Marketing Management and International Trade

Lesson 14. THE CONCEPT OF PRODUCT LIFE CYCLE

Module 3. Elements of marketing mix – I. product

Lesson 14

THE CONCEPT OF PRODUCT LIFE CYCLE

14.1 Introduction

The concept of product life cycle (PLC) is borrowed from biology. According to biological science, each organism passes through different stages in life namely birth, growth, maturity, decline and death. Similarly each product also passes through such phases in its product life cycle namely introduction, growth, maturity and decline. The PLC curve is a bell-shaped sales curve. The importance of PLC concept is that each stage in PLC has its own characteristic behavior and it is necessary to apply certain specific marketing strategies at each stage. A typical product life cycle is shown in Fig. 14.1.

Fig. 14.1 Stages in product life cycle

14.1.1 Steps in PLC

A typical product passes through four distinct stages of introduction, growth, maturity and decline.

1. Introduction

This is the first stage of product life cycle. This is the introduction stage wherein there may not be ready market for the product. There are low sales and consequently less profit. Demand is to be created and customers are to be induced to purchase the product. This stage encounters the problem based upon type of product, its price, technical aspects of product and consumers perception of product. The firm may choose to become a market leader by introducing products or become second movers i.e. learning from the mistakes of market leaders (pioneers) and rectifying it. To be a market leader is both rewarding as well as risky. Pricing and promotion are the two important decision variables at introductory stage. An organization may adopt either market skimming (very high price) or market penetration (Low price) depending upon marketing objectives.

2. Growth stage

Due to the efforts made at introduction stage, the demand for the product increases at this stage. But at this stage competitors also enter the market with their own similar type of products. This necessitates reconsidering the pricing strategy by the pioneer. It is necessary to lay more emphasis on distributive efficiency. By intensive distribution and deeper penetration, there will be increase in store visibility and usage which tends to bring new buyers in the market.

3. Maturity stage

In this stage growth in sales continues at diminishing rate as some of the unsuccessful competitors may leave the industry. Those who remain in the industry may try to capture the share of those who have left the industry and the sales tend to grow at declining rate. The sales reach the saturation point.

Intense price competition occurs and the market leader uses subtle product differentiation to distinguish his brand and tries to maintain the sale. Relatively low price, high marketing costs, fierce competition, and less profit are chief characteristics of this stage.

4. Decline Stage

At this stage, sales start reducing. The demand of the product decreases as new technically and functionally superior products become available in the market or because consumers become apathetic to the product, price, margin, total sale and profits decline at this stage. At this stage organization may remove the product or reintroduce it with modifications.

Table 14.1 Marketing performance at various stages of PLC

Particulars	PLC stages
	Introduction	Growth	Maturity	Decline
Sales	Less	Rapid growth	Limited Growth	Decreasing
Profits	Very less	Highest	Decreasing	Low
Cash Inflow	Negative	Moderate	More	Less
Competitors	Some	Increasing	Many	Decreasing
Customers	Innovative	Mass market	Mass market	Laggards

Tables 14.2 Product Life Cycle: Marketing implications and strategies

Particulars	PLC stages
	Introduction	Growth	Maturity	Decline
Buyers	Innovators	Early adopters	Middle majority	Laggards
Competitors	Less in number so less important	Increasing in numbers and followers	Stable, no increase but intense competition	Decreasing opting out
Sales	At low level	Rapid growth	No further increase, stagnant	Decreasing Sales
Costs	More cost per consumer	Decreasing cost per consumer	Low cost due to more volume	Low cost per consumer
Marketing Objectives	Entering the market: emphasizing product awareness and trail	Penetrating the market: Increasing market share	Define the market share, brands	Reducing the costs, try to get maximum from the products
Marketing Strategies
Product	Offering the basic product	Product augmentation	Diversifying the brands and models	Eliminating weak products
Distribution	Selective distribution	Heavy distribution	Retention of more shelf space	Phasing out un-profitables
Price	High, to recover cost of production and cost of introduction	Adjusted so as to penetrate the market	Kept which buyers can afford and in tune with competitors	Low price
Advertising	Building awareness specifically among target consumers and distribution channel	Mass communication	Emphasis on brand differences	At low level so as to retain only loyal consumers
Sales Promotion	High for increasing trials	Moderate	High for building loyal consumers	Low

14.2 Uses of the PLC Concept

Each stage of product life cycle directly reflects the market behavior. For example, if during introduction stage, buyers remain indifferent to the product and do not try it out, then the introduction stage will continue for a longer time. At the same time, if during maturity stage, specific steps are not undertaken to maintain and increase the consumers’ interest in the product then it will be possible to lengthen the maturity stge. Thus, it is possible to manipulate market behavior with appropriate strategies so that the particular stage in the life cycle can be manipulated in the interest of the organization. This behavior of PLC is helpful to marketing organization specifically the PLC concept is helpful in following ways:

14.2.1 Helps in preplanning activities

It is seen that some of the organizations are not able to handle the preplanning stage appropriately. They then encounter many problems due to their sudden entry into the market and then struggle with it. With the knowledge of PLC, it is possible to have futuristic view and know well in advance the possibilities of certain future marketing events and its impact on the new product. As the future is uncertain, there are also possibilities of that whatever have been assumed and predicted about the future may not come out true in all the cases. But definitely such knowledge helps to have proper product launch with careful planning activities.

14.2.2 Aids to lengthen the profitable stage

It is seen that some products face severe problems in their maturity phase. It may lead to severe decline as a result of competitors’ moves. By the knowledge about characteristics of PLC it will be possible to lengthen the maturity phase by adopting some of the marketing strategies like: To locate new users of the product, to identify new uses of the product, to induce more use of the product, to differentiate the product, or by value addition in the product.

14.2.3 Helps to make investment decisions

By predicting the future of product with the aid of PLC, it is possible to make right investment decisions in projects/ products showing higher profitability.

14.2.4 Give clue to enter the market

The PLC concept has a distinct phase of introduction, growth, maturity and decline. Each organization has its own strengths and weaknesses. As each phase of PLC demands specific characteristics, the organizations can have evaluation of their own strengths and weaknesses and enter the market with their products. Some organization may act as innovators and become market leaders. Some become followers and enter at the growth stage with their own products. Some act as segmentation by late introduction of their version of products at late growth stage. Some even becomes Mc-too firms by introducing their products when the product enters the maturity stage of the life cycle.

14.2.5 PLC helps to serve customers in a better way

As product passes through the product life cycle, similarly consumers also pass through a cycle of events in which their awareness level and consequently their purchasing behavior varies. This can be seen in the consumers’ behavior in general for purchase of shares. In India we can see as the share industry as one of the financial sector industry which has progressed in the liberalized era, so is the experience of consumers also.