Product Life Cycle
A product is like a human being. It is born, grows up fast, matures and then finally passes away. Product life cycle is the stages through which a product or its category bypass. From its introduction to the marketing, growth, maturity to its decline or reduce in demand in the market. Not all products reach this final stage, some continue to grow and some rise and fall. Inshort, The PLC discusses the stages which a product has to go through since the day of its birth to the day it is taken away from the market.
However, the basic difference in case of human beings and products is that a product has to be killed by someone. Either the company (to bring better products) or by competition (too much external competition). There are several products in the market which have lived on since ages (Light Bulbs, Tubelights), whereas there are others which were immediately taken off the shelf (HD DVD).
Thus the Product life cycle deals with four stages of a products life.
Stages of Product life cycle:
A) Introduction: The stage 1 is where the product is launched. A product launch is always risky. You never know how the market will receive the product. There have been numerous failures in the past to make marketers nervous during the launch of the product. The length of the introduction stage varies according to the product.
If the product is technological and receives acceptance in the market, it may come out of the introductory phase as soon as it is launched. Whereas if the product is of a different category altogether and needs market awareness, it may take time to launch.
Characteristics of Introductory stages of Product life cycle
Ø Higher investment, lesser profits
Ø Minimal Competition
Ø Company tries to Induce acceptance and gain initial distribution
Ø Company needs Promotions targeted towards customers to increase awareness and demand for product
Ø Company needs Promotions targeted towards channel to increase confidence in the product
B) Growth: Once the introductory phases are over, the product starts showing better returns on investment. Your customers and channels begin responding. There is better demand in the market and slowly the product starts showing profits.
This is a stage where competition may step in to squash the product before it has completely launched. Any marketing mistakes done at this stage affect the product considerably as the product is being exposed to the market and bad news travels fast. Thus special care has to be taken in this stage to ensure competition or bad decisions do not affect the growth stage of the product.
Characteristics of Growth stage of Product life cycle
Ø Product is successfully launched
Ø Demand increases
Ø Distribution increases
Ø Competition intensifies
Ø Company might introduce secondary products or support services.
Ø Better revenue generation and ROI
C) Maturity stage: One of the problems associated with maturity stages in a technologically advanced environment is the problem of duplication. Not only is the product available in duplicate markets, but also there are several competing products which arise with the same features and capabilities. As a result, the USP’s of the product become less attrative.
Along with competition, Penetration pricing becomes a weapon for competitors. Competitors sell products with the same features at lesser prices thereby trying to penetrate in the market. Nonetheless, The sales of a product (especially sales from return customers) is at its peak point during the maturity stages. The growth of sales may be lesser, but the sales revenue of the organization is maximum during the maturity stage of product life cycle.
Characteristics of Maturity stages of Product life cycle
Ø Competition is high
Ø Product is established and promotion expenditures are less
Ø Little growth potential for the product
Ø Penetration pricing, and lower profit margins
Ø The major focus is towards extending the life cycle and maintaining market share
Ø Converting customers product to your own is a major challenge in maturity stage
D) Decline: 1 product, 10 competitors, minimum profits, huge amount of manpower and resources in use – A typical scenario which a product might face in its last stage. In this stage the expenditures begin to equal the profits or worse, expenses are more than profits.
Thus it becomes a typical scenario for the product to exit the market. It also becomes advantageous for the company as the company can use resources it was spending on the declining product on an altogether different project.
Characteristics of Decline stages of Product life cycle
Ø Market is saturated
Ø Sales and profits decline
Ø Company becomes cost conscious
Ø A lot of resources are blocked in rejuvenating the dead product.
Strategies for the differing stages of the Product Life Cycle
A) Introduction: The need for immediate profit is not a pressure. The product is promoted to create awareness. If the product has no or few competitors, a skimming price strategy is employed. Limited numbers of product are available in few channels of distribution.
B) Growth: Competitors are attracted into the market with very similar offerings. Products become more profitable and companies form alliances, joint ventures and take each other over. Advertising spend is high and focuses upon building brand. Market share tends to stabilise.
C) Maturity: Those products that survive the earlier stages tend to spend longest in this phase. Sales grow at a decreasing rate and then stabilise. Producers attempt to differentiate products and brands are key to this. Price wars and intense competition occur. At this point the market reaches saturation. Producers begin to leave the market due to poor margins. Promotion becomes more widespread and use a greater variety of media.
D) Decline: At this point there is a downturn in the market. For example more innovative products are introduced or consumer tastes have changed. There is intense price-cutting and many more products are withdrawn from the market. Profits can be improved by reducing marketing spend and cost cutting.