The product life cycle (PLC) identifies and explains the stages that a product may go through from the moment it is launched on to the market to the moment it is withdrawn.
Knowledge of the PLC can help identify important marketing environmental factors that managers should be aware of before they decide upon the most effective marketing effort.
There are many factors affecting the life-cycle of a product. The statement of Joel Dean is very important in this regard. He said, “The length of the product life-cycle is governed by the rate of technical change, the rate of market acceptance and the case of competitive entry.”
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1. Meaning of Product Life Cycle 2. Definitions of Product Life Cycle 3. Stages 4. Strategies 5. Patterns
6. Factors Affecting 7. Extension Strategies for Avoiding or Delaying Decline 8. Performance 9. Implication of the Theory 10. Advantages and Limitations.
What is Product Life Cycle: Meaning, Definitions, Stages, Strategies, Patterns, Factors Affecting, Advantages and Limitations
Contents:
- Meaning of Product Life Cycle
- Definitions of Product Life Cycle
- Stages of Product Life Cycle
- Strategies of Product Life Cycle
- Patterns of Product Life Cycle
- Factors Affecting Product Life Cycle
- Extension Strategies for Avoiding or Delaying Decline in Product Life Cycle
- Performance in Different Phases of Product Life Cycle
- Implications of Product Life Cycle Theory
- Advantages and Limitations of Product Life Cycle
What is Product Life Cycle – Meaning
Product life cycle [PLC] can be understood as “the period of time over which an item is developed, brought to market and eventually removed from the market. First, the idea for a product undergoes research and development. If the idea is determined to be feasible and potentially profitable, the product will be produced, marketed and rolled out. Assuming the product becomes successful and its production will grow until the product becomes widely available. Eventually, demand for the product will decline and it will become obsolete.”
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Every product passes through almost similar type of phases, which are known as the product life cycle. Though all products have a different life cycle and several products do not pass through all phases.
In today’s highly competitive and rapidly changing scenario it is getting increasingly difficult to predict any changes that may affect the very survival of the company. Given the importance of predicting the business environment accurately, it is advisable to have a robust technique which will help in anticipating the pattern of industry changes which one can anticipate. One of the most reliable techniques for predicting the probable course of events in the future is the product life cycle [PLC].
Just as human beings pass through defined phases of life, such as –
1. Birth
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2. Adolescence
3. Youth
4. Old age
5. Death
Similarly, an industry passes through a number of phases beginning with introduction, followed by growth, maturity and then finally decline phase.
The PLC theory believes that the industry growth follows an ‘S shaped curve’ because of the process of innovation and diffusion of a new product.
1. The introduction phase – This is usually characterised by a flat curve reflecting the difficulty of overcoming the buyer’s inertia. And their initial denial to buy the product.
2. Then product enters rapid growth phase, once the product has been accepted by the buyers. This is growth phase.
3. This rapid growth phase enters a plateau, once the product reaches the current potential market. This is the maturity phase.
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4. In the final stage the PLC tapers off as the demand for the product keeps on declining due to the entry of new substitutes. This is decline phase.
The product life cycle is an extremely important concept in marketing. It describes the stages a product passes through from when it was first thought of, till it is finally removed from the market. Not all products reach these defined stages. In fact, some products continue to grow while other products rise and fall.
The main stages of the product life cycle, when compared with human life cycle, stated above, give following result –
1. Introduction [birth] – researching, developing and then launching the product
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2. Growth [adolescence] – when sales are increasing at their fastest rate
3. Maturity [youth] – sales are near their highest, but the rate of growth is slowing down, e.g., new competitors in market or saturation
4. Decline [death] – final stage of the cycle, when sales begin to fall
This can be illustrated by looking at the sales during the time period of the product.
What is Product Life Cycle – Definitions Provided by Philip Kotler, Arch Patton and William J.Stanton
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The concept of product life cycle indicates that sooner or later all products die and that if management wishes to sustain its revenues, it must replace the declining products with the new ones. The product life cycle concept also indicates what can be expected in the market for a new product at various stages. Thus, the concept of product life cycle can be used as a forecasting tool.
It can alter management that its new product will inevitably face saturation and decline, and the host of problems these stages pose. The product life cycle concept is also a useful framework for describing the typical evolution of marketing strategy over the product life cycle. This will help in taking sound marketing decisions at different stages of the product life cycle.
Like a human being, a product has also a certain length of life. Again, like a human being, a product has also to pass through certain identifiable stages in its life. As the life of a human being can be divided into six stages — Infant, Childhood, Youth, Adult, Old and Death, in the same manner life of a product can also be divided into six parts — (1) Introduction, (2) Growth, (3) Maturity, (4) Saturation, (5) Decline, and (6) Obsolescence. These six stages are collectively known as the Life-cycle of a product. The team Life-cycle of a product has been defined by many eminent authors.
Some of the important definitions are as under:
Philip Kotler, “The product life-cycle is an attempt to recognise distinct stages in the sales history of the product.”
Arch Patton, “The life-cycle of a product has many points of similarity with the human life-cycle; the product is born, grown lustily, attains dynamic maturity then enters its declining year.”
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William J. Stanton, “From its birth to death, a product exists in different stages and in different competitive environment. Its adjustment to these environments determines to a great degree just successful its life will be.”
Analytical study of the above definitions indicates that different stages in the length of the life, through which a product has to pass, are known as its life-cycle. The life of a product begins with its introduction into the market. Then the product enters into a period during which its market grows rapidly. After this, the product reaches maturity and then the stage of saturation comes. After the stage of saturation, the market of the product starts to decline and finally the life of product comes to an end.
It is important to note in this reference that the length of life-cycle differs from product to product. The Life-cycle of some products is very short such as fashionable ready-made garments. On the other band, some are the products whose life-cycle goes on upto a long period such as machine. It is also important to note that some of the products come out of the market even before passing through all the stages of their life-cycle in the same manner as some persons die in childhood, or at young age.
What is Product Life Cycle – 5 Important Stages: Introduction Stage, Growth Stage, Maturity Stage, Saturation Stage and Decline Stage
Products, like people, have a life cycle. They are born, grow, mature and finally decline and die. The innovation of a new product and its degeneration into a common product is termed as the life cycle of a product.
The product life cycle (PLC) identifies and explains the stages that a product may go through from the moment it is launched on to the market to the moment it is withdrawn. Knowledge of the PLC can help identify important marketing environmental factors that managers should be aware of before they decide upon the most effective marketing effort.
There are five stages in the life cycle of a product are discussed below:
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i. Introduction Stage:
At this stage the product is launched into the market, hence awareness and acceptances are minimal. So here the emphasis should be on promotional activities so as to acquaint customers with the product and gain acceptance.
In the initial stage with distinctive speciality a firm can charge a high price but as this characteristic fades away and the product becomes a pedestrian one, he has to either soften the pricing or bring a change in the product to create some fresh interest so as to compete well with the new products that have entered the market.
Advertising and sales promotions are extensively used in order to build awareness, encourage evaluation and trial and initial adoption.
ii. Growth Stage:
During this stage mass market acceptance will take place through early adopters. Growth will be rapid, profits will emerge and all initial costs covered during this period. This stage is marketed by increase in the number of competitors, major product improvements, etc.
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Intensifying competition might lead to price reductions. An expansion of the distribution network will be sought in order to facilitate market penetration in view of increasing pressure from competitors.
iii. Maturity Stage:
When the product reaches maturity, sales growth continues but at a diminishing rate due to declining number of potential customers. This stage represents the most competitive stage in the life of a product but one in which profits are flowing in steadily. Special promotional efforts are needed to attract new users to the product. During this stage emphasis is given in opening new distribution channels and retail outlets.
iv. Saturation Stage:
There are now many competitors in the market, profits per unit have further declined and there is no growth in sales. It is time to consider new markets, changes in prices, promotion and introduction of new product versions or new products.
v. Decline Stage:
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The product reaches a stage of declining sales as it faces competition from better products or better substitutes developed by the competitors. At this stage the product has to be redesigned or the cost of production reduces so that they can continue to make some contribution to the company.
The manufacturer may have to accept the gradual decline and ultimate withdrawal of the product from the market or may try to revitalize it by introducing new product applications, new packaging, a different advertising theme, new selling methods, new distribution channels or new markets.
What is Product Life Cycle – Strategies: Strategies during Product Development Stage, Introduction Stage, Growth Stage, Maturity Stage and Decline Stage
Strategies followed During Various Stages of Product Life Cycle are:
1. Strategies during Product Development Stage:
a. Focus is on product
b. Emphasis is on cost reduction
c. Trials are the main tools
d. Exploring of the market starts
e. Publicity of the product (about its coming)
f. Minimum expenses to be maintained during this period
g. Production capacity must be looked after
h. Quality must be checked
i. Focus on work is to be given
j. A good introducer of the product is required
k. In-house working should be emphasised.
2. Strategies during Introduction Stage:
i. Persuade people to try the products.
ii. Stress should be on advertising to inform the customer about the product
iii. Give introductory offers by providing some attractive gifts to entice the customers.
iv. Give a valid reason to the customers to buy the product
v. Dealers should be given good discounts
vi. There should be selective distribution to focus on target customers
vii. Skimming pricing should be followed to earn higher profits in the initial stages
viii. Removing the product deficiencies must be focused on
3. Strategies during Growth Stage:
a. Aggressive advertising is required to stimulate the sales of the product
b. Availability of the product should be ensured to a large number of customers
c. Modifications or new versions of the product are required to be introduced to fulfill the requirement of different customer classes. Strengthening of the distribution channels are required so that the product is easily available wherever required.
d. Focus should be on developing the brand image through promotional activities
e. Competitive prices must be maintained to grab the market.
f. Activities should be customer oriented, an emphasis should be given on customer services to satisfy them to a maximum level.
4. Strategies during Maturity Stage:
i. More and more emphasis is required on the brand image in order to differentiate the product from products of the competitors.
ii. More benefits may be provided to the customers e.g. extending the warranty period, guarantee period etc.
iii. Change in packaging may be introduced (Reusable packaging).
iv. Packaging may be used as a silent salesman by making it more attractive.
v. Requirement to explore the new markets for the product.
vi. New uses of the product may be developed.
vii. New users of the product may be developed.
viii. New Technology can be adopted to enhance the quality of the product.
ix. New features can be added to enhance the value of the product.
5. Strategies during Decline Stage:
i. More emphasis on the promotional schemes
ii. Distribution cost should be reduced and the benefit should be transferred to the customers
iii. More value addition to the product can be done.
iv. Packaging will play a very important role at this stage also, so it should be focused on.
v. Cost of production should also be reduced.
vi. Economy packs of the products should be introduced.
vii. Try to increase the life of the stage
viii. Emphasis is on sales volume with minimum profit margins.
If after all these efforts company fails to restore its position in the market, than the best thing for the company is to take out their existing product from the market and come up with a new product comprising of unique features that can hit the market.
What is Product Life Cycle – 3 Common Alternate Patterns of PLC: Growth-Slump-Maturity Pattern, Cycle-Recycle Pattern, Scalloped Product Life Cycle
There are three common alternate patterns of PLC such as:
1. Growth-slump-maturity Pattern.
2. Cycle-recycle Pattern.
3. Scalloped PLC
1. Growth-Slump-Maturity Pattern:
This type of pattern could be easily seen in small kitchen appliances. It may happen when the product is introduced in the market, sales of juicer mixer grew rapidly and then fell to a “petrified” level. The petrified level is sustained by late adopters buying the product for the first time and early adopters replacing the product.
2. Cycle-Recycle Pattern:
This type of pattern could be easily seen in the sales of new drugs. Mostly the pharmaceutical company aggressively promotes its-new drug, and this produces the first cycle. With the passage of time the sales of drug starts declining and the company gives the drug another promotion push, which produces a second cycle.
3. Scalloped PLC:
This type of pattern could be easily seen in when the sales pass through a succession of life cycles, based on the discovery of new-product characteristics, or users. Nylon’s sales, for example, show a scalloped pattern because of the many new uses in hosiery, carpeting, automobile tyres, shirts, parachutes over a period of time.
Special Categories of Product Life Cycle:
There are three special categories of product life cycle which are as styles, fashions, and fads.
i. Style:
A style is a basic and distinctive mode of expression appearing in a field of human endeavour. Styles in homes (carpet, LCD); clothing (formal, casual, funky); and art (realistic), etc. A style can last for generations, and can vanish without any reason.
ii. Fashion:
A fashion is a currently accepted or popular style in a given field. Fashions pass through four stages- distinctiveness, emulation, mass-fashion, and decline. For how long a particular cycle will continue is hard to predict. According to Chester Wasson fashion ends because they represent a purchase compromise, and consumers start looking for missing attribute.
For example, if automobiles turnout to be smaller with the period of time, they become less comfortable and then a number of buyers start demanding larger cars. According to William Reynolds the length of a particular fashion cycle depends on the extent to which the,- fashion meets a particular need, it is consistent with other trends that are taking place in the society, satisfies societal norms and values, and does not exceed technological limits as it develops.
iii. Fads:
Fads are fashion that are easily accepted by public, and are adopted with great enthusiasm, which is accepted very quickly and declines very fast. The period of acceptance is short and they tend to attract only a few people who are searching for excitement or want to be different from others. These people, to distinguish themselves from others, go for body piercing and tattooing. Fads do not survive for a long period of time as they do not satisfy a strong need.
What is Product Life Cycle – 6 Important Factors Affecting PLC: Rate of Technical Changes, Rate of Market Acceptance, Ease of Competitive Entry and a Few Others
There are many factors affecting life-cycle of a product. The statement of Joel Dean is very important in this regard. He said, “The length of the product life-cycle is governed by the rate of technical change, the rate of market acceptance and the case of competitive entry.”
Some of the important factors affecting life-cycle of a product are discussed hereunder:
1. Rate of Technical Changes:
Life-cycle of a product depends upon the rate of technical changes taking place in the country. If technical changes take place in the country at a very high rate, the life-cycle of the products in that country will be very limited because new and improved products take place of the old products.
On the other hand, if the rate of technical changes in a country is not so high, the life-cycle of the products in that country may be longer. For example, rate of technical changes in India is lower when compared with that of the other developed countries. As a result of it, the life-cycle of products in our country is higher than that of the developed countries.
2. Rate of Market Acceptance:
The length of life-cycle of products in a country depends upon the rate of market acceptance in the country also. If the customer of a country accepts a new product very fast, the life-cycle of products in such country will be very limited because the customers, who have accepted a product so fast, can accept another product on next day and the product may stand out of the market.
On the other hand, if the customers of a country accept a product gradually, the life-cycle of products in such country may be quite long. For example, the rate of market acceptance in our country is very low and therefore, the life-cycle of most of the products in our country is quite long.
3. Ease of Competitive Entry:
The success or failure of a product in the market depends to a large extent upon the situation of competition in the market. If the competitors can enter into a market very easily, the life-cycle of the product will be very short because the competitors can make the products out. On the contrary, if the competitors cannot enter into a market so easily, the life-cycle of products in such market can be fairly long.
4. Risk Bearing Capacity:
The enterprises having more risk bearing capacity can keep their products standing in the market for a long period because they can face all the challenges of market effectively. On the other hand, the enterprises having less risk bearing capacity are unable in facing the challenges of the market, life-cycle of their products is curtailed to short.
5. Economic and Managerial Forces:
Economic and managerial forces of an enterprise also determine the success of the enterprise in the market to a great extent. If an enterprise enjoys sound economic and managerial forces, the life-cycle of the product of such enterprise can be longer than that of the products of an enterprise suffering from weak economic and managerial forces.
6. Protection by Patent:
If the patent of a product is getting registered, the life-cycle of the product can be fairly long, and if the patent of a product is not getting registered, the life-cycle of the product is cut short.
What is Product Life Cycle – Marketing Techniques Used to Improve Sales: Advertising, Price Reduction, Adding Value, Explore New Markets and New Packaging
These strategies extend the life of the product before it goes into decline. Again businesses use marketing techniques to improve sales.
The techniques are:
1. Advertising:
It is a good technique to try to gain a new audience or remind the current audience. Tata Nano was revived through heavy advertising. Even Cadbury adopted the new positioning technique by highlighting the fact that it made a good gift and a chocolate is good on happy occasions with a nice catchy phrase “kuch meetha ho jaye”.
2. Price Reduction:
This technique is always more attractive to customers. Airtel significantly lowered the price to remain in competition.
3. Adding Value:
The company, under this approach adds new features to the current product, such as video messaging on mobile phones. An I-Phone performing the features of a Laptop. AN LCD being made Pen Drive compatible.
4. Explore New Markets:
When there is no scope to sell further in the domestic market, it is better for the company to try selling abroad. All the hand set manufactures for mobile phones are exploring the villages and small towns for their cheaper versions of which the stocks are lying with them, but there is no demand in the Metros and the big cities.
5. New Packaging:
When the old packaging has lost its attractiveness, then brightening up old packaging, or subtle changes such as putting crisps in foil packets be done by the company. All cosmetics companies have repackaged the lipsticks differently for the teenagers and for the older women. Even the vermilion which has been mostly popularised by the TV serials is coming in the stick form and not powder form, so that it does not smudge.
What is Product Life Cycle – Performance in Different Phases of Product Life Cycle: Product, Marketing, Buyer Behaviour and Competition
Performance in different phases of product life cycle can be studied under four parameters-
1. Product
2. Marketing
3. Buyer behaviour
4. Competition
Although several parameters such as strategy, risk, profits etc., Can be considered, but for simplicity sake, only four parameters have been taken.
1. Product:
This parameter shows that in the first stage of PLC, the quality of product may not be good, but as the product market grows and feed backs are received, there is advancement in product quality, followed by superior quality and standardization in the maturity stage. The decline stage sets in only because the company stops paying heed to market feedback and segmentation.
2. Marketing:
Under the introduction stage, market penetration is done through heavy advertising and skimming. In the second stage the sales increase and the advertisement costs reduce, in the maturity stage good segmentation is done and by this time there is a slack in aggressive marketing which leads to low sales and declining interest of consumers in the product.
3. Buyer Behavior:
The buyer behaviour is also worth considering as in the start stages the buyer is reluctant to buy the product and he has to be pushed into buying, soon this changes in the growth stage where the acceptance from buyer comes and soon he reaches the saturation in the maturity stage. In the last decline stage, the buyers are not interested in buying the product.
4. Competition:
Similarly, when competition is considered, there are few competitors in the introduction stage, then there are huge buyers in the growth stage then there is a shakeout and the company loses some buyers in the maturity stage. Finally at the end stage, which is the decline stage, there may be too less competition or very fierce competition due to which the company might have vanished from the market.
What is Product Life Cycle – Implications of Product Life Cycle Theory: Sure of Success and Implications in International Marketing
There are following implications of the product life cycle theory in the marketing field:
(1) Sure of Success:
Almost every product passes through, the various stages of the life cycle. A company which has come out with a new product can be sure of enjoying the market success, and the monopoly situation only for a short while. As the product becomes popular and acceptable among customers, other competitors, sometimes with improved designs and lower price, will join.
As more and more competitors join the race, the products move towards an end. It may be possible that the growth stage for the industry as a whole extends over a sufficiently long period while it is shorter for an individual concern. Moreover, the first and innovating company will have to share the market with an increasing number of competitors.
(2) Implications in International Marketing:
The concept of product life cycle call be extended to the international marketing also. A firm tends to produce what is needed by the consumers. If the company is popular with the domestic consumers, the products manufactured by may soon become popular and will satisfy the felt need of the domestic consumers.
When a new product is first commercially exploited, it will enjoy a monopoly in the domestic market. If the demand for the product can be created in overseas markets, it will also enjoy the same monopoly power in overseas market but only for a time being. Initially, sales in the foreign markets may not be high.
Gradually the market for the product will grow substantially and the company will earn high profits. Gradually over time, the demand for the product reaches at a high level, local firms will start manufacturing. It may compete with the exporting company as it will have to pay customs and other duties and to bear the transportation charges from the exporting to importing country.
As the demand increases further the local companies will expand their level of production and will soon enjoy the same level of economies as the exporting company is enjoying. In addition if such firm has an edge over the exporting company in relation to some other elements of costs such as low labour costs etc., they may soon be able to compete in the third countries or even in that country itself where the domestic operations of the innovating company are based.
Therefore, a product starling with a monopoly advantage may end up where it is replaced with imports from a foreign country. For example, U.S.A. once used to export large number of bicycles, now it is one of the largest importers because of labour cost economies in the importing countries.
One more important implication of product life cycle in the international marketing is that one can discern different life cycle patterns in different parts of the world because firms do not look to overseas markets unless their sales and profits show a downward trend in the domestic market.
In other words, firms jump to international markets only when the competitive structure of the local market hits them ‘below the belt’. It means when one product is in the maturity or declining stage in the local market it may be in the innovation of market development (1st Stage) stage in country A and in the growth stage in country B.
What is Product Life Cycle – Advantages and Disadvantages of Product Life Cycle
Advantages of Product Life Cycles:
1. It helps in Understanding Marketing and Development of product. From a marketing and business development perspective, this is one of the strongest advantages of product life cycles
2. For consumers, the product life cycle has generally positive implications by driving innovation, which leads to products that are more effective
3. It helps the marketing division to know the time when innovations are required in the product
4. PLC leads to capture of market in the maturity stage
5. It lets the management know when to discard the product
Limitations of Product Life Cycle:
1. All products follow PLC, But PLC varies a lot, unfortunately, it is applied without any distinction, although is different for different types of products
2. It appears that life comes to an end with decline, but there are examples when after decline the product may have found new popularity and rejuvenation
3. Nothing helps to identify when a product moves from one stage to another. It makes the task of forecasting difficult
4. The model worked well when the environment was relatively stable, not subject to uncertainty as it is today
5. Streetwise marketers point out those unusual circumstances that might interfere with expected life cycle behaviour. It may result in different shape of PLC
6. The life cycle of a product is dependent on sales to consumers. All consumers do not buy in the introductory stage. Some people buy early, others buy after their friends have bought. For any product to be successful it must be bought by early adopters
7. PLC is a metaphor. Products are not organic, and as such do not have to die
8. It attempts to describe only the pattern of evolution
9. There is no scientific basis
10. The pattern may not be the same to all industries
11. All products do not pass through all the stages of PLC