It is a generally accepted statement that 90% of the products we use today did not exist in their current form five years ago. Similarly, 90% of the products we will be using five years from now do not currently exist. Whether this statement is entirely accurate or
not, we can all identify products that have changed from their original form and/or content. And, with today’s rapid changes in technology, almost every product will undergo some sort of modification during its lifetime.
This idea is demonstrated by the Product Life Cycle concept, which shows the path a typical new product takes from its inception to its discontinuation. To be precise, it describes the stages a product goes through from its introduction, through its growth until it is mature and then finally its decline. Moreover, it’s associated with changes in the marketing situation, thus impacting the marketing strategy & the marketing mix as well. Knowledge of the product’s life cycle can provide valuable insights into ways the product can be managed to enhance sales and profitability. Marketing activities are heavily dependent on the stage in the product life cycle.
Products do not last forever. A typical cycle for a product is as follows:
First a product will be developed. The prototype will be tested & market research carried out before it is launched onto the market. There will be no sales at this time.
* In the introduction stage the product is launched in the market. The firm will create product awareness & develop a market for the product. No profits are made at this time as development costs have not yet been covered. Iris-based personal identity cards are in the introduction stage of the product life cycle. IIt may take some products a substantial amount of time to catch on in the market before they enter their growth phases. These products have been referred to as “high learning products.” These products often are complex to understand or use, may be extremely expensive, may not be easy to sample before committing to purchase, or may not be compatible with existing social values. The result is that the product’s rate of acceptance in the market is slowed. The impact on the marketing mix is as follows:
a) Product- branding & quality level is established, and intellectual property protection such as patents & trademarks are obtained (if it’s a new product).
b) Price- Price skimming may be used if the product is a new development & there are no competitors. Or pricing may be low penetration pricing to build market share rapidly.
c) Promotion- Informative advertising is used until the product becomes known. Promotion is aimed at innovators & early adopters.
d) Place- Limited product availability in few outlets/locations.
* In the growth stage sales start to grow rapidly. Profits start to be made as more and more customers buy the product. But competitors see the opportunity and enter the market. Some just copy the most successful product, or try to improve it to compete better. Others try to refine their offerings to do a better job of appealing to some target markets. The new entries result in much product variety. The Internet, more specifically the World Wide Web component of the Internet, is probably in the growth phase of its life cycle. The advantages of the Internet have resulted in its very rapid acceptance in consumer and business markets. Furthermore, iPod (portable digital music player) is also in the growth stage of its life cycle. The impact on the marketing mix is as follows:
a) Product- product quality is maintained & additional features & support services may be added.
b) Price- is reduced a little as new competitors have entered.
c) Promotion- advertising is focused on building brand. Advertising is changed to persuasive advertising to encourage brand loyalty.
d) Place- distribution channels are added as demand increases & customers accept the product.
* In the Maturity stage competition gets tougher as aggressive competitors have entered the race for profits. Industry profits continue to go down during maturity because promotion costs rise and competitors continue to cut prices to attract more business. During the maturity phase, less efficient firms can’t compete with the increasing pressure on prices and drop out of the market. The maturity phase of the life cycle is the longest phase for most products. Sales grow at a decreasing rate and then stabilise. Price wars and intense competition occur. At this point the market reaches saturation. Producers begin to leave the market due to poor margins. Refrigerators illustrate a product that has hovered at maturity for decades. Moreover, refrigerators will continue to remain in the mature stage of the PLC until a new technology emerges that fills the same need. The impact on the marketing mix is as follows:
a) Product- features may be enhanced to differentiate the product from that of competitors.
b) Price- competitive pricing or promotional pricing is used & there are a lot of price wars.
c) Place- distribution becomes more intensive & incentives may be offered to encourage preference over competing products.
d) Promotion- emphasizes product differentiation. A lot of persuasive advertising is done. Many different approaches are used as appropriate to the product. Sales promotion tools like premiums, discounts, coupons, cash rebates, “free” goods, specialty advertising, and demonstrations are used.
* In the Decline stage, new products replace the old. Price competition from dying products becomes more vigorous, but firms with strong brands may make profits until the end because they successfully differentiated their products. They may also keep some sales by appealing to the most loyal customers or those who are slow to try new ideas. Costs, because competition is still intense, continue to rise. Profits, as expected, continue to erode during this stage with little hope of recovery. Typewriters are in the decline stage of the product life cycle.
As sales decline, the firm has several options:
a) Maintain the product- possibly rejuvenating it by adding new features & finding new uses.
b) Harvest the product- reduce costs & continue to offer it, probably to a loyal niche segment.
c) Discontinue the product- liquidating remaining inventory or selling to another firm that is willing to continue the product.
When the product reaches the end of maturity stage (i.e. the saturation stage) of its product life cycle, the firm may stop sales starting to fall by adopting extension strategies. These are ways that sales may be given a boost. Some possible ways businesses might extend the life cycle of their product are as follows:
1) Introduce new variations of the original product, e.g. a children’s version
2) Use a new advertising campaign
3) Sell into new markets, e.g. export the product to another country
4) Introduce a new, improved version of the product
5) Sell through additional, different retail outlets
6) Modify the ‘augmented product’. Services can be added where none existed before — adding free set-up and delivery are good examples.
In reality very few products follow such a prescriptive cycle. The length of each stage varies enormously. The decisions of marketers can change the stage, for example from maturity to decline by price-cutting. Not all products go through each stage. Some go from introduction to decline. It is not easy to tell which stage the product is in. Remember that PLC is like all other tools. Use it to inform your gut feeling.
Strengths – The product life cycle is considered as both straightforward and powerful model. By using the model as guidance, effective and timely marketing will take the product through each stage and can be planned in advance. The product life cycle can also be use to alert the marketer, when the product is in the stages of growth and maturity, to integrate extension strategies during this period to maintain the high profit level.
Weaknesses – It is hard to tell which stage the product is in, as there are constant short-term fluctuations due to external factors, consequently marketing actions could be taken too early or too late. By failing recognize the stage of product in the product life cycle model; it can cause business failure for especially a small business.
In conclusion, it is fair to say that the model can only be used to help identify the symptoms of each stage. Each product will spend different lengths of time in each stage and there is no physical way of showing this on the product life cycle model. However, the better your financial control, the more you will be able to track individual product.