Product Life Cycle of Pharmaceutical Products

Product life cycle: The product life cycle is the course of a product sales and profits.
It involves four stages:

1. Market introduction stage

2. Growth stage
3. Maturity stage
4. Saturation and decline stage

Product life cycle marketing strategy: Product life-cycle marketing strategy is the
succession of strategies used by business management as a product goes through its life-
cycle.

A company’s positioning and differentiation strategy must change as the product,

market, and competitors change over the product life cycle. A product has a life cycle
to assert four things:

1. Products have a limited life.

2. Product sales pass through distinct stages, each posing different challenges,
opportunities, and problems to the seller.
3. Profits rise and fall at different stages of the product life cycle
4. Products require different marketing, financing, manufacturing, purchasing, and
human resource strategies in each life cycle stage.

Marketing strategy: Marketing strategy is a process that can allow an organization

to concentrate its limited resources on the greatest opportunities to increase sales and
achieve a sustainable competitive advantage.

Marketing strategies in different stages: Marketing strategies in different stages

Introduction stage:

• Sales growth tends to be low because it takes time to roll out a new product, work
out the technical problems, fill dealer pipelines and gain consumer acceptance.
• Profits are negative or low.

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 Product Life Cycle of Pharmaceutical Products

• Promotional expenditures are at their higher ratio to sale because of the need to
inform potential consumers, induce product trial and secure distribution in retail
outlets.
• Firms focus on those buyers who are the most ready to buy, usually higher income
groups.
• Prices tend to be high due to high costs.

Growth stage:

• Rapid increase in sales.

• Early adopters like the product and additional consumers start buying it.
• New competitors enter, attracted by the opportunities. They introduce new product
features and expand distribution.
• Companies maintain their promotional expenditures at the same or at a slightly
increased level to meet competition and to continue to educate the market.
• Public awareness increases.
• Sales rise much faster than promotional expenditure, thus profits begins to
increase.

During this stage, the firm uses several strategies to sustain rapid market growth:

• It improves product quality and adds new product features and improved styling.
• It adds new models and flanker products (i.e., product of different sizes, flavors
and so forth that protect the main product).
• It enters new market segments.
• It increases its distribution coverage and enters new distribution channels.
• It shifts from product-awareness advertising to product-preference advertising.
• It lowers prices to attract the next layer of price-sensitive buyers.

In this stage, a firm faces a trade-off between high market share and high current profit.

Maturity stage:

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 Product Life Cycle of Pharmaceutical Products

• Costs are lowered increasing production.

• Sales volume peaks and market saturation is reached.
• Increase in competitors entering the market.
• Prices tend to drop due to the proliferation of competing products.
• Brand differentiation and feature diversification is emphasized to maintain or
increase market share.
• Industrial profits go down.

Saturation and Decline stage:

• Sales decline due to technological advances; switching of consumer tastes to

other products and increased domestic and foreign competition.
• As sales and profits decline, some firms withdraw from the market. Those
remaining may reduce the number of products they offer. They may withdraw
from smaller market segments and weaker trade channels and they may cut their
promotion budgets and reduce prices further.

In declining industries, five strategies are available to the firm:

• Increasing the firm’s investment (to dominate the market or strengthen its
competitive position).
• Maintaining the firm’s investment level until the uncertainties about the
industry are resolved.
• Decreasing the firm’s investment level selectively, by dropping unprofitable
customer groups while simultaneously strengthening the firm’s investment in
lucrative niches.
• Harvesting the firm’s investment to recover quickly.
• Divesting the business quickly by disposing of its assets as advantageously as
possible.

The appropriate strategy depends on the industries relative attractiveness and the
company’s competitive strength in that industry.

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 Product Life Cycle of Pharmaceutical Products

Market-follower strategies: Many companies prefer to follow rather than challenge

the market leader. Parallelisms are common in capital-intensive, homogeneous-product
industries such as steel, fertilizers and chemicals.

A market follower must know how to current customers and win a fair share of new
customers. Each follower tries to bring distinctive advantages to its target market-
location, services, financing. The follower must keep its manufacturing costs low and
its product quality and services high. It must also enter new markets as they open up.
The follower has to define a growth path.

The market follower must follow the following four strategies:

1. Counterfeiter: The counterfeiter duplicates the leader’s product and package and
sells it on the black market or through disreputable dealers. For example, music
record firms, apple computer etc.
2. Cloner: The cloner emulates the leader’s products, name and packaging with slight
variations. For example,
3. Imitator: The imitator copies some things from the leader’ but maintains
differentiation in term of packaging, advertising, pricing or location. The leader does
not mind the imitator as long as the imitator does not attack the leader aggressively.
For example,
4. Adapter: The adapter takes the leader’s products and adapts or improves than them.
The adapter may choose to sell to different markets, but often the adapter grows into
the future challengers. For example,

Market-challenger strategies: Many market challengers have gained ground or even

overtaken the leader. For example, Toyota today produces more cars than General
motors.

A market challenger must first define its strategic objective. Most aim to increase
market share. The challenger must decide whom to attack:

1. It can attack the market leader. This is a high-risk but potentially high-payoff
strategy and makes good sense if the leader is not serving the market well. The
alternative strategy is to out-innovate the leader across the whole segment.
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 Product Life Cycle of Pharmaceutical Products

2. It can attack firms of its own size that are not doing the job and are
underfinanced. These firms have aging products, are charging excessive prices
or are not satisfying customers in other ways.
3. It can attack small local and regional firms. Several major banks grew to their
present size by gobbling up smaller regional banks.

If the attacking company goes after the market leader, its objective might be to gain a
certain share. If the attacking company goes after a small local company, its objective
might be to drive that company out of existence.

Attack strategies: There are five attack strategies:

1. Frontal attack
2. Flank attack
3. Encirclement attack
4. Bypass attack
5. Guerrilla attack

1. Frontal attack: In a frontal attack, the attacker matches its opponent’s product,
advertising, price and distribution. A modified frontal attack such as cutting price face
to face the opponents can work if the market leader does not retaliate and if the
competitor convinces the market that its product is equal to the leaders.

2. Flank attack: A flank attack can be directed along two strategic dimensions-
geographic and segmental. In a geographic attack, the challenger spots areas where the
opponent is underperforming.

3. Encirclement attack: The encirclement maneuver is an attempt to capture a wide

slice of the enemy’s territory through a blitz. It involves launching a grand offensive on
several fronts.

4. Bypass attack: Bypass attack is the most indirect assault strategy. It means bypassing
the enemy and attacking easier markets to broaden one’s resource base. This strategy
offers three lines of approach: diversifying into unrelated products, diversifying into

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 Product Life Cycle of Pharmaceutical Products

new geographical markets and leapfrogging into new technologies to supplant existing
products.

5. Guerrilla attack: Guerrilla attack consists of waging small, intermittent attacks to

harass and demoralize the opponent and eventually secure permanent footholds. The
guerrilla challenger uses both conventional and unconventional means of attack. These
include selective price cut, intense promotional blitzes and occasional legal action.

Market-leader strategies: A market-leader may follow the following strategies:

1. Expanding the total market

2. Defending the market share
3. Expanding the market share

1. Expanding the total market: The dominant firm normally gains the most when the
total market expands. For example, if American increases their consumption of ketchup,
Heinz gains the most because it sells almost two-thirds of this country’s ketchup.

In general, the market leader should look for new customers or more usage from existing
customers.

New customers: Every product class has the potential of attracting buyers who are
unaware of the product or who are resisting it because of price or lack of certain features.
A company can search for new users among three groups: those who might use it but
do not (market-penetration strategy), those who have never used it (new-market
segment strategy), or those who live elsewhere (geographical-expansion strategy).

More usage: Usage can be increased by increasing the level or quantity of consumption
or increasing the frequency of consumption. The amount of consumption can sometimes
be increased through packaging or product design. Larger package sizes increase the
amount of product that consumers can use at one time.

2. Defending the market share: The dominant firm must continuously defend its
current business to expand total market size. The market leader can defend its market
share by continuous innovation. The leader leads the industry in developing new
product and customer services, distribution effectiveness and cost cutting.

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 Product Life Cycle of Pharmaceutical Products

A dominant firm can use six defense strategies:

Position defense: Position defense involves occupying the most desirable market space
in the minds of the customers, making the brand almost impregnable.

Flank defense: The market leader should also erect outposts to protect a weak front or
possibly serve as an invasion base for counterattack.

Preemptive defense: A more aggressive maneuver is to attack before the enemy starts
its offense. A company can launch a preemptive defense in several ways. It can wage
guerrilla action across the market or it can try to achieve a grand market envelopment
or it can send out market signals to dissuade competitors from attacking or it can
introduce a stream of new product.

Counteroffensive defense: When attacked, most market leaders will respond with a
counterattack. In a counteroffensive the leader can meet the attack frontally or hit its
flank or launch a pincer movement.

Mobile defense: In mobile defense, the leader stretches its domain over new territories
that can serve as future centers for defense and offense through market broadening and
market diversification.

Contraction defense: Large companies sometimes recognize that they can no longer
defend all of their territory. Thus, they perform planned contraction, give up weaker
territories and reassign resources to stronger territories.

3. Expanding the market share: Market leader’s can improve their profitability by
increasing their market share. However, gaining increased share in the server market
does not automatically produce higher profits especially for labor-intensive service
companies.

Because the cost of buying higher market share may far exceed its revenue value, a
company should consider four factors before purchasing market share:

• The possibility of provoking antitrust action.

• Economic cost.
• Pursuing the wrong marketing-mix strategy.
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 Product Life Cycle of Pharmaceutical Products

• The effect of increased market share on actual and perceived quality.

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