Scribd
Upload
68 views7 pages

Product Life Cycle

The document discusses the stages of the product life cycle: introduction, growth, maturity, and decline. It provides details about each stage, including challenges faced, typical marketing strategies used, and factors that influence when a product enters each new phase. Pioneering a new product can provide advantages but risks failure if not properly executed. Overall the text examines the full cycle of a product from launch to decline.

Uploaded by

Abhishek Sinha
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
68 views7 pages

Product Life Cycle

The document discusses the stages of the product life cycle: introduction, growth, maturity, and decline. It provides details about each stage, including challenges faced, typical marketing strategies used, and factors that influence when a product enters each new phase. Pioneering a new product can provide advantages but risks failure if not properly executed. Overall the text examines the full cycle of a product from launch to decline.

Uploaded by

Abhishek Sinha
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
You are on page 1/ 7

1

PRODUCT LIFE CYCLE (PLC)

Stages are

 Introduction
 Growth
 Maturity
 Decline

Introduction : Sales growth is slow because

i) It takes time to roll out a new product.


ii) Production capacity is limited.
iii) Technical problems need to be sorted out.
iv) It is difficult to obtain dealer co-operation.
v) Customers are reluctant to try out new products.

Profits are negative or low because huge resources are pumped into
promotion in order to

i) inform potential buyers


ii) induce trial
iii) secure distribution in retail outlets.

 A Company planning to introduce a product needs to decide


‘when’ to enter the market. Being the first to introduce can
be rewarding but it is also risky.

 Historically, the pioneer has enjoyed advantages. One study


has found that the 2nd entrant could obtain only 71% of the
pioneer’s market share, the 3rd entrant obtained only 58%.
2

 Another study found out that 19 out of 25 companies that


are market leaders today were market leaders even 60 years
back.

 Early users tend to recall the pioneer’s name if the product


led to satisfaction.

 The pioneer tends to set the norms of the product business


and has the best chance of emerging a natural leader.

 The pioneer brand normally has an open untapped market


and so it aims at the middle of the market and hence
captures more users.

 The pioneer gets the advantages of customer inertia ;


technological leadership; patents; no entry barriers ; economies
of scale. e.g. Coca – Cola , Kodak, Xerox, Fair & Lovely,
Surf, Colgate.

 However, the pioneer advantage cannot be taken for granted.


Many pioneers have been overtaken by late entrants, e.g.
Texas Instruments were overtaken by Casio in calculators.

 Osborne portable computers were overtaken by IBM.

 The Netscape Navigator was overtaken by the MS Internet


Explorer.

 Ambassador was overtaken by Maruti.

Pioneers fail for a variety of reasons :

i) Crude new products (e.g. Aristo Calculators )


ii) Improper segmentation, targeting and positioning
iii) Premature introduction ( e,g, e-commerce, solar cookers, electric
shavers, dish washers).

iii) Very high product development costs drained the pioneer’s


resources
3

iv) Powerful competition from later entrants


v) Managerial incompetence
vi) Undue complacency

To succeed, a pioneer needs to have vision of a market expansion


plan, persistence, relentless innovation & financial commitment

Growth :

If the new product satisfies the market, it will enter the growth stage
when sales will rise quickly.

 Early adopters buy the product and additional customers start


buying, influenced by favourable word – of – mouth

 Attracted by the opportunities, new competitors also enter the


market. They introduce new product features and try to expand
product distribution . Product reaches new markets.

 Prices remain more or less stable

 Promotional expenses are maintained or slightly increased to


meet competitive levels

 Ads continue to educate the market but some advertising is now


directed at building product preference rather than product
awareness

 Unit manufacturing cost falls as volume increases.

 Unit promotion expenses fall as promotion expenses are spread


over larger volumes

 Profits increase sharply as manufacturing cost falls faster than


price declines
4

Marketing Strategies :

 Improve product quality, features and styling

 Add new models - line extension – different sizes, flavours,


colours etc., not form.

 Enter new markets by increasing distribution channels and


coverage

 Change advertisement content and message

 Lower prices slightly to attract the next layer of price –


sensitive buyers

 It can choose to spend more on product development,


improvement, promotions, distribution at the cost of
maximizing profits at this stage in order to consolidate its
dominant position with an eye to the future.

Maturity :

At some stage, the rate of sales growth will slow down when the
product enters maturity.

 This stage normally lasts longer than the previous stages.

 At any point of time, there are more products in the maturity


stage than in any other. So, most marketers deal with mature
products that pose strong challenges.

 Maturity can be sub divided into-

i) Growth Maturity - sales growth rate starts to decline, but


absolute sales continues to rise, no more new distribution
channels left to be filled
5

ii) Stable Maturity - Sales flatten out as most potential


consumers have tried out the product, further sales will be
governed by population growth and replacement demand.

iii) Decaying Maturity - absolute level of sales starts to decline.

 Decline in sales creates over capacity in the industry. This


leads to intense competition.

 Competitors go to great lengths to differentiate their


offerings in order to create niche markets.

 They start cutting prices, engage in trade and consumer


sales promotion to boost sales.

 They increase advertising.

 They increase R & D budgets to improve / modify products


and to develop line extensions.

 A shake - out begins. Weaker players leave the market to


well – entrenched dominant players, who assume accepted roles
like a quality leader , a service leader , or a cost leader ( e.g. HCL
– quality leader, PCL - cost leader , Wipro – service leader )

 Market Modification Strategy :

Sales volume = number of brand users x usage rate

 Converting non – users to users

 Entering new market segments - Johnson & Johnson


convinced adults to use its baby shampoo

 Winning competitors’ customers – Pepsi

 Convince current users to use the product on more


occasions - e.g. Cadbury, Gillette , Greeting Cards
6

 Convince them to use more of the product on each


occasion - e.g. Shampoos, Ice-creams, blades, face –
packs

 Convince them to use the product in new ways – e.g.


Nirma

Product Modification Strategy :

 Quality improvement - A “plus launch” , offer something as


“new”, “improved” , “stronger”, etc.

 Feature improvement - improves the company’s image as an


innovator. It generates more sales force or dealer enthusiasm but
new features are quickly copied

 Style improvement - e.g. cars, packaging in FMCG. Difficult to


determine if customers will like the new style. Many customers
will stop using the product if the old style is discontinued

 Marketing Mix Modification Strategy

Decline :

Sales decline because of

i) technological advances
ii) shifting consumer tastes
iii) increased domestic / foreign competition

 Most companies do not have a strategy to handle


ageing products because of sentimental reasons

 Carrying a weak product can be very costly because

i) Sales cannot earn a profit and often fail to cover over-


heads
7

ii) It consumes a disproportionately high amount of


managerial time and attention

iii) It needs short production runs, but consumes expensive


set up times

iv) Demands sales force attention, diverting it from more


profitable products

v) Leads to opportunity cost by delaying aggressive search


for profitable products

 Some companies drop dying products earlier than


others depending on exit barriers

Strategies :

 Harvesting :
a) Gradual reduction of costs trying to maintain sales
b) Cut R&D costs , investment in plant and equipment
c) Reduce product quality , sales force , advertising

 Divesting : If the product has strong distribution


and good-will , a company can try and sell it to
another company

You might also like