Introduction
Mainstream marketing allows managers and marketing organizations to create effective and appealing strategies aimed at consumers. During several decades, the product life cycle model has been very popular in management. Companies adopt this concept as a core of business operations and product management. The product-and-service mix is a significant force in corporate growth.
Profit performance and market adjustment have as their fulcrum new product development, which has been called the life blood of a company. Corporate profitability indicates that the growth industries -electronics, chemicals, drugs — have been new-product oriented adopted a product life cycle model. New products contribute substantially to profitable sales (Agarwal, 1997). The necessity of adding new products that will yield profits to sustain corporate growth is clear. Products also level out seasonal impacts, spread risks, use talents, capitalize on tax advantages, and replace obsolescent items.
Business success depends on producing the right product at the right time. New-product development is risky, for market opportunity is couched in uncertainty and instability, and competitive system and the unpredictability of customer reaction increases the risk. In spite of benefits and opportunities proposed by this model, recent years there is a growing number of research studies proving its limitations and weaknesses for modern business.
Critical Review
The large layer of literature supports the product life cycle (PLC) model and underlines its effectiveness and opportunities for business. Products are defined broadly to include both physical products and services. Products are perceived as means of problem solving for both buyers and sellers. The discussion relates to both consumer and industrial goods. Product-line management involves the addition of new products to the line, and the deletion or modification of current products. Product diversification (horizontal, vertical, or heterogeneous), may be the result of internal product policies or mergers (Lee and Stone 1994).
Reasons for diversification vary from spreading risks to using by-products and increasing profits.Product policies and strategies may be offensive or defensive, convergent or divergent. Companies may adopt a followership or leadership posture, and may choose a strategy of segmentation or product, differentiation (Lee and Stone 1994). By differentiating products they try to bend demand to meet their supply and so insure a niche in the marketplace.
Each of the phases of the product-development process (conceptualization, exploration, development, market preparation, commercialization, and review), is considered. Product development is seen as one of the core foundations of corporate planning. Its success or failure shapes corporate destiny. Because of this, particular attention is given to a discussion of new products, their adoption and diffusion processes, the product life cycle, and new-product failures (Agarwal, 1997).
The product life cycle model is perceived positively by Carree and Thurik (2000). These authors underline that typically, products have a monopoly position for a perioda degenerative monopoly position. Eventually competitors will develop competing and even improved products. The pricing executive must decide whether to charge relatively high or low initial prices, and the marketing consequences and related strategies are quite different in each situation.
Obviously, regardless of economic models, it is difficult to establish an optimum price because demand and costs change over time (Lee and Stone 1994). In their Lee and Stone 1994 analyze product innovation process and its impact on life cycle. They come to conclusion that the attention should settle on current profit maximization rather than on the long-run maximization; the whole life cycle of a product and the total product line, rather than a single item, must be considered in pricing; and price must be considered from the perspective of the total marketing mix.
Where products are relatively homogeneous; several large firms constitute a significant part of the market; and buyers are well informed, then estimates of buyer reaction become a significant aspect of the pricing picture. So do competitive reactions that may be ferreted out by the use of marketing intelligence. This reasoning process, utilizing subjective probability estimates, can provide decision makers with good guides for contemplated price changes (Agarwal, 1997). Gillespie and Alden (1989) identify effectiveness of PLC in export operations and its impact on international companies. They conclude that companies with OLC schemes are more competitive on the global scale and global market.
Applied to consumer behavior, it is possible to say that PLC supporters give a special attention to importance of channels of distribution and marketing mix. Distribution channels are the vehicles for matching companies with customers. Masurel and Montfort (2006) analyze the effectiveness of PLC among professional Service Firms. They establish the arrangements and paths for the flow of product and title to ultimate users.
They move products and information to markets and provide the funnel for the feedback of information to the producer. As networks of marketing agencies, they constitute a system-a loose but formal coalition of independent entities linked together to distribute products and services. This research study concludes that distribution channels are critical components of the marketing mix (Lee and Stone 1994).
As the links between companies and markets, they can impede or foster the effectiveness of the rest of the marketing mix. Distribution channels cover a wide range of situations. At one end are found the complicated linkage of manufacturers and their branches, agents and brokers, other wholesalers, and retailers for the movement of certain consumer goods. At the other is the direct distribution of heavy machinery. Between lie a variety of channel assortments. Which one works best depends on the company and its products and markets at a certain time. Distribution channels are essential components of economic system.
Carree and Thurik (2000) analyze positive impact of PLC on American tire industry. They find that the efficient movement of goods and competition both depend on PLC. Nevertheless, as economists often assume, the channels do not perform cost-less activities. Using resources to sort supply and match it with demand, they try to bring both activities into balance. Through channels, companies organize supply and markets and endeavor to develop their own best opportunities.
The product life-cycle concept emphasizes the familiar pattern of product sales volume growing slowly, then more rapidly, reaching a peak, tapering off, and declining. For different products, the length of the cycle, the duration of each phase, and the exact shape of the curve will vary. Eventually, however, sales decline because of competitors, new products, satisfaction of needs, and changing wants. Products now seem to mature more rapidly, and their life cycles are getting shorter. This means that product lines will have to be audited more carefully and strategies directed to capitalize on the life-cycle situation (Gillespie and Alden 1989).
Firms too often only pay attention to current problems, neglecting life-cycle considerations and the impact of marketing strategies. They can deter sales declines, speed introductions, and stimulate growth phases through advertising, personal selling, and pricing. Profit cycles differ from sales cycles. Greenstein and Wade (1998) apply PLC to commercial mainframe computer market and conclude that at the introductory phase, products may be unprofitable; during the period of most rapid growth, profits reach their peak; and as competition sets in, even though sales may be increasing, profits decline and are eventually squeezed out.
Among the factors that govern the advertising and sales programs that should be selected are the degree of newness of the product, the existing degree of competition, the ease of entry of competitors who offer similar products, the brand loyalty of customers, the company image, and the corporate niche in the marketplace. Also, management must decide whether it wishes to skim the market or penetrate it deeply.
Conclusion
In sum, there is no universally superior method of organizing new-product activity. Management thinking has recently focused on the top level responsibility for new-product functions. The main tendency identified in literature is that old layer of literature approves benefits and opportunities of PLC while modern literature criticizes this model. Thus, all researchers agree that the high level of organizational placement reflects the critical nature of new-product development and some of its attendant activities, such as the determination of new product aims and the scrutinizing of acquisitions and mergers.
The major purposes of the department are to facilitate the creation of new products and to insure corporate survival and growth. Product-planning managers perform crucial activities in very competitive markets. Products that contain fundamental innovations are to have accurate market predictions than products that contain adaptive innovations. It is not the degree of technological newness, but newness in the sense of customer perception and changing consumption habits that is significant. Some concepts developed previously are particularly relevant to product adoption. Included are fashion cycles, new-product categories, innovators and early adopters, acceptance and rejection of change, and stages of market development.
References
Agarwal, R. (1997). Survival of Firms over the Product Life Cycle. Southern Economic Journal, 63 (3), 754.
Carree, M.A., Thurik, A.R. (2000). The Life Cycle of the U.S. Tire Industry. Southern Economic Journal, 67 (2), 254.
Gillespie, K., Alden, D. (1989). Consumer Product Export Opportunities to Liberalizing LDCs a Life-Cycle Approach. Journal of International Business Studies, 20 (1), 93.
Greenstein, S.M., Wade, J.B. (1998), The Product Life Cycle in the Commercial Mainframe Computer Market, 1968-1982. Rand Journal of Economics, 29 (1), 772-790.
Lee, H.-H., Stone, J.A. (1994). Product and Process Innovation in the Product Life Cycle: Estimates for U.S. Manufacturing Industries. Southern Economic Journal, 60,
Masurel, E., Montfort, E. (2006). The Cycle Characteristics of Small Professional Service Firms. Journal of Small Business Management, 44 (3), 205.