Author:NancyGreenePenetrationCurve(S-Curve)March1998Copyright©1998Bain&Company,Inc.2PenetrationCurvesBOSAgenda•Concept•Application•Caseexample•MethodologyCopyright©1998Bain&Company,Inc.3PenetrationCurvesBOS•Productscanbethoughtofasfollowingalife-cyclethathasseveraldistinctphases:–earlyadoption/trial–massadoption–saturation/substitution–decline•Theproductlife-cyclegeneratesaseriesofmarketpenetrationratesthattendtofollowaspecificpattern,calledanS-curve(orpenetrationcurve)•Giventhepatternofpenetrationcurvesovertime,andgiventhatthisrelationshipholdstosomeextentinalmosteverycase,penetrationcurvescanbeapowerfultoolinpredictingthegrowthofnewproductsWhatisaPenetrationCurve?(S-Curve)4PenetrationCurvesBOSProductLife-CycleTimeVolumeProductscanbethoughtofasfollowingalife-cyclethathasseveraldistinctphases.Earlyadoption/trialMassadoptionSaturation/substitutionDeclineDrivenbypeoplewhoalwaysadoptnewthingsearlyandfueltheproduct’sinitialgrowthTheproductbecomesacceptedbythegeneralmarket;characterizedbyrapidproductgrowthTheproducthaseithersaturatedthemarket,orisalreadybeingsubstitutedforbyanotherproductthatisinanearlierphaseoftheproductlifecycleThedeclineoftheproduct,drivenbycompletesubstitutionfororreplacementwithanotherproduct5PenetrationCurvesBOSCharacteristicsofPenetrationCurves•Penetrationcanoccurattheexpenseofanexistingproduct,oritcandrivenewmarketstogrow•Severalfactorswillinfluencetheendstate,orsaturationpoint,ofaproduct:–duration/speedofproductlife-cycle–competitiveforces–innovation–culture/societyWhenconsideringpenetrationcurves,thereareafewcharacteristicstokeepinmind:6PenetrationCurvesBOSAgenda•Concept•Application•Caseexample•Methodology7PenetrationCurvesBOSApplicationsofPenetrationCurves•Validating/determiningmarketgrowthforaneworestablishedproduct•Showingprecedentsforsuccessofaproductthroughexistingpenetrationcurves•Predictingthesaturationlevelforaproduct•Determiningmarketentrystrategyortiming,giventhepredictedpenetrationofaproduct•Determiningproductmanagementorphase-out,giventhespeedofnewproducts’adoptionPenetrationcurvescanbeusefulinaddressingaseriesofdifferentstrategicquestionswhicharisewhennewproductsenteramarket.8PenetrationCurvesBOSAgenda•Concept•Application•Caseexample•Methodology9PenetrationCurvesBOS•In1994,theNationalInstitutesofHealth(NIH)issuedastatementconfirmingthatmostulcersarestronglyassociatedwiththepresenceofabacteria(H.Pylori).Whilepreviously,doctorshadbeenadvisedtotreatulcersymptomswithanti-secretorydrugs,NIHnowrecommendsthatulcerpatientswithH.Pyloriinfectionsalsobetreatedwithantibiotics.Thenewtreatmentcuresnotonlyulcersymptoms,buttheunderlyingcauseofthedisease.•In1997,anewdevicewasgrantedapatentbytheU.S.PatentOfficewhichwilltesthumanbreathforthepresenceofH.Pylori–abloodtestforH.Pyloriisalreadyonthemarket–doctorsmayalsotestforH.Pyloriusingtissuesamplesobtainedthroughendoscopy,arelativelyinvasiveandpainfulmedicalprocedure•Ourclientisconsideringbuyingthepatentandbelievesthatthebreathtesttechnologyholdssignificantadvantagesoverbothbloodtestsandendoscopy–lessinvasivethanendoscopy–moreaccuratethanbloodtestsSituation:•HowlargeisthemarketforH.Pyloritestsovertime?KeyQuestion:ABaincaseteamusedpenetrationcurveanalysistoexaminehowquicklymedicalpracticeschange.DisguisedCaseSituation(1of2)10PenetrationCurvesBOS•Asearchoftheexisti...
