Product Life Cycle

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PLC and Marketing Strategies

Product Life CycleThe progression of a product

through four stages: introduction, growth, maturity, and decline.

MP3s

DVDs

CDs

Cassettes

LP records

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The Four Stages of the PLC

FIGURE 10.2

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Product life cycle for the fax machine: 1970-2010

PLC

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PLC

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Style – Fashion - Fad

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Claims of Product Life Cycles

Products have a limited life

Product sales pass through distinct stages each with different challenges and opportunities

Profits rise and fall at different stages

Products require different strategies in each life cycle stage

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Wrist Watch

Camera

TV

Car

Bicycle

Which stage these products are?

Length of stages/ Geography/ Variation/ Attitudes

Yoga

Vegan

Single Parenthood

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Resurrection of valve amplifiers as audiophile systems

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What stage these products are?

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The Product Life Cycle

IntroductionThe initial stage of a product’s life cycle—its first appearance in the marketplace—when sales start at zero and profits are negative

Why new products failLack of resources, knowledge, and marketing skills to successfully launch the product

High pricing to recoup research and development costs

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Strategies at various stages of PLC

Introduction

Build sales by expanding market for the product

Heavy expenditure on promotion

Stimulate trial

Attract distribution channel partners

Prices high or low depending on imminent competition

Product Life Cycle

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The Product Life Cycle

GrowthThe stage of a product’s life cycle when sales rise rapidly and profits reach a peak and then start to decline

More competitors enter the market

Product pricing is aggressive

Brand loyalty becomes important

Gaps in market coverage are filled

Promotion expenditures moderate

Production efficiencies lower costs

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GrowthCustomers aware of the product Build sales and market share by building brand

preference

Segmentation emerges

Product redesigned to create differentiation Promotion lays stress on the benefits of the

differentiated product Focused competitors emerge Distribution will be widened to serve new segments.Product made available in different retail formats as customers of different segments buy differently

Product Life Cycle

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MaturityThe stage of a product’s life cycle when the sales curve peaks and starts to decline and profits continue to fall

Intense competition

Emphasis on improvements and differences in competitors’ products

Weaker competitors lose interest and exit the market

Advertising and dealer-oriented

promotions predominate

Distribution sometimes expands

to the global market

Product Life Cycle

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Maturity

Strategic objectives for maturity stage

Generate cash flow

Maintain market share

Increase share of customer

Product Life Cycle

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DeclineThe stage of a product’s life cycle when sales fall rapidly

Pruning items from the product line

Cutting promotion expenditures

Eliminating marginal distributors

Planning to phase out the product

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DeclineStrategic choices

Harvesting the product’s remaining value

Divesting the product when losses are sustained and a return to profitability is unlikely

Anticipate the impending decline in sales

Analyze changing customer requirements

Exit immediately / gradual withdrawal / Exploit brand loyalty

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Uses of PLC

Emphasizes the need for product planning

Planning for competition

Products have limited life cycle

Plan for the future as growth phase will end

Adapt marketing strategies as market and competitive conditions change

Product Life Cycle

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Limitations of PLC

Not all products follow the classic S-shaped PLC curve

PLC is the result of marketing activities, and is not the cause of variability in sales

Duration of PLC stages is unpredictable

Strict adherence to PLC can lead a company to misleading objectives and strategy prescriptions

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BASS Model of Diffusion

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q = coefficient of imitationp = coefficient of innovation

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Bass Model Parameters from a Cross Section of Categories

Cable TV 0.100 0.060Camcorder 0.044 0.304Cellular 0.008 0.421Radio 0.027 0.435Home PC 0.121 0.281Hybrid Corn 0.000 0.797Tractors 0.000 0.234Ultrasound 0.000 0.534Dishwasher 0.000 0.179Microwave 0.002 0.357VCR 0.025 0.603

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