by  Pranav Patil
rollno: 60

According to Philip Kotler, a product is anything that can be offered to a market to satisfy a want or need. But like markets, products have evolved through various stages. Companies, today, not only try to satisfy the wants and needs of the customers but also add some surprise elements or benefits to surprise the customers.

Product Life Cycle


Product Life Cycle (PLC) provides us with the various stages that a product undergoes and this information can be used to formulate strategies on how to position and differentiate a product. Proper planning goes a long way in creating Brand Equity, which is the added value endowed to products and services. Products have evolved, but in some cases they have shorter life cycle compared to the earlier times, especially technological products like cell phones and home computers. Apparently, this has become a major concern for companies as the PLC of products are becoming shorter with each day. So they are faced with multiple challenges to sustain the product in the market and create brand equity.
This paper explains what is PLC and Brand Equity in brief. The introduction part also covers what is the rationale behind launching products with short PLC. And then it also gives us the advantages of creating Brand Equity. Taking cell phones as an example of products with short PLC, a case study on Nokia has been included. The case study describes the life cycle and the various stages that a cell phone goes through and how is Nokia dealing with the 4 Ps of marketing.
After that, it includes some of the challenges faced by companies like the limited time-frame, competition in the market, changing consumer preferences and uncertainty.
Lastly, some recommendations have been made to tackle challenges like how deal to with the limited time factor taking Hero Honda CBZ as an example. Why is it important to know competition and what are the ways to deal with it? It also discusses the possible pricing strategies that can be adopted by the companies. And finally, it answers how to deal with the changing consumer preferences.
Product Life Cycle, commonly referred to as PLC, can be defined as the various stages a product undergoes during its lifetime, with each stage giving an insight into the product and market development so that the product can be successful in a very holistic way.
The PLC curve is bell-shaped and is divided into four stages: -

According to Philip Kotler, a company's positioning and differentiation strategy must change as the product, market and competitors change over the PLC. This is the basic idea as to why one should know about the product life cycle.
The rationale behind companies launching products with short PLC can be attributed to the following reasons: -
 Fast paced changes in technology and demands always keep a company on the move. A company, therefore, has to upgrade its product even with a slight change or a shift in consumer's demands.
A consumer always wants to be in style irrespective of the stature he/she enjoys in the society. This leads to a stage where consumer's tastes and preferences change very often and are governed by fashion and style.



To cater to such segment of the market, companies have to come up with products with short PLC. For example - mobile phones, clothings and accessories.
Brand Equity
According to Philip Kotler, Brand Equity is defined as the added value endowed to products and services.
The company develops brand equity, however, it is shaped by consumer's perception of the product, which in turn is governed by factors like brand awareness / knowledge. Hence, it becomes vital and challenging for the company to ensure the development of right kind of brand awareness and knowledge of the product and services.
Advantages of brand equity as given by Kotler are as follows: -
1.      Improved perceptions of product performance
2.      Greater loyalty, due to which consumers can pay 20-25% more for the product
3.      Less vulnerability to competitive marketing actions
4.      Less vulnerability to marketing crises
5.      Larger margins
6.      More inelastic consumer response to price increases
7.      More elastic consumer response to price decreases
8.      Greater trade cooperation and support
9.      Increased marketing communications effectiveness
10.     Possible licensing opportunities
11.     Additional brand extension opportunities
Case Study on Nokia
Life Cycle of Mobile Phones
The life cycle of mobile commences with Material Extraction. A mobile phone is made up of 40% metal, 40% plastic and 20% ceramics and trace materials. Material Processing then follows material extraction.
The nine basic components of cell phones viz. - Circuit Board, LCD, Battery, Keypad, Antenna, Microphone, Speaker, Plastic and Accessories are then obtained in the manufacturing stage of the mobile PLC.



Once the product passes the manufacturing stage, it is then Packed and Transported via different distribution channels. The mobile then sees the light of the Useful Life stage of the mobile PLC, wherein consumer can keep the same number even after changing the service provider. To extend the useful life, it is suggested to use the same company for continuing the services. Finally, the cell meets the End of Life stage.
Nokia as a Company
Nokia, a Finland-based company, is the largest manufacturer of mobile and mobile devices. Nokia was established in 1865 as a wood pulp mill. By 1990s, the company dabbled into mobile phone industry, and today it has made its presence felt across the globe so much so that it is the sixth most valued brand of the world.
Though mobile phones have short PLC, owing to changing consumer demands and fast-paced technological developments, Nokia has been successful in capitalizing on the growth and maturity stages of PLC to the best and creating a niche for itself.
With 'Think Global and Act Local' being the punch-line for every company, even Nokia has not been far behind in incorporating it in its strategy.
In India where cell phones are viewed as mere handy device for easy communication and access, it was difficult for Nokia to establish its high technology mobiles in the mass market and change the mindset of the masses. To surmount these kinds of problems and influence the mindset of the people, Nokia came up with advertisement for its 6600 model, where it conveyed that mobiles are not just meant for talking over but it is meant for more than that. Also with competing brands like Motorola pricing its products at lower prices, it was expected that Motorola would dominate in the Indian market.
However, Nokia introduced and launched its mobiles for all segments of the market and catered well to the demands of consumer varying from a basic mobile phone model to voice-centric, colored-screen, camera-fitted, MP3, blue-tooth, infra-red and multi-media enabled cell phones.
Lets have a sneak peak into the marketing mix of Nokia given by the 4 Ps.
1. Product
Nokia has been very accommodating in its approach towards the needs and demands of its consumers. It offers multifarious mobile phones ranging from basic models like 1100, 2100 to colored screen model like 3230 to high-tech mobiles that include features like camera, MP3 player, blue-tooth and infra-red technology like 6600, 7610 to name a few.


Nokia has been considerate to an extent of paying attention to the needs of the disabled people and have included special features like text to speech software for blind customers. It also offers suitable wireless devices to be used with hearing aids and provides features like adjustable fonts for low vision for elderly people.
Hence, Nokia has designed its product with all the styles and features included, keeping the consumers tastes and preferences and changes pertaining to it in mind.
2. Promotion
Nokia has set up some 'Concept Stores' in Delhi and Bangalore for the customers to experiment with application downloads and product experience. In a bid to attract customers, Nokia has opened some flagship stores in November 2005 in Moscow, where in people can purchase and set up Nokia products and experiment with new ideas and technology at kiosks.
3. Price
Nokia follows the skimming price strategy for its products. It introduces its mobiles at higher prices and then goes onto reduce the prices as the product moves from one stage of the PLC to another.
4. Place (Distribution)
Nokia has the best distribution network and retail execution, which is evident from the success of Nokia Priority Dealers across 255+ towns offering not only the mobile phones as a product but a buying experience to the customers.
Nokia follows the chain of distribution in the following way: -
Nokia India - National Distributors - Redistribution Stockist - Micro Distributors - Retail Outlets - Consumers


The Challenges that the Companies Face
 Time Factor - The very fact that products now have short product life cycle is itself a challenge for companies. The products get short time to establish them in the market or, in short, create Brand Equity. The problem is that by the time a product is launched in the market, the competitors already have a similar variant ready, thereby, shortening the life of the original product. The challenge, therefore, is to sustain the product in the market.
 Changing Consumer Preferences - The consumer today, is inundated with alternatives as compared to the earlier times. Take the example of automobile industry when only Fiat and Ambassador were available. There was little or no choice and the consumer had to be satisfied with whatever was on offer. But now the consumer can choose from a number of brands and the brand itself has a number of products.
Also, the consumer possesses a superior level of knowledge and information about a particular product before the purchase decision is made. Thanks to the Internet which provides the consumer with every bit of information. In addition to this, blogging has become a culture today. The consumer can not only collect information from his own contacts but also ask other people or read other people's view on a particular product. The challenge for the companies is to keep up with the change and persuade the consumer by successful differentiation. The consumer's preference is also guided by the word-of-mouth publicity which, in contemporary times, is believed to be a crucial publicity tool. The test for a company is to initiate a positive word-of-mouth publicity.
 Competition - A lot has been said and written about the consumer being the king and their role in product development. But in due course, the company has to face competition from brands first and then the products that represent the brand. It is not only important to know the consumer, but it is equally important to know about the competitors as well. And then design strategies, target segments, define objectives and sense the reaction pattern; all of which should be in tune with the short nature of the product life. Another important aspect would be to gauge the strengths and weaknesses of the competitors.
Uncertainty - This can have three basic issues: -



The first priority would be to find out if the customer is willing to pay the price for the product. Since the product would have a short life cycle, it is essential to have an effective pricing strategy in place.
Then it is very difficult to predict whether the product will be successful or not. Whether the product would be able to add to the existing Brand Equity of the company or capitalize on it and build it's unique brand equity.
Another issue with products having short product life cycle is that the retailer and the whole-saler is always in dilemma of how much to stock. In case the product fails, then the remaining stock would be a waste, and if the stock is not sufficient enough, then there is a chance of creating unsatisfied customers, which in turn would damage the existing brand equity of the company. Therefore, the challenge is to strike a balance between sufficient and insufficient stock.
Recommendations
 Create Hype & Curiosity - Since the product has a short life cycle, a good strategy would be to create a lot of hype and curiosity in the mind of the consumer before the launch of the product. In a way, it extends the life of the product as the consumers begin to think and react even before the product is launched. Lets look at Hero Honda CBZ motorbike.


CBZ was a hugely successful product when it was launched and it was able to sustain itself in the market until Bajaj Pulsar took over. Now, Hero Honda is about to launch it's new product and it's capitalizing on CBZ's success by using the tagline - 'From the makers of CBZ', thereby, creating hype and setting consumer expectation. This strategy works well before the launch. Whether the expectation is met or not remains to be seen.
 Another example would be that of movies. Movies have been particularly affected by this short product life cycle as most of them recover cost in the first week of release, make profit in the next few days, and then fade away. The trailers that are shown on television before the release are nothing but creating hype and curiosity in the mind of the consumer. If the companies are successfully able to do this then they should also allow pre-booking facilities. Before Tata Indica was launched, it had such a large number of pre-bookings that it virtually failed to meet the demand. So a company must not only create demand, it should also be able to satisfy the demand.
 Understanding Market Competition - The companies must have an insightful understanding of competition in the market. This understanding a long way in creating brand equity. The first thing that a company must look at is to have it's strategies in place. For example - form a strategic group and give them the constraints to work on. The constraints could be the type of product, expected life cycle and the price at which the company is planning to launch it in the market. Analyzing strengths and weaknesses is a reactive approach in product development. But it helps in targeting the market. For example -
X - has excellent features but poor availability and service
Y - is overall good with excellent service
Z - is less known but is an average product
Now, a new entrant can target Z on availability and service and overall target Z but it should never target Y.
Apart from all this, the company can also use the traditional research tools in analyzing markets and estimating the customers association with a particular brand. The idea is to collect as much information as possible before the development of the product.


 Pricing Strategies - The customer ultimately has to pay the price and purchase the product. The price of a product has to be precisely determined. Too high prices would result in consumers not buying the product, and too low prices would not be profitable depending on the type of product. In case of products with short product life cycle: -
1. Sell the product right away with minimum down-payment and recover the money in future in form of equated monthly installments. For example, in case of products with high price, it is difficult for the customers to pay the price at one go, so they pay some amount of money initially, and then rest of the amount is paid in installments. In fact this strategy has brought a revolution of sorts in recent times with the consumers able to make high and multiple purchases.
2. It is believed that the consumer makes the maximum purchase in festive seasons. So a product can be made attractive by combining additional gifts, or companies can have a combination of products for sale. This type of strategy is especially useful when the consumer wants to make multiple purchases.
3. Offer discounts on early purchases or introduction stage. And just as the product enters the growth stage and demand increases, increase the price. But this is not followed by the companies today, because of intense competition. Instead, this is used in the test phase to determine how much price the consumer would pay for the product.
 Brand equity can also be created by merchandising - Though it is more of a concept extension, but sometimes it works well for the product. Companies should take a cue from Pantaloons which has perfected this art.
 Meet the consumer's expectations and empower the consumer - Like we saw earlier, it's very easy for brands to create expectations but most of them fail to meet the standard of expectation set by them. Now that the marketing philosophy emphasizes so much on the consumer, it is important for the companies to set the right kind of expectation. The next alternative would be to involve the consumer in product development process. Not only involve but also inform, engage and energize them in the process of building the product. In this way, the product gains a fair share of consumer's mind and heart.
All these initiatives will not only create brand equity but also value equity and relationship equity. In short, don't sell products... empower the customer