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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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