PLM
PLM
All products and services have certain life cycles. The life cycle refers to the period from the product’s first launch into the market until its final withdrawal and it is split up in phases. During this period significant changes are made in the way that the product is behaving into the market i.e. its reflection in respect of sales to the company that introduced it into the market. Since an increase in profits is the major goal of a company that introduces a product into a market, the product’s life cycle management is very important.
The product’s life cycle - period usually consists of five major steps or phases:
Product development, Product introduction, Product growth, Product maturity and finally Product decline.
These phases exist and are applicable to all products or services from a certain make of automobile to a multimillion-dollar lithography tool to a one-cent capacitor.
These phases can be split up into smaller ones depending on the product and must be considered when a new product is to be introduced into a market since they dictate the product’s sales performance.
PRODUCT DEVELOPMENT PHASE
Product development phase begins when a company finds and develops a new product idea. This involves translating various pieces of information and incorporating them into a new product. A product is usually undergoing several changes involving a lot of money and time during development, before it is exposed to target customers via test markets. Those products that survive the test market are then introduced into a real marketplace and the introduction phase of the product begins. During the product development phase, sales are zero and revenues are negative. It is the time of spending with absolute no return.
INTRODUCTION PHASE
The introduction phase of a product includes the product launch with its requirements to getting it launch in such a way so that it will have maximum impact at the moment of sale. This period can be described as a money sinkhole compared to the maturity phase of a product. Large expenditure on promotion and advertising is common, and quick but costly service requirements are introduced. A company must be prepared to spent a lot of money and get only a small proportion of that back. In this phase distribution arrangements are introduced. Having the product in every counter is very important and is regarded as an impossible challenge. Some companies avoid this stress by hiring external contractors or outsourcing the entire distribution arrangement. Pricing is something else for a company to consider during this phase. Product pricing usually follows one or two well structured strategies. Early customers will pay a lot for something new and this will help a bit to minimize that sinkhole that was mentioned earlier. Later the pricing policy should be more aggressive so that the product can become competitive. Another strategy is that of a pre-set price believed to be the right one to maximize sales
PRODUCT DEVELOPMENT PHASE
Product development phase begins when a company finds and develops a new product idea. This involves translating various pieces of information and incorporating them into a new product. A product is usually undergoing several changes involving a lot of money and time during development, before it is exposed to target customers via test markets. Those products that survive the test market are then introduced into a real marketplace and the introduction phase of the product begins. During the product development phase, sales are zero and revenues are negative. It is the time of spending with absolute no return.
INTRODUCTION PHASE
The introduction phase of a product includes the product launch with its requirements to getting it launch in such a way so that it will have maximum impact at the moment of sale. This period can be described as a money sinkhole compared to the maturity phase of a product. Large expenditure on promotion and advertising is common, and quick but costly service requirements are introduced. A company must be prepared to spent a lot of money and get only a small proportion of that back. In this phase distribution arrangements are introduced. Having the product in every counter is very important and is regarded as an impossible challenge. Some companies avoid this stress by hiring external contractors or outsourcing the entire distribution arrangement. Pricing is something else for a company to consider during this phase. Product pricing usually follows one or two well structured strategies. Early customers will pay a lot for something new and this will help a bit to minimize that sinkhole that was mentioned earlier. Later the pricing policy should be more aggressive so that the product can become competitive. Another strategy is that of a pre-set price believed to be the right one to maximize sales
GROWTH PHASE
The growth phase offers the satisfaction of seeing the product take-off in the marketplace. This is the appropriate timing to focus on increasing the market share. If the product has been introduced first into the market, (introduction into a “virgin” market or into an existing market) then it is in a position to gain market share relatively easily. A new growing market alerts the competition’s attention. The company must show all the products offerings and try to differentiate them from the competitors ones. A frequent modification process of the product is an effective policy to discourage competitors from gaining market share by copying or offering
similar products. Promotion and advertising continues, but not in the extent that was in the introductory phase and it is oriented to the task of market leadership and not in raising product awareness. A good practice is the use of external promotional contractor. Managing the growth stage is essential. Companies sometimes are consuming much more effort into the production process, overestimating their market position.
Accurate estimations in forecasting customer needs will provide essential input into production planning process. It is pointless to increase customer expectations and product demand without having arranged for relative production capacity.
MATURITY PHASE
When the market becomes saturated with variations of the basic product, and all competitors are represented in terms of an alternative product, the maturity phase arrives. In this phase market share growth is at the expense of someone else’s business, rather than the growth of the market itself. This period is the period of the highest returns from the product. A company that has achieved its market share goal
enjoys the most profitable period, while a company that falls behind its market share goal, must reconsider its marketing positioning into the marketplace.
During this period new brands are introduced even when they compete with the company’s existing product and model changes are more frequent (product, brand, model). This is the time to extend the product’s life. A successful product maturity phase is extended beyond anyone’s timely expectations. A good example of this is “Tide” washing powder, which has grown old, and it is still growing.
DECLINE PHASE
The decision for withdrawing a product seems to be a complex task and there a lot of issues to be resolved before with decide to move it out of the market. Dilemmas such as maintenance, spare part availability, service competitions reaction in filling the market gap are some issues that increase the complexity of the decision process to withdraw a product from the market. Often companies retain a high price policy for
the declining products that increase the profit margin and gradually discourage the “few” loyal remaining customers from buying it. Sometimes it is difficult for a company to conceptualize the decline signals of a product. Usually a product decline is accompanied with a decline of market sales. Its recognition is sometimes hard to be realized, since marketing departments are usually
too optimistic due to big product success coming from the maturity phase. This is the time to start withdrawing variations of the product from the market that are weak in their market position. This must be done carefully since it is not often apparent which product variation brings in the revenues
A Product Manager exists for three basic reasons.
For starters he manages the revenue, profits, forecasting, marketing and developing activities related to a product during its life cycle.
Secondly, since to win a market requires deep understanding of the customer, he identifies unfulfilled customer needs and so he makes the decision for the development of certain products that match the customers and so the markets needs.
Finally he provides directions to internal organization of the company since he can be the eyes and ears of the products path during its life cycle.
To improve a product success during each of its phase of its life cycle (development - introduction – growth – maturity – decline), a product manager must uphold the following three fundamentals.
When responsible for a given Understand how product management works new product, a product manager is required to know about the product, the market, the customers and the competitors, so that he van give directions that will lead to a successful product. He must be capable of managing the manufacturing line as well as the marketing of the product.
Maintain a product / market balance: The product manager as the person that will make a new product to work, needs to understand and have a strong grasp of the needs of the customer / market and therefore make the right decision, on market introduction, product life cycle and product cannibalization. To achieve the above he must balance the needs of the customers with the company’s capabilities. Also he needs to balance product goals with company objectives. The way a product’s success is measured depends on where the product is in its life cycle. So the product manager must understand the strategic company direction and translate that into product strategy and product life cycle position.
Consider product management as a discipline : Managing a product must not be taken as a part time job or function. It requires continuous monitoring and review. Having said that, it is not clear why many companies do not consider product management as a discipline. The answer lies in the fact that product management is not taught as engineering or accounting i.e. does not have formalized training.
To improve a product success during each of its phase of its life cycle (development - introduction – growth – maturity – decline), a product manager must uphold the following three fundamentals.
When responsible for a given Understand how product management works new product, a product manager is required to know about the product, the market, the customers and the competitors, so that he van give directions that will lead to a successful product. He must be capable of managing the manufacturing line as well as the marketing of the product.
Maintain a product / market balance: The product manager as the person that will make a new product to work, needs to understand and have a strong grasp of the needs of the customer / market and therefore make the right decision, on market introduction, product life cycle and product cannibalization. To achieve the above he must balance the needs of the customers with the company’s capabilities. Also he needs to balance product goals with company objectives. The way a product’s success is measured depends on where the product is in its life cycle. So the product manager must understand the strategic company direction and translate that into product strategy and product life cycle position.
Consider product management as a discipline : Managing a product must not be taken as a part time job or function. It requires continuous monitoring and review. Having said that, it is not clear why many companies do not consider product management as a discipline. The answer lies in the fact that product management is not taught as engineering or accounting i.e. does not have formalized training.
