Product life cycle
Product life cycle is deeper concept yet easy to understand.
A company’s positioning and differentiation strategies must change as the product, market, and competitors change over the product life cycle(PLC). If we are saying product has life cycle then we have assert 4 attributes:
- Products have a limited life
- Product sales pass through distinct stages, each posting 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.
Most product life cycle curves are portrayed as bell shaped. Originally the curve is typically divided into four stages:
- Introduction – A period of slow sales growth as the product is introduced in the market, Profits are non existent because of the heavy expenses of product introduction.
- Growth – A period of rapid market acceptance and substantial profit improvement
- Maturity – A slowdown sales growth because the product has achieved acceptance by most potential buyers. Profits stabilize or decline because of increased competition.
- Decline – Sales shows a downward drift and profits erode.
Product life cycle – Introduction stage
Companies that plan to introduce a new product must decide when to enter the market. To be first can be rewarding, but risky and expensive. To come in later makes sense if the firm can bring superior technology, quality, or brand strength to create a market advantage. Speeding up innovation time is essential in an age of shortening product life cycle. One study found that products coming out six months late- but on budget – earned an average of 33% less profit in their first five years; products that came out on time but 50% over budget cut their profits by only 4%.
Most studies indicate that market pioneer gains the greatest advantage. Example- Coca cola, Amazon, Campbell developed sustained market dominance.
Product life cycle – Growth stage
The growth stage is marked by a rapid climb in sales. Early adopters like the product and additional consumers start buying it. New competitors enter, attracted by the opportunities. They introduce new product features and expand distribution.
To sustain rapid market share growth a firm must;
- Improve product quality and add new features and improved styling
- Add new models( Different size, flavors), to protect the main product
- Enters new market segment
- Increases its distribution coverage and enters new distribution channel
- Lowers prices to attract next layer of price sensitive buyers.
By spending money on product improvement, promotion, and distribution, the firm can capture a dominant position. It trades off maximum current profit for high market share and the hope of even greater profits in the next stage.
Product life cycle – Maturity stage
At some point, the rate of sales growth will slow and the product will enter the stage of relative maturity. Most products are in this stage of the product life cycle which normally lasts longer than the preceding ones.
The maturity stage divides into early maturity and late maturity. You have to closely monitor it. The question is whether to struggle or achieve profits with high volume and less cost or pursue a niche strategy and profit through low volume and high margins.
Product life cycle – Decline stage
Sales in this phase declines for a number of reasons, including technological advances, shifts in consumers tastes, and increased domestic and foreign competition. All can lead to overcapacity, increased price cutting, and profit erosion. The appropriate strategy also depends on the industry’s relative attractiveness and the company’s competitive strength in it. Strategies for harvesting and divesting are quite different. Harvesting calls for gradually reducing a product or business’s costs while trying to maintain sales. When a company decides to divest product with strong distribution and residual goodwill.it can probably sell the product to some other firm.
Product life cycle focuses on what’s happening to a particular product or brand rather than the over all market, it yields a product oriented rather than a market oriented picture. Firms also need to visualize market path as it is affected by new needs, competitors, technology, channels, and other development and change product and brand positioning to keep pace.
I hope this article added value and enhance knowledge on the topic “Product life cycle”. I will recommend to read it with an example in your mind. Choose any product which you know the best and then read this article. You will get a clear understanding. I have not used examples on my own because, sometimes readers do not connect with example. An example of product in your mind could be a better way to understand any topic.
A must read article for marketing students on Viral marketing.