SIMULATING THE PRODUCT LIFE CYCLE ON INTERACTIVE TERMINALS Experiential Learning Enters the Eighties, Volume 7, 1980 74 SIMULATING THE PRODUCT LIFE CYCLE ON INTERACTIVE TERMINALS Newell Edward Chiesl, Indiana State University ABSTRACT This paper reports on a computer simulation designed to assist in the instruction of a product strategy course. Specifically the simulation, using interactive terminals, was developed to illustrate the marketing concept of the product life cycle. The simulation/game presents to the students a marketing environment of five different products, each of which has its own unique product life cycle. INTRODUCTION The notion that products have a life cycle is an Important marketing concept. Simply stated, products have a life span from birth to death. The different stages in the Product Life Cycle (PLC) are seen in the traditional sales curve illustrated in Figure I, which is adopted from Wasson, (10, pp.247-48). In each stage of the PLC there are different marketing strategies to be implemented. In other words, the marketing manager adjusts the product’s promotional mix, price, product quality and distribution to the needs of the market place. Not all the marketing classifications of products have such a nice smooth curve of the Product Life Cycle (PLC) portrayed in Figure I, as noted and illustrated in Figure II. In Figure II, a fad’s PLC is started and ended rather quickly. A fashion has a longer life in the market place, while changes in a consumer durable good’s PLC are slower to develop. There are a few non-believers of the PLC who point out the few products that are exceptions to the rule. Dhalla and Yuspeh have studied several products contrary to the PLC, (3, p.110). However, there are many more marketing applications of the product life cycle concept that originated with the work by Levitt, 1965, (6, pp.81-94) and Wasson, 1968, (9, pp.36-43). Currently many of today’s product strategy textbooks Experiential Learning Enters the Eighties, Volume 7, 1980 75 FIGURE II (1, p.143) Rate and Level of Adoption in Three Product Life Cycles: FAD, FASHION, DURABLE either stress, or carry throughout the book, the concept of the Product Life Cycle, Hisrich and Peters (5), Pessemier (7), Rothberg (8), Hise (4), and Cardozo (2). The concept of the product life cycle, then, is considered by many to be of marketing importance. THE SIMULATION A computer simulation was developed by the author entitled, “Tommie Company: An Interactive Marketing Game.” The purpose of the game is to illustrate, by means of computer simulation, the marketing implications of five products moving through their life cycles. The game is played by students enrolled in a Product Strategy course. The simulation can be played by two or ten teams on interactive terminals. The computer hardware required to play the game is a main frame (the one the class is using is a half Megabyte, but a 100K would be adequate), interactive terminals, and an on line disc storage system. The on line disc storage system has to have an indirect access system of data retrieval for the storage files. Indirect access simply means that students reading files do not obtain the actual file (data), but a scratch copy of the file. In other words, all ten teams could be reading the same file simultaneously via ten scratch files. Figures III-VI graphically illustrate the product life cycles for the five simulated products. The hatched area of each curve indicates which stage of the PLC that is being simulated. The total time compressed by simulation is 100 weeks. The widget’s PLC presented in Figure III, illustrates that this product will have its entire life from birth to death, simulated during the compressed 100 weeks. In Figure III, the stages of the PLC being simulated are the introduction and growth phases of Thingamabobs. Notice that there are not any sales during the introduction until week twenty-five. A 100 weeks of Gizmo’s maturity stage of the PLC is simulated in the game. This is shown in Figure V. Figure VI illustrates the stages of Whatsamacallit’s PLC being simulated. In both the pre-game scenario and the market research information available to the students at the start of the game, the PLC for Whatsamacallits is forecasted to remain stable for the entire 100 weeks. This is also the exact information received concerning Gizmo, but by the 25th week, market research informs the student about a new superior product just entering the market. The results is immediate doom for Whatsamacallit. The product enters the decline stage of the PLC and by week #50 there is zero demand at every price, promotional level, product quality index and amount of distribution coverage. The final product in the simulation/game is Unos. Referring to Figure VII, the Uno’s product life cycle starts a very rapid decline at the beginning of the game. The pre-game scenario for UNOS was for the product to have a stable 1000 potential units demand, per week, per team, ceteris paribus. At the start of the game, however, the players receive market research information that this amount is to decline very quickly. Referring again to Figure VII, 434 potential units are demanded at 10 weeks, 188 at 20 weeks and only a dismal 80 units at 30 weeks. The demand is only potential because of all the interrelated factors determining demand such as competition, price, promotion, product quality indices and certain exogenous factors stochastically being generated in the environment by the simulation. The computations for the UNO’s decline in potential demand is calculated by the equation: (ID)*((R)**(T)) = PD. (1) Experiential Learning Enters the Eighties, Volume 7, 1980 76 FIGURE III WIDGETS PLC FIGURE IV Thingamabob’s PLC Experiential Learning Enters the Eighties, Volume 7, 1980 77 FIGURE V Gizmo’s PLC FIGURE VI Whatsainacallit’ s PLC Experiential Learning Enters the Eighties, Volume 7, 1980 78 FIGURE VII UNO’S PLC where: ID = Initial demand = 1000 R = Rate of change = .92 T = Time period at Time 20 when R=. 92, ID=1000, PD or Potential Demand will equal 188.69333 units. With integer format, the answer becomes 188. The influence of the product quality index is calculated by the equation: IPQI = (f)*(TPQI/AVpqI) (2) where: IPQI = influence of the Product Quality index F_0_1 TPQI = Team’s product quality index AVpqI = Average Product Quality Index for all teams. The function (f) is really the percent the game administrator wants to emphasize the product quality index’s influence on actual demand. For example, when (f) is initialized at .6 in the simulation, then the product quality index has a 60% affect on the actual demand for the product. Referring again to equation (2), when TPQI = 120 and AVPQI = 80, then: IpqI = (.6)*(120/80) IpqI = .9. Putting it all together in the equation: AD = (PD*IpqI) ± (PD*(l-f)) (3) where, AD actual demand PD = potential demand (1-f) = compliment to the (f) percentage. Substituting when PD=188: AD (188*.9) + (188*(1-. 60)) AD = (188*.9) + (188*(.40)) AD = 169.2 + 75.2 AD = 244.4 units. Similar calculations are also performed for the influences that price and promotion have on potential demand. All of the calculations rely on the interactive nature of computer terminals and the system of indirectly accessing the data files. Without such computer capabilities there would be no student interaction with competition (other student players). This combined interaction results in a verisimilitudinal competitive environment in which the students (potential future marketing managers) are collectively and simultaneously experimenting with marketing variables in a closed controlled simulated marketing environment. IMPLICATIONS The simulation of the Product Life Cycle concept on interactive terminals offers business students the opportunity to experiment with marketing variables during the different stages of a product’s life cycle. These experiments offer instant feedback that can be either positive or negative to students. The computer simulation of the Product Life Cycle concept, therefore, has offered to students a valuable experiential learning exercise. Experiential Learning Enters the Eighties, Volume 7, 1980 79 REFERENCES 1. ANDERSON, W. Thomas Jr., BENTLEY, C. and SHARPE, L. K. IV, MULTIDIMENSIONAL MARKETING, (Austin: Austin PRESS, 1976) 2. CARDOZA, Richard N. PRODUCT POLICY, (Reading, Massachusetts: Addison-Wesley, 19]9) 3. DHALLA, Noriman K. and YUSPEH, Sonia, “Forget the Product Life Cycle Concept,” HARVARD BUSINESS REVIEW, January-February, 1976. 4. HISE, Richard T., PRODUCT/SERVICE STRATEGY, (New York: Petrocelli/Charter, 1977) 5. HISRICH, Robert D. and PETERS, Michael P. MARKETING A NEW PRODUCT (Menlo Park: Benjamin! Cummings, 1978) 6. LEVITT, Theodore, Exploit The Product Life Cycle,’ HARVARD BUSINESS REVIEW, November- December 1965. 7. PESSENIER, EDGAR A., PRODUCT MANAGEMENT, (Santa Barbara: John Wiley & Sons, 197]) 8. ROTHBERG, Robert R., CORPORATE STRATEGY AND PRODUCT_INNOVATION, (New York: The Free Press, 1976) 9. WASSON, Chester R. “How Predictable Are Fashion And Other Product Life Cycles?”, JOURNAL OF MARKETING, July 1968. 10. WASSON, Chester R., PRODUCT MANAGEMENT: PRODUCT LIFE CYCLES AND COMPETITIVE MARKETING STRATEGY, (St. Charles, IL: Challenge Books, 1974) Table of Contents Volume 7, 1980 Symbol Recognition and Correlation for Evaluating Decision Making in Computer Aided Business Simulations Polanal: An Experiential Approach to Decision Support The Use of Time Contracts in Formal Education Indexing Simulation Model Response for Gaming Flexibility Moving Toward A Theory of the Use of Simulation Games and Experiential Exercises Use of Simulation Administration to Achieve Pedagogical Objectives Experiential Learning on the Job - A Business Internship Program Toward the Ultimate Experiential Exercise A Learning Through Managing Program Workshop Using Experiential Materials in Industry Training Sponsored Experiential Learning - An Opportunity Problems and Pitfalls of Externally Sponsored Field Research Projects Viewed form an Experiential Learning Perspective A Modular Approach to Experiential Learning: Classroom & Consulting Using Simulation & Experiential Learning In Industrial Settings Terminations: An Experiential Review Agenda Items -- Board of Supervisors' Meeting - Town of Jori The Objective-Setting Interview in MBO: An Experiential Approach The All-Star World Series Team Exercise: an Experiential Learning Exercise Dealing with Various Organizational Behavior Issues Progress Report on global, A Rich Multinational Gaming Environment Computer Simulation: A Tool to Teach Queuing Theory New Technology for Business Games Technological Frontiers in Computer Simulations for Business Education Simulating the Product Life Cycle on Interactive Terminals On Compensatory Demand Functions in Marketing Simulations The Use of Games at Different Levels in a Single Marketing Course to Increase Game Participation Sun Airlines: A Heterogeneous Consumer demand exercise Incorporating a Group Selection Test An Organization Development Approach to Teaching Organization Behavior CBID: Cognitive, Behavioral, and Interpersonal Development - A Skill Development/Social Learning Approach to Management Development Using a Live Case Via Video Tape A Town and gown Approach Development of Student Generated Cases Using Computerized Text Editing and Database Technology Interdisciplinary Approached to Problems in Utilizing Experiential Techniques To Use or Not To Use Experiential Techniques, That's is the Question Forming Participant Teams in Simulation Gaming The Problems of Motivating Students and Clients in Live-Case Projects Problems of Teaching Leadership Skills Through Experiential Techniques Conflict Style Measurement: Antecedent to Change - A Proposal for an Experiential Exercise Demonstration Fundamentals of Simulation for Newcomers An M.B.A. Orientation Simulation for Managing Time and the Areas of One's Life SimNet Workshop: The International Simulation Network Demonstrates Three New Business Games The Use of a Simulation Model in the Planning and Evaluation of Commercial Bank Operations Probability Assessment and Performance in Business Game Simulations WageSim: A Wage and Salary Administration Simulation Grading as a Teaching and Feedback Mechanism: Modifying Student's Self-Perceptions of Performance Can Business Games Effectively Teach Business Concepts? Development of Multiple Value Orientations in Conflict Resolution Behavior: An Experiential Teaching Paradigm in Labor-Management Relations Course Designing a Competency-Based Peer Assessment Scale for the Evaluation fo Teaching in Higher Education A Method for Evaluating Information for the Equipment Replacement Decision: An Application of Monte Carlo Simulation Simulation: A Method of Appraising Communication Networks in Managerial Decision Making An Evaluation of In-Class Student Involvement Evaluation of the SBI Program from an Experiential Viewpoint: Focus on the Student Differential Predictors of Academic Performance for White and Non-White Samples The Manager's Dilemma: An Unobtrusive Measure of the managerial Sex-Role Stereotype Are Computer Simulations Sexist? The Effect of Group Size on Attitudes Toward the Simulation Associations Between Individual Cognitive Processing Variables and Business Game Performance and Play Students' Perceptions on Managerial Functions After Exposure to Either the Case Method or a Simulation What Business Students Learn from Finance Simulations Attitude Toward Experiential Exercises, The Student-Teacher Relationship, Student Psychological Types, and Performance An Example of How to Design a Research-Based and Classroom-Effective Organizational behavior Exercise Some Issues in Game Design Untested Hypotheses: An Approach to Experiential Learning Evaluation of Simulation Games: A Critical Look at Past Efforts and Future Needs Is Self-Perception Predictable? - Some Laboratory Results An Exercise in Conflict-Handling Behavior The Relationship Between Group Size and the Learning Curve Effect in a Gaming Environment Learning About Organizational Management Through Organizational Management: Closing the Gap Strategies, Managerial Approaches, and Decision Making in a General Management Simulation A Comparison and Evaluation of Similar and Dissimilar Group Scenarios Generated Using Manual Simulation Games Weaknesses of Research Methods in Experiential and Simulation Studies