Product Life Cycle


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Product Life Cycle

  2. 2. PRODUCT LIFE CYCLE Like human beings, products also have their own life-cycle. From birth to death human beings pass through various stages e.g. birth, growth, maturity, decline and death. A similar life-cycle is seen in the case of products. To say that a product has a life cycle is to assert four things:
  3. 3. Market Pioneering Stage
  4. 4. Market Pioneering Features: Costs are high, Slow sales volumes to start, Little or no competition, Demand has to be created, Customers have to be prompted to try the product, Makes no money at this stage
  5. 5. Market Growth Stage
  6. 6. Growth Stage Features Costs reduced due to economies of scale, Sales volume increases significantly, Public awareness increases, Competition begins to increase with a few new players in establishing market, Increased competition leads to price decreases.
  7. 7. Market Maturity Stage
  8. 8. Maturity Stage Features Costs are lowered as a result of production volumes increasing and experience curve effects, Sales volume peaks and market saturation is reached, Increase in competitors entering the market Prices tend to drop due to the proliferation of competing products, Brand differentiation and feature diversification is emphasized to maintain or increase market share, Industrial profits go down.
  9. 9. Market Decline Stage
  10. 10. Decline Stage Features costs become counter-optimal, sales volume decline or stabilize, prices, profitability diminish, profit becomes more a challenge of production/distribution efficiency than increased sales.
  11. 11. In Pioneering Stage Pricing strategy should be adopted: Market skimming or market penetration.
  12. 12. In Growth Stage The pioneer may has to change his marketing strategies, Has to persuade the customer to prefer his brand.
  13. 13. In Maturity Stage May try out product and packaging modifications, and promotional deals and make special offers to new market segments.
  14. 14. In Decline Stage Some firms may try to link up the sale of these products with some other premium products. May begin to prepare new products.
  16. 16. Each stage of product life cycle isan outcome of marketbehaviour/repsonse.
  17. 17. The utility of PLC arises out offollowing facts: A product has to necessarily pass through certain strategies during its life, What happens to it each stage depends on market behaviour, By manipulating market behaviour, the life cycle stages of the product can also manipulated.
  18. 18. PLC Concept Helps MarketingStrategy Formulation Facilitates pre planning the product launch, Facilitates prolonging the profitable phase, Facilitates investment decisions on products,
  19. 19. PLC Concept Helps MarketingStrategy Formulation Facilitates choice of appropriate entry strategy Facilitates choice of the right time to exit Provides useful clues for managing customers
  20. 20. Facilitates Pre – Planning theProduct Launch Elaborate pre – planning does render the marketing man equipped to charter the course of product. It provides him valuable lead time He can keep strategic options ready in anticipation of the range of events in the market.
  21. 21. Facilitates Prolonging theProfitable PhaseStrategic routes for extending profitable stage: Finding out new users Finding out new uses for the product Popularising more frequent use of the product Making the product more distinctive to the consumers Adding real and/or psychological value to the product
  22. 22. Facilitates InvestmentDecisions on Product This, in turn, will help investment decisions on products; the firm can assign investment to the right products and avoid committing heavy resources on wrong products.
  23. 23. Linkage Between PLCConcept and Entry Strategy Different firms join the market with their perspective versions at different stages. Basically four distinct entry postures are possible for a firm seeking entry into the market:
  24. 24. Linkage Between PLCConcept and Entry Strategy As an “innovator” at the introduction stage in the life cycle of the product As an “early follower” in the early growth stage. As a “segmenter” in the late growth stage As a “me – too” maturity stage
  25. 25. Entry as Innovator Innovators should have large resources to innovate They must have the capacity to absrob the cost of product failures They must also have qualified people on the R&D and marketing front
  26. 26. Entry as Early Follower They have to be good market watcher. They also need invest heavily in R&D because they essentially copy the innovator They must have an organisation capable of putting product
  27. 27. Entry as Segmenter They identify certain market segments with less competition and concentrate on them
  28. 28. Entry as me – too They don’t need much R&D efforts But they need a strong marketing organisation to compare with already established competitors
  29. 29. PLC can be a Useful Tool inManaging Customers As a product moves through the various phases of its life cycle, the consumer also moves on the path.
  30. 30. PLC can be a Useful Tool inManaging Customers The marketing man will gain a great deal if he knows what actually happens to the consumer during this process
  31. 31. PLC can be a Useful Tool inManaging Customers The seller has to understand when and how such transitions take place in the experience level of customers
  32. 32. PLC can be a Useful Tool inManaging Customers The changing expectations through different strategy routes: Strenthening company customer relationship Augmenting the product Improving service support and modifying the pricing approaches
  33. 33. PLC OPERATES AT THREE LEVELS** The product level The product sub – category level The brand level** See the book’s examples about this title
  34. 34. Limitations of PLC It’s difficult to measure where the product is on its PLC graph Furthermore, some products have not experienced a decline. E.g. Coca Cola and Pepsi
  35. 35. Limitations of PLC Another factor is that differing products would possess different PLC "shapes". A fad product would hold a steep sloped growth stage, a short maturity stage, and a steep sloped decline stage. A product such as Coca Cola and Pepsi would experience growth, but also a constant level of sales over a number of decades.