LECTURE 16 DATE: 13-01-2020

UNIT: 07
“Organizational Structure & its Planning”
PLC: PRODUCT LIFE CYCLE

Like people, Product go through life cycle. They are born, grow in sales then decline &
eventually replaced. From birth to death a PLC can generally be divided in to five stages
under Sales & Time.
1) Introduction (new born baby)
2) Growth (growing child)
3) Maturity (adult)
4) Decline (Old Age)
5) Abandonment (Death)

How Product & the Market behave in context of PLC:

Stage-1 Stage-2 Stage-3 Stage-4

PLC Introduction Growth Maturity Decline
Rejuvenate the
Create Maximize
Your product or cut
awareness & Try to maximize profits while
Marketing down
trail your market share keeping the
Objectives unnecessary
product market share
costs
Sales Low Rapid Increase Peak Sales Declining
Costs High Average Low Low
Profits None Rising profit High profit Declining
Competitor
Few Growing High Declining
s

Marketing Mix
High quality
Product High Quality High Quality with product Average Quality
extensions
Match
Price High/Low Low Cut Price
Competitors
Place Selective Wider intensive Intensive Selective
Promotion Heavy Average Heavy Minimal
 Stages
 Development

In the development stage, the product goes through testing and a

prototype is developed. This is after considerable market research to
identify consumer needs and wants. If the product is deemed
commercially viable, then the product may be put into mass production
and launched.

It is important to remember at this stage expenditure for the company is

high. No income is being received as there are zero sales.

 Introduction

This is the stage in which a new product is first made available in the
market. In the introduction stage, customers are few, competition is
less, sales are low, risk is high and profits are low or nil. There are
heavy distribution and promotion expenses. This stage is full of risks
and uncertainties. prices are also high because (1) costs are high due
to low level of output. (2) technological problems in production may not
have been solved, and (3) high profit margins are required to support
the heavy promotion expenditure. the product at the introduction stage
requires high activity in promotion.

 Growth

If the product is popular with consumers, then sales will start to rise. It
may be a rapid growth or a slower one. Rapid growths that fall away
just as quick are called 'Fads'.

Advertising is often still heavy at this point.

 Maturity

Once the product is well established and consumers are satisfied, then
the product is widely accepted and growth slows down. Before long,
however, a successful product in this phase will come under pressure
from competitors. The producer will have to start spending again in
order to defend the product's market position or introduce extension
strategies.
 It may only be in the Maturity stage where companies will receive a
return on their original expenditure and investment due to potentially
high start-up and development costs.

 Saturation

At the very end of the Maturity stage, and where there is no further
growth possible, saturation occurs. This is also referred to as Saturation
Point.

This is when little or no advertising is needed and sales are levelling off.

 Decline

Sooner or later sales fall due to changes in consumer tastes or new

choices available from competitor's products.

Again, extension strategies may be open to the company to keep the

product alive. The product can be declined if there is no proper growth
and the later stage which has been discussed above.

 Use in Marketing
The product life cycle is an important concept in marketing. It includes stages that a
product goes through from when it was first thought of until it is eliminated from the
industry. Not all products reach this final stage. Some continue to grow and others rise
and fall.

 Stages of Product Life Cycle Can Vary in Length

"Branded product life cycles vary in length and shape. Product category and product form
life cycles also possess degrees of variability, depending on the type of product under
consideration. One extreme is the very short life cycle associated with the product fad.
Fads move almost immediately into the growth stage of the PLC. Some fads possess
significant residual markets that keep them around for a while, but even these products
move fairly rapidly into and through decline." Fads: "A temporary fashion with a short life
cycle (Hula Hoop, Frisbee, Wristbands) Some products can have extremely long maturity
phases, but others may have very long introductory phases. It may take some products a
substantial amount of time to catch on in the market before they enter their growth
phases. These products have been referred to as "high learning products." These
products often are complex to understand or use, may be extremely expensive, may not
be easy to sample before committing to purchase, or may not be compatible with existing
social values."[6] (courcesunt.edu). "There are five different product adoption groups
during the product's life cycle 1.Innovators-well-informed customers who are able to try
unproven product 2.Early adopters-usually educated opinion leaders 3.Early majority-
careful consumers, who tend to avoid risk 4.Late majority-somewhat doubtful customers
5.Laggards-those who avoid change The rate of adoption depends on many factors and
correlated with the product life cycle."