Product Life Cycle And Customer Perception

The global market and the technology are expanding day by day, therefore the business world getting more and more competitive. The companies are now seeking for new ways to invent more competitive advantages. Innovation is vitally significant for any business. The creative idea for business and for new product development is to enrich the existing system and business model. Changes in the factors of product life cycle affect the enterprise and the effectiveness of the firm depends on how they are responding towards the changes with their innovation in strategic orientation before their competitors. As well as customer perception like product lifestyle, design, social status also has a great impact on choosing a product. As economy is changing the social status and other requirements of living and demand is changing. As for example while a low income economy start developing sometimes the life cycle of a product become shorten then some products get obsolete and sometimes demand of new product arises. Customer perception in most of the cases directly influences the Product life cycle and thus innovation is necessary. Because if business fails to cope with this situation it will become difficult for them to survive in the marketplace and to cope with this changes. Therefore business innovation strategy must be dynamic and up to date. On the other hand as product life cycle influenced by the customer perception it also changes because of various factors such as presence of substitute product, changes in demand, technological development etc. To survive in the market place business also need to have close observation on the changes in the product life cycle and develop the strategy in a way that it becomes easy to cope with the changes. Paul Steffens and Maria Kaya 2008 cited, product life cycle is widely used as a managerial tool that can be estimated from the overall sales pattern and competitive dynamics and the theory of adoption in introduction and growth stage the role and influence of consumer was overlooked. But every stage of product life cycle is directly influenced by the customer perception because the factors of customer perception are also work as influential factors in product life cycle. According to Paul Steffens and Maria Kaya (2008) PLC work as a holistic, conceptual framework that can be a used to fix marketing strategy over a product’s life cycle and product life cycle model can be defined into four phases: Innovation → Majority → Repeat → Substitute. These variables directly underlie on the customer trends. As the market’s competitive economy changes, reconsiderations of the competitive environment of the organization and better positioning these factors are very important, because if one of these factors goes out of control all the aspects of the business will be affected. Better competition only does not depends producing new product and services but also depends on the knowledge of innovation and the ways of using the innovation strategy in an effective manner. Business innovation strategy keeps a close eye on the dependable innovation policy of the organizations, this not only provide a competitive advantages for the business but also make the demand of the product in an optimum position and increase the growth of the business. A better innovation strategy also increases the time of the life cycle of the product that refers to an optimum profitable position for the business.

Customer perception has direct impact on the business innovation strategy. It changes frequently the features of the products or services must be modified or change to cope with the current demand of the market. This is a factor that increases the competitive effectiveness of the business and an area where innovation strategy is essential. According to Booz, Allen, and Hamilton (1982), as the success of a private firm is measured on the sales and profit growth and as success of sales and profit growth depends on the ability to meet changed demand, hence the firms need to give more emphasis on innovation strategy to meet the demand of the stockholders. It is hardly possible to respond in the changes in the factors of customer perception and provide product and services as per the new changed demand due to lack of proper innovation. Introducing new product and services is not only important for organizational growth and effectiveness but also it bears high risk for the business. Booz, Allen, and Hamilton (1982) also cited that, many new products and services fail in the market because of lack of effective innovation strategy.

This research will try to find out how the changes of the factors in product life cycle and customer perception will impact on the business strategy and why the strategy need to be innovative.

Keywords

Product Life Cycle, Business Innovation Strategy, Consumer Perception.

Problem statement:

This paper will try to find out the following problems:

• How business innovation strategy effected by changes on product life cycle and customer perception?
• Why product life cycle and customer perception changes or stimulate business innovation strategy?
• When product life cycle and customer perception stimulate business innovation strategy?

Aim:

The aim of this paper is to find out a positive relationship of business innovation strategy with the changes of the factors of product life cycle and customer perception.

Objectives:

This research will be conducted to fulfill the following objectives:

• To critically review the related theory of PLC and business innovation strategy.
• To explore the effectiveness of PLC and business strategy of Nokia Corporation.
• To evaluate how customer perception changes over time and how does it impact on the business strategy.
• To develop a model that represent how changing factors of PLC and consumer perception affect innovation strategy.
• To make recommendation to improve the product innovation strategy on the basis of customer perception.

Literature Review

A brief literature of product life cycle:

According to Kotler and Armstrong (2005), ‘product life cycle is sales and growth of a product over its lifetime. Product life cycle involves five stages as follows:

In the product development stage, the producer or company finds a new product idea and began to think about all other related matters with marketing. In this stage sales of the company remain zero and only investment occurs.

In the introduction stage, new product is introduced in the market and starts slow sales and growth for the product.

While a product comes to a growth stage it gets rapid market recognition and increase the profit of the producer.

A product comes to maturity stage when most of the potential buyers purchase the product as a result sales, growth and profit slowdown in this stage. Many competitors also arise in some cases and it drives the products towards the decline stage.

In this last stage of product life cycle sales fall and profit of the marketers also decline dramatically.

This product life cycle is generalized because some products introduce and then just decline. Some has long maturity stage, so all the products do not fall in this cycle.’ Product life cycle (PLC) is one of the most controversial and enduring concepts of marketing however this model has been working as important marketing planning and strategy tools for over 30 years. Product life cycle was widely introduced by Levitt’s in 1965 in Harvard Business Review article. It also draws the attention of early critics Dhalla and Yuseph in 1976. According to Steven Klepper (1996), there are various factors that constitute product life cycle. For example Oliver Williamson (1975, pp. 215-216) has described products development can be recognized in an early exploratory stage, an intermediate development stage, and a mature stage. In the stages of product life cycle the management, marketing, and manufacturing strategies are revised as per the current situation. In 1996 Klepper come out the new dimension of product life cycle that is the evolution of the firm. That means the number of firm joined in the industry has a great impact on the product life cycle. Gort and Klepper (1982) found that 46 new products were introduced in the previous century and they failed because of the growth of the number of independent producer. Klepper (1996) gives emphasis on the innovation strategy for competing with the product life cycle. According to Day (1981) and Hunt (1983), product life cycle has been criticized for a long time because of lacking of solid theoretical demonstration. Day (1981) and Gardner (1987) argued that, diffusion model worked as a basic tool to strengthen the theory of PLC.

A brief literature on Customer Perception:

Customer perception now comes with broad and different dimension. According to Slywotzky (1996), now the common perception is increasing and delivering superior customer value will increase the value of the organization. Delivering high value to the customer enumerate the monetary growth of the value of the organization which also enumerate the worth of the owners. Positive perception of the customers towards the organization increase brand image of the organization and that is the optimum goal of the organization. Keller (1993; 1998) argued that, brand perception is reflected by the brand association which is detained in the customer’s memory. Some important definitions of customer perception are given below to have a clear understanding on it.

According to Zeithaml (1988), customer perception is a judgment of customer on a utility of a product of what is given and against that what is received. On the other hand Anderson, Jain, and Chintagunta (1993, p. 5) defined customer value as, monetary value of a product that customer receives as a set of economic, technical, service, and social benefits in exchange of price of the product taking considerations of the other products or services.

For understanding the individual stimuli business need to be concerned with psychometrics. Audretsch and Feldman (1996) argued, to find out the similarity among existing stimuli and new stimuli perceptual maps can be produced from multi-dimensional scaling method. Now customer satisfaction and perception becomes one of the most common performance measures. Understanding customer perception and respond according that give a business a competitive advantage and research and development as well as innovation activities fosters with the perception of having a close eye on the customers rather than competitors. Butz and Goodstein (1996, p.63) argued that, an emotional bonding has been established with a customer they become brand loyal and hardly switch the product.

A brief literature on Business Innovation strategy:

Strategy is commonly used in many companies for making themselves more organized and competitive by positioning its products and services. Strategy enables a company to defend and operate them in the marketplace with a unique competitive position. And if think about today’s economic status companies must think about to do something new to compete effectively and efficiently in the current marketplace. As the market is now become global and the number of competitors is increasing in alarming rate they are continuously coming with new ideas and features for their product as a result it becomes very important for the companies to do something new. So innovation is now becomes a significant part of the business strategy.

According to Amabile, (1998), Innovation is defined as the successful execution of inventive ideas within an organization. Product innovation based on idea which ultimately focuses on a product innovation increases consumer utility. In authenticity, on the other hand, it seems unlikely that consumer utility actually increases if a product innovation is introduces to the market. Customer may not notice the growth of the new product unless the new product is not marketed at all.

Today innovation does not only stand for new products or services, but also focus on new business plan. The model of business innovation is all about how the product or services is formed or how they are paid for. Such as Google, all the advertisement finances the service as a result the users or the customers do not have to pay them. The fashion chain ZARA, they have different business innovation by having the clothing lines in the shop for some weeks, afterword they modify their clothing line for the following some weeks. This company is able to improvise with the new ideas to attract the customers.

It has been argued by Granstrand et al. (1997) that innovation does not necessarily decrease the focus on the core competencies of the organization, rather than the management of the company should not confuse technological innovation with product innovation as a rule of thumb to avoid such a possibility. This is highly relevant to the mobile phone company, where they should take extra care to deal with the technological innovation and the product innovation separately.

Literature review on Impact of PLC and Customer perception on business innovation:

From the earlier part of the literature review it is clearly found that product life cycle, customer perception, and business innovation strategy is very much important for conducting the business activities successfully and efficiently. Now for meeting the objectives of this paper the literature work on the impact of product life cycle and customer perception on business innovation strategy are exemplified in this part. Klepper (1996) has identified three innovative activities with the functioning of product life cycle. The first one is that innovative activities are very much suitable in the earliest phases of product life cycle. Second is, in the early and growth stage innovation activities are occurred to meet the actual demand of the consumers and the last one is to lengthen the maturity stage and to compete with the competitors with an effective manner the innovation activities are very suitable.

Steffens and Kaya (2008) argued, in the end of 1981 market researchers found that product life cycle needs further development and research to develop its framework it becomes challenges for many researchers. In 1989 Lambkin and Day come with their significant work that conceptually extended product life cycle. According to Day (1981) and Gardner (1987), as a marketing tool, product life cycle specified sales pattern and finding out the importance of innovation, market structure, dynamics, competitive environment are included in the product life cycle model. Golder and Tellies (2004) says, now product life cycle is considered as a concept which adopts and includes information cascades. Steffens and Kaya (2008) argued, however some researcher still now focus on the sales patterns, PLC shapes etc. This paper will try to focus on the aspects of product life cycle, customer perception and business innovation strategy are closely related on the basis of the theory.

Now days the business needs to consider their innovation activities which are followed by the customer perceptions. Utterback (1993) said that, Evidence from the literature indicates that about 40% to 60% new successful inventions were made from the need of the customers. According to Woodruff (1997), to understand the customer needs now the manager need to give emphasis on the customer satisfaction model (CSM) to emerge the “voice of the customer” into the product development and innovation effort. Dutka (1994) argued that, Reasons for failing a product or service generally occurred due to lack of including customer satisfaction into their goal and strategy; do not act correctly with the customer satisfaction model. In today’s perception it is essential for the organization to deliver optimum customer value with the quality which enables the organization to gain competitive advantages. It must have to agree to adopt and deliver optimum customer value requires extensive knowledge about markets and target customers. The organization should respond this efficiently otherwise obtaining vast knowledge about markets and target customers will all go in vain. This can only be avoided if the way of responding to deliver the product or services according to their need. This is the place where innovation is very much necessary. Because to produce product or services business need specific innovation strategy and product cannot be changed in a while as the demand of the customer is always changing. So the organization needs to modify or invent a product or service that will fulfill the need and demand of the customer for a long period of time.

In the era of the globalization the business need to compete with the whole world and the customers also spread all over the world. In this situation innovation strategy plays a vital role for operating the activities successfully. As the optimum goal of the business is to earn profit by delivering product or services towards the customers here they need to consider two matters one is every product has a specific life and another one is what customers want. If business want to increase the length of their product they need to consider on the customer demand and want; as the need of customers is always changing so the business also need to give a close eye to point out the changes and to cope with the changes having a strong and effective innovation strategy is very much necessary. Customer perception can effect product life cycle as the demand for a product can be changed and this can shorten the life span of that specific product and according to the changing demand new features need to add with the products and services while innovation strategy can make the product or services as the demand of customers by adding new features. According to While Klepper (1996) and Audretsch (1995), Success of business depends on who innovates and how much innovation activities are undertaken?. Other issue that needs to be considered as the number of the competitors is huge and they are coming up with new idea and innovation to attract more market share and this make the customer having more bargaining power and new innovation and features attracts them. So to compete with the current market strategy innovation is a key to gain competitive advantage.

Customer perception can directly impact both on the product life cycle and innovation on the other hand elements of product life cycle also impact on the innovation strategy; because innovation always tries to check and make a balance with the customer demand and product life cycle. These three factors are closely interrelated if we think on the context of the business innovation strategy; while business need to construct their innovation strategy they must give emphasis on the market condition, economic aspects, lifestyle, social status, competitors strategy needs to be closely considered. On the other hand, while designing the product life cycle with the help of innovation organization also needs to consider the life span of the product, flexibility in changes, technological availability, and profitability etc. for doing these activities extensive research and development activities will be necessary.

According to Klepper (1996), the impact of market performance and structure over time on a product is different according to its industrial organization, structure and performance; and the characteristics of the industry is shaped and determined by firm’s cost function and barriers to entry. But Mueller (1986) argued that, without considering some exceptions of the firms whose are existing in the same industry is irrelevant. Klepper (1996) argued that, by considering the embedding differences over firm’s capabilities expansion in output is a matter of subject to firm’s increasing marginal cost and the capabilities of effecting on innovation process. While firm is considering innovation for a product in its life cycle they must associate its cost with their activities, sometimes frequent innovation can increase the marginal cost of the product and decrease the profitability of the firm. Determining the length of maturity stage is very important as it differs for various reasons like customer perception, technological obsolesce etc. Golder and Tellis (2004) have identified several reasons for changes in product life cycle:

Customer durable face a distinct takeoff while sales reach over 45% a year after that sales slowdown and decrease about 15%.

Profitability of slowdown of the product life is positively associated with slower growth of economy, price reduction, and higher penetration.

While a new or substitute product comes to the market an average of 34% slowdown occurs in the product demand.

Hypothesis:

As a researcher the following hypothesis can be identified:

H1: Rapid changes in the product attributes over last few years as customers taste changes with diversified culture.

H2: Technology facilitated more innovation and increasing rate of product obsolescence resulting changes in the PLC strategy.

H3: Growing trend of open market economy is the reason of innovation.

Methodology:

Research methodology is the path which accomplish with the research aim and objective. The centre point of any research is to data collect and the analysis. Saunders et al. (2009) described this centre point as a centre of onion which has different layers that need to be peeled away to get into the centre point. (i.e. data collection and analysis).

Research method

In order to achieve the aim of the study both qualitative and quantitative methods will be used. In this paper researcher will focus on a specific product Nokia Corporation as sample product to serve the purposes of the research. To fulfill the objectives of this research the trends of innovation, production, product life cycle and customer perception will be analyzed. It also requires conducting an exploratory case study research on Nokia Corporation. Secondly this paper will try to develop a model to find out the indicator of changes of factors of product life cycle and customer perception on the basis of case study of the Nokia Corporation.

Data collection

For conducting this research successfully researcher need to focus on both the primary and secondary data. As the research will be conducted on Nokia Corporation which is manufacturer of technological product the main target customer of this type of product are young people and baby boomers. To collect the data about product life cycle researcher will focus on secondary data and mail questionnaire towards the respondents.

A two-phase approach of data collection will be required for the current study. Primary data will be collected in both the phases of data collection. In the first phase in-depth face-to-face personal interview with open-ended questionnaire will be more effective mode of data collection. Moreover mail and telephone survey will be used to justify the accuracy of data if needed. In the second phase of data collection a survey will be conducted with a closed-ended questionnaire. For conducting the research Secondary data will be collected from various documentary sources such as journals, Internet sources, company annual reports and local govt., semi govt., other international publications, and Nokia Corporation.

Sampling

The population for this research will select from Nokia Corporation, distribution center, Nokia outlet, and different sales center of Nokia product. Convenience sampling procedure will be followed in selecting population for this research. Sample will be selected randomly from management level, executive level, and customer level. For sample study London area will be selected where there are 1 outlets of Nokia. 1 distribution center and 1 sales center are situated among this the researcher will survey 50%. From each center it will select 10 respondents randomly to collect information for this research.

Limitation:

The data collection process of PLC and customer perception on innovation strategy is expected to test in London. Though it is difficult enough to work with all the population related with our sample researcher will take 50% of outlets and sales center as sample this will cover the level of significance of data.

Scope:

This research will built up knowledge about the product life cycle and customer perception on innovation strategy. The researcher has connection to get all the relevant information to conduct this report. The collected data and the theoretical background will pursue this study by better understanding of PLC and customer perception on business innovation strategy.