Product Life Cycle (PLC)
Introduction
Anything that can be offered in the market for sale and can satisfy the needs and wants of customers is called a product. For example, a bottle of Pepsi is a product to satisfy a buyer's thirst. Every product has a life span, may it be one year or fifty years. Products are born when they are introduced in the market for sale. Products die when they are removed from the market. Between birth and death, products pass through different phases, which are called the stages of the product life cycle. In this article, we will explain the concept of product life cycle, its stages and its marketing importance.
Definition
A product life cycle (PLC) is a relationship between the sales of a product and time, normally represented as a graph. It shows a particular duration of time for which a product is available to customers in the market. The product life cycle starts when a particular product or service is introduced into the market and ends when a product or service is removed from the market. A German economist, Theodore Levitt, who worked at Harvard Business School in the United States, first introduced the concept of the product life cycle.
Management and marketing professionals use the concept of product life cycle to make marketing and sales decisions. For example, whether there is a need to increase advertising or not, expand products to new markets, reduce prices, and redesign products’ packaging.
Product Life Cycle Management
The process of strategising ways to support and maintain a product or service is called product life cycle management, but there must be continuous support and maintenance.
International Product Life Cycle (IPL)
A process of keeping track of how a company needs to manage and market its products in the different international markets is called the international product life cycle. The concept behind the marketing theory of product life cycle along with international trade was introduced by Professor Raymond Vernon in the late 1960s.
He suggested that the products in international trade have three phases: new products, maturing products, and standardised products.
Stages of a Typical Product Life Cycle
The following are different stages of a typical product life cycle:
Development Stage
The first stage in the product life cycle is the development phase, which is also named a research phase because the research is done before a product is introduced to the customers. In this stage, companies that want to launch their product find new investors, develop prototypes of their products, test their product’s effectiveness, and make strategies to launch them. All of this process requires a lot of money without bringing in any revenue because the product is not being sold yet.
For a truly innovative product, the development stage can be difficult because the first initiative of a product is not always as successful as future replications. The pioneer product must be introduced into small segments of a market or in a small region for the purpose of testing before full-scale production. This step helps companies understand the market acceptance of the product, collect feedback, and make necessary adjustments before properly launching that product.
Introduction Stage
The second stage is the introduction stage. In this stage, a product is launched in the marketplace, and marketing professionals start building awareness about the product and targeting potential customers in the marketplace. In this stage, the sales are low because the product is just introduced in the market and many customers don't know about it.
In this stage, marketing managers primarily focus on advertising and promotion strategies to build awareness.
This is a crucial stage because at this stage companies have a golden opportunity to grab the attention and loyalty of the early buyers of their product. The positive feedback and good word-of-mouth recommendations from these early customers can affect the wide target market and stimulate product adoption at high levels.
For example, there are some products that are in their introduction phase, like generative AI, 3D televisions, and self-driving cars. However, the success of this stage paves the path for a product’s future growth and success in other phases of the product's lifecycle.
Growth Stage
The growth stage is the third stage in the product life cycle. During this stage, the product is accepted by the customers and marketplace, and consumers of this product are truly starting to buy it, which means that demand, profits, and sales are growing at a relatively fast rate. But this momentum is crucial for maintaining sustainable business operations, funding for other products’ development, and generating ROI (return on investment).
The products that are in their growth stage are peloton, electric cars, and smart watches. When companies scale, they mainly benefit from low per-unit cost of production, enhanced supply relationships, and advanced distribution networks. But there are also some challenges associated with this phase. When the product market expands, competition also increases. Potential competitors can’t resist your success and will want in. In order to remain on top, companies must attract new customers and maintain their brand loyalty so that the existing customers never stop buying, and in this way, companies can stay ahead of competition.
Maturity Stage
When the sales start to level off from the rapid growth period, then the product is in the maturity stage. In this stage, companies start to lower their product prices in order to stay competitive among the growing competition between companies. The smartphones, Amazon, and video game consoles are examples of products that are in their maturity phase.
In this stage, companies become more efficient and start learning from their mistakes made in the introduction and growth stages. The marketing and advertising campaigns mainly focus on product differentiation rather than product awareness, which mean that product features can be enhanced, distribution becomes more intensive, and prices can also decrease.
The products start to enter their most profitable stage during the maturity stage. During this stage, the cost of production decreases and sales volume increases.
Saturation Stage
During this stage, competitors gained a significant portion of the market, and then pioneer products will neither experience growth nor decline in terms of sales. This is the point where consumers start using a product, but there are also many competitive companies in the market providing similar products. At this point, companies need to make their product the brand preference so that their product does not enter the decline stage. In order to achieve this, companies need to focus on providing exceptional service and building a strong bond with their customers. Some soft drinks, breakfast cereals, and streaming services are examples of products that are in the saturation stage.
Companies need to be innovative to stay competitive and relevant in a saturated market. They should continuously invest in research and development (R&D) to improve their product and to offer new features. If they do not do so, they may face a significant loss in market share, and their product will eventually become obsolete.
Decline Stage
When a particular product does not become the brand preference in the marketplace, then it enters the decline stage. Its sales will decrease due to heightened competition, which becomes difficult to overcome for companies. A product may decline if product is less relevant, faces newer technologies in the market, and becomes outdated. Consumers’ preference will shift towards more advanced options, making the declining product less desirable.
At the decline stage, a company should discontinue to produce and sell the declining product, sell the entire company, or innovate some strategies to make its product work. Some old landline phones, DVDs, CDs, and cassette tapes are the products that are in the declining stage.
Strategies to Improve Stages of a Product Life Cycle
The following are some strategies to improve various product life cycle stages:
Development Stage
The following are some strategies that might be helpful in improving the development stage:
High-Quality Research
Companies should invest in conducting high-quality research that provides information about what the market needs, wants, and has a preference for, through which they can modify their product according to market conditions.
Ad Testing
Companies should test each ad they intend to launch across various regions and demographics.
Messaging and Surveys
Companies should need to conduct A/B testing of different messages and conduct surveys to collect feedback on each and every potential option and test out significant marketing channels.
Introduction Stage
The following are some strategies that might be helpful in improving the introduction stage:
Focus on Marketing Campaigns
Companies should invest in marketing campaigns to boost product visibility as quickly as possible across different channels.
Engage Customers
Companies should engage their customers in order to build up supportive clients that spread good word of mouth about their products in their circles.
Updated Campaigns
With product launch, companies should adjust and update their introductory campaigns to align with data-driven insights.
Growth Stage
The following are some strategies that might be helpful in improving the growth stage:
Scale to Meet Demand
Companies should stimulate their growth by scaling up their marketing campaigns, initiatives, and strategies and attracting more customers.
Use Consumer Feedback
Companies should adapt and learn from consumer feedback to refine their offerings and improve their customer satisfaction.
Keep an Eye on Competitors
Companies should keep an eye on their competitors by conducting market research in order to get new opportunities that are available in the market for growth.
Maturity Stage
The following are some strategies that might be helpful in improving the maturity stage of the product life cycle:
Reduce Costs
Companies should reduce their cost-related expenses in order to maintain and increase their profitability and growth.
Continue Market Research
Companies should focus their market research in order to identify new potential opportunities to enter new markets and add advanced features in their product to enhance their consumers’ interest.
Strong Customer Relationships
Companies should create a voice of customer programme in order to build strong relationships with their existing customers.
Decline Stage
The following are some strategies that might be helpful in the decline stage of the product life cycle:
Launch New Versions
Companies should continue to launch new versions of their existing products. For example, Apple maintains the hype with every new iPhone release, which makes it adaptive to its customers.
Different Pricing Strategies
Companies should try new pricing strategies after some period of time, like Dollar Shave Club. Companies use subscription methods for pricing and pricing based on the number of blades in each razor.
Extend Product Line
Companies in the decline phase should need to extend their product line, for example, soda brands such as Pepsi and Coca-Cola. These soda brands add multiple flavours to their product line, such as vanilla, cherry, etc.
Differences between Product Life Cycle and BCG Matrix
BCG matrix is a portfolio management technique in which the products are shown in a table with respect to their relative market share and market growth rate. The following table contains the main points of difference between product life cycle and BCG matrix.
Factors Affecting Product Life Cycle
The following are some factors that affect the product life cycle:
Ease of Entry
A healthy competition in the market directly affects product success. If the target market is smaller in size, has low-cost products, and has less competition, then entering the market is easy for new entrants. Due to this, the products have a short life because competitors will quickly enter and saturate the market. But if the market is highly competitive and the above factors are higher, it is difficult to enter the market, which will provide a longer product life.
Economic Forces
The economic state of a country directly affects a product’s life cycle. During recessions, consumer spending behaviours shifted towards savings. A good economy is the one that shortens the product’s introductory phase and enhances the product’s growth phase by increasing spending. The impact of economic forces directly affects target markets, products, and the entire industry.
Advancements in Technology
Due to advancements in technology, the product’s life cycle is becoming shorter and shorter. If a company launches its product in a highly advanced market like cellphones, computers, and tablets, then their product life will be short. In order to stay profitable and enhance product life, companies should understand how quickly these industries adapt and evolve. Companies should also make new changes or improvements in order to stay competitive.
Importance of Product Life Cycle
The following points explain the importance of a product life cycle:
Increased Profitability
By adapting to each stage in the product life cycle, it improves interactions and helps increase sales across the product’s lifetime.
Make Informed Decisions
The product life cycle helps to make informed decisions based on the life cycle stage. Each stage in the cycle has its own marketing strategy. Having knowledge of each stage helps in successful launch and contributes to the sustainability of a product.
Modify your Marketing Messages
This helps in adjusting marketing messages and related strategies with the maturity of a product and helps sustain customer relations with the particular product.
Limitations of Product Life Cycle
The following points explain the limitations of a product life cycle:
Excess Inventory
When companies do not adapt to the shifts in consumer spending behaviour along with the product’s maturity, which automatically leads to overproduction and underselling of a product, and this kind of company is left with an excess of inventory on hand.
Limited Shelf Life
Poor management in a product life cycle can lead to a premature decline in consumer interest. Due to this, that product has a limited shelf life and declines after some time of its launch.
Loss of Profits
Another limitation of a product life cycle is that a company’s ineffective management will lead to additional marketing costs at each stage of a product life, and automatically profits will reduce.
Conclusion
In conclusion, a product life cycle is basically a time period from a product creation to finally its removal from the market. Exploring a product life cycle is critical to maintaining sales, profitability levels of a product, and staying competitive in the marketplace. Every business that works in a marketplace must go through the six stages of their product life cycle, which consist of development, introduction, growth, maturity, saturation, and decline. It is important to keep in mind that a product life cycle is affected by external factors, like economic situations, politics, and technological processes.
