Marketing management

The concept of product life cycle The PLC concept presumes that products are not immoral like any creature.. From the framework for international trade ofthe product cycle, which was ado

University of Chester

the Global Environment

Student number : 1326927

Although the ideal is closely associated with the core-value of the company survival, its

products, the concept of PLC (PLC) has been debated for years to examine the practical use as a

successful tool of strategic marketing This paper will critically evaluate the PLC concept from

internationally and domestically strategy viewpoint within fast moving consumer goods (FMCG)

sector

2. The concept of product life cycle

The PLC concept presumes that products are not immoral like any creature From a new

product launched to its gradual disappearance, it will pass through distinct stages with different

opportunities and difficulties to the manufacturers (Kotler, 2003) Therefore, specific business

strategies should be carried out in accordance with each respective period to retain a stronger

position of product in the marketplace (Ibid) The Figure 1 exhibits four stages of PLC, which

are described in the Table 1:

Table 1: Four main stages of PLC

Introduction This is when a new product enters the market The sales grow slowly

while the business likely makes a loss due to the high cost of marketingcampaigns

Growth The increasing demand accelerates the profit and sales substantially,

which will attract the entry of more competitors

Maturity In this period, there is a slowdown in sales growth because of increased

Figure 1: Sale and

Profit Life Cycles

Source: Kotler (2003)

Sales Sales Sales

competition combined to a relative market saturation

Decline The overcapacity from maturity leads to the decrease in sales and profit

This stage can end rapidly or can be prolonged for many years

This basic concept can be used to analyze a brand, a product form, or a product category

It should be noted that not all products follow the S-shape curve There are some different shapes

of PLC shown in Figure 2

3. The concept from an international viewpoint

From international prospective, PLC are more complex because products can have theirlife in different countries (Doole and Lowe, 2012) From the framework for international trade ofthe product cycle, which was adopted by Vernon (1966), Well (1968) has divided theinternational PLC into four main stages These stages describe how products of the United States(US) market develop in the local market and then in the world trade

US export strength

A new product is introduced to meet the local demands, for instance, in the high-incomemarket in the US despite the higher production and labor cost The design and marketing planmust be changed quickly to attract customers The manufacturer has a virtual monopoly not only

in US but globally The products get the international appeal and are exported

Star of foreign production

Although a copy product is introduced and produced in the importing country, during thistime, the US producer still is in its dominant position within the global market Compared to the

Figure 2: Different shapes of the product life cycle

Source: Lancaster & Reynolds (2004)

Phase IV Phase III

Phase II Phase I

Foreign production competitive in export markets

The position is reversed, products made by foreign manufacturers become competitivedue to the growth in producing scale and lower labor cost The international market share offoreign manufacturer develops gradually, exceeding that of American’s As a result, a furtherdecline in the growth rate of US export is in progress

Import competition begins

The foreign producers take much more advantage in their home and abroad market bymass production The US firms have to scale down their business, the exporting sales decreasedramatically, virtually reaching the zero point The cycle is complete

The early foreign manufacturers, who take over the US firm, will continue the similarcycle, and then are displaced later by the growth of less-developed countries The production ismoved from country to country

Figure 3: Net exports of nations and phases over IPLC

Figure 4: Lancaster's modification to Wells's theory

As can be seen from the Figure 4 when a product are going to be in decline in the homecountry, it may not only start a new life in the international market, but also are improved in salesover time due to the expanding market after each cycle (Lancaster, Massingham & Ashford,2002).

4. The validity of the basic PLC concept and criticisms

Since the idea about PLC appeared, there have raised many discussions, arguments,analysis about its value of approaching successful business plan

In the 1960s, the idea about PLC was familiar as a basis for business proposition aboutmarketing programs, but a very small number of marketing executives could benefit from thePLC concept According to Levitt (1965), this was because the concept had not been exploitedextensively He had pointed out the importance of efforts to predict the course of productdevelopment before the introduction stage by taking an illustrative example about Nylon’s life

He demonstrated the upward movement of Nylon’s sale after each strategic action following anoptimum sequence was done in early flattening phases

Although Levitt was not certain that all the decisions in order to lengthen the Nylon lifehad been made deliberately, he assumed that a firm, especially an originator should try to build along-term marketing plan based on anticipated changes of product life at the outset even whether

it is precise or not

More specifically, by dividing PLC into three groups: Product class, product form, andbrand, and comparing them with each other, Polli and Cook (1969) proved that product formgives a better interpretation of sales behaviour than product class He showed that the possibility

of reversal of a general product class is much more than this of product form, in other word, thedecline stage of product form should be more considered making appropriate actions Inaddition, not all products follow the expected sequence of the classic shape, and the length ofmaturity phase is normally longer, hence managers need to take more attention in

Source: Lancaster, Massingham & Ashford (2002)

Golder and Tellis (2004) conducted a research on 30 product categories and showed thatthere is a common sales pattern in consumer durables products They concluded that basing theirfindings, some prediction can be made to help managers avoid not only overreacting to boostdemand but also unnecessary expense on product development

In contrast, Dhalla and Yuspeh (1976) showed that there was a very little persuasiveevidence of the three different categories, particularly in brand Predicting each step of productimprovement may be too difficult and inaccurate because PLC is a changeable curve depending

on the marketing management They also took the example about Dupont’s nylon and thenpresumed that the shape and the length of a brand curve can be changed by a marketing strategywithout PLC Following the marketing formulation of each stage could lead to a wrongorientation for marketers (Wood, 1990) Therefore, the method is that evaluating the collecteddata, examining the real picture, taking drastic action before the real decline stage

Taking an example about Egg chair, which had an impressive recovery after a completedecline, Christiansen, Varnes, Gasparin, Storm-Nielsen, & Vinther (2010) point out despitetaking actions dominated by PLC curve, managers must understand their products to makeadaption attract current customers

Although assuming the validity of PLC in anticipating sales in an intermediate term, fromthe finding of 140 categories, Polli and Cook (1969) also argued that life cycle application islimited in certain markets which are influenced by supply condition Moreover, only about a fifth

of product class and product form achieved the consistency of the life cycle

Regarding to international PLC, Doole and Lowe (2012) also point out the conceptdemonstrates incompletely international trade Due to the increasing globalization of world trade,product standardization emerges from major market quickly and simultaneously

It can be seen obviously that the variability of PLC in different circumstances causesarguments Lancaster and Massingham (2010) accept the limitations of the concept, but do admitthe usefulness of the PLC concept in marketing management The concept can be used to assistmarketing management to set on plan in advance, or understand and find the marketingorientation (Kotler & Keller, 2012) Lancaster, et al (2002) believes taking attention at thecriticism is necessary to fulfil the comprehension of manipulating the notion Consequently, apart

from the S-shaped curve there have been several possible patterns that can apply for some type

of product

The PLC concept can help not economists, but marketers understand product and marketdynamic, although this concept is less useful to be a predicting tool, it is practically one inproduct management

5. PLC within the FMCG sector

5.1 Brief characteristic of fast-moving consumer good

Consumer goods are products provided to meet the daily demand of every person Thephrase “Fast-moving” refers the fact that these items, for example, soft drinks, toiletries, dairyproducts, are picked up quickly from the shelves of supermarkets Fast-moving consumer goods(FMCG) are normally in low price for a wide range of consumer groups, purchased frequently(fmcg.co.uk, 2007) Therefore the manufacturers always concentrate on extending convenientsales channel, and building image brand with a system of product management (Lancaster &Reynolds, 2004)

5.2 PLC model within FMCG

Although some limitation, PLC concept have its own meaning in marketing strategy.Therefore, any company can consult some suggestions and opinions that Kotler (2003) hasassembled as follows:

Table 2: Summary of PLC Objectives and Strategy

As for a FMCG in a competitive international environment, the product may have a morefluctuation in its life with changes in tastes and preferences of consumers, which requiremarketers to adopt alternative implementation and combine various marketing mix to create thesuccessful marketing strategy

Introduction

The process of launching the new product take the efforts of the FMCG firm Because thetypical characteristic of the FMCG market, that is possibly having many competitors with thesame product class, the firm need to spend a relatively high budget for distribution and

Source: Adopted from Kotler (2003)

Maximize profitwhile defendingmarket share

Reduce expenditureand milk the brand

service, warranty

Diversify brandsand items models Phase out weakproducts

Go selective: Phaseout unprofitableoutlets

differences and

encourage brandswitching

Reduce to minimallevel needed toretain hard-coreloyals

promotion However, the FMCG firm should “choose a launch strategy that is consistent with theintended product positioning” (Kotler & Armstrong, 2014, p 297) That means this initialexpenditure need based on the future income The price policy of an FMCG manufacturer is veryimportant, which can bring to the firm a competitive position in a future However, the firm canfollow the penetration strategy involving a high price if the product is distinctive

Pepsi is a good example of the introduction stage (Blatchford, 2014) Pepsi is not themarket pioneer in the soft - drink industry, setting a cost-plus pricing policy Pepsi create theproduct awareness by a celebrity endorsement In addition, Pepsi-Cola only launched in Brad’spharmacies, which is its selective channel

With regarding export activity, before introducing products into another market, FMCGfirm have to make a research about social and cultural factors influencing the buyers’ behaviour

in the imported countries Especially firms which operating in food and drink industry Forexample, General Food fail when introduced packaged cake to Japan due to a majority householddid not have ovens (Kotler, 2003)

The relationship between producer and existing retail outlet need to take care and remain,therefore, promotion budget should switch to distributors more than customers

Decline

At this point, where is the main subject of criticism, some serious marketing decisionsneed to be made Management needs to prepare for the withdrawal from the market, but try toreact to the specific situation The FMCGs can make a price reduction and implement harvesting

strategy, reducing the cost and maintain the sales volume The FMCGs also can sell the brand toanother company

6 Conclusion

Despite facing criticisms about the practical implication, the PLC concept has its ownvalue as an important tool helping marketer make marketing decisions It is noticeable thatproduct behave differently through its life, and the sales and the revenue always change, whichPLC concept attempts to illustrate and explain Then, the PLC can support companies in strategicmarketing planning, improving its competitive power, lengthening the life of its product This inturn generates the profit as well as the growth

The weakness of the concept lies in the imperfect S-curve and duration, however, there is

no consistent rule for any economic phenomena As same usage as many economic theories, it isnecessary to consider this concept to both the current position and possible suggestions Flexibleimplementation of PLC combining with an appropriate marketing mix strategy can create thesurprising company’s future development

7. References

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post) Retrieved from web site: of-pepsi/

http://manifestedmarketing.com/2014/01/05/product-life-cycle-Christiansen, J K., Varnes, C J., Gasparin, M., Storm-Nielsen, D., & Vinther, E J

(2010) Living Twice: How a Product Goes through Multiple Life Cycles Journal of Product

http://onlinelibrary.wiley.com/doi/10.1111/j.1540-5885.2010.00753.x/full

Dhalla, N K., & Yuspeh, S (1976) Forget the Product Life Cycle Concept! Retrieved

from Harvard Business Review website concept/ar

http://hbr.org/1976/01/forget-the-product-life-cycle-Doole, I., Lowe, R (2012) International Marketing Strategy: Analysis, Development

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Fmcg.co.uk (2007) Fast moving consumer goods Retrieved Jun 21, 2014, from FMCG

website: http://fmcg.co.uk

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Kazmi, S & Batra, S (2008) Advertising & sales promotion New Delhi: Excel Books.

Kotler, P (2003) Marketing management (11th ed., international ed.) Upper Saddle

River, N.J.: Pearson Education International

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Part (B)

1. Introduction

Under the increasing globalization of world trade as well as the force of fiercecompetition, marketing has been an indispensable process supporting companies in thepromotion of sales to strengthening reputations This in turn forces firms employ a widerperspective of integrated marketing communications (IMC), which seem to be much moreeffective than the traditional promotion due to its coordination and the oriented interaction withcustomers As a result, marketers manage to combine each IMC tool to generate the synergy fortheir promotional program, creating a mix

Naturally, all firms always want to plan the IMC mix effectually, but as economically aspossible This objective request marketing executives to concentrate more on allocation ofcommunications budget so as to optimize the communications effects

This report will discuss and focus on the IMC mix as well as the way of establishing anoptimal IMC plan In addition, budgeting strategy will be analyzed to indicate the method fordistributing resources to different elements of a mix, reaching cost-effectiveness

2 Integrated marketing communications mix

Integrated marketing communications

In planning a marketing program, the primary task is to apply effectively the concept ofthe marketing mix (McCarthy, 1964), which is known as a combination of 4P: Product, Price,Place, and Promotion Then, additional three Ps: People, Physical evidence and Process areadded to fulfil the customer satisfaction, especially in the field of service business Among theseelements, Promotion, which recently been described as alternative term “marketingcommunication”, seems to be the most noticeably powerful tool of the marketing mix(Pelsmacker, Geuens, & Bergh, 2001)

As integration is a fundamental principles in order to create the synergy of 7Ps, it also isapplied into the usage of marketing communications That means multiple communicationschannels do not work separately, but coordinately to provide a consistent and clear message withregard to a company or its products to target market (Reynolds, 2014) Therefore, the integratedmarketing communications (IMC) is much more interactive, oriented and the effective than