For companies to be successful and provide a long term value from purchasing, a strategic plan should exist with experienced supply chain professionals in place to execute. Knowledge of the industry and the products the company provides is just the beginning. How one handles and understanding how purchasing strategies change depending on the product life cycle stage is an important piece to keeping a company competitive.
Product Life Cycle
There are similarities and differences to purchasing strategies depending on the stage of the Product Life Cycle. As a purchasing professional in the IT industry where our job is to provide relevant technology timely, efficient and effective planning, implementing and controlling of products and services through supply chain management is necessary. One specific product that we provide for our customers is webcams. A webcam is an external digital camera that connects to a computer and allows real time streaming. Our customer’s expectations were part of the testing our development team performed on a number of different webcams. In addition to the webcams, the necessary configurations were identified and tested to ensure the one chosen for distribution provide the necessary security, quality and over-all functionality required for our customer’s environment.
Working with other functional areas within our company to determine the best purchasing strategy for each Product Life Cycle is extremely important. We established a working group to include representatives from each area. Depending on the Product Life Cycle stage, different functional areas played different roles and had different levels of involvement. Quality of the product, investment cost, marketing, competition, risk and profit are just a few features that are evaluated during each stage. However, no one role or functional area was ever left out or not important to make the over-all purchasing strategy successful.
During the first Product Life Cycle stage, Introduction, a market plan is developed and customers are made aware of the availability and capability of the webcams. Distribution is limited until a broader acceptance of the webcams is acknowledged. A low quantity of webcams are purchased during this stage, especially since this technology is new for our customer’s environment.
During the second Product Life Cycle stage, Growth, increased marketing and brand preferences are performed while on the lookout for competitors with similar offerings. Hopefully during this stage, pricing is maintained as demand increases with no competition (“Boundless”, 2016). We enter into contracts with multiple customers, which increase our purchases of webcams during this stage.
During the next Product Life Cycle stage, Maturity, profits are maximized with a more defined market. If competitors appear, product features may be enhanced to differentiate our webcams from that of our competitors. Possible improvements or modifications are considered that might give us a competitive advantage (“Product Life Cycle Stages”, 2016). Pricing could be adjusted lower depending on or competition (“Boundless”, 2016). We made additional accessory options available as part of the webcam purchase to the customer. Different types of headphones and handsets that worked with the webcams and with only slight configuration changes or none at all made this change a positive one. We were able to raise our prices for only handsets additions, but keep the price the same no matter what type of headphone the customer selected. After we shared these changes as part of our marketing plan, over half of our normal customer’s requested handsets with their webcam.
In the final Product Life Cycle stage, Decline, a decision is made on how to handle webcams going forward. Several options are reviewed during this stage to decide if the webcams are to continue being provided and maintained as the current rate, a reduced rate or discontinued all together (“Boundless”, 2016). We have not yet reached this stage with our current webcam products and support. However, we anticipate our purchase quantity to reduce extremely after a year as we believe most of our customer’s will have received this product.
The idea of the product life cycle is nothing new and it is an important principle companies need to understand in order to make profit and stay in business. The key is not just understanding the life cycle, but also proactively managing products throughout their lifetime, applying appropriate resources and sales and marketing strategies, depending on what stage products are at in the cycle (“Product Life Cycle Stages”, 2016).
Boundless. “Impact of the Product Life Cycle on Marketing Strategy.” Boundless Marketing. Boundless, 20 Sep. 2016. Retrieved 31 Oct. 2016 from https://www.boundless.com/marketing/textbooks/boundless-marketing-textbook/products-9/product-life-cycles-69/impact-of-the-product-life-cycle-on-marketing-strategy-348-10771/
Product Life Cycle Stages. (2016). Retrieved from http://productlifecyclestages.com/