In this essay we will discuss about the stages of product life cycle.
Each product has a life span when it introduced in the market means birth of a product, grows, mature and finally decline and substituted by a new product, it is a continuous process. Product Life Cycle (PLC) is a concept that provides a way to outline the different stages of a product’s acceptance, from its introduction to its decline.
Product life cycle is based on certain characteristics of products these characteristics may differ according to the nature of a product.
Following are the characteristics of products:
(i) Products have a limited life;
(ii) Product sales pass through different stages with different challenges, opportunities, and problems for the seller;
(iii) Profits rise and fall at different stages of the product life cycle;
(iv) Demand of product varies from one stage to other;
(v) Different marketing strategies are required in each stage.
Product life cycle curves are normally divided into four stages:
1. Introduction Stage:
It is the first stage when a company launched a new product by innovation. High degrees of risk are involved in introducing new product in market. During the introduction stage the growth of product’s sale is slow, because it is new in the market.
Moreover during this stage as the product is new, the company has to spend huge funds on the advertisement of product, so the profits are non-existent in this stage. A new product category requires a longer introductory period to stimulate primary demand. Even a brand that has achieved acceptance in other markets will require introduction in new markets.
Marketing Strategies during Introduction Stage:
Sales remain low in this stage. Production cost remains high due to less production it delays in the expansion of production capacity. Adoption of process remain slow. Sales of new products depend on additional factors such as product complexity and fewer buyers and price of product. In the introduction stage, profits are negative or low because of low sales and heavy distribution and promotion expenses. Much money is needed to attract distributors. Promotional expenditures are high because firm wants to inform potential consumers, induce them for product trial, and wants to increase distribution.
Prices tend to be high because costs are high due to relatively low output rates, technological problems in production, and high required margins to support the high promotional expenditures.
2. Growth Stage:
In this stage people began to adopt new product and sales increases rapidly, as new customers enter the market and old customers make repeat purchases. At this point of time marketer need to add new dealers and distributors, expansion of distribution network took place. Firm began to earn profit at increasing rate. Due to expansion of market, competitors are attracted who copy and improve on the features of the new product, therefore new firm entered in the product category.
In the last part of growth stage profit level declined due to large number of firms in the market and rising competition, but total industry sales are still raising. In this phase, the company faces a trade-off between high market share and high current profit. By spending a lot of money on product development, promotion, and distribution, the company can capture a dominant position.
Marketing Strategies during Growth Stage:
In this stage a firm can earn high profit by their marketing polices, the sales increases rapidly. Early adopters like the product, and additional consumers start buying it. Attracted by the opportunities in the market due to market expansion new competitors enter with new product features and expanded distribution. Prices remain where they are or fall slightly, depending on how fast demand increases.
During this stage, the firm uses several strategies to sustain rapid market growth as long as possible:
(i) Improvement in quality and features of product
(ii) Adding new products of same line
(iii) Brand positioning
(iv) Increasing distribution coverage and entering new distribution channels
(v) Shifting from product-awareness advertising to product-preference advertising
(vi) Modification in products according to the demand and expectations of customers.
3. Maturity Stage:
Number of consumers remains high in this stage as the product has achieved acceptance by most potential buyers. Growth rate become stable, profits decline due to increased competition. At this stage greater number of competitors, competitive product forms, and brands exists. Firms invest heavy on promotions activities to stabilize their sales.
It is during this stage that marketers are focusing effort on extending the lives of their existing brands. The role of product managers is crucial at this stage because he should do more to extend the lives of their mature products rather than allowing it to coast into decline. They should consider modifying the market, product and marketing mix.
Marketing Strategies at Maturity Stage:
This stage is most challenging for marketer as the competition remains at the peak position this stage lasts longer than the previous stages.
The following are the strategies for the maturity stage:
i. Change in Marketing Strategies:
In this stage, marketers must focus to retain their customer. They can enter in new market segments, to convince the existing customers by increasing the usage of the product, differentiated products can be added in the same product categories. They should adopt a suitable expansion strategy to increase market share.
ii. Product Modification:
Marketers can increase sales by modifying the product’s characteristics by quality improvement, feature improvement, or style improvement. Firms should adopt concept of total quality improvement aims at increasing the product’s functional performance—its durability, reliability, quality and utility. However, feature improvements are easily imitated unless there is a permanent gain from being first, the feature improvement might not pay off in the long run. Most of software and computer companies modify their products frequently to capture market.
iii. Marketing-Mix Modification:
Marketing managers can stimulate sales by modifying marketing-mix elements such as prices, distribution, advertising, sales promotion, personal selling, brand development, packaging etc.
4. Decline Stage:
The final stage of PLC is decline stage. Due to increased competition company’s products may enter into the decline stage. Sales and profits decline rapidly and competitors become more cost conscious. Some products experience a faster rate of decline while others experience a slower decline rate. The reason for decline in sales could be technological advances, increase in competition and shift in consumer’s tastes and preferences, etc. Brands with strong acceptance by some customer segments may continue to produce profits. During the decline stage of PLC, the sales of the product fall rapidly, forcing firms to withdraw from the market.
Marketing Strategies at Decline Stage:
There are so many reasons due to which it is generally believed that the company should not carry dying products like hidden costs in terms of management time, sales force attention, frequent inventory re-adjustments, and advertising changes. For these reasons, companies should pay attention to their dying products.
At this time, management may decide:
(i) To maintain its brand without changes in the hope that some competitors will leave the market.
(ii) Management may decide to drop the product from the line.
(iii) Reducing the number of products in a product line offered to the market especially those products that are not earning any profits.
(iv) Reduction in promotional budgets and prices.
(v) Cutting down the distribution channels and the distributors with poor sales.
(vi) Ultimately withdrawing the product totally from the market.
(vii) Increase the firm’s investment to strengthen its competitive position and dominate the market.
(viii) Divest the business through disposal of assets.
