Analysis of Product Life Cycle

Abstract:

Product life cycle (PLC) is categorization of a product in various phases of its life cycle. Starting from its introduction, to growth, maturity, and lastly decline stage. The research investigates the key internal contributors for each stage of the PLC, their significance as well as the relevant strategies that should be used at each stage of PLC. The purpose of this research was to investigate and record the current life cycle stages of some products of the Patanjali Ayurveda Limited (PAL) utilizing Boston Consulting Group (BCG) matrix of the product life cycle theory. In addition, an analysis was conducted of the management strategies used by the Patanjali Ayurveda Limited (PAL) for its different products in the different stages of the life cycle. The research was conducted by collection of the sales data of the patanjali group products of a particular region and with the help of the BCG matrix the results were obtained. The recommendations and suggestions were given to the distributors of products of Patanjali for further improvement in sales.

Keywords: Product life cycle (PLC), BCG Matrix, Management Strategies, Patanjali Ayurved Limited (PAL), Patanjali products

1. Introduction

When a new product is being introduced into a market, it normally undergoes a series of stages in the market; these stages are introduction, growth, maturity and lastly the decline stage. These steps follow each other chronologically and thus referred to as the product life cycle (PLC). The product can be defined as goods, services or both; in other words, it's anything that satisfies a customer need. Each product has its own duration of life, however it shares the same aspect and we define the period which the product goes through as the "Product Life Cycle".

The PLC sequence is closely linked with the dynamics in the market environment and has subsequent effects on the product marketing mix and marketing strategies. Marketing is about creating markets by satisfying target customer needs and wants better than other competitors in the market. Marketing is all about product, the product is a bundle of satisfaction that a customer buys. The marketing definition of a product is more than just what the manufacturer apprehends it to be.

2. Literature Review

The  product  life  cycle  concept  represents  a  core  element  of marketing  theory  and  has  been  so  for  the  past  40  years. According  to  Kotler  (2000:  315),  Walker,  Boyd  &  Larréché (1999: 146) and Churchill & Peter (1998: 234) every product or  service  has,  by  definition,  a  life  cycle  and  how  this  is managed  is  the  key  to  survival  in  business.  The  product  life cycle  has  represented  a  central  element  of  marketing  theory for  four  decades,  from  its  development  in  the  1950s,  and  its subsequent popularization in the 1960s. The product life cycle  concept  has  remained  a  stable  feature  of  marketing teaching, despite evidence of its limited applicability.

Mercer (1993: 269) states that the product life cycle theory has been subjected to relatively little public criticism and only 20 percent of 271 papers published on this subject between 1971 and 1991 undertook further research into this subject and challenged its basic assumptions. Grantham (1999: 4) posits that attempts to validate the life cycle concept on an empirical basis have been restricted by the lack of definition as to which life is being examined, since different authors have different understandings of the product life cycle concept.

3. Research Objectives

• To study the product life cycle of the Patanjali products and determine its stage with the implementation of BCG matrix.
  
• To study the management strategies of the product implemented by the company.
  
• To identify the future prospects of the company in comparison to other leading MNCs.
  
  
  

4. Theoretical Framework

4.1 Product Life Cycle 

The traditional PLC theory is defined by the pattern of sales or revenues against time, which is generally assumed to adopt a bell-like shaped curve, developed by Steffens & Kaya in 2008. The PLC can be divided into four key life stages, which are: introduction, growth, maturity, and decline, each representing a different level of sales volume as shown in figure 1

Figure 1: The traditional product life cycle model

• Introduction Stage
  In this stage, the company builds product awareness and develops a market for the product, and launches the product into the market. The size of the market for the product is small, which means sales are low, though the sales will be increasing. On the other hand, the cost of things like research and development, consumer testing, and the marketing needed to introduce the product can be very high, especially if it's a competitive market.
  
• Growth Stage
  The growth stage is usually characterized by a strong growth in sales and profits, and because the company can start to benefit from economies of scale in production, the profit margins, as well as the overall amount of profit, will increase. In this stage, the company builds brand preference and increases its market share.
  
• Maturity Stage
  During the maturity stage, the product is established in the market and now the manufacturer aims to maintain the market share they have built up. This is probably the most competitive time for most products and businesses as they need to invest wisely in any marketing they undertake.
  
• Decline Stage
  In this stage sales decline. This shrinkage may be because of various factors like, due to the market becoming saturated or because the consumers are switching to a different type of product. To overcome this, the firms either reduce the cost to continue or quit from the market.
  
  

4.2 Boston Consulting Group (BCG) Matrix

The growth–share matrix (BCG-matrix, Boston matrix, Boston Consulting Group analysis, portfolio diagram) is a chart that was created by Bruce D. Henderson for the Boston Consulting Group in 1970 to help corporations to analyze their business units. The Boston Matrix is a business model which analyses the goods or services of a business in terms of their share of the market, which also takes into account the rate of growth the market is currently experiencing. Using this method, a business can quickly evaluate where each of their individual products lies in their own market.

Figure 2: BCG Matrix

a) A star (named after "rising star") has both high market share and high market growth. A star product enjoys increasing sales revenue, but because it's a growing market, competitors are attracted to it. This results in the company spending a great deal on promotion, and might involve the business in high capital investment to increase the capacity.

b) Cash cows (with high market share in a low market growth) often exist in established markets that have reached maturity stage. The low rate of market growth reduces competition, so it is possible to spend less on advertising. A high proportion of cash cows are ideal for companies seeking high profits, but firms with cash cows will try to develop new products in order to enter high-growth markets.

c) Question marks (or problem children) are competing in a competitive market, with a low market share and high market growth. Because the market is growing, there is the possibility of increasing future sales, even if the product does not increase its market share. Many new products are problem children at first, as they tend to need large amounts of market research and promotion in order to succeed. If successful, they become stars or cash cows.

d) A dog has a low market share and is in a low-growth market. Businesses need to think carefully about retaining such products in the market, as they offer little scope for profit-making. During recession, these products will be dropped. However, these products should not be so simply written off.

4.3 Relation between Product life cycle and BCG matrix

a) There exists a relationship between product life cycle of a product and BCG matrix:

• If a product falls in the category of question mark in the BCG matrix, then the product is in its introduction stage of the PLC.
  
• If a product falls in the category of Star in the BCG matrix, then the product is in its growth stage of the PLC.
  
• If a product falls in the category of Cash Cow in the BCG matrix, then the product is in its mature stage of the PLC.
  
• If a product falls in the category of Dog in the BCG matrix, then the product is in its decline stage of the PLC.

Figure 3: Relationship b/w PLC and BCG Matrix

5. Data Analysis and Interpretation

The Patanjali products which have been considered for study are;

a) DANTKANTI

b) GHEE

c) ATTA

Sales data of Patanjali Ghee Sales Data was collected from the distributor of the study region (INDORE) of the above patanjali products with the help of the questionnaire. Sales Data of other rival companies from the market was also collected from the above category of the product i.e. toothpaste, ghee and Atta noodles respectively by preparing a questionnaire.

5.1 Formula

Following formula is used for the calculation purposes:

a) Relative Market Share(RMS)

RMS = $\dfrac{Business \; Unit \; Sales  \; this \; year} { Leading \; rival \; sales \; this  \; year}$

b) Market Growth Rate (MGR)

MGR = $\dfrac{ Individual \; Sales \; this \; year - Individual \; sales \; last  \; year  }{Individual \; sales \; last \; year}$

5.2 Dantkanti

Table 1: Sales data of Dantkanti

Table 2: Calculation of relative market share for Dantkanti

Figure 4: Graph Obtained from Above Data

5.3 GHEE

Table 3: Sales data of Patanjali Ghee

$MGR = \dfrac{7400000 -680000}{7400000} = 8.1 \%$

Table 4: Calculation of relative maket share for Patanjali ghee

Figure 5: Graph Obtained from Above Data

5.4 ATTA Noodles

Table 5: Sales data of Atta Noodles

$MGR = \dfrac{134000 - 126000}{134000} = 6.6 \%$

Figure 6: Graph Obtained from Above Data

5.5 Results

The results of all of the three products are obtained from the data analysis and graph. Result obtained is as follows

Table 7: Results obtained from analysis

6. Management Strategies of Patanjali Group

• Promotional Strategies
  • Baba Ramdev himself as the brand ambassador of PAL highly affects the advertisement sector as he has a huge following in all sectors of media.
  • Yoga shows all over the country helps in promoting patanjali products.

• Product Strategies
  • Brand Image- Ayurvedic and herbal product that has no harmful chemicals.
  • 100% natural and herbal products.
  • Swadeshi Products- One of the key factors for the success of patanjali products.
  • It also strengthens the Indian economy by replacing foreign product with Indian product.
  • Promoting "MAKE IN INDIA" campaign.

• Pricing Strategies
  
  • Patanjali products are 10-15% cheaper than other FMCG products.
    

7. Suggestive Strategies for Future

a. Improvement in packaging of the products as they lack attractiveness in case of many patanjali products. Packaging does not attract materialistic people.

b. More outlet stores should be opened as products are not easily available to the consumer.

c. Focus on Exports; Patanjali has largely focused on catering to the domestic market. Exports thus remain to be a very low fraction of the total sales. It is thus imperative to focus on exporting products using Indian operations as sourcing hub for the same

d. Most of the revenues generated by the Patanjali group are from some of its mainline products such as ghee, honey, Dantkanti etc., so it should also focus more on the other products so as to generate maximum revenue for the company.

e. Product availability must also be improved, as shortage of products is many times indicated by the customers.

8. Conclusion

From the analysis, it has been finally concluded that Dantkanti and Patanjali Ghee are at the growth stage while Patanjali Atta noodles is at the introductory stage of its launch. Suggested strategy can be implemented so that these products can proceed to their individual next stages. PAL is one of the fastest growing FMCG in our country. In the last fiscal year it generated a 100% increase in revenue and they are expecting 100% increase in its revenue this year also.

Source: Gurdeep Singh Saluja and Dr. Devendra S. Verma, https://www.ijser.in/archives/v5i7/IJSER151589.pdf
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