What is the Product Life Cycle?
The product life cycle (PLC) is the marketing strategy that outlines the stages of a product from its development, introduction in the market to its removal from the market. It outlines five main stages of the product – introduction, growth, maturity, saturation, and declining, and also gives the necessary strategy as each stage requires a unique marketing strategy to make alive the product on the market.
The product life cycle believes, just like we humans have a life, we are born, live, and one day we die, the same happened to the product. First, the product production decision is made, then produced, then introduced in the market, satisfies the market, and one day its life ends and is removed from the market. This idea was first popularized by German American Economist – Theodore Levitt, in 1965 and up to today it is also a popular strategy in the marketing field.
There are plenty of reasons behind the popularity of the product life cycle concept in the marketing field. They are, first, marketing analysts have found that products life is shorter now than previously. Second, new products are requiring additional investments. Third, it enables marketers to predict the change in consumer taste, competition, and channels and helps to adjust marketing plans accordingly. And, finally, it enables marketers to set product mix in a way that gives the most.
To be more clear, the product life cycle attempt to recognize distinct stages in the sales and profit history of the product. A marketer needs to understand the product life cycle because;
- The product has a limited lifetime after which the product may be dead if necessary and appropriate strategies are not adopted.
- Product sales pass through different stages and every stage poses challenges for sellers.
- The product sales and profits rise and fall in different stages.
- A product requires different production, marketing, financial, purchasing, personnel strategies in its life different stages.
A clear understanding of a product at all stages can help the marketer to adopt effective marketing strategies which help him to keep his product always in the competitive position in the market either it is the introduction stage, maturity stage, or declining stage. So, how the product life cycle works? Let’s find in the next,
The Product Life Cycle Stages
As already mentioned, the product life cycle has five stages – introduction, growth, maturity, saturation, and declining. As people do family planning before giving birth to a baby, the production of the product also must be planned and before introducing it to the market the product must be produced and on hand.
The pioneer stage of the product life cycle is the introduction where a new product, idea, or service is introduced in the market. In this stage, the consumers are not informed about the newly offered product by the marketer. This stage has the following key situations:
- No competitors exist in the market.
- Requires high marketing and production cost.
- Slow increase in sales and profits.
- Usually prodcuts have high prices.
- Limited distribution due to limited production.
In this stage, the main purpose of the marketer is to attract new customers, attempt to make them informed, and create a new consumer market. The sales and profit of the business start from zero levels and increase at a slow pace since most of the customers are unknown about the product and even they know, they hesitate to buy because they may think buying an unknown brand’s product would be risky than the familiar known one.
The marketer has to spend huge money on advertising to attract new customers, as such, there is a high cost on production, marketing, there is limited sales volume – even there will be no nay sales, and cash flow is poor. Thus, at first, competitors do not want to enter as they do not see opportunities. There may be only one, two, or very few dominant competitors and they enter with only one or two products because entering with a broad range of products could be risky.
Here, for convenience products, the marketer should distribute intensively, and for luxury items selectively or exclusively. With an increase in the sales volume, the marketer can adapt penetration prices, that provide a market want to survive in the long run. He should apply all the promotional measures including advertising, sales promotion, publicity, personal selling techniques. However, at first, the promotion must be informative rather than persuasive, because when first time purchasing, customers might be want to know about the product benefits and uses.
In this growth stage of the product life cycle, many of the consumers will come to know about the product, since informative communication was done in the introduction stage. As such, the number of customers will go on increasing, which lead to more sales, and profits for the marketer will increase rapidly.
Due to the increasing number of customers, competitors want to enter the market. However, at first, due to continuous increase in the sales volumes, there may not have an adverse effect on sales in this stage by the competition. When the competition becomes stronger the firm’s sales will go on increasing at the declining rate and its profits will be at the peak. The key situations of growth stage would be,
- Due to an increase in opportunities, the number of competitors will be increasing.
- Sales and profits increase at an increasing rate.
- Demand for products increases continuously.
In this stage, competitors try to create their product’s demand over the existing products. Thus, here, the main goal of the marketer should be to increase the range of product alternatives. As a result, the number of distribution outlets increases, economies of scale would be introduced, and prices may come down or various options of prices may be available for the product.
As such, the promotion becomes competitive, thus marketers must focus on persuasive promotion than informative. Here, the marketers who are able to persuade customers will only be able to expand their sales and profits.
In the third stage of the product life cycle, different types of competitors have entered the market with a broad range of products. As such marketing mix program i.e. product, pricing, promotion, distribution is at its highest peak, every business firm makes as much as possible efforts to achieve a differential advantage.
To get a competitive advantage they may offer low-priced products, high-quality products, add different features, or they may augment by proving discounts, warranties, etc. to attract customers and maintain their position in the market because the market is saturated. Here, the market segmentation process is at a faster pace. The key features/situations of the maturity phase would be:
- Sales and profits increase at decreasing rate.
- Profits start to decrease.
- There is perfect competition in the market.
- Entrance of diverse products in the market takes place.
- Market segmentation increases at a faster pace.
- Product specialization increases in the market.
In this stage, most of the firms focus on the STP model of marketing and promotion activities. Firms try to segment the market into reachable ones, target them and build up a distinct position, because here only mass advertising does not meet the objectives of the firm. Likewise, sales promotion strategies such as gifts giving, sample distribution, warranties are offered.
Similarly, as such products become old, most of the firms try to extend the life cycle of the products. Where some try to introduce new products, where some try to modify the existing products by adding new product features such as new taste, size, quality, color, etc.
The saturation stage of the product life cycle is the stage at which the firm’s growth ends and its sales become horizontal for a certain period. This stage reveals the following situations
- Sales rise and fall with basic economic forces.
- There is cutthroat competition.
- Profits go on decreasing.
- No chance to increase sales without product and market modification.
- Markets are highly segmented.
- Introduction of new improved technology and mass production.
- Competitors try for the dropping the products or differentiating or standardizing the prodcuts.
- Exists high entry barriers in the market.
- It is purely a consumers market.
In this stage, there exists a cutthroat competition. The marketer must try to increase sales and profit but also must work to provide customers peak satisfaction. The marketer should improve the product quality, standardize & differentiate the product, adopt a heavy promotion strategy, try to add a unique & very useful product feature, make attractive designs, etc. to improve the markets.
However, if these strategies do not work well, in such a situation, it would be better for the marketer to quit the existing one and try to enter into a new market segment or even might try to introduce a new product.
In the last stage of the product life cycle, as the saturation stage continuous the product demand and sales decrease. As such profits decreases and the product is also being retired from the market when additional efforts are useless to improve the existing one.
It creates a very difficult situation for the firms to survive in the market, thus most of the firms quit the market and go on a search for other opportunities. The decline stage reveals the following situations:
- As most of the firms go for new opportunities during this period number of firms declines.
- Products offerings become narrow, as there is no scope for the business in the market.
- Profits decline at the beginning, but when many competing firms quit the market, the situation of the existing firms may go on improving.
During the maturity stage, when the firm fails to adopt an appropriate product strategy to maintain the market, because of cutthroat competition, sales decline permanently, new innovative products replaced old products, adoption of new production technologies changes in consumers taste and demand. In this stage, no additional efforts can improve the company’s sales and profits.
In this particular situation, firms may have three alternative courses of action:
- Cut down on their marketing programs, thereby reducing the number of products they make, the outlets they sell-through, and the promotion they use, or
- Revive the product by positing, repackaging, or remaking it, or
- Terminate or remove the product from the market.
Usually, in the declining stage of the product life cycle, the number of consumers goes on decreasing, many firms quit the market, and product offering becomes narrow. When this happens, the competitive power of the survived firms goes on improving, they get a maximum number of customers to sell their products, the demand of their products will be further improved, and the product swiftly may move into maturity stage, again.
Therefore, in this particular situation, the survived firm regain the market for their products, as such, they may earn adequate profits. But his situation appears after a long struggle in the market. This is possible only for strong firms and brands.
The Product Life Cycle Strategies
There are two alternative product life cycle strategies, first, product modification strategy, and second, product abandonment strategy. Both of these product life cycle strategies are adopted either during the saturated situation of maturity stage or at the beginning of the declining stage. It will be meaningless to adopt these strategies before the saturation stage or during the late declining stage.
Product Modification Strategy
This strategy simply can be defined as modifying some aspects of a product. It can be called “new and improved” even after a small change.
There are many ways to modify a product. The product modification strategy of the product life cycle can be classified into four categories as below:
Functional Changes: Functional changes mean simply adding new utilities to the product to make work better. For example, a marketer has an existing product shampoo that has functions as follows – it cleans dandruff, makes complexion fair, and makes fresh. In this situation, the marketer may add another utility as “checks hair fall”, which also attracts consumers facing hair fall.
Quality Changes: Quality change means a change of materials to be used in producing a product. If the product price is low it may have low quality, and if the product has a high price it will have better quality.
Style Changes: Do you know, in this modern age the style of prodcuts also satisfies the needs of consumers. The change of style may be the product’s appearance, packaging, design, color, brand, etc.
Socio-Ecological Changes: It refers to increasing the quality of the product by also increasing its safety for both consumers and the environment too. For example, a “tempo” can also be operated through “batteries” instead of “diesel or petrol”.
Product Abandonment Strategy
In this strategy of the product life cycle, if the marketer thinks that even applying all the above-mentioned four product modification processes noting is going to improve the market position he may drop or abandon the product from the line and introduce a new product in the market.
This may be a difficult task for the marketer to remove from the market immediately, it may make him lose reputation from the market, may cause a huge loss, or it may be very risky. However, if the marketer actually going to remove his product from the market, I think he should forecast the future potentiality of the new product carefully and inform the customers in advance what is coming next, etc.
Examples of the Product Life Cycle
I am a 1900s person, were at that time at my area there only was a DVD player with the TV is available to watch movies and listen to some radio stations. At that time, the demand for DVDs in my area was increasing rapidly, and in just two years of time, most of the households had bought to enjoy watching movies. At that time I am a child, I & my some friends used to do some people’s household works just for watching TV, works such as washing people kitchen, cutting grass, etc. but now when I think about it, it makes me laugh however those days were “beautiful”. And now I must say that time DVD companies and suppliers would have made lots of profits. But after a couple of years, with the advancement of technology and the internet, people are moved into mobile, smartphones, laptops, and the demand and use of DVD players had drastically decreased. Now, at the present, almost no households are using the DVD player in my area rather now they have mobile phones.
Another example of product life cycle could be of the typewriter, it was first introduced in late 19th century, at that time the demand and use of typewriter are very high. It was very popular for writing and had made easier the life of people. However, with the invention of technology – smartphones, laptops, desktops have quickly replaced the typewriters – as such the demand and sales revenues and use of typewriters are dropped off.