Page 166 - DMGT510_SERVICES_MARKETING

Unit 9: Service Product and Operation

Figure 9.2: Schematised Product Life Cycle Notes

INCUBATION INTRODUCTION GROWTH MATURITY DECLINE POSTMORTEM

Saturation
Point of
Shake Out

SALES/REVENUES Profit Curve
“Me too”
competition

Ideation Point of
Take-Off

T P T S
TIME
Postmortem
Break even
New Product Marketing Point expenditure
Development Costs
Cost
 Sluggish sales  Increasing  Peak sales  Declining  No revenues
 No revenues;  High cost per sales  Cost per revenue  Provisions for
only customer  Cost per customer  Cost per financial
expenditures  Financial losses customer lowest customer reserves
 Ideation and  Innovative falls  Profits high low  Plans for
testing of customers or  Profits rise  Mass market  Profits fall further use of
concepts adopters  Increasing  Stable  Customer facilities as
 Market  Few (if any) no. of number of  base shrinks they have
competitors
Number of
longer life
customers
competitors
planning
 More competitors cycle than
competitors products
necessitating
Conception/Incubation
This is the incubation stage of a service product, called New Product Development. It consists of
the complete activities from ideation, research and development and product testing.
Introduction
This is the stage soon after the launch of the service offer. The public at large is not fully aware
or exposed to the offer. Sales growth or adoption by the market is slow. The potential consumers
display uncertainty and resistance to any new products that are not tried and tested. And those
that would dare to risk sampling the offers would be the experimental, innovators or adopters.
The service firm would be incurring heavy expenditure, without any surge of revenue, only for
building up awareness through different types of promotions. Unlike firms dealing in goods,
service marketers do not have to go through the expenditure of cost of production, storage and
inventory – not unless they have sizable tangible component in their offer (like restaurants).
Neither would they have to bother about such cost drivers as full utilization of production
facilities or the lack of economies of scale at the introduction stage. Nevertheless, at this stage,
the cost of the offers is high and only adroit cash flow management can take the service firm
through to the next stage of the product life cycle.
The normal sequences for any offer to become popular and enduring its trial, or sampling of the
offer — followed by repeat purchases. For intangibles like service products, word-of-mouth
publicity and recommendations anyway plays a major role in bringing in new customers for
sampling. If the service offer is unable to satisfy the customers, there is a dim possibility of any
product surviving the first stage.

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