PRODUCT LIFE CYCLE(PLC)-Marketing

Like human beings, every product has a life span. When a new product is launched din the market, its life starts and the product passes thorough various distinct stages and after the expiration of its life span dies – dies in terms of its capacity to generate sales and profit. This is called Product Life Cycle (PLC).

The Product Life Cycle is an attempt to recognize ‘distinct stages’ in the ‘sales history’ of the product. In each stage, there are distinct opportunities and problems with respect to marketing strategy and profit potential. Hence, products require different marketing, financing, manufacturing, purchasing and personnel strategies in the different stages of their life cycle. The PLC concept provides a useful framework for developing effective marketing strategies in different stages of the Product Life Cycle.

There are four stages in the Product Life Cycle – introduction, growth, maturity and decline.

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Introduction Stage

The introduction stage starts when the new product is first launched. In this stage only a few consumers will buy the product. Further, it takes time to fill the dealer pipeline and to make available the product in several markets. Hence, sales will be low a profit will be negative or low. The distribution and promotion expenses will be very high. There are only a few competitors. Regarding pricing, the management can pursue either skimming strategy i.e. fixing a high price or penetration strategy i.e. fixing a low price.

The company might adopt one of several marketing strategies for introducing a new product. It can set a high or low level for each marketing variable, such as price, promotion, distributions and product quality. Considering only price and promotion, for example, management might launch the new product with a high price and lose promotion spending. The high price helps recover as much gross profit per unit as possible which the low promotions spending keeps marketing spending down. Such a strategy makes sense when the market is limited in size, when most consumers in the market know about the product and are willing to pay a high price, and when there is littlie immediate potential competition.

On the other hand, a company might introduce its new product with a low price and heavy promotion spending. This strategy promises to bring the fastest market penetration and the largest market share. It makes sense when the market is large, potential buyers are price sensitive and unaware of the product, there is strong potential competition and the company’s unit manufacturing costs fall with the scale of production and accumulated manufacturing experience.

Growth Stage

If the new product satisfies the market, it will enter a growth stage. This stage is market by quick increase in sales and profits. The early adopters will continue to buy, and later buyers will start following their lead, especially if they hear favourable word of mouth. New competitors enter the market, attracted by the opportunities for high profit. The market will expand. Prices remain the same. Companies maintain their promotional expenditure at the same level or slightly higher level to meet competition and continue educating the market.

During this stage, the company uses the following marketing strategies:

s The company improves product quality and adds new-product features and models.

s It enters new market segments.

s It enters new distribution channel.

s It changes the price at the right time to attract more buyers.

In the growth stage, the firm faces a trade-off between high market share and high current profit. By spending a lot of money on product improvement, promotion and distribution, the company can capture a dominant position. In doing so, it gives up maximum current profit, which it hopes to make up in the next stage.

Maturity Stage

This stage normally lasts longer than the previous stages and it poses strong challenges to marketing management. At this stage, sales will slow down. This stage can be divided into three phases. – growth maturity, stable maturity and decaying maturity.

In the growth maturity phase, the sales start to decline because of distribution saturation. In the stable maturity phase, sales become static because of market saturation. In the decaying maturity phase, the absolute level of sales now starts to decline and customers starts moving toward other products and substitutes. Competitions become acute.

Although many product in the mature stage appear to remain unchanged for long periods, most successful ones are actually evolving to meet changing consumer needs. Product managers should do more than simply ride along with or defend their mature products – a good offense is the best defense. They should consider modifying the market, product and marketing mix.

s Marketing Modification: The company should seek to expand the market and enters into new markets. It looks for new users and find ways to increase usage among present customers.

s Product Modificaiton: the company should modify the product’s characteristics such as quality improvement, features improvement, style improvement to attract new users and/or usage from current users. For gfdfgdsg dgdf gdf gdf gdf g df gdf gd fg df gdf g df gdf gfd g dg df gdf g d gdf gd fg d gdf gdf g dfg dg g dfg dfg df gdf g dfg gd fg dg d gd g dg df gdf gd fg dfg fd g g g df .

s Marketing-mix Modification: The company should also try to stimulate sales through modifying one or more marketing-mix elements such as price cut, step-up sales promotion, change advertisement copy, extending credit etc.

A major problem with marketing-mix modification is that they highly imitable by competitors. The firm may not gain as much as expected and in fact all firms my experience profit erosion as they complete each other.

Decline Stage

In this stage, sales decline and eventually dip due to number of reasons including technological advances, consumer changes in tastes and acute competitions. As sales and profit decline some firms withdraw from the market. Those remaining may reduce the number of product offerings.

They may drop smaller market segments and marginal trade channels. They may reduce the promotion budget and prices further.

Hence, companies need to pay more attention to their aging products. The firm has to identify those products in the decline stage by regular’s reviewing sales, market shares, costs and profit trends. Then, management must decide whether to maintain, harvest, or drop each of these declaiming products.

Marketing Strategies during the Decline Stage

Ø Identify the weak products by appointing a product-review committee with representatives from marketing, manufacturing and finance.

Ø The firms may adopt the following strategies.

i) Management may decide to maintain its brand without change in the hope that competitors will leave the industry.

ii) Management may harvest by selling whatever is possible in the market.

iii) Management may decide to drop the product from the line.

When a company decides to drop a product, the firm can sell or transfer the product to someone else or drop it completely. It must decide to drop the product quickly or slowly. It must decide on how much parts in inventory and service required to maintain service to past consumers.

USES OF PLC CONCEPT

PLC concept’s usefulness varies in different decision-making situations. As a planning tool, the PLC concept characteristics the main marketing challenges in each stage and suggests major alternative marketing strategies the firm might pursue. As a control tool, it allows the company to compare product performance against similar products in the past.

CRITICISM OF PLC CONCEPT

1. PLC stages do not have predictable duration. It may very from product to product.

2. The marketer cannot tell at what stage the product is in as there is no definite line of demarcation between one stage to another stage.

3. Not all products pass through all the stages. It is possible that the product may travel to the first and second stage and die out.

4. A product may not be in an identical stage in all the market segments; it may be in the second stage in one segment, whereas in the third stage in another segment at a particular point of time.

Not all products pass through all the stages of its life cycle. Some products are introduced and die quickly; others stay in the nature stage for a long, ling time. Some enter the decline stage and re then cycled back into the growth stage through strong promotion or repositioning.