PRODUCT LIFECYCLE If we plot a graph of sales volume versus time
for a product, generally, the PLC represents a bell- shaped or
s-shaped curve. The product life cycle concept is derived from the
fact that a given products volume and revenue follow a typical
pattern of four phases cycle. This life cycle is the representative
fact of the existence of every product.2. DEFINITION The stages
through which the individual products develop over a period of time
is known as product life cycle. DeclineMaturityGrowthIntroduction3.
THE FOUR STAGES OF PRODUCT LIFECYCLE 4. PRODUCT LIFE CYCLESales
andProfits ($) Sales Profits Time Product Introduction Growth
Maturity Decline Develop- mentLosses/Investments ($) 5.
INTRODUCTION STAGE OF THEPLC Sales Low sales Costs High cost per
customer Profits Negative Create product awareness Marketing
Objectives and trial Product Offer a basic product Price Use
cost-plus Distribution Build selective distribution Advertising
Build product awareness among early adopters and dealers Slow
penetration- Launching the new product at a low price and low level
of promotion. Rapid Penetration-Launching of product at low price
with heavy promotion. Slow skimming- Launching the new product at
high price and low promotional level. Rapid Skimming- Launching the
new product at high price and high promotional level. Example- 3rd
generation Mobile Phones. Marketing Strategy used in Introduction
Stages-6. 7. Growth Stage of the PLC Sales Rapidly rising sales
Costs Average cost per customer Profits Rising profits Marketing
Objectives Maximize market share Offer product extensions, service,
Product warranty Price Price to penetrate market Distribution Build
intensive distribution Advertising Build awareness and interest in
the mass market Examples- Hyundai-I10. Lower prices to attract next
layer of price sensitive buyers. Shifts from product awareness to
product preference advertising. Increase distribution coverage
enter new distribution channels. Enter new market segments. Add new
models and products of different sizes, color, shapes etc. Improved
product quality and add new product features and styling. Marketing
Strategy Used in Growth Stage:8. 9. Maturity Stage of the PLC Sales
Peak sales Costs Low cost per customer Profits High profits
Marketing Objectives Maximize profit while defending market share
Product Diversify brand and models Price Price to match or best
competitors Distribution Build more intensive distribution
Advertising Stress brand differences and benefits Product
Differentiation. Adopting advance technology. Quality Improvement.
Redefine target market.2. Product Modification- Win competitors
customers. Entering new market segments. Converting non users.
Marketing Strategy Used in Maturity Stage:2. Mar ket
Modification-10. 11. Decline Stage of the PLC Sales Declining sales
Costs Low cost per customer Profits Declining profits Marketing
Objectives Reduce expenditure and milk the brand Product Phase out
weak items Price Cut price Go selective: phase out unprofitable
Distribution outlets Advertising Reduce to level needed to retain
hard-core loyal customers Divesting the business quickly by
dropping off its assets as advantageously as possible. Harvesting
the firms investment to recover cash quickly. Decrease the firms
investment selectively, by dropping the unprofitable customers
group, while simultaneously strengthening the firms investment
niche segments. Maintaining the given firms investment level until
the uncertainties about the industry are resolved. Increase the
given firms investment to dominate the market or strengthen its
competitive position.12. MARKETING STRATEGY USED IN DECLINESTAGES
The time span of each stage in product life cycle in respect of
each product may vary. Thus, a product may experience longer period
in growth stage and relatively short period in maturity stage. At
the same time, a product may be in different stages of its life
cycle in different segment of the market. For example, the product
concerned may be in the introduction stage in Asian market while
facing decline in western countries. There is no definite line of
demarcation between the various stages of product life cycle. Not
all product introduced in the market essentially pass through all
stages of its life cycle. It is also possible that the product may
attain introduction stage and then get phased out.13. PLC CONCEPT
IS BASED ON FOLLOWINGASSUMPTIONS-
Strategies for the differing stages of the Product Life
Cycle.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.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.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.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.
Problems with Product Life Cycle.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. Remember that PLC
is like all other tools. Use it to inform your gut
feeling.Theproduct life cycleis an important concept in marketing.
It describes the stages a product goes through from when it was
first thought of until it finally is removed from the market. Not
all products reach this final stage. Some continue to grow and
others rise and fall.
The main stages of the product life cycle are: Introduction
researching, developing and then launching the product Growth when
sales are increasing at their fastest rate Maturity sales are near
their highest, but the rate of growth is slowing down, e.g. new
competitors in market or saturation Decline final stage of the
cycle, when sales begin to fallThis can be illustrated by looking
at the sales during the time period of the product.
A branded good can enjoy continuous growth, such as Microsoft,
because the product is being constantly improved and advertised,
and maintains a strong brand loyalty.Extension strategiesextend the
life of the product before it goes into decline. Again businesses
use marketing techniques to improve sales. Examples of the
techniques are: Advertising try to gain a new audience or remind
the current audience Price reduction more attractive to customers
Adding value add new features to the current product, e.g. video
messaging on mobile phones Explore new markets try selling abroad
New packaging brightening up old packaging, or subtle changes such
as putting crisps in foil packets or Seventies music
compilations
Introduction:It is a stage when the product is totally new to
the market. The stress is not on immediate profits, but on creating
awareness about the product. A price skimming strategy is employed.
The product has no, or very few competitors. Growth:Competitors are
attracted into the market. They begin offering similar products.
Product becomes more profitable. The stress is on advertising and
brand building. Market share starts stabilising. Maturity:The
survivors of the earlier stages tend to stay longest in this
stage.Salesgrow at declining rates. Producers leave the market
because of poor margins. Sales promotion and price wars are rampant
and find prominant part in this stage. Decline:This stage marks the
downturn of the market. Sales grow negatively. Many products are
withdrawn from the market. Profits are ensured by cost cutting and
reducedmarketingspend. All products need not go through all these
stages. There are products which go from introduction to decline.
The length of each stage also varies enormously. The decisions of
the marketers also change the stage. For example a steep price rise
can take the product from growth to decline, or a shift from
decline to maturity can be experienced by a price cut.Product Life
Cycle (PLC): The Product Life Cycle (PLC) is based upon the
biological life cycle. For example, a seed is planted
(introduction); it begins to sprout (growth); it shoots out leaves
and puts down roots as it becomes an adult (maturity); after a long
period as an adult the plant begins to shrink and die out
(decline). Each product may have a different life cycle PLC
determines revenue earned Contributes to strategic marketing
planning May help the firm to identify when a product needs
support, redesign, reinvigorating, withdrawal, etc. May help in new
product development planning May help in forecasting and managing
cash flow 2. product life cycle Time Product Develop- ment
Introduction Profits Sales Growth Maturity Decline Losses/
Investments ($) Sales and Profits ($) 3. Introduction Stage of the
PLC Sales Costs Profits Marketing Objectives Product Price Low
sales High cost per customer Negative Create product awareness and
trial Offer a basic product Use cost-plus Distribution Build
selective distribution Advertising Build product awareness among
early adopters and dealers 4. Growth Stage of the PLC Sales Costs
Profits Marketing Objectives Product Price Rapidly rising sales
Average cost per customer Rising profits Maximize market share
Offer product extensions, service, warranty Price to penetrate
market Distribution Build intensive distribution Advertising Build
awareness and interest in the mass market 5. Maturity Stage of the
PLC Sales Costs Profits Marketing Objectives Product Price Peak
sales Low cost per customer High profits Maximize profit while
defending market share Diversify brand and models Price to match or
best competitors Distribution Build more intensive distribution
Advertising Stress brand differences and benefits 6. Decline Stage
of the PLC Sales Costs Profits Marketing Objectives Product Price
Declining sales Low cost per customer Declining profits Reduce
expenditure and milk the brand Phase out weak items Cut price
Distribution Go selective: phase out unprofitable outlets
Advertising Reduce to level needed to retain hard-core loyal
customers 7. Example: New Flavor of Pepsi Stage 1: Market
Introduction Pepsi bottles the new flavored product and places it
on the market for consumers. Pepsi also spends a lot of money
advertising the new flavor creating awareness. Stage 2: Market
Growth Customers like the flavor and begin to make routine
purchases. Coke introduces their competing flavor. 8. Stage 3:
Market Maturity More competitors enter the market taking some of
Pepsis profits. Stage 4: Sales Decline Customers have moved on to
the next new flavor. Some loyal fans stay behind. PRODUCT LIFE
CYCLE: PRODUCT LIFE CYCLE
What is a Product?: What is a Product? A PRODUCT is anything
that can be offered to a market usually to satisfy a want or
need
Slide 3: There are 4 general categories of products that r
marketed: Goods Services Places Persons Can you think of an example
for each category?
Goods: Goods
Services: Services
Places: Places
Persons: Persons
Product Life Cycle : Product Life Cycle Every PRODUCT has a life
cycle and asserts four things about a PRODUCT : PRODUCTS have a
limited life PRODUCT sales pass through different stages each
posing different challenges, opportunities n problems to the seller
Profits rise n fall at different stages PRODUCTS require different
marketing, financial, purchasing strategies at each stage
Slide 9: Product Life Cycle.... No of sales Time line Research
& Development (R&D) Launch / Introduction Growth Maturity
Saturation Decline
Product Life Cycle......: Product Life Cycle...... Research n
Development Phase: Begins when the company develops a new-product
idea Sales are zero Investment costs are high Profits are
negative
Product Life Cycle......: Product Life Cycle...... Introduction
Phase: Low sales Prices tend to be high becoz costs r high Negative
profits Innovators are targeted Little competition
Product Life Cycle......: Product Life Cycle...... Growth :
Sales rapidly rise Prices remain where they r , or fall slightly
Rising profits Promotional expenditure may increase or decrease
depends upon competition New customers also start buying Growing
competition
Product Life Cycle......: Product Life Cycle...... Maturity
Phase : Usually lasts longer than previous stages Divided into
three phases: Growth-sales growth rate starts to decline
Stable-sales flatten becoz of market saturation Decaying
maturity-the absolute level of sales begin to decline and customers
start switching to other products
Product Life Cycle......: Product Life Cycle...... Decline Phase
: Sales and profits decline Some companies withdraw their products
from market Those remaining reduce number of products High prices
on spare parts Focuses on cost reduction
Marketing strategy-Introduction Phase: Marketing
strategy-Introduction Phase Rapid-skimming strategy (high
price/high promotion). Slow-skimming strategy (high price/low
promotion). Rapid-penetration strategy (low price/high promotion).
Slow-penetration strategy (low price/low promotion).
Marketing strategy-Growth Phase: Marketing strategy-Growth Phase
Improve service quality and add new service features and elements
Enter new market segments Use new channels of distribution Lower
prices to attract more price-sensitive customers Shift from product
awareness advertising to product-preference advertising
Marketing strategy-Maturity Phase: Marketing strategy-Maturity
Phase Market-modification strategy Increase frequency use by
current consumers Look for new target market Product-modification
strategy Quality improvement Feature improvement
Marketing strategy-Decline Phase: Marketing strategy-Decline
Phase Reduce cost Reduce price Phase out weak items Include special
offers
