Product Life Cycle

• The product life cycle is an important concept in marketing that provides insights into product’s competitive dynamics.

• The product life cycle portrays distinct stages in the sales history of a product. Corresponding to these stages are distinct opportunities and problems with respect to marketing strategy and profit potential.

• The PLC is normally an S shaped curve. This curve is typically divided into 4 stages i.e Introduction, growth, Maturity and Decline

• Introduction :the product is introduced in the market. Obviously

because it is new there will be slow sales growth. • Take for e.g. the launch of Hindustan Times edition in

Mumbai. As people are already reading Times of India, the number of buyers for Hindustan Times will be on the lower side.

• Profits are non existent in this stage because of the heavy expenses of product introduction.

• The expenses are in terms of putting a new factory, advertising and sales promotion expenses, distribution expenses, etc.

• For e.g. for Hindustan times the expenses will be in terms of giving press and TV ads, sales promotion expense in terms of subscription offer of 96 paise per paper per day for the full year, putting a new printing press in Mumbai etc.

• Growth : if the product is good, more and more people will take it. Thus the product sees a period of rapid market acceptance and substantial profit improvement.

• Thus if consumers who read Hindustan Times like it they will keep buying it and recommend it to others.

• As per thumb rule, a company’s product enters the growth stage if the sale increases every month by atleast 2% over the previous month.

• Maturity: A time comes in a product’s life when most potential buyers have tried the product.

• Thus the growth rate tapers off.

• Profits stabilize or decline because of increased marketing outlays to defend the product against competition.

• Decline : The last part of the PLC, where the product sees a downward drift in sales.

• Most consumers shift to better products or a different product altogether.

• For e.g The Black and White TV market is in decline phase and the Colour TV market is in growth phase.

Rationale for the product life cycle

• . The theory of diffusion and adoption of

innovations provides the underlying rationale. • When a new product is launched, the company has to

stimulate awareness, interest, trail and purchase. • This takes time and in the introduction stage only a few

persons (“innovators”) will buy it. • If the product is satisfying, a large number of buyers

(early adopters) are draw in.• The entry of competitors into the market speeds up the

adoption process by increasing market awareness and by causing prices to fall.

• More buyers come in (Early majority) as the product is legitimized.

• The growth rate stabilizes as the (late majority) also buy the product.

• Eventually the growth decreases as the number of potential new buyers approaches zero.

• Sales become steady at the replacement – purchase rate.

• Eventually sales decline as new –product classes, forms, variants and brands appear and divert buyer interest from the existing product.

Strategies at different stages OF PLC

• Introduction Stage: The introduction stage starts when the new product is launched.

• The product manager has the choice of using high pricing (market skimming strategy) for products which are innovative or low pricing (market penetration ) if already such a product exists in the market.

• Similarly companies spend heavily on advertising to create awareness and spends a lot on sales promotion to induce trails of their product among potential users.

• Also companies start placing the product in select dealer outlets in certain cities.

• e.g Both BPL mobile and Orange , when they launched their services in Mumbai , they went for high pricing coupled with massive advertising to create awareness.

• The price was kept high, as it was the first time such a service was being made available in India.

• Growth stage : During this stage , the company uses several strategies to sustain rapid market growth as long as possible. They are

• The company improves product quality and adds new product features.

• The company adds new models• It enters new segments• It increases its distribution coverage• It shifts from product awareness advertising to product

preference advertising• It lowers prices to attract the next layer of price sensitive

buyers• For e.g Hero Honda launched bikes in all segments,

focused on distribution etc.

• Mature stage: In the mature stage, marketers can consider strategies of market, product and marketing –mix modification

• Market modification: The company can try to expand the market for its mature brand by either increasing the number of users or increasing the usage rate per person.

• The company can expand the number of brand users in three ways.

• 1) Win competitors’ customers: The company can attract competitors’ customers by giving sales promotion schemes (for e.g Colgate can woo Pepsodent users by giving offers like buy 2 toothpaste get 1 free)

• 2) Enter new market segments: The company can try to enter new market segments, using demographic segmentation, that use the product but not the brand.

• For e.g. Johnson and Johnson successfully promoted its baby shampoo to adult users.

• All adult users who wanted a mild shampoo preferred Johnson and Johnson. . Also the company can look at new markets. For e.g if the brand is not available in certain parts of India, efforts are made to make it available there.

• 3) Convert nonusers. : The company can attract non-users to the product. For e.g Colgate can try to convert non-users like consumers who use salt, charcoal, neem twigs to clean their teeth instead of toothpaste to start using toothpaste.

• Volume can also be increased by convincing current brand users to increase their annual usage of the brand.

• The three ways are• More frequent use: The company can try to get

customers to use the product more frequently. For e.g Colgate and Pepsodent are trying to convince the consumers to brush twice a day thus increasing usage.

• More usage per occasion: The company can try to interest users in using more of the product on each occasion.

• Thus head and shoulders or other shampoo brands might indicate that shampoo is more effective against dandruff with two rinsing rather than just one rinsing.

• New and more varied uses: the company can try to discover new product uses and convince people to use the product in more varied ways.

• Food manufacturers list several recipes on their packages to broaden the consumers’ uses of the product.

• Product modification: Product managers try to increase sales by modifying the product characteristics.

• The company either improves the quality of existing product or they add new features to existing products to make it more contemporary.

• Marketing mix modifications: Product managers might try to stimulate sales by modifying one or more of the marketing mix.

• Prices: Whether dropping prices will bring in new users? Should discounts be given? In certain cases raising prices signals quality.

• Place: Should the distribution be improved? Should more outlets be covered?

• Promotion: Should the advertising and sales promotion expenditure be increased? Is the media vehicles used proper, or should it be changed?

• Many experts believe that in maturity stage, sales promotion has high impact because consumers have reached an equilibrium in their buying habits and preferences and psychological persuasion (Advertising) is not as effective as financial persuasions (sales-promotion schemes).

• Decline Stage:• The sales of most product forms and brands eventually

decline. • Sales decline for a number of reasons, including

technological advances, consumer shifts in tastes and increased domestic and foreign competition.

• All lead to overcapacity, increased price cutting and profit erosion.

• In India, the B & W TV market went into decline phase because of Colour TV.

• Similarly the advent of Computers, mobiles and VCDs /DVDs saw the decline of Typewriters , Pager and cassettes respectively.

• Also the changing consumer preferences saw the demand for bikes soaring at the cost of scooters.

• The following strategies are available at the decline stage

• Companies can withdraw from the market or from select markets

• Companies can reduce the number of variants of the product in the market.

• Companies cut promotion budget and maintain minimum advertising and sales promotion.

• Also price cuts are done to ensure some sales