, calls for more
production, extended distribution, and well thought out pricing and promotion
policy. During the last phase of growth stage, when the sales shoot up and we are
satisfied with the profit generated by the product, competitors will now enter the *
market and perhaps offer new product features. Therefore, we may have to think of
improving our product s o that we do not reach the ultimate 'decline7 stage too
quickly. The promotional expenditure is maintained at the same level or is raised
slightly in order t o meet competition.
Maturity Stage
We now come to the next stage called the maturity stage. This stage generally lasts
longer than the other stages and poses problems for the management in maintaining
the sales level. Actually, there is a slow down in the growth rate of the sales in case
of such matured products. The company may well adopt a three-pronged strategy
1) market modification, 2) product modification, and 3) marketing mix modification.

1) Under Market Modification the company stresses to unearth opportunities by

, finding new buyers. It can be done by looking for new marketslnew market
segments.
i Alternatively, you can find new ways of using the same product. Otherwise, you
may re-position the product and concentrate your promotional efforts in a
newlgrowing market segment. In this way, you can improve the market share.
2) The product, by now, has become stereotyped. There is need to come out of this
stagnant picture. This can be done by well thought out changes in product
characteristics to attract new customers or more usage by existing customers.
Product Modification can be brought about by improving the quality or features
or style of the product.
3) A company t r ~ e sto stimulate sales during the maturity stage by modifying the
marketing mix strategies. It can assume any of the following forms : 1) reduce
piice t o attract new customers, 2) develop more affective advertising campaign,
3) aggressive promotion characterised by trade deals, gifts, contests and freeships,
4) offering new or improved service to the buyers, and 5) offering more incentive
to channel members.
Declining Staye
When a product moves into the decline stage, we need to adopt different types of
strategies. The decline may be slow or rapid. It may be due to better substitute
products, better competition, technological advances with which we have not kept
up, and several other reasons. Such a product now proves expensive for the
organisation. One must, therefore. be willing to consider the elimination of such
marginal or unprofitable products. It requlres constant monitoring and review'of sales
volume from each market segment. This is essential to decide about total withdrawal
from those areas where operations become uneconomical and the market cannot be
stretched any more. Thus, management is faced with the prcblem of considering
totallpartial abandonment of the product. Using resources of the organisation in
chasing unproductive pursuits is not good tor the company. For a company product
 withdrawal is as important as product introduction. Ultimately unprofitable products
have to pave the way for a new product.
+\

Check Your Progress B

1) What is product life cycle?

2) List out the stages in a product life cycle.

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3) Identify at what stages of their respective product life cycle are the following
products in Indian market context.

Product Stage
-.
i) Colour Televisions ....................................................................

4) Try to identify at least two products in each stage of product life cycle in Indian
market.

5) Identify four new products which failed in the market.

6) State whether the following statements are True or False.

4
i) At the introductory stage the company may incur losses.
ii) Rate of increase in the sales volume is higher in introductory stage compared

vi) The strategy of rnArket modification-is advopted in growth stage.

vii) Product may be modified to attract new customers and, thus, improve sales
ingaturation stage. -. . --

Product innovation means offering a new ~ r o d u c or

t an existine Droduct with some

The process of new product development consists of seven stages: 1) idea generation,
2) idea screening, 3) concept development and testing, 4) product development and
marketing strategy development, 5) business analysis, 6) market testing, and
71 commercialisation. The Dumose of each staee is to decide whether the idea should

1 30
Even after careful screening at each and every stage of product development process,
many products fail after introduction in to the market. This is mainly due to the
 ~xoblemsassociated with product, distribution channel, promotion, pricing, N ~~ Devehpmeat md
Wo d o d
M u e t Ulb Cycle
competition and timing of the introduction.
1,ike human beings, products also have life cycle. A product life cycle (PLC) consists
of four stages : I) introduction, 2) growth, 3) maturity, and 4) decline. -
'me time taken for transit from one stage to the next varies with each product, the
company and the timing of introduction of the product. Similarly, the profit curve
~ L ~ varies
SO from product to product and the stage of PLC.

P
Introductory stage is marked by slow growth and low profits (even losses), as the
product is just pushed into distribution. Heavy promotional and distribution emphasis
is needed and heav! expenditure is incurred at this stage. When the product enters
i ~ o w t hstage, sales and profits increase rapidly, customers are aware of benefits
provided by the product and middlemen show interest to distribute the product. With
the rise in demand, competition increases in size and numbers. New features are
added to the product to make it more attractive, price is either maintained or is
slightly reduced, and promotional tempo is sustained or even raised. During maturity
2nd saturation stage, competition intensifies and profit margin declines. There is a
reed to increase advertising, reduction in prices and offer more incentives to
clistributors. Product improvements are restored to and cost economies are thought
of to arrest the trend of decline. At the decline stage, sales and profits decline rapidly,
while new and better products enter the market. Companies tend to cut back on
promotional expenditure, unless considered essential to revitalise the product. The
company has to take the sad decision of withdrawing the product from the product
I~ne.

ti.8 KEY WORDS

Ilecline Stage : A stage in the product life cycle where the sales and profits shoot
clown.
I'ads : Novelty products that come quickly to the public eye and are lost fast. Hcre
1
the product life cycle is very brief.
E'ashion : A style which is currently accepted but is likely to change, as fashions move
in a cycle and change over a period of time to return to the original. For example, a
woman's skirt gets longer and longer until it can get longer no more. It then goes
upward as fashion moves in a cycle.
Growth Stage : A stage in the product life cycle when the sales and profits increase
happily for the organisation. .
Introduction Stage : A stage in the product life cycle where the product is just
introduced and is at the beginning of the product life cycle. 'This is evidenced by slow
growth and very small profits.
Market Testing : A stage in the product development where the product is actually
tt:sted.in the market, that is, introduced in a consumer setting with a view to ascertain
the reactions of consumers and dealers before a final decision to market or launch
the product is made.
nlaturity Stage : A Stage in the product life cycle where the sales stop going up and
s ow down because competitors have entered the market and it becomes difficult for
a continuous increase in the sales.
New Product : A product that opens up an entirely new market, replaces an existing
product or significantly broadens the market for an existing product.
Product Life Cycle : Refers to the stages a product goes through from its introduction,
through its growth and maturity, to its eventual decline and death.

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61.9
- ANSWERS TO CHECK YOUR PROGRESS
Pi 3 i) True ii) False iii) False iv) False v) True
vi) False vii) False viii) False
ED6 i) True ii) False iii) True iv) True v) True
vi) Falce vii) True - - - --- -- - 31 '

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6.10 TERMINAL QUESTIONS
1) What do you mean by product life cycle? Discuss the various stages in the life
cycle of a product.
2) How can a company develop new products?
3) Why are the generation, screening, and analysis of ideas the most important steps
in new product development?
4) Give some examples of products you regard as being in the :
a) Introductory stage
b) Decline stage
Give reasons for your conclusion.
5) Explain briefly the 'product life cycle concept' in marketing management and state
why you feel it is useful to understand this concept.
6) Explain how the marketing mix has to be changed during the different stages of
the product life cycle?
7) Selection and development of a new p r ~ d u c t ~ a very
r e important steps in the
marketing strategy. Explain briefly the stages through which you would test ideas
coming up for new products until the final stage of launching the new product.

Note: These questions will help you to understand the unit better. Try to write
answers for them. But do not submit your answers to the University for
assessment. These are for your practice only.
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