What is a product life cycle?
Ever wondered where the old CD players or keypad phones are now? Well, we all know that they are not used anymore but how does the company decide not to keep them in the market now. The answer to this is the concept called Product Life Cycle (PLC). We all are living in an era that is fast-paced and technologically advanced, we have experienced multiple products introducing and declining over the product life cycle phases.
Right from the point, the product is in the ideation phase and it starts its life cycle. At the start, it’s unknown to the customer, but over the PLC the customer is well-versed with benefits be it tangible or intangible. Product sales decline when the consumer changes preference and shifts or realizes that the product does not suffice to the new demands he/she perceives. From a company’s point of view, this is the moment of changing the old product with a new product that addresses the need gap. In the service industry, it could mean rolling out upgrades to keep the device updated with the new software patch.
Below we will see how the PLC actually works and how companies can manage existing products over PLC.
What is the Product Life Cycle (PLC)?
The PLC is the progression of the product across the timeline right from its introduction in the market till it reaches the decline phase where it is called off from the market. The PLC has four stages- introduction, growth, maturity, and decline.
We often see some products which sustain the changing market dynamics but eventually these products also phase out due to several reasons like increasing competition, decreasing demand, and saturation. Companies use PLC to map the changing demands in the market, to build strategies in terms of budgeting, marketing, and other crucial decisions to create a space for the product.
Stages of Product Life Cycle:
Introduction Stage:
The introduction stage comprises the development and launch phases. The development stage is the stage where the research & development takes place. The development stage is where the business gets the investors, develops prototypes, tests the prototypes for their effectiveness, and designs the launching strategy. This is the stage in the product where the product is not sold i.e the revenue is not generated, but the investments are high.
The launch stage in the introduction stage of the PLC is where the product is launched in the market. This is the stage where the company invests heavily in the marketing of the product. The main goal during the PLC is to create awareness and build the brand image for the product.
The strategies implemented during the introduction phase are as follows:
- Advertising on social media platforms and inviting early adopters and innovators.
- Marketing
- Creating “buzz” about the product.
- Porter’s five force
- Pricing strategies:
a) Rapid skimming — launching at a high price and high marketing level
b) Slow skimming — launching at a high price and low marketing level
c) Rapid penetration — launching at a low price with significant marketing
d) Slow penetration — launching at a low price with less marketing
The main goals during the introduction stage are as follows:
- Building a definitive brand image.
- Finding the right set of customers to promote the product.
- Building a community to trust the brand and promote the brand themselves.
Growth Stage:
The growth stage is where the consumers have known the brand and moved down the marketing funnel to actually buy the product. The concept is very well adapted and has started showing tangible results in the form of increased sales.
The growth stage is also where the competitors become aware of the potential of the product space and start investing to draw profit shares. The increased number of competitors also causes an expansion in the market to create higher demand and create an overall expansion of the market space.
The growth stage is where the maximum product development and feature addition take place to stay ahead of the competition. The advertising in this phase is more inclined to promote the product features and speak how the product is better than the competitors.
Strategies used:
- Building product features and qualities.
- Improving market share.
- Venturing into new markets.
- Building distribution channels to fulfill demands.
- Reassessing the pricing to continue having an edge over the competitors.
- Shifting from awareness to the preference marketing message.
Maturity Stage:
The maturity stage is where the product sales start to plateau from the rapid growth stage. This is the stage when the marketplace saturation is the highest and the sale of the products drops.
The main aim at this stage is to maintain the competitive advantage at any cost due to lower demands and pressure from the competitors. The advertising strategies at this stage are focused on creating product differentiation. This means that the brand starts to focus majorly on enhancing features, skimming prices, and push marketing.
During the maturity stage, the cost of production is less and the sales are high which means that the longer the product stays in the maturity stage the higher will be the profits.
Strategies used:
- Market modification — This means the company enters into new segments, converts non-users, and pulls competitor customers.
- Product modification — Modifying features, quality, and prices to create differentiation.
Decline Stage:
The decline stage in the PLC is when the sale of the product drops significantly due to changing customer demands and the market environment. The company loses market share for the product and the higher number of competitors causes a further decline in sales.
The marketing in the decline stage is focused on loyal customers and the marketing spending is least. The BCG (Boston Consultancy Group) matrix can help in the decline stage to gain a better understanding of the products to be divested.
Strategies used:
- Reduction in distribution units.
- Reduction in promotion cost.
- Expanding the use of the product.
- Decide on harvesting based on BCG.
- Sell the brand to competitors.
- Milking or harvesting based on the market share.
- Price skimming to sell the remaining stocks.
Managing existing products over PLC:
Companies need to keep revising and innovating different strategies from time to meet the changing market dynamics. To manage the existing products over the PLC the BCG matrix can be employed to make the crucial decisions. The BCG matrix can help with the decision of harvesting, divesting, milking, and investing in the product.
The revisions are necessary due to:
- Changing customer demands.
- Competitors.
- Trade conditions.
- Technology revolutions.
The existing products can be safeguarded by studying the micro and macro business environments thoroughly.
Strategies used to manage existing products-
Line extension:
The product line extension is using the established product’s name for the new products in the same product line.
Eg. Colgate — Colgate Maxfresh, Colgate Maxwhite, and Colgate Total, etc.
- Down-market stretch: This involves price skimming to cater to a larger population. Eg. Walmart, Snapdeal, Flipkart Big billion sale, and Reliance Mart, etc.
- Up-market stretch: Companies that aim to achieve high margins may venture into high profit differentiated markets. Eg. Starbucks, Apple, and Evocus H2O, etc.
- Two-way stretch: Companies that have a high market share and are deemed as middle-range market companies can extend in both directions to manage the existing products over PLC. Eg. Coca-cola, Tata motors, and Cadbury chocolate, etc.
Reference:
- Claessens, written by M. (2020, March 21). Characteristics of the product life cycle stages and marketing implications. Marketing. Retrieved from https://marketing-insider.eu/characteristics-of-the-product-life-cycle-stages/.
- Exploit the product life cycle. Harvard Business Review. (2014, August 1). Retrieved from https://hbr.org/1965/11/exploit-the-product-life-cycle.
- Product life cycle. Product life cycle strategies. (n.d.). Retrieved from https://www.nibusinessinfo.co.uk/content/product-life-cycle-strategies.
