Product Life Cycle In The High Tech Industry Marketing Essay

Product Life Cycle In The High Tech Industry Marketing Essay Posits that, as the pace of change has accelerated rapidly and created unprecedented uncertainty in the markets of this decade, many companies have needed to dispense with existing, once reliable, practices in order to remain competitive. Suggests that the efficacy of one particular marketing tool, the product life cycle model, has been questioned, by various writers in the academic and business press, with regard to the general applicability and validity of its assertions and the claim it makes to be able to predict the marketing strategies that should be applied at different stages of a products life. Explores the arguments for and against the validity of the product life cycle model as a marketing tool in this present, dynamic environment. Introduction the product life cycle model Since its adoption by marketing, the product life cycle (PLC) has achieved universal acceptance because of its appeal and wide application. In the 1950s and 1960s, when markets concentrated on consumer goods and were characterized by simple segmentation, comparatively stable technology and relatively unsophisticated communications, the product life cycle model was an acceptable assemblage of market dynamics (Wood, 1990). Despite the fact that no two life cycles are the same, the model was proffered, with support either from experience or from empirical research in the fast-moving consumer goods sector, as a predictive tool to anticipate marketing requirements and aid long-term planning of product strategies in advance of each stage of the cycle. The concept was analysed so frequently in marketing literature that it became given to many executives. The product life cycle represents a core element of marketing theory and has done for four decades. According to marketing literature, every product or service has, by definition, a life cycle and how this is managed is key to survival in business. The product life cycle model describes how most products pass sequentially through four stages: introduction, growth, maturity and decline (see Figure 1). Each of these phases requires different strategies relating to promotion, pricing, distribution and competition, to maximize the products value and profitability. The principal components of the model are changes in sales, stage identification and sequential sales behaviour. The concept proved to be exceptionally durable and was explicated eloquently. According to Dhalla and Yuspeh (1976), its use has added lustre and believability to the insistent claim that marketing is close to becoming a science. The product life cycle theory has been exposed to comparatively little reproach with very few writings contesting the assumptions it makes, although Mercer (1993a) emphasizes that substantiation of the concept has seemed surprisingly difficult to uncover. However, the dynamic markets of the eighties, bore little resemblance to the relatively simply defined and stable markets of the early sixties (Wood, 1990) and with this the validity of the product life cycle was brought into question. Dhalla and Yuspehs article is the one most quoted as the premiss for recent scepticism over the product life cycle theorys general applicability (Mercer, 1993a). The validity of the product life cycle model The product life cycle theory draws an analogy with the life cycle of human beings, in that every product in a market is mortal. In the world of biology, each stage in the cycle is fixed, with one stage following on from another in both an invariable and irreversible order. In the marketing world, however, neither of these circumstances is typical, the length of different stages of the life cycle tending to differ from product to product. For example, certain products have scarcely any growth stage, while others introductory and maturity stages are barely discernible (Dhalla and Yuspeh, 1976). Not all sequences of stages in actual sales are consistent with the expected sequence of the model. The expected time pattern for each stage is often dismissed on the premiss that it depends on the product itself. Polli and Cook (1969) explain how most graphic representations of the cycle ignore the stage of decline, inferring that the introduction and growth stages make up half of the products life. This leads us to assume the life cycle curve is symmetrical at the middle of the growth stage. Furthermore, this implies the introductory and growth stages amount to the same length of time as periods of slow growth and maturity. The model presumes the existence of some rules indicating the movement of the product from one stage to another. However, à ¢Ã¢â€š ¬Ã‚ ¦ no such rules can be objectively developed (Dhalla and Yuspeh, 1976). Wood points out that the phrase life cycle itself contradicts the evidence by insinuating absolute inevitability and irreversibility (Wood, 1990), the evidence demonstrating that products can move in different time scales and in different sequence throughout their life. Polli and Cook (1969) conclude that this presumed sequence of sales characterizes the weak assumption of the product life cycle model and that in addition the expected proportion of time spent in each stage represents the strong assumption of the product life cycle model. Similarly, a products life cycle differs to that of a human beings as it is usual for products to attain a second life or to be reincarnated as a result of promotion. Likewise, numerous brands have been seen to go from maturity back to rapid growth (Dhalla and Yuspeh, 1976). Hiam (1990) believes it is dangerous to presume that products have a life cycle, since anything with a life cycle dies. Although it appears obvious that every product will ultimately be replaced, at a frequency that is dependent on the specific industry and market, there is the problem that this assumption of death will prove a self-fulfilling prophecy. Hiam (1990) states that many products can be revitalized and that maturity simply reflects saturation of a specific target market with a specific product form. If the form of product is varied and the target market expanded, new growth can sometimes be created, such that only when a company has exhausted all alternative ways to reposition the product has the produ ct to die. Hiam (1990) believes it is a myth that products have a predetermined life-span. Wood (1990) concurs that, by establishing the prospect of decline, the product life cycle may become a self-fulfilling prophecy with valuable brands being prematurely discontinued. Dhalla and Yuspeh (1976) substantiate this rationale with their research, which found many cases where a brand was dropped because management, on the basis of the product life cycle theory, believed the brand had reached a dying stage. For instance, where a brands success had dwindled for a few years, because of factors such as poor advertising, management believed the product had reached the decline stage and subsequently redirected funds from this product to new products, rather than seek corrective measures. As the brand continued to deteriorate, new products were launched and the brand was considered to be in decline purely on the basis of the product life cycle concept. One example was that of a US toothpaste, Ipana, which was marketed until 1968, then abandoned and replaced by new products. However, a year later, two businessmen picked up the brand name and created a new formula, keeping the original packaging. With virtually no promotion and limited resources, sales turned around in the first seven months, and within three years the toothpaste was still being used by over one million people. Had the original company kept the product and provided suitable marketing support for it, the brand may have been in an even stronger position in the market (Dhalla and Yuspeh, 1976). Dhalla and Yuspeh (1976) also identified several other problems with the product life cycle model. First, it is often difficult to determine, with any accuracy, at which stage of the cycle the product actually is. As the four stages of the cycle are not clear-cut, it is possible to assume a product is at a particular phase when the opposite may in fact be the case. For instance, a product may be seen to have reached maturity, when in actuality it is merely at an ephemeral plateau. Considering variations can take place year-to-year, it is also difficult to foresee when the next stage of the life cycle will appear, how long it will last, and to what levels sales will extend (Dhalla and Yuspeh, 1976). In a similar vein, Levitt highlights some shortcomings of the practical application of the product life cycle concept, on the presumption that the purpose of the concept is to establish the stage of ones product in the cycle and then select the strategy befitting that stage. The major problem which Levitt identifies is that, in order for the model to have any practical use, the marketing manager needs to know the answers to three key questions: how and to what extent the shape and duration of each stage can be predicted; how one can determine what stage a product is in; and how the concept can be used effectively. Answering these questions is difficult. If basic marketing information is not held, the shape of the curve is irrelevant and positioning the product on the product life cycle curve becomes reduced largely to a matter of guesswork (Wood, 1990). Mercer (1993b) also points out that in many markets the product or brand life cycle is longer than the actual planning cycle of organizations. Even where companies look to the product life cycle, they will be basing their plans only on the small section of the cycle in which they reside at the time, rather than covering the entire life of the product. As a result, the theory can offer only few, if any, benefits. In Mercers (1993b) survey, 49 per cent of managers attached the value of the product life cycle to new products and a quarter attached it to the decline stage, while none referred to the mature stage. As a result, the theory has little value for the majority of organizations whose products are at the mature stage. Mercer sees its use as dangerous for such organizations because it may entice managers of thriving mature products prematurely to expect the move into the decline stage. Similarly, the product life cycle concept has led top executives to over-emphasize new product introduction and neglect older brands, despite the belief that the odds are four to one against new products being successful. While Dhalla and Yuspeh (1976) believe work on new products should proceed, they see that it is on todays products that a companys profits normally depend. In parallel, Goldberg (1994) states that too many executives in the industry think building new products is the answer, when it is often not. He maintains that companies need to be creative and refresh and create excitement around products to avoid the costs that occur with brand new products. He believes responding to short cycles is a key part to todays hyper-competitive market and doing this the wrong way is bound to cause you major problems. Most writers proffer the product life cycle concept as an ideal framework, but neglect to establish the difference between product class (e.g. cigarettes), product form (e.g. filter cigarettes) and brand (e.g. Winston). Many product classes' life can extend into centuries, e.g. automobiles, radios, soft drinks. Many appear in the absence of technological breakthroughs, to be almost impervious to normal life cycle pressures, provided they satisfy some basic need. When supporters talk about the life cycle of a product, they are invariably referring to product forms. The Marketing Science Institute also carried out research in an attempt to validate the product life cycle concept for product classes and forms. Over 100 product categories in the food, health, and personal care sectors were inspected and the number of cases that did not follow the sequence of stages on the product life cycle concept were recorded. Research concluded that the product life cycle concept had some reason for being, in that it explained sales behaviour better than a chance model could, however, the authors expressed doubts about its general validity. The authors concluded that their findings suggest the life cycle concept, when used as an explicit model, is more likely to be misleading than useful (Dhalla and Yuspeh, 1976). With regard to brands, the product life cycle model has been shown by Dhalla and Yuspeh (1976) to have even less validity. They believe that even when a brand survives the introductory stage, the model in most cases cannot be used as a planning or a predictive tool. Evidence for the product life cycle concept is not assuring because brands tend to have different patterns of sales, and therefore the product form curves cannot indicate what sales will be like (Dhalla and Yuspeh, 1976). Polli and Cook (1969) also believe the model to be more appropriate for examining the life of product forms than of product classes, while Wood (1990) suggests that, as the product life cycle concept is being related purely to brands, the use of the theory is encouraging an unhealthy myopia and brand/product focus. Mercer (1993a) also carried out research into the life cycle of brands, using data collected by the British Marketing Research Bureau, in which 929 brands were tracked within 150 market segments from 1969 to 1989. He found that the majority of those brands which were leaders in 1969 remained brand leaders in their respective markets in 1989. Only 7 per cent had declined below fourth place and only 1 per cent had been discontinued (Mercer, 1993a). This research shows there is a clear lack of evidence of the end stage of the life cycle, which itself weakens the assumption that the product life cycle theory is applicable generally. The research illustrates that the most important characteristics of most life cycles is that-for all practical intents and purposes-they do not exist (Mercer, 1993b). Mercer (1993b) believes, therefore, that the product life cycle of brand leaders is one of continuity and that it is a tautology that products are created and later die. Consequently, Mercer (1993b) questions the practical use of the product life cycle theory to the marketing manager. Since his findings suggest the average length of a brands life exceeds 20 years, the product life cycle concept may do little to satisfy the needs of the marketing manager whose objectives are likely to be contained within two years. This problem was also highlighted in discussions with the Public Relations Manager for the IT sector of Insight Marketing, Jo Bethell, who expressed difficulty in following the product life cycle model when marketing high-tech products. The difficulties arose primarily when developments in the industry forced Insight Marketing to take reactive action, contrary to the action predetermined by the product life cycle model. Polli and Cook (1969) concur that it is wrong to deduce, even from an extensive period of sales stability in a general product class, that saturation has been reached necessarily and that the product life cycle model, despite its other merits, cannot be invoked to support this supposition. They believe saturation is reached only if new product forms are not practicable with existing technology and if new uses for existing forms cannot be found. Both these forces can increase dramatically the level of market acceptance for a product class, with changes in past sales failing to predict their effects. Polli and Cook (1969) conclude that the maturity stage for a product class can be construed as saturation only by taking as given the state of technology and applications for existing product forms with the product class. In addition, they suggest it is not sound to conclude, from the detection of a few periods of decline after prolonged sales stability, that sales of a product class will continue to fall. Their findings propound that, while continued decline is possible, it is uncommon for a product class and the most likely outcome of such a period of decline will be fall in the maximum sales level and a renewed period of sales stability or maturity. They deduce, therefore, that a decline in the acceptance of a product class does not mean it is a dying market opportunity. Some suggest the maturity stage of a product is associated with stability of market shares within that product. With regard to the market share of product forms that are within a general product class, Polli and Cook (1969) found this to be inapt. They illustrated that, even during maturity of the product class, acceptance levels of product forms can change significantly. For example, in their research, plain filter cigarettes (a product form) experienced rapid growth to a high level of sustained demand, whereas the product class (cigarettes) stayed in the maturity stage for more than 40 years. Nevertheless, Dhalla and Yuspeh (1976) argue that, where consumer tastes and values change, or preferences move to new and improved competitive products euthanasia has to be quietly performed so that the companys capital resources can be used profitably in other ventures. The existence of product feature cycles and upgrades in features of products which are referred to as product life cycles also confuses the issue. Nevertheless, the brand that contains these ephemeral components is often still the dominant element of the overall product and is very long lasting. Mercers (1993a) evidence shows how the theory has little import in most markets and should be used only in special circumstances. Nevertheless, the major lesson of the PLC-that change is to be ignored at the marketing managers peril-still holds true (Mercer, 1993a). The product life cycle model has also been criticized for its lack of empirical backing. Wood (1990) refers to research by Polli and Cook to point out that only 17 per cent product classes and 20 per cent product forms exhibited a sales behaviour essentially consistent with the product life cycle and that 83 per cent product classes and 80 per cent product forms did not fit the classical PLC shape. Some supporters of the product life cycle concept have attempted to validate the theory by introducing alternative curves appropriate for different situations. Many shapes, durations and sequences have been revealed, yet explanations for such differences have not been researched, despite this understanding being crucial for development of strategy and well-informed forecasting (Day, 1981). Variations in the product life cycle are inescapable if Levitts premiss is believed, i.e. that the basis of the concept is that the life-cycle can be managed (Wood, 1990). Dhalla and Yuspeh (1976) believ e such endeavours to substantiate the product life cycle concept leave much to be desired and that it would be better to admit that the whole PLC concept has little value in the world of brands. Yet another element of question in the validity of the product life cycle is that the sales changes of a product differ in relation to the actual definition of the product. In support of this, Polli and Cook (1969) explain that, although cars and mentholated filter cigarettes are both products, cars include components more heterogeneous among themselves than filter cigarettes. Thus, this general problem must be acknowledged to avoid error Polli and Cook (1969) concede that the product life cycle concept has not been tested systematically as a model of sales behaviour, probably because of the inclination not to take the concept very seriously, because of its degree of validity. However, they profess that several writers have used the product life cycle model as a basis for recommendations about the composition of marketing programmes at the various stages of the life cycle, for instance to formulate advertising campaigns and so on. These marketing programmes are based on the underlying presupposition that the product life cycle is independent of a companys marketing practice. Polli and Cook (1969) point out, however, that, while it is possible that amendments to advertising may not affect the life cycle of a product, this ought to be clearly established before it is accepted as a basis for planning. Polli and Cook (1969) carried out extensive research to evaluate the performance of the product life cycle model and attempt to verify it empirically as a descriptive model of sales behaviour. Their principal aim was to evaluate the consistency of the model with actual records of sales of product classes, product forms and brands. They compared the number of stages that deviate from the presumed sequence of the life cycle model with the number of inconsistent observations in 100 simulated sequences, which are stages generated by a chance process. For a detailed explanation of their test procedures, see Polli and Cook, 1969. They found that the concurrence between sales performance of product forms and the life cycle model was good and that changes in sales for product classes, product forms, and brands were all concordant with the product life cycle model. When testing the performance of the life cycle their findings showed that, in essence, 44 per cent of all products displayed sales behaviour consistent with the life cycle and that, for 96 per cent of products, the inconsistent observations were fewer than the mean number of inconsistencies. However, they do stress that any inference from their research results should consider ones personal assessment of what compounds a good enough fit, which depends on the definition of product used and the influence of demand and supply on sales. Nevertheless, Polli and Cook (1969) contest that their results strongly suggest the life cycle concept, when tested in a given market and found valid, can be a fairly rich model of sales behaviour and that, even with refer ence to brands, the product life cycle model is strong enough to merit its use in that category and further testing in other categories. Polli and Cook (1969) conclude that, while the overall performance of the model could be disputed with regard to its general applicability, its appeal, the existence of a theoretical foundation in the adoption process, and their own research results point to the model being valid in many common market situations. The product life cycle concept is a verifiable model of sales behaviour, particularly in market situations where different product forms compete for the same market segment with a general class of products, and can be helpful in planning marketing and forecasting sales. Quarterdeck Office Systems, a small computer software firm in Santa Monica, California, USA, also profess the validity of the product life cycle, the use of which they claim saved the companys neck. The company exists through serving a niche created by Microsoft. When Microsoft launched Windows 3.0, which incorporated the features of Quarterdecks products, Quarterdeck would have been ruined were it not for managements knowledge and use of the product life cycle concept. They identified the various life-cycle stages of their products and continually assessed the strategies Microsoft was following. They found that their product worked more efficiently with older computers and for a large segment of users who struggle to learn new programs and would rather not upgrade to new hardware. On the other hand, Microsofts Windows worked better with newer computer models and with software requiring more memory. On this basis, and considering the fact Microsoft was aiming their product at the introduction and growth stages, Quarterdeck positioned its own product at the mature and declining stages of the life cycle. Through creating such a niche in these stages of the life cycle, the company identified the only way it could succeed (Paley, 1994). Paley (1994) believes marketing managers generally are starting to administer product life cycle strategies to extend the sales life of their product, find a market position in which they can avoid conflict with strong rivals, and organize their salesforce to achieve greater productivity. He sees introducing the product life cycle strategy as a resourceful way in which to forge competitive advantage and that its implementation could make the difference between life and death of a company when confronted with overwhelming competition. Attempts to validate or rebut the life cycle concept on an empirical basis have been restricted by the lack of a definition as to which life is being examined, since different writers have different understandings of the product life cycle concept. No satisfactory empirical ratification of the concept exists and furthermore, by following sales over time, what are being observed are the consequences of different management strategies on the life cycle. To exemplify, Wood (1990) refers to Cox who identified six types of life cycle curve, which would imply a cycle-recycle pattern where sales do not decline following maturity of the product, but begin the old cycle again as a result of a push in promotion. Despite such criticism, the product life cycle has become accepted and valued as an element of basic marketing theory and has become a block on which management theory has been built. Mercer (1993a) points out that, from the evidence taken from his literature searches, the product life cycle seems still to be a dominant component of marketing theory. Nevertheless, he devotes much of his paper to augmenting the evidence that the product life cycle has only limited applicability. Conclusions Serious doubt as to the validity of the product life cycle model as a marketing tool has been raised. The model has been widely criticized, by writers in the academic and business press, for many reasons. For instance, not all sequences of stages in actual sales are consistent with the expected sequence of the model, and products have been seen to experience second lives, a concept not acknowledged by the product life cycle model. Furthermore, many writers have criticized the model since it is difficult to determine at which stage of the cycle the product actually is. The model has also been open to reproach on the grounds that it does not establish the difference between product class, product form and brand. Moreover, products themselves differ according to levels of innovation and price, changes in technology, consumer needs and tastes, and changes in economic circumstances, all of which can influence the life cycle. Although the product life cycle concept has not been tested systematically as a model of sales, probably as a result of this abundance of criticism and subsequent tendency not to take it too seriously, some writers have used the model and based marketing strategies on the assertions and recommendations it makes for each stage. Polli and Cook (1969) offer probably the most thorough examination of the validity of the concept and one of few that actually finds that the concurrence between sales performance and changes in sales of products were concordant with the product life cycle model. Nevertheless, it has been the significance of these factors-which have been raised by critics of the concept-which has led to the questioning of the efficacy of the product life cycle concept as a tool to predict marketing strategies. Evidence set out here suggests that the product life cycle model is useful to monitor sales but its expediency in deciding the fate of products has been strongly challenged. Kotler himself was reported by Wood (1990) as now accepting that the value of the product life cycle for forecasting is limited, while Wood (1990) suggests the product life cycle has fulfilled its purpose. He contends that the product life cycle concept is failing to perform effectively and that in the 1990s the PLC will have little, if anything, to offer marketing education and that teaching the concept will actually constrain marketing management thinking. Mercer (1993a) goes as far as to say that the product life cycle should be eliminated from the marketers vocabulary and is in effect a fallacy (Mercer, 1993b).