34 Product Life Cycle

Kulbhushan Chandel

1. Learning outcome:

After completing this module the student will be able to:

Define the concept of product life cycle
Understand the needs of product life cycle
Explain the effective uses of product life cycle
Describe the process of the product life cycle

2. Introduction:

3. Meaning of product life cycle (PLC)

A sales potential of a product and its profitability changes over time. The product life cycle is the course of a product‟s sales and profits over its life time and it involves five distinct stages, viz., product development, introduction, growth, maturity and decline. The product life cycle concept was developed by Prof. Theodore Levitt and was popularised by many scholars like, C.R. Wassen, B. Carthy, D.J. Luck, D.T. Kollat, R.D. Blackwell and others. Product life cycle is a theoretical demonstration of the life of a product. A product passes through definite different stages during its life same as human beings have a typical life-cycle going from childhood, adolescence, youth and old age. Thus, products also follow a similar route which is known as product life cycle (PLC). The PLC concept shows the sales history of a product in a bell shaped curve which depicts its life.

3.1 Definition of product life cycle

According to Arch Patton,

“Life Cycle of a product is a kin to human life cycle from several angles. Like a man the product also takes birth, rapid growth, attains the maturity and then enters the declining stage.”

According to Philip Kotler,

“The product life cycle is an attempt to recognise the distinct stages in the sales history of the product- sales history pass through four stages. These are known as introduction, growth, maturity and decline.”

According to William J. Stanton,

“The product life cycle concept is the explanation of the product from its birth to death as a product exists in different stages and in different competitive environments.”

The study of the above definitions of product life cycle indicated that the product is introduced, it grows and attains maturity and then a saturation point comes in the market. Later or sooner it is bound to enter in its declining stage and finally it reaches the stage of obsolescence, the stage when the product loses its distinctiveness and dies out in the market in both sales and profit terms.

4. Features of product life cycle

The main implications and features of the product life cycle are as follows:

Like every human life, the products also have a specified life, divided into various stages of its life time.
The life cycle starts with the introduction stage of the product in the market and is followed by the growth, maturity and decline stage.
The whole product life cycle depicts the various stages through which a product passes in its whole life.
The profitability of the firm also grows with the growth of the product in the market which is followed by the maturity stage at which the profitability of the product is maximum.
Every product has its own life cycle which is distinct from the life cycle of other products.
Even the duration of the product at any particular stage of its life cycle is different from the other products.

5. Stages of product life cycle

The various stages of the product life cycle are shown below; the typical product life cycle graph is a bell-shaped curve depicting different stages:

I. Market Introduction Stage

It is a stage wherein the product is launched in the market with the full scale production and marketing programmes. The product is new one. The new product means that product which opens up in the market and which is new in the market and which replaces an existing product. Because of it, the growth rate is very slow. In this stage, there is low profit margin, few direct competitors, high production and distribution costs, limited markets, more emphasis is paid by the company on the advertising and sales promotion activities. The main characteristics of this stage are as follows:

Low and Slow Sales: The growth in sales volume is at a lower rate due to lack of knowledge about the products in the consumers, delay in expansion of production facility, delays in making available the product to consumers due to lack of retail outlets of the product.
High promotional expenses: During this period of introduction of the product, the promotional expenses are the highest. This is because of small sales and high promotional efforts to create demand. Demand for the product is created by informing potential and present customers.
Highest Product Prices: The process charged at the beginning is the highest due to low sales output and very few competitors. There are also some technological problems also which are encountered at the launch of the product.
Narrow Product Line: In this stage, the product has only one model and this product line is shorter and also the market area for the product at the introductory stage is limited.

II. Market Growth Stage

Once the product is accepted by the market, the next stage comes of the growth in sales of the product. In this stage, the product achieves the considerable approval in the market. The sales and profits increase at an increasing rate in this stage. The main characteristics of this stage are as follows:

Rapid Increase in Sales: The sales in this stage increase at a rapid rate as the consumers become familiar with the product and they start accepting the product. Moreover the distribution network of the product is established at this stage. The promotional expenses are heavy and there is product improvement and also there is increase in number of product items in the product line.
Product Improvements: in this stage, the manufacturer improves the product quality and also adds some new features in the product. The length of product line id enlarged by introducing the new versions of the product fulfilling the requirements of different types of the customers.
High Promotional Expenses: In this stage of growth, the promotional strategy of the product changes. At this stage the product is promoted so that the customers identify the product through its brand. Special offers, concessions, allowances are provided.
Increase in profits: During this stage, the profits of the manufacturers, retailers and the distributors increase at a rapid rate.

III. Market Maturity Stage

Ultimately, the market becomes saturated as the household demand is satisfied and the distribution channels are full. Sales level off and over capacity in the production channel becomes apparent. The greater the cost of production at a level which gives him low unit costs. The product has to face keen competition which brings pressure on prices. The sales rise at lower rate and profit margin also declines in this stage. The main characteristics of this stage are as follows:

Sales increases at decreasing rate: as most of the demand of customers is satisfied, the increase in the sales level is at decreasing rat. This happens as the demand is of repeat sales, competitors enter and the prices falls and selling becomes more aggressive. Moreover, the profits are squeezed. This leads the firms to employ extension strategies to retain their market share. The extension strategies can be development of new products, new uses of the products, wider range of products and development in the style of the product.
Normal Promotional Expenses: During this stage, the promotional expenses reach a normal ratio to sales. Advertising at this stage lays more emphasis on brand promotion.
Product modifications: Efforts are made for product modifications, improvements in marketing mix or product mix becomes apparent.
Uniform and lower prices: Prices charged by the manufacturer are quite lower and uniform with the competitors.
Profit margin decreases: In this stage, prices are lowered and promotional efforts are made aggressive to face competition. This lowers the profit margins of both manufacturers and retailers.

IV. Market Decline Stage

The final stage of the product life cycle is called market decline stage. It is the terminal stage in which the sales begin to fall under the impact of new product competition and changing consumer behaviour. The sales and profits fall down sharply and the promotional expenditure has to be cut down. The main characteristics of this stage are as follows:

Rapid fall in Sales: As the product becomes old and the new products are available in the market and there is change in the trend in the market. People get more interested in buying new products. The sales fall shapely and over production of the product becomes a major problem for the company.
Further fall in prices: Due to rapid reduction in sales of the product the company reduces prices to intensify competition to liquidate the stock.
No promotional expenses: Due to saturation, advertising and sales promotion efforts lose their effectiveness. Therefore, many companies reduce their advertising budget. Distribution network is also reduced to the minimum. Only selected promotional expenses are incurred.

Example: the businesses need to set clear aims and objectives for succeeding in business. The Kellogg Company is the world‟s leading producer of breakfast cereals and convenience foods such as cereal bars and aims to maintain this position. Product lines include ready-to-eat cereals and nutritious snacks such as cereal bars, rice krispies, special K, nutri gain. Kellogg has a good position in the market and great brand value. They also have a strong commitment towards the corporate social responsibility. The company divided its market into six segments. Kellogg‟s cornflakes have been on the breakfast tables for years and it represents a „tasty start‟ of the day. Other segments include simply wholesome products that are good for consumers like Kashi Muesli, Shape products like Special K and Inner Health lines like All Bran. For children there is Kid Preferred and Mom Approved brands for foods recognised by parents as being good for children. Each brand has to hold its own in a competitive market. Brand managers monitor the success of brands in terms of market shares, growth and performance against the competition. Key decisions have to make for those brands which are not succeeding. This is a case study of Nutri-Grain. It shows how Kellogg‟s recognised the problem and used various business tools for solving it. The overall aim was relaunching the product in the market and returning it to growth in its market.

6. Six Staged Product Life Cycle

Theodore Levitt has explained six staged product life cycle by dividing the maturity stage and decline stage. The six stages are introduction stage, growth stage, maturity stage, saturation stage, decline stage and obsolescence. After reaching the saturation point, the product reaches the decline stage. The sales and profits begin to fall and the product is gradually replaced by the new inventions. This occurs due to technological advances, changes in the consumer taste, increase in competition, etc. Obsolescence is the last stage. In this stage, the product loses its distinctiveness and dies out in terms of both sales and profit margins. The decline in the sales is permanent and the product disappears from the market. Like kerosene lamps have disappeared from the market.

7. Applications of product life cycle concepts

The concept of product life cycle is highly important tool which is used by marketing manager in market forecasting, planning and control. Product life cycle helps every firm to establish price, sale forecasting of their products

There are different areas where product life cycle concept used:

Regarding product pricing: Every firm and manufacturer have a different options regarding price of product like some firms follow high price and skim the market strategy, some follow low price strategy and aim at greater and more rapid market penetration.
Regarding product planning: Every product is the total outcome of the research and development. It is necessary for product because the improvement, remodelling or elimination of product totally depend on product life cycle.
Regarding sales forecasting: One of the most important applications of product life cycle is in sales forecasting. Because it helps to know about future demand for product either rise or false.
Regarding product control: It becomes an effective control tool for the multi-product based firm. Because when a single firm offers different number of products then product life cycle is used by the company to know about the position of their product in market.
Regarding advertisement of product: Product life cycle also tells about the type of advertising which should be done for the product at different stages. For e.g.:

At first stage, the advertising should tell about product availability
At second stage, it should inform the customer about product differentiation.
At third stage, it should inform the customer about product improvement
At fourth stage, it should inform the customer regarding the grand clearance sale.

8. Importance of product life cycle:

Helpful in Sale Forecasting: The product life cycle and the study of different stages of the product life cycle help in the sales forecasting of the product. It helps in the establishment of cause and effect relationship and helps to arrive at some concrete conclusions.
Helpful as A Planning Tool: The study of product life cycle helps in studying the competitor‟s policies and marketing strategies. It also reveals the effect of their policies and strategies on the sales and products of the enterprise.
Helpful as A Control Tool: product life cycle is a very helpful tool when the company is producing various products. When simultaneously many products are manufactured by the company, then all products don‟t contribute in same proportion to the success. Some might be performing very well and some might be below expectations. So product life cycle helps in making effective controlling policies for those products whose performance is below standard level.
Helpful as A Predictive Tool: It helps the marketing manager in identifying various problems which a product faces at different stages of its life cycle. Moreover, the product life cycle helps in the timely improvements which can be made in the product so that the old product can be replaced.
Development of New Products: Product life cycle helps the marketer to make the necessary plans regarding the improvements, modifications and elimination of product at various stages of product life cycle. It helps in studying the change in needs, habits, tastes, attitudes of the consumers.

9. Summary

In today‟s business world every product and service has a certain life cycle. The product Life cycle is a picture of whole life of the product which starts from the Launch of product in the market until its final withdrawal and it is divided in various phases. The product life cycle or PLC is one of the most significant and frequently used concepts in the marketing management. Product life cycle acts like a key to Successful product management. Some companies use strategic planning and others follow the basic rules for product life Cycle. The understanding of a product life cycle can help a company to understand and realize when it is time to introduce and withdraw a product from market. A sales potential of a product and its profitability changes over time. The product life cycle is the course of a product‟s sales and profits over its life time and it involves five distinct stages, viz., product development, introduction, growth, maturity and decline. The product life cycle concept was developed by Prof. Theodore Levitt and was popularised by many scholars like, C.R. Wassen, B. Carthy, D.J. Luck, D.T. Kollat, R.D. Blackwell and others. Product life cycle is a theoretical demonstration of the life of a product. A product passes through definite different stages during its life same as human beings have a typical life-cycle going from childhood, adolescence, youth and old age. Thus, products also follow a similar route which is known as product life cycle (PLC). The PLC concept shows the sales history of a product in a bell shaped curve which depicts its life. Theodore Levitt has explained six staged product life cycle by dividing the maturity stage and decline stage. The six stages are introduction stage, growth stage, maturity stage, saturation stage, decline stage and obsolescence. After reaching the saturation point, the product reaches the decline stage. The sales and profits begin to fall and the product is gradually replaced by the new inventions. This occurs due to technological advances, changes in the consumer taste, increase in competition, etc. Obsolescence is the last stage. In this stage, the product loses its distinctiveness and dies out in terms of both sales and profit margins. The decline in the sales is permanent and the product disappears from the market. Like kerosene lamps have disappeared from the market. The concept of product life cycle is highly important tool which is used by marketing manager in market forecasting, planning and control. Product life cycle helps every firm to establish price, sale forecasting of their products. There are different areas where product life cycle concept used are Regarding product pricing, regarding product planning, regarding sales forecasting and regarding product control. The product life cycle and the study of different stages of the product life cycle help in the sales forecasting of the product. It helps in the establishment of cause and effect relationship and helps to arrive at some concrete conclusions. Product life cycle helps the marketer to make the necessary plans regarding the improvements, modifications and elimination of product at various stages of product life cycle. It helps in studying the change in needs, habits, tastes, attitudes of the consumers.

Suggested Readings (Books and Websites)

Ghosh PK, Sales Management- Text and Cases, Himalaya Publishing House, 2010.
Jobber David and Lancester Geoff, Selling and Sales Management, Pearson Education, Sixth Edition.
McCarthy, Jerome E. (1964). Basic Marketing. A Managerial Approach. Homewood, IL: Irwin.
Needham, Dave (1996). Business for Higher Awards. Oxford, England: Heinemann.
Kotler, Philip (2012). Marketing Management. Pearson Education. Kotler, P. and Keller, K. (2006), Marketing and Management, Pearson Prentice Hall, Upper Saddle River, NJ, USA
McCarthy, Jerome E. (1975)”Basic Marketing: A Managerial Approach,” fifth edition, Richard D. Irwin