When a company introduces a new product, it passes through a series of stages known as the product life cycle. It is defined a sequence in which a products moves from start (introduction) to growth and then to maturity and finally towards decline. The PLC concept is applicable to a brand, a category of products or just a single product.
Why is it called Lifecycle?
Because it represents the various phases a product passes through its life. Like a living thing, a product too has life stages: Beginning, growth, maturity and death. As it goes through all these life-phases in a cycle it is called the life cycle of a product.
Stages of Product Life Cycle
There are four stages of a Product in its entire life. Again, as the requirements for every phase of a living thing changes, so we need different marketing strategies to deal with the different stages of the product. We will discuss each stage briefly here.
This is the beginning. This stage introduces or develops a new product so it is also called as development stage. At this stage marketing costs are high for a number of reasons, such as market research, development costs, promotion costs and distributions costs etc. There is no or little competition and demand is to be created. Marketing promotions and establishing channels are necessary at this stage to create demand and prompt customer to try the product. The revenue is minimum because of high marketing costs and low sales volumes.
This is the second stage in which the product revenue start to grow because of the reduction of costs and sales growth. With the increase in sales volume and the reduction of costs due the economies of scale, the profit begins to rise. The sale volume increases at this stage because of the public awareness and promotions during launch times. However, new competitors enter the market and competition begins to increase. The marketing strategy may either to maintain the price or reduce it depending upon the competition. If the competition is low and demand is high, the price may be maintained. The new players may, however, create a competitive environment and the prices may be lowered to meet the competition. More distribution channels are added and promotion is spread to a broader section of the market.
3. Maturity Stage
The pace of sale growth may be slower at this stage, but will still continue to grow. The sale increases as the brand matures with more public awareness. The costs get further lowered with the increase in production. The sale volume reaches to the peak and the market is saturated. The establishment of products by other players (competitors) at this stage make the competition tough and marketing managers need to drop the prices. New features are added to increase the benefit and value in the product and beat the competitor. New distribution channels are explored and incentives may be announced to avoid losing market share. New ways of promotions may be adapted like loyalty, product differentiation and diversification.
4. Decline Stage
This is also called saturation stage as the market get saturated at this point. The market shrinks due to decline in sales; the costs increase and profits diminish. If there is a category of products, its number may be reduced. The more profitable should be maintained and the non-productive should be eliminated. The prices may come further down to clear the stock of unsold items.
Limitations of the Product Life Cycle Model
The PLC concept is a useful model for marketing strategy. However, the concept has its own certain limitations. Critics argue that products may not have the same life cycle as living organisms. For instance, a certain style of jeans may have a life cycle but clothes in general do not have. Furthermore, marketers may not properly and accurately evaluate a product on the PLC graph which may lead to wrong marketing mix strategies. Some critics also level the criticism that the PLC graph differs drastically in case of different products. For example, a PLC graph for a fade may be entirely different from that of products like Coca Cola or Pepsi.
Product Life Cycle and the Marketing Mix
The theory of PLC offers useful information to use marketing mix strategies effectively. Each stage of the PLC model requires separate marketing mix strategy. The price, place, promotions and people may require to change as the products process evolves. Prices and promotion at the beginning may be set higher than at maturity or decline. In short, the various stages of the product during its life cycle tell the marketer to change his strategy as required. The 4 Ps’ must change as the product passes through its various stages.
Examples of Product Life Cycle
There are a number of examples of the PLC concept. Many businesses regularly conduct a thorough analysis of their product portfolio to adjust their marketing tactics.
An analysis of Kellogg’s cereals from 1997 to 2004 is a good example of international product cycle. The company introduced Nutri-Grain in 1997. From that period till 2002, the sales increased and this may be considered as its growth stage. The next one year was maturity followed by decline in 2004.
Another example of international Product life cycle is McDonalds’ consistent phasing out of products and introducing new products. McDonald’s claim that they know the importance of the fact the sales of products on its menu will change and various points. So they consistently strive to introduce new products to cater to the ever changing demands of its customers.