Some Dope On Product Life Cycle

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Product Life Cycle

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Product Life Cycle

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• A PLC consists of four stages: – Introduction—most risky and expensive.

– Growth—both sales and profits rise, often rapidly.

– Maturity—sales increase at a decreasing rate and profits decline.

– Decline—demand drops, often because of another product development.

Product Life Cycle

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Time

Do

llars

Product Category Profits

Product Category Sales

Introductory Stage

Growth Stage

Maturity Stage

Decline Stage

0

Product Life Cycle - Concept

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Concept describes sales and profit margin of a given product category over a prolonged period .

Concept holds that a product’s sales and profits change over time in a predictable manner - in four stages of introduction , growth , maturity and decline.

PLC Concept Implications

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Firms must generate new products or enter new markets to sustain its profitability over time.

Objectives and strategy for a given product change as it passes through various life cycle stages.

Opportunities and threats in each stage are sufficiently well known to aid in the formulation of the most appropriate marketing mix for each stage.

PLC - Applications

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• To suggest appropriate functional area emphasis by stages of life cycle

• To suggest appropriate grand strategy alternatives

• To time strategy changes

• To assess the balance of a corporate portfolio of SBU’s to ensure that developing products

are introduced as others pass through growth to maturity

Introduction - Market Development

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• This is when a new product is first brought to market , before there is a proven demand for it.

• Technical capability in all respects is still not established.

• How long this stage lasts depend on :-

-product’s complexity

-its degree of newness in market

-its fit into consumer needs

-presence of competitive substitutes.

Introduction - Characteristics

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Market growth : slow growth

Technological change : high

Profits : negative

Cash flow : low

Customers : innovators (limited)

Competition : limited

Introduction - Responses

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Strategic focus : build awareness

Marketing expenditures: very high

Marketing emphasis : create primary demand

Product : limited standardized version

Price : low/ high

Distribution : limited

Promotion : educate on basic features of product

Market Growth

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• Demand begins to accelerate and size of total market expands rapidly.

• It is the “Takeoff Stage”. • Potential competitors jump in to the fray. Some

join with carbon copies of originals and others with improved versions.

• Product and brand differentiations begin to develop at this stage.

• Instead of seeking ways to get customers to try the product the originator has to establish his brand identity

Product Life Cycle: Growth

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• Sales increase at accelerating rate

• Profits increase

• Competition increases

• Strategies: Invest in product improvements, promotion.

Growth Stage - Characteristics

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Market growth : fast growth

Technological change : moderate

Profits : peak levels

Cash flow : moderate

Customers : mass markets

Competition : growing

Growth - Responses

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Strategic focus : market penetration

Marketing expenditures: high ( declining %)

Marketing emphasis : brand preference

Product : improved versions

Price : lower

Distribution : intensive

Promotion : focus on brand building

Maturity Stage

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• Evidence of market saturation.

• Over capacity becomes apparent.

• Sales now grow about on a par with population.

• Major focus is on creation of brand loyalty and holding on to brand preference.

• Emphasis on competing more effectively.

Product Life Cycle: Maturity

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• Sales slow down

• Profits level off

• Competition intense

Maturity Stage - Characteristics

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Market growth : slow growth

Technological change : limited

Profits : substantial but declining %

Cash flow : high

Customers : mass markets

Competition : intense

Maturity - Responses

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Strategic focus : defend share Marketing expenditures : declining Marketing emphasis : brand loyalty Product : highly differentiated Price : lowest Distribution : intensive Promotion : focus on brand

preference by emphasis on product tangibles or intangibles

Decline Stage

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• Market decline triggered by industry transformation.

• Over capacity becomes endemic.

• Few companies weather the storm well while others voluntarily / or forcibly quit the market.

Product Life Cycle: Decline

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• Lose market acceptance.

• Diminished popularity, obsolete technology, or market saturation.

Decline Stage - Characteristics

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Market growth : decline

Technological change : limited

Profits : low to negative

Cash flow : low

Customers : laggards

Competition : declining number

Decline - Responses

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Strategic focus : productivity Marketing expenditures: low Marketing emphasis : focused segments/

markets Product : Rationalized Price : raise with increased

features Distribution : selective Promotion : selective promotion

only to attractive segments

The PLC, Marketing Objectives and Marketing Mix

Marketing objective

Gain Awareness

Stress differentiation

Maintain brand loyalty

Harvesting, deletion

Competition None Growing Many Reduced

Stage of the product life cycle S

ale

s re

ven

ue

or

pro

fit

Introduction Growth Maturity Decline

+ 0 –

Total industry sales revenue

Total industry profit

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Marketing Strategies for PLC

INTRODUCTION GROWTH MATURITY DECLINE

Product Strategy

Distribution Strategy

Promotion Strategy

Pricing Strategy

Limited models

Frequent

changes

More models

Frequent

changes.

Large number

of models.

Eliminate

unprofitable

models

Limited

Wholesale/

retail distributors

Expanded

dealers. Long-

term relations

Extensive.

Margins drop.

Shelf space

Phase out

unprofitable

outlets

Awareness.

Stimulate

demand.Sampling

Aggressive ads.

Stimulate

demand

Advertise.

Promote heavily

Phase out

promotion

Higher/recoup

development

costs

Fall as result of

competition &

efficient produc-

tion.

Prices fall

(usually).

Prices

stabilize at

low level.

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Extending the PLC

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• Change product

• Change product use

• Change product image

• Change product positioning

PLC Length Depends on …..

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• Needs the product satisfies

• Changes in market conditions

• Competitive activity

• Marketing strategy of company

Diffusion Process and PLC Curve

Innovators

Early adopters

Early majority Late majority

Laggards

Product life cycle curve

Diffusion curve

Introduction Growth Maturity Decline

Sale

s

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Innovators

Early

Adopters Early

Majority

Late

Majority Laggards

Adoption and Diffusion

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Innovators

• First adopters of a new product

• Venturesome

• Risk-taking

• 2.5% of all adopters

Innovators

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Early Adopters

Second adopters of a new product

Self-confident

Opinion leaders

13.5% of all adopters

Early adopters

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Early Majority

Third adopters of a new product

Middle-class consumers

Cautious with new products

34% of all adopters

Early Majority

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Late Majority

Fourth adopters of a new product

Older, more conservative

Skeptical of new products

34% of all adopters

Late Majority

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Laggards

Last adopters of a new product

Innovations not welcome

Resist change

16% of all adopters

Laggards

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