2010-2012

ASSIGNMENT ON: PRODUCT LIFE CYCLE OF ITC LIMITED SUBMITTED TO: PROF. MAHESH SONI SUBMITTED BY: PRIYANK GARG PREKSHA SHUKLA PIYUSH BANERJEE PRIYANKA SONKAR PRACHYA RATHORE

Introduction to PLC
Product life cycle management (or PLCM) is the succession of strategies used by business management as a product goes through its life cycle. The condition in which a product is sold (advertising, saturation) changes over time and must be managed as it moves through its succession of stages. Product life cycle (PLC) Like human beings, products also have a life-cycle. From birth to death, human beings pass through various stages e.g. birth, growth, maturity, decline and death. A similar life-cycle is seen in the case of products. The product life cycle goes through multiple phases, involves many professional disciplines, and requires many skills, tools and processes. Product life cycle (PLC) has to do with the life of a product in the market with respect to business/commercial costs and sales measures. To say that a product has a life cycle is to assert three things:

Products have a limited life, Product sales pass through distinct stages, each posing different challenges, opportunities, and problems to the seller, Products require different marketing, financing, manufacturing, purchasing, and human resource strategies in each life cycle stage.

The four main stages of a product's life cycle and the accompanying characteristics are:

Stage 1. Market introduction stage

Characteristics 1. costs are very high 2. slow sales volumes to start 3. little or no competition 4. demand has to be created 5. customers have to be prompted to try the product 6. makes no money at this stage 1. 2. 3. 4. 5. costs reduced due to economies of scale sales volume increases significantly profitability begins to rise public awareness increases competition begins to increase with a few new players in establishing market 6. increased competition leads to price decreases 1. costs are lowered as a result of production volumes increasing and experience curve effects 2. sales volume peaks and market saturation is reached 3. increase in competitors entering the market 4. prices tend to drop due to the proliferation of competing products 5. brand differentiation and feature diversification is emphasized to maintain or increase market share 6. Industrial profits go down

2. Growth stage

3. Maturity stage

4. Saturation and decline stage

1. 2. 3. 4.

costs become counter-optimal sales volume decline prices, profitability diminish profit becomes more a challenge of production/distribution efficiency than increased sales

PRODUCT LIFE CYCLE MODEL DESCRIPTION The products 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 products sales performance.

Fig. 1: Product Life Cycle Graph

1. 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.

2. 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. A good example of such a launch is the launch of Windows XP by Microsoft Corporation. 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. This has the benefit of testing an important marketing tool such as outsourcing .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. This however demands a very good knowledge of the market and of what a customer is willing to pay for a newly introduced product. A successful product introduction phase may also result from actions taken by the company prior to the introduction of the product to the market. These actions are included in the formulation of the marketing strategy. This is accomplished during product development by the use of market research. Customer requirements on design, pricing, servicing and

packaging are invaluable to the formation of a product design. A customer can tell a company what features of the product are appealing and what are the characteristics that should not appear on the product. He will describe the ways of how the product will become handy and useful. So in this way a company will know before its product is introduced to a market what to expect from the customers and competitors. A marketing mix may also help in terms of defining the targeted audience during promotion and advertising of the product in the introduction phase. 3. 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 competitions attention. The company must show all the products offerings and try to differentiate them from the competitors one. A frequent modification process of the product is an effective policy to discourage competitors from gaining market share by copying or offering similar products. Other barriers are licenses and copyrights, product complexity and low availability of product components. 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 contractors. This period is the time to develop efficiencies and improve product availability and service. Cost efficiency and time-to-market and pricing and discount policy are major factors in gaining customer confidence. Good coverage in all marketplaces is worthwhile goal throughout the growth phase. 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. A company must not make the mistake of over committing. This will result into losing customers not finding the product on the self.

4. 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 elses 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 companys existing product and model changes are more frequent (product, brand, and model). This is the time to extend the products life. Pricing and discount policies are often changed in relation to the competition policies i.e. pricing moves up and down accordingly with the competitors one and sales and coupons are introduced in the case of consumer products. Promotion and advertising relocates from the scope of getting new customers, to the scope of product differentiation in terms of quality and reliability. The battle of distribution continues using multi distribution channels. A successful product maturity phase is extended beyond anyones timely expectations. A good example of this is Tide washing powder, which has grown old, and it is still growing. 5. 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. Such an example is telegraph submission over facsimile or email. Dr. M. Avlonitis from the Economic University of Athens has developed a methodology, rather complex one that takes under consideration all the attributes and the subsequences of product withdrawal process. 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. The prices must be kept competitive and promotion should be pulled back at a level that will make the product presence visible and at the same time retain the loyal customer. Distribution is narrowed. The basic channel is should be kept efficient but alternative channels should be abandoned. For an example, a 0800 telephone line with shipment by a reliable delivery company, paid by the customer is worth keeping.

PLC MODEL FOR ITC LIMITED

If we apply the PLC model to the ITC LIMITED then we find that it is applies in the company also. There is the graph showing the same.

PRODUCT DEVELOPMENT STAGE

INTRO GROWTH MATURITY DECLINE

SALES INNOVATORS EARLY

ADOPTORS

EARLY
MAJORITY

LATE
MAJORITY

LAGGARDS

PROFIT

PRODUCTS CATEGORIZED ACCORDING TO THE STAGE PRODUCT DEVELOPMENT STAGE(Vivel Health Glow Soap) TIME INTRODUCTION (Fiama Di Wills)

GROWTH (John Player, Classmate registers, Mangaldeep Aggarbatti)

MATURITY (ITC Hotels)

DECLINE (Superia, Kitchens of India)

Description: Product development Stage:

Launched in May 2011, Vivel Healthy Glow soap is enriched with the goodness of neem, turmeric and milk cream, promising clear healthy glowing skin by controlling acne-causing germs. Vivel Healthy Glow contains Actipro-N which gives total care through nourishment, protection and moisturisation. This latest addition to the Vivel range is an exquisite mix of traditional and modern ingredients which gives the consumer healthy glowing skin.

Introduction:
In September 2007, ITC launched Fiama Di Wills, a premium range of personal care products comprising shampoos, conditioner, shower gels and bathing bar. The Fiama Di Wills range combines the goodness of nature and science, providing gentle and effective care. The Fiama Di Wills product portfolio has been developed by scientists at the ITC R&D Centre, leveraging the expertise of International product formulation specialists. The fragrances, aesthetics and packaging have been developed in collaboration with European specialists.

Growth:
ITC forayed into the youth fashion segment with the launch of John Players in December 2002 and John Players is committed to be the No. 1 fashion brand for the youth. This foray leverages ITCs proven competencies in understanding consumer insights, brand building and design capabilities. Youth icon & bollywood actor, Ranbir Kapoor is the brand ambassador of John Players. The 'New face of cool' personifies the youthfulness, vibrancy and panache that brand stands for. John Players offers a complete and vibrant wardrobe of Casual wear, Party wear, Work wear, Denims, Outer wear and Suits & Jackets, incorporating the most contemporary trends, an exciting mix of colors, playful styling, trendy textures and comfortable fits. The brand is available across the country through a nation-wide network of over 225 exclusive stores and 1200 multi-brand outlets. At the Images Fashion Awards 2005, John Players was declared 'The Most Admired Shirt Brand of the Year'. At the Images Fashion Awards 2007, John Players was awarded the 'The Most Admired Fashion Campaign of the Year' award.

With Celebration Gift Certificates, John Players presents a new way of festive gifting. Having built a powerful brand portfolio that is making waves across the country, ITC's Lifestyle Retailing is poised to grow and build a dominant presence in the country's fashion industry.

Maturity Stage Product

ITC Hotels is India's second largest hotel chain with over 100 hotels.[1] Based out of Hotels Division Headquarters at the ITC Green Centre in Gurgaon, off New Delhi, ITC Hotels is also the exclusive franchisee of The Luxury Collection brand of Starwood Hotels and Resorts in India.ITC Hotels is regularly voted amongst the best employers in Asia in the hospitality sector. The group today operates under several distinct brands:

ITC - Luxury Collection Hotels WelcomHotel Sheraton Hotels Fortune Hotels, which has 54 hotels with 4446 rooms in 41 cities across India. WelcomHeritage Hotels

The hotel segment of ITC is now experiencing the maturity stage in its product life cycle and the customer adoption mainly constitute early majority and late majority, this statement is justified by the given graph of ITC hotels sales value over last 5 years.

ITC Hotels
1200 1000 Sales (in cr.) 800 600 400 200 0 2007 2008 2009 Year 2010 2011 sales

The graph shows that the companys sales over last 5 years is more or less near to the 1000 cr., the sales is neither much declined nor rise during the last 5 years. So, we can say that the hotel business of ITC including all the brands is on the maturity stage.

Declined Product
Superia Soap
The Superia range of soaps and shampoos has been launched to cater to the large popular market in the personal care category. The products under the Superia brand are made from scientifically developed formulations enriched with natural ingredients that have traditionally been known to be good for the skin and hair. The range offers consumers access to some of the best-in-class products in vibrant attractive packaging. Superia Soaps enriched with natural ingredients give radiant glowing skin. Superia Soaps are available in four variants:

1. Fragrant Flower: with the fragrance of Rose & Lavender Oil 2. Soft Sandal: with the fragrance of Sandal & Almond Oil

3. Natural Glow: with Neem & Coconut Oils 4. Healthy Glow: with Orange Oil The Superia Soap from ITC seems to be on the declining stage the from its introduction couldnt able to make a significant share in the market and now it has reaches to the declining stage. The product is mainly targeted to the SEC 3 class but due to tough competition in the market from other players it has come to the stage of decline. Now, the product is used by the leggards.

An ITC endeavour, Kitchens of India is so much more than just a delicious meal. It entices your taste buds on a mystical voyage through the legacy of authentic Indian gourmet cuisine. Kitchens of India products encompass ancient recipes of India safeguarded and passed down by generations of royal cooks of the Maharajas, capturing the elements of a time when every meal was treated as a grand celebration. With Kitchens of India, the traditional culinary lineage of Indian food has been further perfected by Master Chefs of Indias prestigious ITC hotels - with passion and an eye for detail to deliver nothing short of an enchanting experience. The Kitchens of India delectable treats are crafted with 100% natural ingredients and free of any preservatives. The age-old cooking techniques used by our Master Chefs add a unique taste that captures the essence of a meal that is nothing short of a royal Indian treat. Kitchens of India meals are packaged in keep fresh packs, so that you can enjoy in an instant, what has taken centuries to perfect. Kitchens of India has a strong presence in both the Indian and overseas markets. So, no matter which part of the globe you are in, you can always savor the taste of authentic Indian gourmet cuisine. Through Kitchens of India, ITC presents a selection of gourmet Indian recipes made by the master chefs of ITC restaurants, in a conventional ready-to-eat form. These Indian recipes of gastronomic delights have been handed down through the ages, perfected by the skills of ITC Master Chefs.

Types of customers:There are five different types of customers in the market who adopt the product at different stages of product life cycle. They are as follows:(1)Innovators-These are all those people who adopt the product at its very early stage. They constitute only 2.5% of the total customers market. They are high risk takers, opinion maker, and drivers of the market. (2)Early adopters-They are those who pick product at the second stage of the plc. They move in groups only. They are community leaders and if they reject the product the product will not work. They constitute about 13.5% of the customers. (3)Early majority-They are those who create volume for the company. They are the opinion seekers. They constitute about 34% of the market. (4)Late majority- They constitute about 34% of the market. They are safe players do not want to take any risk. (5)Laggards-They are those people who move in the down to upward direction. They constitute about 16% of the market.

Now, we are trying to overlap the two concepts that are the PLC and the types of customers who adopt them in the different stages of the product life cycle. (1)Product development stage and the innovators:When the product is in the development stage they will be taken by the innovators. For example in case of ITC their new model Vivel Glow Soap is first picked up by the innovators. (2)Introduction stage and the early adopters:When the product is in the introductory stage the product is taken by the early adopters. Like in case of Fiama Di Wills it is first taken by the innovators and now by the early adopters. Because they are the opinion makers and community leaders so they pick the product at the early stage. (3)Growth stage and the early majority:When the product is its growth stage it is taken by the early majority. Like in case with the John Player it is taken by the early majority because they pick the product when the opinion about the product is made so in the growth stage the product become quite popular so they buy the product.

(4)Maturity and the late majority:When the product is in its maturity they are taken by the late majority. Like in case with the ITC Hotels they are now taken up by the late majority. Because they take the product very late once the product becomes very famous. (5)Decline and the laggards:When the product is in its declining stage the product is taken by the laggards because they move in the down to upwards so when the market is exhausted they start to pick up the products. Like Superia Soaps. They are now taken up by the laggards.

THANK YOU