26 Product Life Cycle

L. Shanthi

A product is both what a seller has to sell and what a buyer has to buy. People purchase products, because they are capable of realizing some benefits to the purchaser. A product is one which satisfies the needs of the customers.

According to Philip Kotler, “A product is anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need. It includes objects, services, persons, places, organization and ideas”.

PRODUCT LIFE CYCLE

Product life cycle is very similar to the human life cycle. Human beings have to pass various stages from his/her birth till death. Similarly, the product from its birth passes through various stages, until it is finally out from the market. The length of the life-cycle, its duration of each phase and the shape of the curve may differ from product to product, but the whole life cycle passes through certain definite stages. These stages are together referred to as ‘product life cycle’. The period during which a product lives in the market is termed as ‘product life-cycle’.

STAGES IN THE PRODUCT LIFE CYCLE

Introduction stage
Growth stage
Maturity stage
Saturation stage
Decline stage

The following chart depicts the stage of Product Life Cycle clearly

Introduction stage:

This is the most important and beginning stage of the product’

Most of the product fails in the introduction stage. Why?

In this stage, the product is in infant stage. Profit may not be there as there is low sales volume. The product may require heavy advertising and sales promotion. Products are brought cautiously on a trial basis. Weakness can be identified and can be rectified in this stage to avoid heavy loss for the companies.

Characteristics of Introduction stage:

New market segments are opened.
Sales increase rapidly.
Company earns higher profits.
Unit manufacturing costs falls faster.
Competition enters the market.
Competitors engage in frequent price cuts.
Competitors increase promotional activities.

Growth stage

What is growth stage?

‘This is called as market acceptance stage’.

As the name growth indicates, both sales and profit rise up in this stage. The rise is very rapid. The firm gives top priority to sales volume and quality maintenance may have second preference. Effective distribution and advertising are considered as key factors. Word of mouth advertising leads to more new users. Repeat orders are secured.

Maturity Stage:

‘This is the longest stage in the life of a product’.

Sales continue to increase but at a decreasing rate. Keen competition brings pressure on prices. Increasing marketing expenditure and falling price will reduce profit. Competitors go for mark-down price by increasing advertising deals. Additional expenses are involved in product modification and also improvement in marketing mix, product mix or style changes, to attract the customers and retain the market. Overall marketing effectiveness becomes the key factor in this stage.

The saturation stage occurs in the market when all the potential buyers are using the product and we have only replacement sales. Prices may fall rapidly and profit margins may become small unless the firm makes substantial improvements and realizes cost economies.

Decline Stage:

Once the peak or saturation point is reached, product inevitably enters the decline stage and becomes obsolete. Sales drop severely, competition dwindles, and even the product cannot even stand in the market. A marketer is expected to keep new products ready to fill up the gap created by the demise of existing products.

SYNOPSIS OF THE PRODUCT LIFE CYCLE CONCEPT:

The following table gives a quick recap of what have already learnt about the PLC:

BENEFITS OF THE PRODUCT LIFE CYCLE CONCEPTS:

When the firm is able to identify the product life pattern, the management can be cautious in taking advance steps, before the decline stage, by adopting product modification, pricing strategies, style, quality changes etc.,
The firm can prepare an effective product plan, by knowing the PLC of a product.
The PLC will greatly help the management in drawing future plans of the firm
PLC serves as a planning tool to the marketers. It allows a marketer a choice of various strategies at different stages.
PLC is a control tool which allows a comparison of the launched product with previously launched products.
PLC is a forecasting tool which gives an idea of the likely sales growth of a product and its profitability. However, as there are variations in the duration of each stage, its usefulness as a forecasting tool is limited.

A management may be able to adopt measures to control the PLC. They are:

Creation of new uses by expansion of the market.
Extension of the life at maturity and saturation stage by adopting new packing, repricing or product modification.
Creation of more varieties of the product among current users. For instances, Amul Milk Powder, through advertisement emphasizes many uses, in preparing milk, tea, curd. “It is like having a dairy in your home”
Adoption of the latest technological changes, fashion changes, market acceptance, etc.,

MANAGEMENT OF PRODUCT LIFE CYCLE:

By timely and effective implementation of specific marketing actions such as through new packaging, repricing or product changes, the life cycle of the product may be extended or stretched out. The most important key to product life cycle management is to forecast the profile of the proposed product’s life cycle even before it is introduced. Then at each stage, the management should anticipate the marketing requirements of the following stage.

Theodore Levitt cities examples of how Du Pont’s nylon, General Food’s Jello, and 3 M’s Scotch Tape, were the beneficiaries of marketing life stretching strategies. For example, ‘the first nylon introduced had mainly military uses, viz., for parachutes, thread and rope. Nylon then entered the circular knit market and dominated the women’s hosiery business. After some years, the steady rising growth and profit curves began to flatten out and the threat of obsolescence was imminent. Therefore, Du Pont developed measures for revitalizing the sales and profits.

These measures involved strategies attempting to expand sales by four different methods.

Promoting more frequent usage of the product among current users.
Developing more varied usage of the product among current users.
Creating new uses for the basic material.

§ In order to develop more varied usage of the product among current users Du Pont began to promote the fashion smartness of tinted hose and later patterned and highly textured hosiery, thereby making hosiery a simple ingredient of fashion. The new uses for basic material were from varied types of hosiery to new uses as rugs, tyres, bearing, etc, Approximate action resulted in consumption actually exceeding 500 million pounds, which would have been only 50 million pounds has these developments not taken.

MANAGEMENT OF INTRODUCTION STAGE:

Now we are going to discuss how can the firms manage introduction stage?

What are the various strategies implemented in this stage?

While launching a new product, marketing mix for each variable can be set at a high or a low level. If we examine price and promotion variable of the marketing mix. There are four major marketing strategies available.

The strategies implemented in the introduction stage are:

Rapid Skimming Strategy:

The product is new to the market and launched at a high price. Heavy promotion is needed since the product is new. This strategy will be successful if there are people who are unaware of the product, become aware of it and buy it at a price demanded. There is a risk of competition and so the firm has to build up brand preference.

Slow Skimming Strategy:

The product is priced high. Since the product is known to the market, the money spent on promotion is low. The lower promotional cost keeps the marketing expenses in check. It is perceived that potential competition will not around right now.

Rapid Penetrating Strategy:

The product is offered at the lowest possible price. At the same time, since the product is new to the market, promotion is kept at a high level. The objective is to bring about a very fast market penetration. This strategy is suitable for large markets which are highly competitive. The market is price sensitive.

Slow Penetration Strategy:

The price and the promotion are kept low at the time of launch. Lower price leads to fast acceptance of the product. The lower promotional costs keep up healthy profits. In a large market with high awareness level and price sensitiveness, this strategy makes sense. There is some potential of competition.

MANAGEMENT OF GROWTH STAGE:

In this stage, there is a rapid increase in sales. Potential buyers start buying the product. Buyers compare this product with the rival products. The number of outlets is increased. Companies maintain their promotional expenditures at the same or at a slightly raised level to meet competition.

This stage is more important, the manager should manage by implementing the following strategies.

Product quality is improved.
New features are incorporated. The style is improves.
New models are introduced. Flanker products are introduced.
New market segments are tapped.
Enter into new distribution channels.
Brand building promotion is resorted to.
Prices may be lowered to lure the next layer of price-conscious buyers.

The firm, by strengthening its promotion and products can secure dominant position in the market.

MANAGEMENT OF MATURITY STAGE:

In this stage, the manufactures gets maximum profit through maximum sales. Price competition is severe. The sales and profit gets down, due the arrival of the substitute products. Hence, the firm should implement effective steps to be in the market.

Strategies implemented in maturity stage:

Improve the quality of the product
Give proper attention to increase the usage among the current customers.
Try to convert non-users into users of the product that is creating new users.
Give more emphasis to advertisement and promotional programmes.
Try to discover new uses for the product.

In the maturity stage, the companies can also take the following strategies to stimulate sales.

Market Modification
Product Modification
Marketing Mix Modification

Market Modification:

The company may try to expand the market in order to increase sales by adopting the following strategies.

Enter new market segments
Attract new users
Increase usage among the present customers.
Persuade customers to use the product.
Create new uses of the product.

The decline in the sales can be arrested by improving in following aspects:

Quality improvements like durability, reliability, speed.
Feature improvements like size, materials, and weights.
Style improvements like new models, new styles.

Market Mix Modification:

The companies can try to stimulate sales by modifying marketing mix elements.

Price
Distribution
Advertisement
Personal selling

MANAGEMENT OF SATURATION STAGE:

In this stage, the manufacturer’s finds difficult to expand the sales volume beyond a particular point, that is, sales are at the peak and further increase is not possible. Since the sales cannot be increased, the marketing manager should implement the following strategies:

Introduce new models
Pursue new uses for the product
Introduce new package and repricing.
To increase middlemen’s margin.
If the price is high, offer the product on instalment basis

MANAGEMENT OF DECLINE STAGE:

This is the last and crucial sage. Sales may decline for a number of reasons like technical advances, arrival of new products at low cost, changes in fashion, customer preference. Sales and profits continue to fall at this stage. If the substitutes are more attractive and in latest fashion, buyers may turn their eyes towards them.

In this stage, cost control is increasingly important to generate profits by the following measures as suggested by Stanton.

To improve the product or revitalize it in some way.
To review the marketing and production programmes to be sure that they are quite efficient.
To streamline the product assortment by pruning out unprofitable size, styles, colors and models.
To cut all costs to bare minimum level that will optimize profitability over the limited remaining life of the product.
Abandon the product.

The following table summarizes the marketing strategies followed at each stage of the Product Life Cycle.

REVIVAL OF PRODUCT LIFE CYCLE:

In a nutshell, innovation is the answer to the revival of Product Life Cycle. Ultimately, however, if necessary, a product is eliminated. It is, sometimes, difficult for the executives associated with the product for a long time to abandon it due to emotional reasons. This is a pitfall to be avoided.

Based on the type of products, the Product Life Cycle may be short or long, for example, for consumer electronics items and fashion wear, PLC is very short, and for some other products like consumer durables, it is very long.

CHANGING MARKET:

It is sure that, we cannot have a constant market. Markets often do change. There are very few markets which are the same today as they were ten years ago. Consumer attitudes, competitive pressures, socio-economic changes all make it vital for each company to keep it survive. This means that it is certain that once a product is born, it grows, matures and eventually dies. To explain this, a simple product life cycle technique has been invented.

WHY NEW PRODUCTS FAIL?

When a product does not bring inadequate profits, the failure may be traced to the management’s neglect or mishandling of the product innovation or the faulty management of the product life cycle. The National Industrial Conference Board, after surveying 87 companies, attributed eight factors for a failure of product.

Inadequate market analysis:
Product defects
Higher costs than anticipated
Poor timing
Competition
Insufficient marketing efforts
Inadequate sales force
Weakness in distribution

This study brought out two important considerations.

The main factors that cause failure were within control.
About two-thirds of the causes of failure were marketing shortcomings, while all other functions of business combined like production, finance, purchasing etc., accounted for only one-third.
Cundiff and still classify the causes of failures of product into six categories. They are:

Product problems:

Neglect of market needs or ignorance of market preferences;
Defects in product function;
Poor technical design or external appearance
Poor package or inappropriate sizes
Too high variation in quality.

2. Distribution and channel problems:

Inappropriate channels of outlets,
Necessary middlemen, cooperation not obtained;
Poor system of distribution

3. Pricing Problems:

Bad forecast of price, that buyers would pay,

Inadequate margin for the middlemen

Price instability

Promotional problems:

Inadequate and ineffective promotion.
use of wrong appeals
inadequate training , motivation or supervision

Timing problems:

Product introduced too early or too late

Competitive problems:

Competitors took the critical moves first with respect to products, distribution, promotion and price;

FAILURES OF NEW PRODUCT MAY BE AVOIDED BY:

Improved screening and evaluation of ideas and products
Organizational changes
Changes in procedural and development efforts
Improvements in production and quality control
Improving caliber of personnel working o new-product programmes

you can view video on Product Life Cycle

Reference Books:

Marketing Principles and Practice- A.A.Chunnawalla- Himalaya Publishing House
Marketing Management- R.S.N.Pillai, Bagavathi- S.Chand & Company Pvt.Ltd.
Marketing Management concepts and cases- S.A.Sherlekar, R.Krishnamoorthy- Himalaya Publishing House
Principles of Marketing- S.A.Sherlekar, K.Nirmala Prasad, S.J. Salvadore Victor-Himalaya Publishing House
Marketing – Dr.L.Natarajan- Margham Publications