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Presented By:
Afrin Pathan
Tokir Patel
Shatmeen Raoter
Presented to:
Prof. Faisal Memon
The Development
Stage:
Initial Ideas possibly large number
Introduction/
Launch:
Advertising and promotion campaigns
Target campaign at specific audience?
Monitor initial sales
Maximise publicity
High cost/low sales
Length of time type of product
Introductory Phase
Sales
Sales
Low
Low sales
sales
Costs
Costs
High
High cost
cost per
per customer
customer
Profits
Profits
Negative
Negative
Product
Product
Create
Create product
product awareness
awareness
and
and trial
trial
Offer
Offer aa basic
basic product
product
Price
Price
Use
Use cost-plus
cost-plus
Distribution
Distribution
Build
Build selective
selective distribution
distribution
Advertising
Advertising
Build
Build product
product awareness
awareness among
among
early
early adopters
adopters and
and dealers
dealers
Marketing
MarketingObjectives
Objectives
Growth:
Increased consumer awareness
Sales rise
Revenues increase
Costs - fixed costs/variable costs, profits may
be made
Monitor market competitors reaction?
Growth Phase
Sales
Sales
Rapidly
Rapidly rising
rising sales
sales
Costs
Costs
Average
Average cost
cost per
per customer
customer
Profits
Profits
Rising
Rising profits
profits
Marketing
Marketing Objectives
Objectives
Maximize
Maximize market
market share
share
Product
Product
Offer
Offer product
product extensions,
extensions, service,
service,
warranty
warranty
Price
Price to
to penetrate
penetrate market
market
Price
Price
Distribution
Distribution
Advertising
Advertising
Build
Build intensive
intensive distribution
distribution
Build
Build awareness
awareness and
and interest
interest in
in
the
the mass
mass market
market
Maturity:
Sales reach peak
Cost of supporting the product declines
Ratio of revenue to cost high
Sales growth likely to be low
Market share may be high
Competition likely to be greater
Price elasticity of demand?
Monitor market changes/amendments/new strategies?
Maturity Phase
Sales
Sales
Peak
Peak sales
sales
Costs
Costs
Low
Low cost
cost per
per customer
customer
Profits
Profits
High
High profits
profits
Marketing
MarketingObjectives
Objectives
Maximize
Maximize profit
profit while
while defending
defending
market
market share
share
Product
Product
Diversify
Diversify brand
brand and
and models
models
Price
Price
Price
Price to
to match
match or
or best
best competitors
competitors
Distribution
Distribution
Advertising
Advertising
Build
Build more
more intensive
intensive distribution
distribution
Stress
Stress brand
brand differences
differences and
and
benefits
benefits
Saturation:
New entrants likely to mean market is flooded
Necessity to develop new strategies becomes more
pressing:
Searching out new markets:
Linking to changing fashions
Seeking new or exploiting market segments
Linking to joint ventures media/music, etc.
Developing new uses
Focus on adapting the product
Re-packaging or format
Improving the standard or quality
Developing the product range
Effects of Extension
Strategies
Time
Decline Phase
Sales
Sales
Declining
Declining sales
sales
Costs
Costs
Low
Low cost
cost per
per customer
customer
Profits
Profits
Declining
Declining profits
profits
Marketing
Marketing Objectives
Objectives
Product
Product
Reduce
Reduce expenditure
expenditure and
and milk
milk the
the
brand
brand
Phase
Phase out
out weak
weak items
items
Price
Price
Cut
Cut price
price
Distribution
Distribution
Advertising
Advertising
Go
Go selective:
selective: phase
phase out
out
unprofitable
unprofitable outlets
outlets
Reduce
Reduce to
to level
level needed
needed to
to retain
retain
hard-core
hard-core loyal
loyal customers
customers
What is Life
Cycle Costing?
Accumulated
cost
Over product
life
Research and
development
To Removal
Definition
The term Life Cycle Cost has been defined as follows, it
includes the costs associated with acquiring, using, caring
for and disposing of physical asset including the
feasibility studies, research, design, development,
production, maintenance, replacement and disposal as well
as support, training and operating costs generated by the
acquisition use, maintenance and replacement of
permanent physical assets.
Today's manufacturing environment should provide
flexibility, reduction of product cycle time, and reduction
of time to market.
Development
Introduction
Growth
Maturity
Decline
Key Concept
PRODUCT
PLANNING &
DESIGN STAGE
MANUFACTURING
&
SALES STAGE
SERVICE
&
ABANDONMENT
STAGE
Stages of PLC
Manufacturing stage
Witnesses both growth and maturity in sales. All the manufacturing,
marketing, selling and distribution costs are incurred at this stage
Illustration 1
Total
R&D
300
300
Design
200
200
Product Costs
75
90
90
255
Marketing Costs
70
50
30
150
Distribution Costs
20
27
24
71
15
23
30
68
Graph
Sales and
Profits ($)
Sales
Profits
Time
Product Introduction
Developme
nt
Losses/
Investments ($)
Growth
Maturity
Decline
Development
Cost Incurred
No Revenue
Loss Making
Large % total Cost
Trying to minimize
Introduction
Introduction
Introduction to market
Unknown
Marketing
Required
Cost incurred
Advertising /
Marketing
Training
Production /
Distribution
Growth
Growth
Revenues
Build
Move into
Profit
Economie
s of scale
Costs
Inventory
Holding
Productio
n/
Distributio
n
Maturity
Demand Slows
Maturity
Reduce Marketing
Decline
Low demand
Market looses Interest
Long Phase
Illustration II
Year
Development
R&D
Growth
Maturity
Decline
50
40
20
200
Marketing Cost
($ million )
Production Costs
Total
Intro
$4 x 2m = $3.50 x 5m $3 x 10m
$8m
=$17.5m
=$30m
200
58
57.5
50
( 200+58+57.5+50+16.8)
(2+5+10+4 )
(382.3/21)
$3.20 x 4m
= $12.8m
16.8
382.3
21
$18.20
Implications
Pricing
Performance
Traditional
Upto 90 % costs
in R&D
Life Cycle
Track Costs
through life cycle
Focus on early
decisions
Minimize time to
market
1. Traditional
Traditional
In period incurred
2. Life Cycle
Advantages
Efficient resource
allocation
Advantages
Track Cost to
products
R&D
ID Relationship
between
Ultimate Cost
Thank You..