Does_Plc_Really_Make_Sense_

Does PLC really make sense' INTRODUCTION PLC (product life cycle), it is well known for a long time both in the studies of general economy and management, and also be widely used in companies. However, why do companies usually uses PLC assessment techniques to assess one product' Does PLC really make sense' This question is the core problem of my report, and my work is to understand what is PLC, to find out the advantages and disadvantages of it, and deal with suggestions for using PLC thinking into the business with real company case. FOCUS ➢ Conceptions of PLC, and its performance ➢ PLC of Wang Lao Ji Tea analysis ➢ PLC’s pro and con BASIC OVERVIEW Conceptions of PLC and its performance A new product progresses through a sequence of stages from introduction to growth, maturity, and decline. This sequence is known as the product life cycle (PLC) and is associated with changes is the marketing situation, thus impacting the marketing strategy and the marketing mix. The product revenue and profits can be plotted as a function of the life-cycle stages as shown in the figure 1: [pic] Figure 1—Product Life Cycle Diagram Source: own analysis and draw on data from John D. Daniels (2004) INTERNATIONAL BUSINESS There are four stage of PLC and each stage reflect different situation and influence marketing mix. Introduction Stage In the introduction stage, the firm seeks to build product awareness and develop a market for the product. The impact on the marketing mix is as follows: • Product branding and quality level is established and intellectual property protection such as patents and trademarks are obtained. • Price may be low penetration pricing to build market share rapidly, or high skim pricing to recover development costs. • Distribution is selective until consumers show acceptance of the product. • Promotion is aimed at innovators and early adopters. Marketing communications seeks to build product awareness and to educate potential consumers about the product. Growth Stage In the growth stage, the firm seeks to build brand preference and increase market share. • Product quality is maintained and additional features and support services may be added. • Price is maintained as the firm enjoys increasing demand with little competition. • Distribution channels are added as demand increases and customers accept the product. • Promotion is aimed at a broader audience. Maturity Stage At maturity, the strong growth in sales diminishes. Competition may appear with similar products. The primary objective at this point is to defend market share while maximizing profit, • Product features may be enhanced to differentiate the product from that of competitors. • Price may be lower because of the new competition. • Distribution becomes more intensive and incentives may be offered to encourage preference over competing products. • Promotion emphasizes product differentiation. Decline Stage As sales decline, the firm has several options: • Maintain the product, possibly rejuvenating it by adding new features and finding new uses. • Harvest the product --- reduce cost and continue to offer it, possibly to a loyal niche segment. • Discontinue the product, liquidating remaining inventory or selling it to another firm that is willing to continue the product. The marketing mix decisions in the decline phase will depend on the selected strategy. For example, the product may be changes if it is being rejuvenated, or left unchanged if it is being harvested or liquidated. The price may be maintained if the product is harvested, or reduced drastically if liquidated. CASE ANALYSIS Company Background I intend to use WANG LAO JI to support my argument. Herbal tea is making of Chinese herb medicine in Guangdong and Guangxi. Until now, WANG LAO JI has 175 years history. Before 2002, WANG LAO JI is a good brand which has a steady sale in Guangdong and Zhenan, it has relatively fixed customers and good income. However, it is now has a lot of problems that should be overcome. Moreover, it has become an obstacle to continued growth even strength companies. Problems ➢ Bad introduction stage with unsuitable marketing strategy ➢ WANG LAO JI cannot walk out of Guangdong ➢ Unclear promote conception PLC of WANG LAO JI In the years when WANG LAO JI has just been launched, not many people knows it and the sales of WANG LAO JI was not good because there were many similar products in market and the prices were much lower than WANG LAO JI, so WANG LAO JI had a hard work to do. While WANG LAO JI’s managers facing such problems, it began to change its sale strategy. When WANG LAO JI’s sales were just about 150 million Yuan at 2002, it suddenly increased to 600 million at 2003, and the following year’s sale was better and better. Now, WANG LAO JI is at maturity stage. The figure 2 shows the PLC of WANG LAO JI. [pic] Figure 2—PCL of WANG LAO JI Source: own analysis and draw on data from Achieve Marketing Consultation From the figure we can find that WANG LAO JI had a not good introduction, it grows slowly and almost going to die. When company saw this situation, it must bring out a new strategy to rescue this product. There are four ways to rescue. They are high price speediness strategy, select penetration strategy, low price speediness strategy, and slowly penetration strategy. WANG LAO JI was used high price speediness strategy, which means use high prices at the same time, with a lot of publicity to promote activities to new products to market. It aimed at the head start, first to capture market, and that the competition has not yet appeared in large numbers until you get to recover the cost and get profit. Therefore, after WANG LAO JI changed its strategy, its sales grow up quickly. Now, WANG LAO JI has its fixed market and stay at maturity stage. Although WANG LAO JI has good sales now, it also should continued develop its product and strategy to adapt market. FURTHER ANALYSIS Advantages From WANG LAO JI we can find that WANG LAO JI used PLC to analyse market and change its strategy in time. So, PLC has a significant advantage that is PLC can provide a range of marketing strategy. It divided product into different period, and marketer can target different characteristics of each stage to take a different marketing mix strategies. Otherwise, PLC is only considered the sale of the product life cycle and time of the two variables that is easy to understand. The figure 3 is showing different strategy in different PLC stages. [pic] Figure 3—Different strategy in different PLC stages Source: own analysis and draw on data from MBAlib Disadvantages While we are talking about the pro of PLC, we also should pay attention to its con. In generous, six main parts of con are collected. • Product at decline stage does not mean that cannot be recycled. Such as through the appropriate improvement strategy, the company may scale new product life cycle. For example, KAWAI Kanyu Drop has a complete PLC in Japan, so the company changes their target market to China, and continued its PLC. Therefore, PLC just can measure products a part of life cycle. • Various stages of product life cycle criteria for the classification are not easy to confirm starting and ending points. • Not the entire product life cycle curve is the standard S-type, and there are many special product life cycle curves. Such as Style PLC, Fashion PLC, Fad PLC and Scallop PLC, shows at follows figure 4. [pic] Figure 4—four special PLC style Source: own analysis and draw on data from Lyndon Sinmkin (1996) MARKETING Fourth European Edition a) Style, It is a basic feature of human life, but prominent expression. Once a style has been produced, it might last for generations, and according to people's interest, it presents a circular pattern of recycling. Sometimes be popular, but sometimes not. b) Fashion, it is popular to people for one field recently. The point of fashion PLC is when it just enters the market, few people can accept it, but along with the time past, more and more people can accept it and like it. Finally, this fashion will passed and people beginning to focus on another fashion. c) Fad, it is a menacing and soon attracted public attention in the fashion, commonly known as the fad. It always comes and grows fast and also goes fast. Mainly because of it is only momentary to meet human curiosity and needs. d) Scallop, a PLC which shows continued to extend. This is often because of product innovation or discovery of new uses from time to time. • Cannot determine the product life cycle is suitable for single product items or mix product items. • The curve only considers the relationship between sales and time, not related to costs and prices and other variables that effect sales. • Easily lead to "marketing myopia” that the products have been premature to recession and the market value will still have a good product removed from the product line. For example, McDonald’s ice-cream, deleted the popular products too early and change new products too fast that customer cannot be accept in time. COMMENT AND SUGGESTIONS WANG LAO JI is a good example for using PLC, the key points of its success are: Firstly, in introduction stage, WANG LAO JI managers make a good position for it. Secondly, in growth stage, the managers make a good brand for WANG LAO JI and improve products, increase product variety and service assurance. This stage promotes the development of WANG LAO JI. Thirdly, in Maturity Stage, the managers’ focus on maintaining market share and now WANG LAO JI is still full of energetic. Although WANG LAO JI have not go to decline stage, the managers still have to proper to use of PLC to keep its market share, because PLC can be extend. Moreover, not only WANG LAO JI is a good example for used of PLC, both DA JIA LE restaurant and PIZZA HUT are used PLC flexibly, they always collected different way’s information and then according to these information to make marketing strategy in different life stagy. Every time when PIZZA HUT launches a new product, it will focus on its introduction stage and growth stage, if it has good sales, PIZZA HUT might retain this product for a period time. Otherwise, PLC is not a panacea, when company wants to make a forecast or a new strategy, it should use different kinds of method to do it together. Then, more complete and comprehensive marketing strategy will comes out. CONCLUSION Product life cycle theory reveals that any products are the same as organisms, from introduction - growth - maturity - decline of the process, and continued innovated, developed new products. With product life cycle, we can analyse and judge the product life cycle at which stages, speculated that the trend of the future development of products, and life products in the market correctly. Furthermore, it also can accord the characteristics of different stages to take the appropriate marketing mix strategies, and enhance their competitiveness, improve the economic efficiency of enterprises. To sum up, PLC is certainly a useful method in management, it does really make sense, but it cannot use to do all the forecast and strategies. Because, everything has it pro and con, so we should treat them with Confucius Dialectical Thinking. REFERENCE Lyndon Sinmkin (1996) MARKETING Fourth European Edition, London JOHN D. DANIELS, LEE H. RADEBAUGH (2004) INTERNATIONAL BUSINESS TENTH EDITION, PEARSON Suomala P. (2004) ‘The Life Cycle Dimension Of New Product Development Performance Measurement’, International Journal of Innovation Management Narayanan, S., et al. (2005) ‘Temporal differences in the role of marketing communication in new product categories’, Journal of Marketing Research Dr. Louis R. Nudy President, Eco PerformanceTM Ltd. Product Life Cycle Issues Analysis VOLPATO Giuseppe and STOCCHETTI Andrea Ca’ Foscari University, Faculty of Economics Dept. of Business Economic and Management Venezia – Italy (2010) [Online] Available, http://www.gerpisa.univ-evry.fr/rencontre/16.rencontre/GERPISAJune2008/Colloquium/Papers/P_Volpato-Stocchetti%20paper.pdf QuickMBA Marketing (2010) the product life cycle [Online], Available, http://www.quickmba.com/marketing/product/lifecycle/ [1999-2007] Yahoo (2010) Why do companies extend the product life cycle' [Online], Available, http://uk.answers.yahoo.com/question/index'qid=20100313114159AA1niur [Mar, 2010]