Product Life Cycle

Definition of Product Life Cycle

Product Life Cycle (PLC) is the progression of an item through the four stages of its time on the market. The four life cycle stages are: Introduction, Growth, Maturity and Decline. Every product has a life cycle and time spent at each stage differs from product to product.

Product life cycle (PLC) is the cycle through which every product goes through from introduction to withdrawal or eventual demise. PLC analysis, if done properly, can alert a company as to the health of the product in relation to the market it serves. PLC also forces a continuous scan of the market and allows the company to take corrective action faster. But the process is rarely easy.

How Product Life Cycles Work

A product begins with an idea, and within the confines of modern business, it isn't likely to go further until it undergoes research and development and is found to be feasible and potentially profitable. At that point, the product is produced, marketed, and rolled out. The product introduction phase generally includes a substantial investment in advertising and a marketing campaign focused on making consumers aware of the product and its benefits. Assuming the product is successful, it enters its growth phase. Demand grows, production is increased, and its availability expands. As a product matures, it enters its most profitable stage, while the costs of producing and marketing decline. However, it inevitably begins to take on increased competition as other companies emulate its success, sometimes with enhancements or lower prices. The product may lose market share and begin its decline. The stage of a product's life cycle impacts the way in which it is marketed to consumers. A new product needs to be explained, while a mature product needs to be differentiated from its competitors.

Product Life Cycle (PLC) Stages

A new product progresses through a sequence of stages from introduction to growth, maturity, and decline. This sequence is known as the product life cycle and is associated with changes in the marketing situation, thus impacting the marketing strategy and the marketing mix. The product revenue and profits can be plotted as a function of the life-cycle stages as shown in the graph below:

source: Quick MBA

• Introduction Stage: In the introduction stage, the firm seeks to build product awareness and develop a market for the product. The impact on the marketing mix is as follows:
  • Product branding and quality level is established, and intellectual property protection such as patents and trademarks are obtained.
  • Pricing may be low penetration pricing to build market share rapidly, or high skim pricing to recover development costs.
  • Distribution is selective until consumers show acceptance of the product.
  • Promotion is aimed at innovators and early adopters. Marketing communications seeks to build product awareness and to educate potential consumers about the product.
• Growth Stage: In the growth stage, the firm seeks to build brand preference and increase market share.
  • Product quality is maintained and additional features and support services may be added.
  • Pricing is maintained as the firm enjoys increasing demand with little competition.
  • Distribution channels are added as demand increases and customers accept the product.
  • Promotion is aimed at a broader audience.
• Maturity Stage: At maturity, the strong growth in sales diminishes. Competition may appear with similar products. The primary objective at this point is to defend market share while maximizing profit.
  • Product features may be enhanced to differentiate the product from that of competitors.
  • Pricing may be lower because of the new competition.
  • Distribution becomes more intensive and incentives may be offered to encourage preference over competing products.
  • Promotion emphasizes product differentiation.
• Decline Stage:As sales decline, the firm has several options:
  • Maintain the product, possibly rejuvenating it by adding new features and finding new uses.
  • Harvest the product - reduce costs and continue to offer it, possibly to a loyal niche segment.
  • Discontinue the product, liquidating remaining inventory or selling it to another firm that is willing to continue the product.

The marketing mix decisions in the decline phase will depend on the selected strategy. For example, the product may be changed if it is being rejuvenated, or left unchanged if it is being harvested or liquidated. The price may be maintained if the product is harvested, or reduced drastically if liquidated.

Preparing for the Product Life Cycle

There is no definite way you can prepare for the product life cycle. You can’t predict the exact amount of time the product will be in each stage. But, understanding the product life cycle will help you know how to handle pricing strategies, competition, and marketing.

source: Patriot Software

New Product Development Stages

Before a product can embark on its journey through the four product life cycle stages, it has to be developed. New product development is typically a huge part of any manufacturing process. Most organizations realize that all products have a limited lifespan, and so new products need to be developed to replace them and keep the company in business. Just as the product life cycle has various stages, new product development is also broken down into a number of specific phases. Developing a new product involves a number of stages which typically center around the following key areas:

source: http://productlifecyclestages.com

• The Idea: Every product has to start with an idea. In some cases, this might be fairly simple, basing the new product on something similar that already exists. In other cases, it may be something revolutionary and unique, which may mean the idea generation part of the process is much more involved. In fact, many of the leading manufacturers will have whole departments that focus solely on the task of coming up with ‘the next big thing’.
• Research: An organization may have plenty of ideas for a new product, but once it has selected the best of them, the next step is to start researching the market. This enables them to see if there’s likely to be a demand for this type of product, and also what specific features need to be developed in order to best meet the needs of this potential market.
• Development: The next stage is the development of the product. Prototypes may be modified through various design and manufacturing stages in order to come up with a finished product that consumers will want to buy.
• Testing: Before most products are launched and the manufacturer spends a large amount of money on production and promotion, most companies will test their new product with a small group of actual consumers. This helps to make sure that they have a viable product that will be profitable, and that there are no changes that need to be made before it’s launched.
• Analysis: Looking at the feedback from consumer testing enables the manufacturer to make any necessary changes to the product, and also decide how they are going to launch it to the market. With information from real consumers, they will be able to make a number of strategic decisions that will be crucial to the product’s success, including what price to sell at and how the product will be marketed.
• Introduction: Finally, when a product has made it all the way through the new product development stage, the only thing left to do is introduce it to the market. Once this is done, good product life cycle management will ensure the manufacturer makes the most of all their effort and investment.

Thousands of new products go on sale every year, and manufacturers invest a lot of time, effort and money in trying to make sure that any new products they launch will be a success. Creating a profitable product isn’t just about getting each of the stages of new product development right, it’s also about managing the product once it’s been launched and then throughout its lifetime. This product life cycle management process involves a range of different marketing and production strategies, all geared towards making sure the product life cycle curve is as long and profitable as possible.

Product Life Cycle Management

To effectively manage the product life cycle, organisations need to have a very strong focus on a number of key business areas:

• Development: Before a product can begin its life cycle, it needs to be developed. Research and new product development is one of the first and possibly most important phases of the manufacturing process that companies will need to spend time and money on, in order to make sure that the product is a success.
• Financing: Manufacturers will usually need significant funds in order to launch a new product and sustain it through the Introduction stage, but further investment through the Growth and Maturity stages may be financed by the profits from sales. In the Decline Stage, additional investment may be needed to adapt the manufacturing process or move into new markets. Throughout the life cycle of a product, companies need to consider the most appropriate way to finance their costs in order to maximize profit potential.
• Marketing: During a product’s life, companies will need to adapt their marketing and promotional activity depending on which stage of the cycle the product is passing through. As the market develops and matures, the consumers attitude to the product will change. So the marketing and promotional activity that launches a new product in the Introduction Stage, will need to be very different from the campaigns that will be designed to protect market share during the Maturity Stage.
• Manufacturing: The cost of manufacturing a product can change during its life cycle. To begin with, new processes and equipment mean costs are high, especially with a low sales volume. As the market develops and production increases, costs will start to fall; and when more efficient and cheaper methods of production are found, these costs can fall even further. As well as focusing on marketing to make more sales and profit, companies also need to look at ways of reducing cost throughout the manufacturing process.
• Information: Whether it’s data about the potential market that will make a new product viable, feedback about different marketing campaigns to see which are most effective, or monitoring the growth and eventual decline of the market in order to decide on the most appropriate response, information is crucial to the success of any product. Manufacturers that efficiently manage their products along the product life cycle curve are usually those that have developed the most effective information systems.

Most manufacturers accept their products will have a limited life. While there may not be much they can do to change that, by focusing on the key business areas mentioned, product life cycle management allows them to make sure that a product will be as successful as possible during its life cycle stages, however long that might be.

Product Life Cycle Examples

The traditional product life cycle curve is broken up into four key stages. Products first go through the Introduction stage, before passing into the Growth stage. Next comes Maturity until eventually the product will enter the Decline stage. These examples illustrate these stages for particular markets in more detail.

• 3D Televisions: 3D may have been around for a few decades, but only after considerable investment from broadcasters and technology companies are 3D TVs available for the home, providing a good example of a product that is in the Introduction Stage.
• Blue Ray Players: With advanced technology delivering the very best viewing experience, Blue Ray equipment is currently enjoying the steady increase in sales that’s typical of the Growth Stage.
• DVD Players: Introduced a number of years ago, manufacturers that make DVDs, and the equipment needed to play them, have established a strong market share. However, they still have to deal with the challenges from other technologies that are characteristic of the Maturity Stage.
• Video Recorders: While it is still possible to purchase VCRs this is a product that is definitely in the Decline Stage, as it’s become easier and cheaper for consumers to switch to the other, more modern formats.

Another example within the consumer electronics sector also shows the emergence and growth of new technologies, and what could be the beginning of the end for those that have been around for some time.

• Holographic Projection: Only recently introduced into the market, holographic projection technology allows consumers to turn any flat surface into a touchscreen interface. With a huge investment in research and development, and high prices that will only appeal to early adopters, this is another good example of the first stage of the cycle.
• Tablet PCs: There are a growing number of tablet PCs for consumers to choose from, as this product passes through the Growth stage of the cycle and more competitors start to come into a market that really developed after the launch of Apple’s iPad.
• Laptops: Laptop computers have been around for a number of years, but more advanced components, as well as diverse features that appeal to different segments of the market, will help to sustain this product as it passes through the Maturity stage.
• Typewriters: Typewriters, and even electronic word processors, have very limited functionality. With consumers demanding a lot more from the electronic equipment they buy, typewriters are a product that is passing through the final stage of the product life cycle.

While it’s usually left up to the manufacturers and their marketers to worry about Product Life Cycle Management and what implications the different stages might have for their business, considering actual products is a good way to show consumers the part they play in this life cycle.