It is the life of a product in the market with respect to business/commercial costs and sales measures. To say that a product has a life cycle is to assert four things: Product has a limited life. Product sales pass through distinct stages, each posing different challenges, opportunities, and problems to the seller. Profits rise and fall at different stages of the product life cycle. Products require different marketing, financial, manufacturing, purchasing and human resource strategies in each life-cycle stage. Four main stages:
Slow sales growth; offering of basic product Limited distribution Negative or low profits Little or no competition Customers have to be prompted to try the product (awareness creation) Intensive personal selling to channel members. Promotional expenditures are at their highest ratio to sales. Prices tend to be high because costs are high. Firms focus on those buyers who are most ready to buy. Speeding up innovation time is essential in an age of shortening PLCs. To be first can be rewarding, but risky and expensive. Concept of pioneer’s advantage. First movers also have to watch out for ‘second mover advantage’.
• High price RAPID SKIMMING • High promotion • Large market unaware of product • High price and low promotion SLOW SKIMMING • Market aware of product • Competition non intense • Low price intense competitionRAPID PENETRATION • High promotion price sensitivity • Large market unaware customer • Low priceSLOW PENETRATION • Low promotion • Large market, aware customers, price sensitive
Rapid climb in sales; brand building Purchase by early adopters Increase in public awareness; intensive distribution Bringing product extensions, warranty and service New competitors enter, attracted by the opportunities Prices fall slightly or remain as it is, depending on demand increase and increased competition. Promotional expenditure maintained the same or at slightly increased level to meet competition and to educate the market. Decline in the promotion-sales ratio Increase in profits because of economies of scale and learning effect Possibility of a trade-off between high market share and high current profit.
Focus shifts towards brand buildingBringing product extensions, warranty & servicesAdding new features and improving quality/style/lookEntering new market segmentsIncreasing distribution coveragePrice reduction to attract new buyersIncreased advertisingExample- Hyundai- i10 car
Sales volume peaks and market saturation is reached at some point Costs reduced but prices also tend to drop because of competition This stage normally lasts longer than the previous stages and poses big challenges to marketing management as profits go down. Majority buyers make repeat purchases, laggards join them Can be divided into three phases: growth, stable & decaying maturity Growth phase- sales growth rates start to decline, no new distribution channels to fill, new competitive forces emerge. Stable phase- sales flatten on a per capita basis because of market saturation, future sales governed by population growth & replacement demand. Decaying phase- the absolute level of sales start to decline, customers begin switching to other products, intensified competition.
• Quality improvements (durability, reliability, etc.) • Feature improvements (utility, safety, convenience, versatility, etc.) Product • Style improvements (aesthetic value)modification • Converting non-users and winning competitor’s customers • Entering new market segments Market • Encouraging usage rate (more frequent use, more usage per time)modification • Changes in price and distribution of product Marketing • Changes in sales promotion and personal selling mix • Changes in services (delivery, maintenance, technology assistance)modification
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Decline in sales because of technological changes, shift in consumer tastes, and increased competition Laggards and repeat purchases driven sales Costs become counter-optimal Overcapacity, increased price cutting, reduced promotion & profit erosion Most of the product class usually die at this stage Withdrawal from market or reduction in number of products offered It is also possible to extend the life of the product by various means
Appropriate strategy depends upon the exit barrier, industry’s relative attractiveness, product category, and the company’s competitive strength Different strategies used: HARVESTING DIVESTING LIQUIDATING • Gradually • Selling the • Bringing the reducing a product to product to an product or another firm if end & business it has strong dropping off costs while distribution & the assets trying to residual maintain sales goodwill
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STYLE: a basic & distinctive mode of expression appearing in a field of human endeavor (homes, clothing, and art). A style can last for generations and go in & out of vogue. FASHION: a currently accepted or popular style in a given field. Fashions pass through 4 stages- distinctiveness, emulation, mass fashion, and decline. The length of a fashion cycle is hard to predict. FAD: a fashion that comes quickly into public view, is adopted with great zeal, peaks early, and declines very fast. The acceptance cycle is short Fads tend to attract only a limited following who are in search of excitement and distinctiveness Fail to survive because they don’t normally satisfy a strong need
Most product life cycle curves are portrayed as bell shaped. However, three common alternate patterns are also noted many-a-times:
Most product life cycle curves are portrayed as bell shaped. However, three common alternate patterns are also noted many-a-times: Growth-slump-maturity pattern: sales grow rapidly just after introduction and then fall to a petrified level that is sustained by late adopters buying the product for the first time and early adopters replacing it. Often characteristics of small kitchen appliances. Cycle-recycle pattern: often describes the sales of new drugs. Aggressive promotion of new drugs produces the first cycle. Later, sales start declining and another promotion push produces a second cycle (usually of smaller magnitude and duration). Scalloped pattern: sales pass through a succession of life cycles based on the discovery of new-product characteristics, uses, or users. Eg.- sales of nylon: In thread, in parachute, etc.
When a product reaches the maturity stage, following strategies can be adopted to extend the life of the product: Price reductions Repackaging and redesigning (to make them seem new and attract new attention) Launch in new markets Revised promotion (to gain new audience and remind the current ones) Direct selling Adding value (new features to the current product)
There are three levels of PLC: Product level (eg. Dell XPS 15 laptop) Category level (eg. Desktop, laptop, netbook, tablet PC) Brand level (HP, Lenovo, Dell, Acer, Apple, Sony) Determines the revenue earned Helps the firm in being proactive Contributes to strategic marketing planning May help the firm to identify when a product needs support, redesign, revitalization, withdrawal, etc. May help in new product development planning or creating a marketing mix for success of a brand/product.
Product planning Maintaining a proper balance of product at different stages of PLC Preventing cannibalization Pre-planning product launch Making investment decisions on products Choosing appropriate entry and exit strategy Prolonging the profitable phase (by highlighting new uses, adding new users, etc.) Shortening the product development time Customer management
PLC patterns are too variable in shape and duration to be generalized Marketers can seldom tell which stage their product is in. For specific products, the duration of each PLC stage is unpredictable. A product may appear to be mature when actually it has reached a plateau prior to another upsurge. The PLC pattern is the self-fulfilling result of marketing strategies and that skillful marketing can in fact lead to continued growth. Use of PLC may lead to inappropriate actions sometimes. Because of these limitations, strict adherence to PLC can lead a company to misleading objectives and strategy prescriptions.