(See supporting article "Strategic Marketing in the Semiconductor Industry")
The Product Life Cycle (PLC) is applicable for every type of durable good from a certain make of automobile to a multi-million dollar lithography tool. Because of the rapid development of technology in the semiconductor industry the PLC of capital equipment and materials are somewhat typical, but different in certain aspects. In order for an effective strategic marketing plan to be implemented, we need to understand the differences in the various stages of introduction, growth, maturity and decline.
The Product Life Cycle for semiconductor equipment typically has an accelerated rate of accent in comparison to the conventional model. Many seasoned marketing specialists believe the introduction stage is relatively easy for both equipment and materials in our industry in that our customers, especially the early adopters are always interested in the latest technology. It is easy to create interest. However, a well-developed strategy for a product introduction is essential for the long-term success of the product.
The strategy begins in the Product Introduction Plan (PIP) with a clear understanding of your customer's requirements and expectations. This is accomplished by involving the customer from the beginning of the product development. Give the customer the ability to input thoughts on how the product is designed, priced, serviced and even packaged. If the customer is involved in these areas up front, product introduction and promotion are going to have greater impact imparting momentum to the early part of the life cycle.
Customers who have expressed an interest in your technology and have helped with the product definition are excellent candidates for "beta" sites. Customer partnerships are essential during introduction. They help minimize the high support costs of getting the product launched and provide good references and data to support your claims.
Product definition and specifications also need to be included in the PIP. A realistic summary of the features and benefits of your new product will help in the introduction stage. Customers need to know why they should consider your product -- what will it do for them. However, be aware that specifications need to be broadly defined. You may need to change formulations or product configurations.
Anticipate your customer's response and be prepared. The customer is going to tell you what they like and don't like. They will also give you insight into applications and uses you may not have thought about. The customer is going to tell you how to use and describe your product. You must move from a technical understanding to being application oriented. This information will help drive the successful introduction into the next phase of the PLC.
Another factor in introduction stage is anticipating your competitor's response. This is especially applicable if your product is considered a commodity and is price sensitive such as a process chemical. Competitors may react to your new product introduction by lowering their prices. This may delay your customer's willingness to evaluate your product in the introduction stage. You will need to provide information to support the technical superiority of your product.
A large promotional budget is not a requirement during the introduction phase of the PLC. Marketing communications is usually direct. It is highly targeted and not formalized. However a well-defined strategy for future activities needs to be developed. Who is the audience and how are you going to deliver the message once your product has been introduced.
During the growth cycle, you want to capture as much of the market as you can, as quickly as you can. The idea is to maximize market share as well as establish and maintain a competitive advantage. During this time in the PLC you are still doing continuous improvement on the product as you ramp-up production. The product should begin to have all of the features identified in the Market Requirement Statement(MRS). Specifications and formulations should be fairly well-defined.
Managing the growth stage is essential. Often times in our industry, we are capacity constrained by production at this stage, both in materials and equipment. Good forecasting of customer requirements will help establish production needs. Set realistic delivery schedules and communicate any delays to customers immediately. A serious mistake many companies make during the growth stage is over committing.
The cost of a missed delivery of equipment to a billion-dollar wafer fabrication operation is significant. Your company's reputation as a reliable supplier for now and for the future depends on meeting promised delivery date.
As your product moves through the growth stage you should use the pricing mechanism to recover your investment. This is the time when the market will be more accepting of paying a premium. And as one of the early vice presidents of Intel once said, "price on value but charge what the market will bear".
Marketing communications plays a big role in the growth stage of your product. Typically your company's heaviest investment in marketing communication is during this period as you attempt to build market share and support the sales activity. You have a message to deliver and an urgent need to create positive customer perceptions.
The main focus during the maturity stage is to hold onto market share. Your product offering has to be reliable and demonstrate the lowest cost of ownership. Product performance must be proven and clearly defined. The requirements originally established in the MRS have been met.
For semiconductor equipment, products typically mature in two to three years. Materials such as photoresist and process chemicals sustain a four to five year maturity cycle. Pricing during this stage has to be competitive because you are trying to hold onto market share.
Product support must be maintained in order to keep your existing customer base satisfied. Very rarely will customers switch to a competitive product during this phase. The industry philosophy tends to be "if its not broke, don't fix it."
Marketing communications efforts are targeted at improving customer perceptions. Now is the time to handle any adverse perceptions that may have developed such as reliability issues. Advertising and public relations activities should reinforce your brand image as a market leader. Applied Materials, the leading equipment company in the semiconductor industry, has an excellent campaign which promotes and supports their claims as the provider of total process solutions.
At this stage your product offering is very mature. Enhancements could be added to extend the life. Renaming and reintroducing an improved version is one way many companies attempt to market a product in its decline. Another strategy may be to find a new application or technology for the product. Companies have been successful taking equipment and materials originally developed for semiconductor manufacturing and offering them to the printed circuit board or disc drive industry.
Pricing may become an issue especially in the materials sector. Customers recognize that your company has been making the product for an extended period of time and that it should be cheaper to manufacture. Substantiating price increases for products in decline is very difficult. One way to maintain the gross margin is to minimize product support. However, it is important not to lose customer loyalty. Your company needs to be remembered as the supplier of choice for the next technology buy.