Product Life CycleStages and StrategiesPrinciples of Marketing Notes CBCS PatternB.Com 5th Sem Hons
Product Life Cycle Meaning
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).
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Stages of Product life cycle
Thus
the Product life cycle deals with four stages of a products life.
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.
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