Tip of the Week: Management of Product and Service Life Cycles
Management of product life cycle will price and position pharmacist services effectively so that uptake is quick.
Most of us have at least heard of the term, ‘product life cycle.’ The terms typically refers to a product’s sustainability in regard to its use or sales.
It makes a few key assumptions:
- Products have a limited life and thus every product has a life cycle;
- Product sales pass though distinct stages, each posing different challenges, opportunities, and problems to the seller; and
- Products require different marketing, financing, manufacturing, purchasing, and human resources strategies in each life cycle stage.
These stages of a product’s life cycle are:
- Market Introduction: costs are high, sales are slow at first, there is little competition, demand has to be created
- Growth: costs are reduced due to economies of scale, rise in public awareness, rise in profitability, increased competition, then resultant price decreases
- Maturity: sales volume peaks and market saturation occurs, continued increase in competitors, industry profits go down, product differentiation among competitors
- Saturation and Decline: costs become counter-optimal, profitability diminishes, profit is more about production/distribution efficiency than increasing sales
Many aspects of product life cycle applies to services as well. We can explore the product life cycle of drugs. Even while pharmacists do not market drugs, they should have a good idea about how the life cycle of these products work and that which can be applied to products and services they market more directly.1
Product life cycle management attempts to strengthen and lengthen the growth phase of a product, and to minimize the time and deleterious nature of its saturation phase, while maximizing operations and sales efficiency at every stage. You are probably aware of some products that have seemingly been around forever, such as certain colas and snack foods. In their maturity and saturation stages they continue to differentiate their product with more flavors and tweaks while relying on distribution and advertising efficiency advantages.
A similar phenomena in the market for pharmaceuticals is described in the journal Drug Discovery Today. This phenomena is especially challenging given that new scientific breakthroughs can render older drug products not only dated, but completely obsolete. The authors discuss various strategies that aim to accelerate speed and efficiency in the drug development process during clinical trials, to hit the market hard during the pre-launch phase so that sales can be robust very early during the drug’s campaign, to manufacture batches of the drug more economically, and then to make modifications of the drug once it comes off patent. Maintaining some brand loyalty and niche areas for marketing and indications can keep the drug profitable for quite some time even after the drug has come off patent and has considerable competition.
There is much to be learned about the drugs we dispense regarding pricing, innovation, and even clinical ‘positioning.’ At the same, pharmacy managers can adapt product life cycle management strategies into the pharmacy business as a whole and for certain services of the pharmacy business, thus maintaining awareness of the different marketing, pricing, and operational strategies necessary to maximize use and profitability of the service prior to and many years after its launch.
Management of product life cycle will price and position pharmacist services effectively so that uptake is quick. Effective management will continue refining the service to keep it differentiated from others who begin to offer similar services, then continue gaining greater efficiencies in delivering that service over time.
Additional information about Marketing Applications can be found in Pharmacy Management: Essentials for All Practice Settings, 5e.
Shane P. Desselle, RPh, PhD, FAPhA, Professor of Social/Behavioral Pharmacy at Touro University California.
Hering S, Loretz B, Friedli T, et al. Can lifecycle management safeguard innovation in the pharmaceutical industry? Drug Discov Today. doi: 10.1016/j.drudis.2018.10.00.