The 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).
In theory it's the same for a product. After a period of development it is introduced or launched
into the market; it gains more and more customers as it grows; eventually the market stabilises
and the product becomes mature; then after a period of time the product is overtaken by
development and the introduction of superior competitors, it goes into decline and is eventually
withdrawn.
However, most products fail in the introduction phase. Others have very cyclical maturity
phases where declines see the product promoted to regain customers.
The product revenue and profits can be plotted as a function of the life-cycle stages as shown
in the graph below.
Strategies for the differing stages of the Product Life Cycle.
Introduction Stage
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. The impact on the marketing
mix is as follows:
Product demand has to created, branding and quality level is established.
Pricing may be low penetration pricing to build market share rapidly, or high skim pricing to
recover development costs.
Distribution is selective until consumers show acceptance of the product.
Promotion is aimed at innovators and early adopters. Marketing communications seeks to
build product awareness and to educate potential consumers about the product.
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Growth Stage
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.
Product quality is maintained and additional features and support services may be added.
Pricing is maintained as the firm enjoys increasing demand with little competition. New players
are establishing in the market.
Distribution channels are added as demand increases and customers accept the product.
The firm vigorously searches out new market segments to enter.
Promotion is aimed at a broader audience. Public awareness increases. Promotion shifts
from building product awareness to product acceptance and purchase.
Maturity Stage
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. The primary objective at this point is to
defend market share while maximizing profit.
Product features may be enhanced to differentiate the product from that of competitors. It
involves product re-launch to increase functional performance of a product e.g. durability,
reliability, speed etc.
Pricing may be lower because of the new competition. The firm cuts prices in order to attract
new users and competitors’ customers.
Distribution becomes more intensive and incentives may be offered to encourage preference
over competing products.
Promotion is carried out to emphasize product differentiation and attracting consumers’
attention.
Decline Stage
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.
As sales decline, the firm has several option:
- Maintain the product, possibly rejuvenating it by adding new features and finding new
uses (Continuation strategy).
- Harvest the product; reduce costs and continue to offer it, possibly to a loyal niche
segment.
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- Discontinue the product, liquidating remaining inventory or selling it to another firm that
is willing to continue the product.
The marketing mix decisions in the decline phase will depend on the selected strategy. For
example, the product may be changed if it is being rejuvenated, or left unchanged if it is being
harvested or liquidated. The price may be maintained if the product is harvested, or reduced
drastically if liquidated.
Problems with the Product Life Cycle.
It is claimed that every product has a life cycle. It is launched, it grows and at some point may
die. In reality very few products follow such a prescriptive cycle. The length of each stage
varies enormously. The most important aspect of the PLC is that, even under normal
conditions, to all practical intents and purposes they often do not exist (hence, there needs to
be more emphasis on model). In most markets the majority of the major brands have held their
position for at least two decades. The dominant PLC, that of the brand leaders which almost
monopolize many markets, is therefore one of continuity.
The decisions of marketers can change the stage, for example from maturity to decline by
price-cutting. Not all products go through each stage.
The PLC is a dependent variable which is determined by marketing actions; it is not an
independent variable to which companies should adapt their marketing programs.
