Readers of the Tips of the Week have probably at least heard of the “product life cycle” concept. If not, then now is as good a time as ever. A product’s life cycle describes its life mostly in regard to its use or sales. It makes a few key assumptions: (1) products have a limited life and thus every product has a life cycle; (2) product sales pass though distinct stages, each posing different challenges, opportunities, and problems to the seller; and (3) products require different marketing, financing, manufacturing, purchasing, and human resources strategies in each life cycle stage. These stages 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).
Much, even if not all aspects of the product life cycle applies to services, as well. In this week’s Tip, we explore the product life cycle of drugs. Even while pharmacists do not market drugs, per se, 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. Specifically, Hering et al examine product life cycle management of pharmaceuticals.1 Product life cycle management attempts to strengthen and lengthen the growth phase of a product and 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 (eg, 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. Hering et al describe similar phenomena in the market for pharmaceuticals. This is especially challenging given that new scientific breakthroughs can render older drug products not only dated but completely obsolete. They discuss various strategies that aim to accelerate speed and efficiency in the drug development process during clinical trials, hit the market hard even pre-launch so that sales can be robust very early during the drug’s campaign, manufacture batches of the drug more economically, and then make modifications of the drug as (and even after) it comes off patent for derivations of that compound to maintain some market niche, including important places on key clinical guidelines and major formularies. 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/or 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 just prior to and even many years after its launch.
Additional information about Marketing Applications can be found in Pharmacy Management: Essentials for All Practice Settings, 5e. If you or your institution subscribes to AccessPharmacy, use or create your MyAccess Profile to sign-in to Pharmacy Management: Essentials for All Practice Settings, 5e. If your institution does not provide access, ask your medical librarian about subscribing.
1Hering 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.
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How do you apply product lifestyle concepts in services marketing?