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Unit 7: New Product Development and Product Life Cycle Strategies

12. ……………………… pricing is a pricing strategy in which the firm sets very high Notes
introductory price for its product.
13. At ……………………… stage of the PLC, the firms try to create a persuasive differentiation
relative to competing brands in that category.
14. Brands like Maggi and Tide are in its ……………………… stage.
15. At ……………………… stage of PLC, most companies have options of either harvesting or
divesting the product.

7.5 Implications and Limitations of Product Life Cycle Concept

Product life cycle concept shows a framework to spot the occurrence of opportunities and threats
in a product market and the industry. This can help firms to reassess their objectives, strategies,
and different elements of marketing programme.
A new product launch requires investment of considerable resource, and most companies have
to contend with substantial short-term losses. During the growth stage, sales rise rapidly and
competition increases, and large investments are required. The company that captures largest
share of the market should have lowest per unit cost because of economies of scale and experience.
If the market-share leader reduces the price, it discourages aspiring new entrants and low-share
firms. Such low-share firms as well as new entrants have not only to invest to take advantage of
market growth but also to increase market share. The “first starter” company is likely to lose
some market share during this stage but its sales keep on increasing.
During the maturity phase, companies with larger market share enjoy the rewards of their
earlier investments. Product price is sufficient to keep even high-cost companies in business
because they do not need investments, as was the case during growth stage. Most competitors
are content with the present position and do not try to increase their market share. Market
leader keeps investing to improve product and attain more efficiency in production, marketing,
and physical distribution.

The major weakness of product life cycle concept is that it is prescriptive in nature and focuses on
strategies based on assumptions about different life cycle stages. Besides, it is difficult to tell
what stage the product is in. A product may seem to have reached the maturity stage but it might
be a temporary phase before it takes another upsurge. It ignores the fact that market forces drive
the PLC reflecting consumer preferences, technology, and competition. Mary Lumpkin and
George Day have strong views that greater emphasis on competitive issues and understanding
the dynamics of competitive behaviour can help better understand how product-market structures
evolve.

Self Assessment

State whether the following statements are true or false:

16. PLC model is based on assumptions and not on reality.
17. It considers the fact that market forces drive the PLC.

7.6 Summary

It is essential for companies to develop new products for the sake of their survival.
Researchers have identified six categories of new products depending on their newness to
the world, to the consumer, or to the company. New products also include repositioned or
upgraded products.

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