Effectively Managing Existing Products

           Effectively Managing Existing Products



If you are not clear on where your product is on the product life cycle curve, it is all too easy to misstep when managing the marketing mix. For example, it is a waste of resources to make a big investment in cost reducing a product that is at end of its life. This article helps you to determine where your product is situated on the life cycle curve in order to devise the appropriate strategies and tactics to optimize the financial and market performance of your product.


Product managers and marketing managers usually have a sense of how their products are performing in the markets in which they operate. They draw conclusions from sales data or data, some of which is derived internally, some obtained from analyst reports, and some received from other sources. Here are some questions to be pondered:


     1) How do you really know where your product rests along the life cycle curve?
     2) Are you making adjustments to the marketing mix that are inappropriate for the
        product’s actual stage in its life cycle?


In some cases, products have been on the market for many years. Those who are assigned responsibility for the day-to-day management of those products may not have been associated with the product from the beginning, therefore, a complete picture of the performance of the product may not be available. Their perspective may be blurred by the fact that the only data available is current data and ‘recent past’ data. Products in the very early stages of the product life cycle may not require sophisticated measures in adjusting the marketing mix. More mature products on the other hand, tend to be more
difficult to assess, therefore, tactical recommendations need to be carefully considered. Many organizations wrestle with the problem of determining the level of market maturity of a given product. This, in turn, may lead to undertaking undue levels of innovative activity, when all that might be needed is re-packaging and re-positioning, along with some promotional investment.

The problem then, is finding out how far the product has progressed along the life cycle curve within the context of the life cycle of the market, and being able to determine whether the adjustment of marketing mix elements is sufficient, or if a greater level of R&D is needed to invest in an entirely new generation of product. We suggest that companies make these life cycle state assessments by understanding the historical performance of their products. The data needed to conduct these assessments could include some or all of the following: unit volumes, pricing, revenue, cost of goods, level of direct expenses, and overall product profitability. Product profitability is one of the most important determinants of product performance. Our experience in working with many companies is that product profitability seems to be difficult to determine. One reason is that financial systems don’t report at the product level. Further, there are situations where product level reporting is available, but operating departments mis-allocate expenses, thereby burdening one or more product lines which understates product profitability. In other instances where the data exists, no one is routinely examining the data. In a recent survey, we found that about 32% of respondents did not regularly review their product line financials.




If you continue to have trouble gathering product profitability data, you might consider approaching your accounting department to view the balance sheet section of the general ledger. You can attempt to view the invoices for goods and services billed (accounts receivable). You can look at the line items which include: customer names, ship dates and billing information (this is called the ‘order-to-cash’ cycle). From this data, you can create product sales and volume profiles to create your life cycle curves. Another method to determine the level of product maturity is to examine the history of cost reduction efforts. If no cost reduction programs have been undertaken, then perhaps the product isn’t very mature. Cost reductions can be understood by examining each individual business function impacting the development or on-going support of
existing products. For example, if the product is tangible, you might examine the purchasing history, manufacturing costs, or other supply chain elements. This involves working closely with your manufacturing, supply chain, or sourcing organizations. Also, the change in gross margin, over time, as a percentage of revenue may be a good indicator of a product’s current life cycle status.




A third method of determining how far down the product is in its life cycle is to review any quality improvement initiatives which may have been undertaken, or are currently underway. If your company has adopted programs like QFD (Quality Function Deployment), Six Sigma, etc., it’s usually an indication that the organization has determined that there is ample information on processes, practices, or routines to put the particular product, or product area under the quality improvement microscope. Newer products (early stage) are probably not candidates for extensive process reviews.
In order for the product team to get its hands around the issue of life cycle state, here are some action plans  to consider:

 Gather historical data – Construct life cycle curves based on revenue, unit sales, profitability, cost, gross margin, market share, and any other pertinent information that you can gather for as many years into the past that you can. If this
information does not exist at the product level, work with your financial organization to obtain it on a going forward basis. Use tables and graphs to portray the data.


Assess historical marketing mix elements – Try to figure out what kinds of changes to the marketing mix took place in the past, and to correlate shifts in the curve(s) with those tactical moves. Use colorful graphics to point to places where
obvious shifts in the curve took place. One method is to examine the history of product introductions or improvements to determine if there was a desired increase in unit volumes or revenue associated with each introduction. Another example is to determine the impact on sales, web traffic, or call center volumes resulting in the execution of advertising and promotional programs.


 Look closely at the marketplace – Establish a series of marketplace conditions (e.g., the percentage changes in sales or unit volumes) and resulting tactical moves that you can adopt in order to adjust the levers of the marketing mix, which can stimulate demand and drive revenue. These should be articulated in current and future product plans, and documented for future reference.

To summarize the whole article, organizations who understand where their products rest along the life cycle curve are in a better position to take the appropriate actions needed to optimize the performance of their existing products or to determine whether new innovative activities are called for to evolve the product line.