PRODUCT LIFE CYCLE

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.

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 lifecycle, needs to develop strategies and methodologies.

All products have a life cycle; the concept of the product life cycle has been
based on the life cycle of biological organisms, and like the different life stages of
biological organisms, products too have definite life stages. Each stage of the life
cycle poses different challenges and opportunities to the company, because of
which products require different marketing, financial, manufacturing, and
purchasing and resource strategies at each stage.

The life cycle curve is portrayed as bell-shaped curve, representing the

product sales over a period of time. The curve is divided typically into five
stages: introduction, growth, maturity, decline and obsolescence.

The PLC concept is used to analyze the life cycle of a product category
(mobile phones), product form (monochrome handsets) or a technology
(CDMA). The PLC concept cannot be effectively used to analyze a brand’s life
cycle, which is a completely different concept. A product’s lifecycle curve i.e. the
sales curve of the product represents the combined sales for the entire category,
not the sales of an individual firm’s product. A brand’s life cycle on the other
hand, represents the sales of a particular brand and may not follow the product
category’s life cycle curve. The brand’s sales curve is dependent on the strategic
actions of the individual firm; a brand may have gone into decline even though
the product category is in the growth phase, because of incorrect strategies
employed by the company.
 PRODUCT LIFE CYCLE MODEL DESCRIPTION
The product’s life cycle - period usually consists of five major steps or phases:
Product development, Product introduction, Product growth, Product
maturity 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.
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 marketplace and the introduction
phase of the product begins. During the product development phase, sales are
zero and revenues are negative. It is the time of spending with absolute no
return.

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.

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”1 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 competitors’ 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”.

MATURITY PHASE
When the market becomes saturated 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 competitors’ 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.
The battle of distribution continues using multi distribution channels2. 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.

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.
 MARKETING RESEARCH
Research is the only tool an organization has to keep in contact with its external
operating environment. In order to be proactive and change with the environment
simple questions need to be asked:

• How are customers needs changing? Can you meet these changing needs?
What do your customers think about existing products or services?

• How are competitors operating within the environment? Are their strategies
exceeding or influencing yours? What should you do?

• How are macro and micro environmental factors influencing your organization?
Again how will you react?

As witnessed with the UK retail clothing group C&A, failure to react to the
changing needs of its customers within its environment has resulted in C&A
closing all their UK retail stores. Marks and Spencers also face an uncertain
future. Research tells them that customers feel that the stores and clothes are
outdated. M&S are now rushing out new lines and experimenting with new
concept stores to retain existing and attract potential new customers. In the world
of credit it is just recently that M&S are excepting credit cards!

Market Research and Marketing Research a difference:

A common mistake by many students, lecturers and textbooks is that there is no
understanding of the clear distinction between market research and marketing
research.

Market Research: Involves researching specific industries or markets.

Researching the computer industry to discover the number of competitors and
their market share will be an example of market research.

Marketing Research: Marketing Research goes further. Marketing Research

analyses a given marketing opportunity or problem, defines the research and
data collection methods required to deal with the problem or take advantage of
the opportunity, through to the implementation of the project. In essence
marketing research aims to discover the root cause for a specific problem within
an organization (eg. declining sales) and put forward solutions to that problem.
 TATA MOTORS

HISTORY
Tata Motors is a part of the Tata and Sons Group, founded by Jamshetji Tata
and J. Baker. The company was established in 1945 as a locomotive
manufacturing unit and later expanded its operations to commercial vehicle
sector in 1954 after forming a joint venture with Daimler-Benz AG of Germany.
Early years Tata Motors launches its first truck in collaboration with Mercedes-
Benz. Tata Motors started its commercial vehicle operations in 1960 with the
manufacturing of first commercial vehicle (a copy of a Daimler Benz model) in
Pune. It took five years for the company to begin the commercial production of
heavy commercial vehicles. Considering the road infrastructure of the country
which does not support heavy vehicles, the company adopted a route for light
commercial vehicles (LCV). It came out with its first LCV, Tata 407, in 1986. Post
liberalization, in order to expand rapidly, the company adopted the route to joint
ventures. In 1993, it signed with Cummins Engine Co., Inc., for the manufacture
of high horsepower and emission friendly diesel engines. It was an effort made to
reduce the pollution in the existing Tata engines and to produce more
environmentally friendly engines. Furthering the trail of JVs it signed a joint
venture agreement with Tata Holset Ltd., UK, for manufacturing turbochargers to
be used on Cummins engines.
INTRODUCTION
Tata Motors Limited is India’s largest automobile company, with revenues of Rs.
35651.48 Crores (USD 8.8 billion) in 2007-08. It is the leader in commercial
vehicles in each segment, and among the top three in passenger vehicles with
winning products in the compact, midsize car and utility vehicle segments. The
company is the world’s fourth largest truck manufacturer, and the world’s second
largest bus manufacturer. The company’s 23,000 employees are guided by the
vision to be “best in the manner in which we operate best in the products we
deliver and best in our value system and ethics.” Established in 1945, Tata
Motors’ presence indeed cuts across the length and breadth of India. Over four
million Tata vehicles ply on Indian roads, since the first rolled out in 1954.
The company’s manufacturing base in India is spread across Jamshedpur
(Jharkhand), Pune (Maharashtra), Lucknow (Uttar Pradesh) and Pantnagar
(Uttarakhand). Following a strategic alliance with Fiat in 2005, it has set up an
industrial joint venture with Fiat Group Automobiles at Ranjangaon (Maharashtra)
to produce both Fiat and Tata cars and Fiat powertrains. The company is
establishing two new plants at Dharwad (Karnataka) and Sanand (Gujarat). The
company’s dealership, sales, services and spare parts network comprises over
3500 touch points; Tata Motors also distributes and markets Fiat branded cars in
India. Tata Motors, the first company from India’s engineering sector to be
listed in the New York Stock Exchange (September 2004), has also emerged
as an international automobile company. Through subsidiaries and associate
companies, Tata Motors has operations in the UK, South Korea, Thailand and
Spain.

In 2004, it acquired the Daewoo Commercial Vehicles Company, South

Korea’s second largest truck maker. Today two-thirds of heavy commercial
vehicle exports out of South Korea are from Tata Daewoo. In 2005, Tata Motors
acquired a 21% stake in Hispano Carrocera, a reputed Spanish bus and coach
manufacturer, with an option to acquire the remaining stake as well. In 2006, it
formed a joint venture with the Brazil-based Marcopolo, a global leader in body-
building for buses and coaches to manufacture fully-built buses and coaches for
India and select international markets. Tata Motors is also expanding its
international footprint, established through exports since 1961. The company’s
commercial and passenger vehicles are already being marketed in several
countries in Europe, Africa, the Middle East, South East Asia, South Asia and
South America. It has franchisee/joint venture assembly operations in Malaysia,
Kenya, Bangladesh, Ukraine, Russia and Senegal.

The foundation of the company’s growth over the last 50 years is a deep
understanding of economic stimuli and customer needs, and the ability to
translate them into customer-desired offerings through leading edge R&D. With
over 2,500 engineers and scientists, the company’s Engineering Research
Centre, established in 1966, and has enabled pioneering technologies and
products. The company today has R&D centers in Pune, Jamshedpur, Lucknow,
in India, and in South Korea, Spain, and the UK.

It was Tata Motors, which developed the first indigenously developed Light
Commercial Vehicle, India’s first Sports Utility Vehicle and, in 1998, the Tata
Indica, India’s first fully indigenous passenger car. Within two years of
launch, Tata Indica became India’s largest selling car in its segment. In 2005,
Tata Motors created a new segment by launching the Tata Ace, India’s first
indigenously developed mini-truck In January 2008, and Tata Motors unveiled its
People’s Car, the Tata Nano, which India and the world have been looking
forward to.

The years to come will see the introduction of several other innovative vehicles,
all rooted in emerging customer needs. Besides product development, R&D is
also focusing on environment-friendly technologies in emissions and alternative
fuels. Through its subsidiaries, the company is engaged in engineering and
automotive solutions, construction equipment manufacturing, automotive vehicle
components manufacturing and supply chain activities, machine tools and factory
automation solutions, high-precision tooling and plastic and electronic
components for automotive and computer applications, and automotive retailing
and service operations.

True to the tradition of the Tata Group, Tata Motors is committed in letter and
spirit to Corporate Social Responsibility. It is a signatory to the United Nations
Global Compact, and is engaged in community and social initiatives on labour
and environment standards in compliance with the principles of the Global
Compact. In accordance with this, it plays an active role in community
development, serving rural communities adjacent to its manufacturing locations.
With the foundation of its rich heritage, Tata Motors today is etching a refulgent
future.
 HISTORY OF TATA INDICA

In September 1995, Ratan Tata, Chairman of Tata Motors Ltd., had a dream. A
dream he believed he shared with every Indian. "We'll have a car with the Zen's
size, the Ambassador's internal dimensions, and the price of a Maruti 800". In
December 1998 Tata Motors Ltd., pioneer in Indian automobile industry,
launched Tata Indica - India's first indigenously designed & manufacture
hatchback cars. Tata Indica car was the epitome of the vision for every Indian
that Ratan Tata had. Ease of maneuverability, small-size with large space,
comfortable with safety of passengers are the striking features that are
accredited to Tata Indica. Since its launch Tata Indica saw number of changes in
its technology combined with the state-of-the-art features. Tata Indica has been
launched in three upgraded versions as Indica V2 (in year 2002), Indica V2
Turbo (in year 2005) & Indica V2 Xeta (in year 2006), Available for sale in
sizzling colors and competitive price these upgraded versions of Tata Indica are
going neck-to-neck with its rivals like Chevrolet Spark, Hyundai Santro Xing,
Hyundai Getz Prime, Maruti Zen Estilo and Maruti Suzuki Wagon-R.
 PRODUCT LIFE CYCLE OF TATA INDICA

INDICA is a brand that is an epitome of persistence. Tata Motors through Indica

has demonstrated how to manage product lifecycle effectively. The brand which
was launched in 1998 has passed through many hurdles.
 Product Life Cycle Graph

TATA INDICA
40

35

30

25

TATA INDICA
20

15

10

0
1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007
INTRODUCTARY STAGE

The first of these stages, the development stage, represents a slow growth
period. It is assumed that newly released products require some time to gain
market acceptance, so sales in the initial period are slow.

In 1998, Tata Motors developed the first indigenously developed Light

Commercial Vehicle, India’s first Sports Utility Vehicle, the Tata Indica, India’s
first fully indigenous passenger car. Within two years of launch, Tata Indica
became India’s largest selling car in its segment. The brand successfully
transcended the initial flaws, bad customer /expert reviews and brickbats to
become one of the largest selling cars in the Indian auto industry.

GROWTH STAGE

The brand survived and thrived because of the constant focus of Tata Motors
to improve the product continuously. More than the product innovation, it was
the value proposition that forced customers to choose Indica despite all those
nagging troubles. You can see lot of Indica customers cribbing about the bad
service and constant trip to the service centers but sticking to the brand because
of the value proposition. You cannot get a diesel car with that much space at
the price at which Indica is selling (so far).Tata Motors has been continuously
tweaking the brand over these years sometimes making quantum leap in the
quality and refinement of the product.

MATURITY STAGE

When first launched, the Indica prompted many complaints from early
purchasers, who claimed that the vehicle did not deliver horsepower and gas
mileage as promised.  In response to the customer complaints, Tata Motors re-
engineered the internals of the car and launched it as Indica V2 (version 2),
which solved most of the complaints and emerged as one of the most sought
after cars in the Indian automobile industry sing the Product Strategy. Later, it
was again updated, now marketed as the "Refreshingly New Indica V2". This
was followed by the next variant of Indica, current in early 2008, called the Indica
V2 Xeta Petrol.

The Product Strategy at this stage aims at reviving the life cycle of the product
through either a major technological innovation or by expanding usage of the
existing product through new uses and use situations.

Presenting here in brief the different Tata Indica models:

TATA INDICA V2 (LAUNCHED IN 2002) - More Car per Car the Indica V2 was
the revamped version of Tata Indica. Indica V2 was launched with lots of exciting
features like: new front grille, clear lens head & tail lamps, muscled sporty look,
designer alloy wheels, refurbished interiors combined with micro processor
based engine to deliver superior fuel efficiency. Refreshing Colors of Tata Indica
V2 Salsa Red, Odyssey Blue, Pastel Green, Satin Glow, Arctic Silver, Cavern
Grey, Carbon Black, Mint White. Versions of Tata Indica V2 DL-BS III, DLE-BS
III, DLS-BSIII INDICA V2 TURBO (LAUNCHED IN YEAR 2005)- More Power Per
Car The Indica V2 Turbo was launched with turbo engine to offer turbo charger
that make turbo diesel engine more advanced with power output of 68PS@ 4500
rpm. Indica V2 Turbo was launched with lots of new features like: Chrome-plated
strip on hood, internally adjustable Outer Rear View Mirror, plush fabric used in
interiors, adjustable head rest and rear seat, new electronic instrument cluster,
power Steering, power Windows. The new Indica V2 Xeta promises to make
much more car sense with its eXtra Efficiency Torque Advantage (XETA) petrol
engine that delivers 12.4 kgm torques.

To sustain in a highly competitive market for more than 9 years is no child's play.
Tata Motors has invested heavily in both product and brand development over
these years. The new launch is yet again another proof of the company's
resilience.
Indica Vista is Tata's entry into the luxury hatchback segment. The segment is
dominated by Maruthi Swift. Indica Vista replaces seven variants of the original
Indica V2.
Over the last few months, the sales of Indica were showing a decline: a classic
case where the product reaches the declining maturity stage. And as theory says
one strategy is to go for product modification.
Vista comes with a new style, more space and a new set of engines. The car
sports Quadrajet and Safire engines which was build jointly by Tata Motors and
Fiat. The new Indica Vista comes in the price range of Rs 3.50 - 4.50 lakh price
range. The original Indica is also retained in the product line. Now Indica offers a
wide choice to the customers from price points of Rs 2.80 lakh to Rs 5 Lakhs.
The brand Vista sports a refreshing next generation look. Indica had the
weakness of not looking peppy or sexy. That put off many young customers. The
new Indica Vista is curvier and looks pretty cool, but not as sexy as its
competitors like Swift or Getz.

The brand made a quantum leap in 2008 with the launch of Indica Vista. The
entire brand personality changed with the launch of Vista. The product's looks
and feel had changed completely and it was a rebirth for Indica.
The changes in the product were not limited to exteriors. Indica began sporting
different types of engines from Fiat which gave a new perception of quality to the
brand.
At the pricing also, Tata Motors consciously raised the Vista brand to a higher
level. The Vista is pricier than the original V2 thus reducing the attractiveness of
the brand to the Taxi segment. At a price range of Rs 4 - Rs 5 Lakh, Indica Vista
is not a cheap diesel car. It was an upward stretch by the brand.

The Indica brand portfolio consists now of three sub-brands V2, VISTA and
XETA.

V2 is the most economical of the lot and is the original Indica. This product is
retained because there is still huge demand for V2 at that price point. Within the
V2 range, there are three variants which include the Indicab which is for the Taxi
segment. Price of this sub-brand ranges from Rs 3,50,000 - Rs 3,95,000.

XETA is the petrol variant of Indica V2. I am not sure about the future of Xeta
since the petrol segment is heavily competitive and compared to Maruti and
Hyundai, Indica Xeta's value proposition is not that attractive as the diesel option.
Prices range from Rs 2,72,000- Rs 3,00,000).

Next sub-brand is the VISTA. Vista is the new generation Indica and Tata Motors
would like this brand to take over the leadership position from V2 in future. The
brand is targeting the discerning Indian consumer with its value proposition and
good looks. Vista has lot of variants satisfying the various needs of the customer.
The Indica Vista Aura is the premium range that sports many goodies that
premium brands claim like ABS, Airbags etc. Vista also comes in Petrol version
sporting the Saphire engine. Prices range from Rs 3,90,000 - Rs 4,90,000
(apprx). Within the Vista range, customers are given lot of engine option
including engines from Fiat.

The positioning across the brand portfolio remains the same. All the brands focus
on the value proposition. But these sub - brands sports different taglines

Indica V2- “More car per car”

Indica Vista- “Changes Everything” (“Surprise Yourself” is the new tagline)
Indica Xeta – “Makes much more car sense”

Vista recently launched itself with Drivetech 4 technology and is now sporting a
new tagline “Surprise Yourself”.

Indica in a way is an example of good marketing practice. The brand

continues to evolve and is a pleasure to watch.
The Indica Brand portfolio is given below:
 DIVYA JAIN
ADVERTISING, PR & BUSINESS STUDIES
ONE YEAR
MARKETING ASSIGNMENT – 1

PRODUCT LIFE CYCLE – TATA INDICA

 LESSONS FROM THE PRODUCT LEFE CYCLE CONCEPT
The critical concept of the life cycle is the management of profits and sales
through the life cycle. A fact that challenges most managers is that the profit
curve does not follow the sales curve. Profits peak before sales mainly because
competition and mainly the intensity of rivalry between firms, brings down the
possibility of the industry. Most competition follows the imitation route and tends
draw customers away from the pioneering firms with better prices, services,
product features, distribution networks and marketing communication. To
compete and retain market share, a pioneer firm needs to increase market
expenditure, which puts a downward pressure on profitability. On the other hand,
the pioneer firm may have to retain price levels or even reduces prices to remain
competitive. This puts further pressure on profitability of the firm. Hence although
sales revenue may be rising due to the marketing efforts of the firm, profitability
gets eroded due to increased marketing expenditure and competitive pressure.
Another reason is shifting consumer preferences and loyalty. A competition
intensifies; better and more efficient products become available, thereby shifting
customer preferences.

The key lesson from this is that firms have to evolve product strategies and
manage for profitability as the product moves through the life cycle. The firms
have to start early in product modification and adapting to newer technologies.
Most progressive and market driving firms follow this route. Market driving firms
anticipate competition, develop competitive advantages and evolve strategies to
pre-empt competitive moves.