Product Life Cycle

By: Aislinn E. Santana

Product Life Cycle (PLC)

is a term used to describe individual stages in the life of a product
is an important aspect of conducting business which affects strategic planning

Divided into 4 distinct stages characterized by the revenue generated by the product.

Introduction
Growth Maturity

Decline

Introduction Stage
the firm seeks to build product awareness and develop a market for the product

involves focused and intense marketing effort designed to establish a clear identity and promote maximum awareness

The impact on the marketing mix is as follows:

Product - one or few products, relatively undifferentiated Price - may be low penetration pricing to build market share rapidly, or high skim pricing to recover development costs.

Place - is selective until consumers show acceptance of the product.

Promotion - aimed at building brand awareness. Samples or trial incentives may be directed toward early adopters. The introductory promotion also is intended to convince potential resellers to carry the product.

Characteristics

costs are very high slow sales volumes to start little or no competition demand has to be created customers have to be prompted to try the product makes no money at this stage

Growth Stage
the firm seeks to build brand preference and increase market share involves focused and intense marketing effort designed to establish a clear identity and promote maximum awareness.

The impact on the marketing mix is as follows:

Product - New product features and packaging options; improvement of product quality Price - is maintained as the firm enjoys increasing demand with little competition Place - channels are added as demand increases and customers accept the product

Promotion - Increased advertising to build brand preference

Characteristics:
costs reduced due to economies of scale sales volume increases significantly profitability begins to rise public awareness increases competition begins to increase with a few new players in establishing market increased competition leads to price decreases

Maturity Stage
At maturity, the strong growth in sales diminishes. Competition may appear with similar products.

The primary objective is to defend market share while maximizing profit.

The impact on the marketing mix is as follows:

Product - features may be enhanced to differentiate the product from that of competitors. Price - may be lower because of the new competition. Place - becomes more intensive and incentives may be offered to encourage preference over competing products. Promotion - Emphasis on differentiation and building of brand loyalty. Incentives to get competitors' customers to switch.

Characteristics :
costs are lowered as a result of production volumes increasing and experience curve effects sales volume peaks and market saturation is reached

increase in competitors entering the market

prices tend to drop due to the proliferation of competing products brand differentiation and feature diversification is emphasized to maintain or increase market share

Industrial profits go down

Decline Stage As sales decline, the firm has several options: Maintain the product, possibly rejuvenating it by adding new features and finding new uses. Harvest the product - reduce costs and continue to offer it, possibly to a loyal niche segment. Discontinue the product, liquidating remaining inventory or selling it to another firm that is willing to continue the product.

The impact on the marketing mix is as follows:

Product - number of products in the product line may be reduced Price - may be lowered to liquidate inventory of discontinued products. Prices may be maintained for continued products serving a niche market. Place - Distribution becomes more selective. Channels that no longer are profitable are phased out. Promotion - Expenditures are lower and aimed at reinforcing the brand image for continued products.

Characteristics :
costs become counter-optimal sales volume decline or stabilize prices, profitability diminish profit becomes more a challenge of production/distribution efficiency than increased sales

Why is it important to know the product life cycle?

Any for-profit business is constantly seeking ways to grow future cash flows by maximizing revenue from the sale of products and services. Positive cash flow allows a company to invest in development of new products and services, to expand production capabilities, to improve its workforce, and so on.

Does every product follow the same product life cycle curve?

No.
Most products in developed markets fail in the introduction phase. Their product life cycle is very short, and they do not even make it to the maturity stage. We can also find products with cyclical maturity phases. A product enters the decline phase of the product life cycle where it is promoted to regain customers again.

Sources:
https://www.wikipedia.com https://www.QuickMBA.com http://www.maxi-pedia.com