Product Life Cycle

Introduction

Growth

Maturity

Decline

Sales
Sales

Profits Time

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Product Life Cycle

Ninety percent of the products we use today did not exist in their current form five years ago. Similarly, 90% of the products we will be using five years from now do not currently exist. With today's rapid changes in technology, almost every product will undergo some sort of modification during its lifetime. This leads us to the concept of Product Life Cycle. Product Life Cycle is a path, a typical new product takes from its inception to its discontinuation. It describes the stages a product goes through from its introduction, through its growth until it is mature and then finally its decline. Each stage of the product life cycle calls for a specially designed marketing strategy and a different marketing mix.

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Product Life Cycle

Product life cycle Management is the succession of strategies used by management as a product goes through its product life cycle. The conditions in which a product is sold changes over time and must be managed as it moves through its succession of stages. The fact that products have a life cycle imply the following: The products have a limited life, Product sales pass through distinct stages, each posing different challenges, opportunities, and problems to the seller, Profits rise and fall at different stages of product life cycle. Products require different marketing, financial, manufacturing, purchasing, and human resource strategies in each life cycle stage.

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Product Life Cycle

Stages of PLC
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Product Life Cycle

Stage I: Introduction
In the introduction stage, the product is launched in the market. The firm will create product awareness & develop a market for the product. No profits are made at this time, as the development costs have not yet been covered. The impact on the marketing mix is as follows:

Product branding & quality level is established, and intellectual property protection such as patents & trademarks are obtained (if its a new product). Price skimming may be used if the product is a new development & there are no competitors. Or pricing may be low penetration pricing to build market share rapidly. Informative advertising is used until the product becomes known. Promotion is aimed at innovators & early adopters. Limited product availability in few outlets/locations.
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Product Life Cycle

Stage II: Growth
In the growth stage, sales start to grow rapidly. Profits start to be made as more and more customers buy the product. But competitors see the opportunity and enter the market. Some just copy the most successful product, or try to improve it to compete better. Others try to refine their offerings to do a better job of appealing to some target markets. The new entries result in much product variety. The impact on the marketing mix is as follows:

Product quality is maintained & additional features & support services may be added. Price is reduced a little as new competitors have entered. Promotion is focused on building the brand. Advertising is changed to persuasive advertising to encourage brand loyalty. Distribution channels are added as demand increases & customers accept the product.
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Product Life Cycle

Stage III: Maturity
In the Maturity stage, the competition gets tougher as aggressive competitors have entered the race for profits. Industry profits continue to go down during maturity because promotion costs rise and competitors continue to cut prices to attract more business. During the maturity phase, less efficient firms can't compete with the increasing pressure on prices and drop out of the market. The maturity phase of the life cycle is the longest phase for most products. Sales grow at a decreasing rate and then stabilize. Price wars and intense competition occur. At this point the market reaches saturation. Producers begin to leave the market due to poor margins. The impact on the marketing mix is as follows:

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Product- features may be enhanced to differentiate the product from that of competitors. Price- competitive pricing or promotional pricing is used & there are a lot of price wars. Place- distribution becomes more intensive & incentives may be offered to encourage preference over competing products. Promotion- emphasizes product differentiation. A lot of persuasive advertising is done. Many different approaches are used as appropriate to the product. Sales promotion tools like premiums, discounts, coupons, cash rebates, "free" goods, specialty advertising, and 7 demonstrations are used.

Product Life Cycle

Stage IV: Decline
In the Decline stage, new products replace the old. Price competition from dying products becomes more vigorous, but firms with strong brands may make profits until the end because they successfully differentiated their products. They may also keep some sales by appealing to the most loyal customers or those who are slow to try new ideas. Costs, because competition is still intense, continue to rise. Profits, as expected, continue to erode during this stage with little hope of recovery. As sales decline, the firm has the following options:

Maintain the product- possibly rejuvenating it by adding new features & finding new uses. Harvest the product- reduce costs & continue to offer it, probably to a loyal niche segment. Discontinue the product- liquidating remaining inventory or selling to another firm that is willing to continue the product.
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Product Life Cycle

Extension Strategies
When the product reaches the end of maturity stage (i.e. the saturation stage) of its product life cycle, the firm may stop sales from falling further by adopting extension strategies. These are ways by which sales may be given a boost. Some possible ways in which businesses might extend the life cycle of their product are as follows:

Introduce new variations of the original product, e.g. a childrens version Use a new advertising campaign Sell into new markets, e.g. export the product to another country Introduce a new, improved version of the product Sell through additional, different retail outlets Modify the 'augmented product'. Services can be added where none existed before -- adding free set-up and delivery are good examples.
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Product Life Cycle

Critical Analysis - PLC
In reality very few products follow such a prescriptive cycle. The length of each stage varies enormously. The decisions of marketers can change the stage, for example from maturity to decline by price-cutting. Not all products go through each stage. Some go from introduction to decline. It is not easy to tell which stage the product is in. Strengths The product life cycle is considered as both straightforward and powerful model. By using the model as guidance, effective and timely marketing will take the product through each stage and can be planned in advance. The product life cycle can also be use to alert the marketer, when the product is in the stages of growth and maturity, to integrate extension strategies during this period to maintain the high profit level. Weaknesses It is hard to tell which stage the product is in, as there are constant short-term fluctuations due to external factors, consequently marketing actions could be taken too early or too late. By failing
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Product Life Cycle

Growth Maturity Decline

Introduction

3G Mobile phones Bio-metric identification Video Calls Space Tourism Social Networking Smart Homes Touch Pads

Laptops Desktop Computers Credit Cards Mosquito Coils GPS Devices Cheque books Smart Phones Fax Machines

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