Unit 9. Product Life Cycle and Its Marketing Implications
Whatisaproduct lifecycle?Aproduct'slifecycle(PLC)canbedivided intoseveral stages characterized by the revenuegenerated by the product. If a curve is drawnshowing product revenue over time,it may takeoneof many different shapes,anexampleofwhich is shown inthe next chart.The product life cycle concept may applyto a brand or toa category of product.Its duration may be as short as afew months or a century or more for product categoriessuch as the gasoline-powered automobile. Productdevelopment is the incubation stage of the product lifecycle.There are no sales and the firm prepares to introducethe product.As the product progressesthrough its life cyclechanges in the marketing mix usually are reguired inorderto adjust to the evolving challenges and opportunities
ProductLifeCycleStages(SeeP161Fig.9.1)SalesandSalesProfits ($)ProfitsTimeProductIntroductionGrowthMaturityDeclineDevelopmentLosses/Investments($)SalesandProfits Over the Product'sLife FromInception toDemise
Time Product Develop- ment Introduction Profits Sales Growth Maturity Decline Losses/ Investments ($) Sales and Profits ($) Sales and Profits Over the Product’s Life From Inception to Demise
IntroductionStage Whentheproduct isintroduced,sales will be lowuntil customers become aware of the product andits benefits.Some firms may announce theirproduct before it is introduced,but suchannouncements also alert competitors andremove the element of surprise.Advertising coststypically are high during this stage in order torapidly increase customer awareness oftheproduct and to target the early adopters. Duringthe introductory stage the firm is likely to incuradditional costs associated with the initialdistribution of the product.These higher costscoupled with alowsalesvolume usually maketheintroduction stage a period of negative profits
During theintroductionstage,the primary goal istoestablishamarket andbuildprimarydemandforthe product class.Thefollowingare someof themarketing miximplications of theintroductionstage:Product-one or few products,relatively undifferentiatedPrice-Generally high, assuming a skim pricing strategyfor a high profitmargin as the early adoptersbuy theproduct and the firm seeks to recoup development costsquickly.In some cases apenetration pricing strategyisused and introductory prices are set low to gain marketsharerapidly.Distribution -Distribution is selective and scattered as thefirm commencesimplementation of the distribution planPromotion-Promotion is aimedat building brandawareness. Samples or trial incentives may be directedtoward earlyadopters.5
GrowthStageThegrowth stage is a period of rapid revenuegrowth.Sales increase as more customers become aware of theproductand itsbenefitsandadditional marketsegmentsaretargeted.Duringthegrowthstage,the goal isto gain consumerpreference and increase sales.The marketing mix may bemodifiedasfollows:Product-New product features and packaging options;improvementofproductqualityPrice- Maintained at a high level if demand is high, orreduced to capture additional customers.Distribution -Distribution becomes more intensive.Tradediscounts are minimal if resellers show a strong interest inthe product.Promotion - Increased advertising to build brandpreference.6
MaturityStageThematuritystage isthemostprofitable.While salescontinue to increase into this stage,they do so at a slowerpace.Duringthematurity stage,the primary goal istomaintain market share and extend theproduct life cycleMarketingmixdecisionsmayinclude:Product -Modificationsare made and features are addedin order to differentiate the product from competingproducts that may have been introduced.Price-Possible price reductionsin response to competitionwhile avoiding a price war.Distribution -New distribution channels and incentives toresellersinorderto avoid losing shelf spacePromotion-Emphasis on differentiation and building ofbrand loyalty.Incentivesto get competitors'customerstoswitch
DeclineStageEventuallysalesbeginto declineasthemarketbecomessaturated,the productbecomestechnologically obsolete,orcustomer tastes change.If the product hasdeveloped brandloyalty,the profitabilitymay bemaintained longer.Unit costsmay increase with the declining production volumes andeventually no more profit canbe made.During the declinephase,the firm generallyhas threeoptionsProduct-The number of products in theproduct line maybe reduced.Rejuvenate surviving products to make themlooknewagain.Price-Prices may be lowered to liquidate inventory ofdiscontinued products.Prices may be maintained forcontinued products serving a niche market.8
Distribution-Distribution becomes more selectiveChannels that no longer are profitable are phased out.Promotion -Expenditures are lower and aimed atreinforcing the brand image for continued productsLimitations of the Product Life Cycle ConceptThe term "life cycle"implies a well-defined life cycle asobserved inlivingorganisms,but productsdo not have suchapredictable life and the specific life cycle curves followed bydifferent products vary substantially.Consequently,the lifeCycle concept is not well-suited for the forecasting of productsales.Furthermore,critics have argued that the product lifecycle may become self-fulfilling
Forexample,if sales peak and thendeclinemanagers may conclude that the product is in thedecline phase and therefore cut the advertisingbudget,thus precipitating afurther decline.Nonetheless,the product life cycle concepthelpsmarketing managersto planalternatemarketing strategies to address the challengesthat their products are likely to face.It also isuseful for monitoring sales results over time andcomparing them to those of products having asimilarlifecycle