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Product Life Cycle
Product Life Cycle
The product life cycle (PLC), like the biological life
cycle, describes the advancement of products
through identifiable stages of their existence as
shown below:
Diffusion Process
1. When a new product form is first introduced to the
market, consumers go through a process in determining
whether to adopt it.
2. Some consumers adopt a new product when it is first
introduced; others wait until the innovation has been on
the market for some time.
3. These different adoption rates mean that it typically
takes time for an innovative new product form to diffuse
throughout a market.
4. The diffusion process describes the adoption of an
innovation over time.
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Type of Product Adopters
PLC Stages and Characteristics
The interaction of the diffusion process and
firm competition means that marketers face
a different situation at each stage of the
product life cycle.
The Product Life Cycle
§ The concept of the product/service life cycle
applies to product or service categories, not
to brands;
§ Products have limited life and different
products will have different- shapes of the life
cycle curves
§ A product/service is normally perceived to
pass through four stages over its life cycle;
Introduction, growth, maturity, and decline.
§ Each stage requires different marketing
strategies
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Characteristics of Life Cycles
§ length of the life cycle will vary across markets;
some are quite short and may be getting
shorter
§ some fads have very short life cycles, while
other products stay at maturity for years
§ in high-tech and fashion markets, life cycles
are very short
§ some products do not make it through all four
stages; they may fail in introduction
The Product Life Cycle Analysis
Product category Sales
and
profit
over time are ploted
This evolution has a strategic
implications for an organisation.
Product Life Cycle
Post
Introduction Growth Maturity Decline Mortem
sales Sales
Profit Time
Loss/profit
Progression of product “life” stages (sales & time)
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Product Life Cycle
(sales and profit)
Volume
Introduction Takeoff Maturation Obsolescence
Stages
Product Life Cycle/Strategic choices
(sales and profit)
Volume
Market development
Product development
Penetration
Market development Enhancement
Market Product development Status quo
development Penetration Divestiture
Retrenchment
Product Vertical integration Liquidation
development Divestiture
Related diversification Harvesting
Unrelated
diversification Unrelated
diversification
Introduction Takeoff Maturation Obsolescence
Stages
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INTRODUCTION STAGE
§ High failure rates (slow sales initially)
§ Little to no competition
§ Frequent product modification
§ Limited distribution (try to attract intermediaries)
§ Price is generally high (to recover high
marketing & production costs)
§ Negative profits (due to high initial costs)
Introduction Stage Strategy
§ Developing product awareness (informing
customers of benefits – lead to trial)
§ Stimulate primary demand for the product
category
§ Intensive personal selling
§ Pioneering Advantage - benefit of being the
first one in the market
GROWTH STAGE
Begins when the product begins to break even
§ sales grow at an accelerated (increasing) rate
§ Many competitors enter the market
§ Large companies may acquire small pioneering
firms
§ Profits are healthy (because of demand)
§ R & D costs have been recovered
§ sales begin to level off
§ sales volume create economies of scale
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Growth Stage Strategy
§ Promotion stresses brand preference &
brand loyalty
§ Promotion is targeted towards attracting
the mass market
§ Product quality will be stressed &
improved
§ Wider distribution will be gained and
costs will be lowered
MATURITY STAGE
§ This is where most products spend most
amount of time at.
§ Sales continue to increase but at a
decreasing rate
§ Marketplace is approaching saturation
§ Marginal competitors begin dropping out
§ Both price and profits begin to fall
Mature Stage Strategy
§ Heavy promotion is necessary to both dealers
and consumers (for increasing and usage)
§ Product lines are widened; New models with
emphasis on style rather than function;
products require little technological
improvements
§ Market share can be increased by either
taking it away from the competitors or
manufacturing private brands for channel
members
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DECLINE STAGE
Signaled by a long-run drop in sales
§ Product looses market acceptanc
§ Change in consumers taste
§ Wide availability of substitutable
products
§ Few competitors remain
§ Decreased profits industry wide
§ Price generally stabilizes
Products at different PLC stages
Summary of PLC/Marketing Mix
Costs High R&D High Average Low Low
Profits Negative Negative Rising High Declining
Customers Innovators Early adopters Middle majority Laggards
Competitors Few Growing Stable number Declining
Marketing Product Maximize Market share Reduce costs
Objectives trial market share and profit milk brand
Product In development Basic Extensions Diversify brand Phase out weak
Price tbd Skimming or Penetrate Be price Cut
penetration market competitive price
Distribution tbd Selective Intensive Increase Reduce outlets
Advertising tbd Educate Awareness Brand Reduce
awareness interest differences and remind
Promotion tbd Heavy to Reduce Increase for Reduce costs
encourage trial heavy consumer brand switching minimum level
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Introduction Stage of the PLC
Sales Low sales
Costs High cost per customer
Profits Negative or low
Marketing Objectives Create product awareness and trial
Product Offer a basic product
Price Usually is high; use cost-plus formula
Distribution High distribution expenses
Advertising Build product awareness among early
adopters and dealers
Growth Stage of the PLC
Sales Rapidly rising sales
Costs Average cost per customer
Profits Rising profits
Marketing Objectives Maximize market share
Offer new product features, extensions,
Product service, and warranty
Price Price to penetrate market
Distribution Increase number of distribution outlets
Advertising Build awareness and interest in the mass
market
Maturity Stage of the PLC
Sales Peak sales
Costs Low cost per customer
Profits High profits, then lower profits
Maximize profits while defending market
Marketing Objectives share
Product Diversify brand and models
Price Price to match or best competitors
Distribution Build more intensive distribution
Advertising Stress brand differences and benefits
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Decline Stage of the PLC
Sales Declining sales
Costs Low cost per customer
Profits Declining profits
Reduce expenditure and maintain, reposition,
Marketing Objectives harvest or drop the product
Product Phase out weak items
Price Cut price
Distribution Go selective: phase out unprofitable outlets
Advertising Reduce to level needed to retain
hard-core loyal customers
Limitations of the PLC
The PLC model’s major weakness lies
in the normative approach to prescribing
strategies based on assumptions about
the features or the characteristics of
each stage.
Limitations of the PLC
It fails to take into account that the PLC
in reality is, driven by market forces
expressing the evolution of
Consumer preferences ( the market)
Technology ( the product)
Competition ( the supply side).
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Diffusion of Innovations
Source: Rogers, Everett M, Diffusion of Innovations, 4th ed. (New York: Free Press, 1995)
Technology Adoption Life Cycle
Model that describes how communities respond
to disruptive technologies that represent more
than an incremental improvement on an existing
product.
The mainstream
market
The early
market
Diffusion
The spread of the product through
the population is known as the
diffusion of innovation
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Adopter categories
Innovators
Early adopters
Early majority
Late majority
Laggards
Five Profiles of the Technology Adoption Life Cycle
Technology Enthusiasts
The early market
People who are fundamentally committed to new technology on the grounds that it is
bound to improve our lives.
VISIONARIES
True revolutionaries in business and government who want to make a break with the
past and start a new future.
PRAGMATISTS
The mainstream market
Make the bulk of all technology infrastructure purchases. Neutral about technology
and look to adopt innovations only after a proven track record.
Conservatives
Pessimistic about their ability to gain any value from technology investments. Price-
sensitive, highly skeptical, and very demanding.
Skeptics
Ever-present critics, not potential customers. Goal of high-tech marketing is not to
sell to them but to sell AROUND them,.
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