Product Life Cycle

• The product life cycle is an important concept in

marketing that provides insights into product’s
competitive dynamics.
• The product life cycle portrays distinct stages in
the sales history of a product. Corresponding to
these stages are distinct opportunities and
problems with respect to marketing strategy and
profit potential.
• The PLC is normally an S shaped curve. This
curve is typically divided into 4 stages i.e
Introduction, growth, Maturity and Decline
• Introduction :
the product is introduced in the market. Obviously
because it is new there will be slow sales growth.
• Take for e.g. the launch of Hindustan Times edition in
Mumbai. As people are already reading Times of India,
the number of buyers for Hindustan Times will be on the
lower side.
• Profits are non existent in this stage because of the
heavy expenses of product introduction.
• The expenses are in terms of putting a new factory,
advertising and sales promotion expenses, distribution
expenses, etc.
• For e.g. for Hindustan times the expenses will be
in terms of giving press and TV ads, sales
promotion expense in terms of subscription offer
of 96 paise per paper per day for the full year,
putting a new printing press in Mumbai etc.
• Growth : if the product is good, more and more
people will take it. Thus the product sees a
period of rapid market acceptance and
substantial profit improvement.
• Thus if consumers who read Hindustan Times
like it they will keep buying it and recommend it
to others.
• As per thumb rule, a company’s product enters
the growth stage if the sale increases every
month by atleast 2% over the previous month.
• Maturity: A time comes in a product’s life
when most potential buyers have tried the
product.
• Thus the growth rate tapers off.
• Profits stabilize or decline because of
increased marketing outlays to defend the
product against competition.
• Decline : The last part of the PLC, where the
product sees a downward drift in sales.
• Most consumers shift to better products or a
different product altogether.
• For e.g The Black and White TV market is in
decline phase and the Colour TV market is in
growth phase.
 Rationale for the product life cycle
• .
The theory of diffusion and adoption of innovations
provides the underlying rationale.
• When a new product is launched, the company has to
stimulate awareness, interest, trail and purchase.
• This takes time and in the introduction stage only a few
persons (“innovators”) will buy it.
• If the product is satisfying, a large number of buyers
(early adopters) are draw in.
• The entry of competitors into the market speeds up the
adoption process by increasing market awareness and
by causing prices to fall.
• More buyers come in (Early majority) as the product is
legitimized.
• The growth rate stabilizes as the (late majority)
also buy the product.
• Eventually the growth decreases as the number
of potential new buyers approaches zero.
• Sales become steady at the replacement –
purchase rate.
• Eventually sales decline as new –product
classes, forms, variants and brands appear and
divert buyer interest from the existing product.
Strategies at different stages OF
PLC
• Introduction Stage: The introduction stage starts when
the new product is launched.
• The product manager has the choice of using high
pricing (market skimming strategy) for products which
are innovative or low pricing (market penetration ) if
already such a product exists in the market.
• Similarly companies spend heavily on advertising to
create awareness and spends a lot on sales promotion
to induce trails of their product among potential users.
• Also companies start placing the product in select dealer
outlets in certain cities.
• e.g Both BPL mobile and Orange , when they
launched their services in Mumbai , they went
for high pricing coupled with massive advertising
to create awareness.
• The price was kept high, as it was the first time
such a service was being made available in
India.
• Growth stage : During this stage , the company uses
several strategies to sustain rapid market growth as long as
possible. They are
• The company improves product quality and adds new
product features.
• The company adds new models
• It enters new segments
• It increases its distribution coverage
• It shifts from product awareness advertising to product
preference advertising
• It lowers prices to attract the next layer of price sensitive
buyers
• For e.g Hero Honda launched bikes in all segments,
focused on distribution etc.
• Mature stage: In the mature stage, marketers can
consider strategies of market, product and marketing –
mix modification

• Market modification: The company can try to expand

the market for its mature brand by either increasing the
number of users or increasing the usage rate per person.
• The company can expand the number of brand users in
three ways.
• 1) Win competitors’ customers: The company can attract
competitors’ customers by giving sales promotion
schemes (for e.g Colgate can woo Pepsodent users by
giving offers like buy 2 toothpaste get 1 free)
• 2) Enter new market segments: The company
can try to enter new market segments, using
demographic segmentation, that use the product
but not the brand.
• For e.g. Johnson and Johnson successfully
promoted its baby shampoo to adult users.
• All adult users who wanted a mild shampoo
preferred Johnson and Johnson. . Also the
company can look at new markets. For e.g if the
brand is not available in certain parts of India,
efforts are made to make it available there.
• 3) Convert nonusers. : The company can attract non-
users to the product. For e.g Colgate can try to convert
non-users like consumers who use salt, charcoal, neem
twigs to clean their teeth instead of toothpaste to start
using toothpaste.

• Volume can also be increased by convincing current

brand users to increase their annual usage of the brand.
• The three ways are
• More frequent use: The company can try to get
customers to use the product more frequently. For e.g
Colgate and Pepsodent are trying to convince the
consumers to brush twice a day thus increasing usage.
• More usage per occasion: The company can try to
interest users in using more of the product on each
occasion.
• Thus head and shoulders or other shampoo brands
might indicate that shampoo is more effective against
dandruff with two rinsing rather than just one rinsing.
• New and more varied uses: the company can try to
discover new product uses and convince people to use
the product in more varied ways.
• Food manufacturers list several recipes on their
packages to broaden the consumers’ uses of the
product.
• Product modification: Product managers try to
increase sales by modifying the product
characteristics.
• The company either improves the quality of
existing product or they add new features to
existing products to make it more contemporary.
• Marketing mix modifications: Product
managers might try to stimulate sales by
modifying one or more of the marketing mix.
• Prices: Whether dropping prices will bring in
new users? Should discounts be given? In
certain cases raising prices signals quality.

• Place: Should the distribution be improved?

Should more outlets be covered?
• Promotion: Should the advertising and sales
promotion expenditure be increased? Is the
media vehicles used proper, or should it be
changed?
• Many experts believe that in maturity stage, sales
promotion has high impact because consumers have
reached an equilibrium in their buying habits and
preferences and psychological persuasion (Advertising)
is not as effective as financial persuasions (sales-
promotion schemes).
• Decline Stage:
• The sales of most product forms and brands eventually
decline.
• Sales decline for a number of reasons, including technological
advances, consumer shifts in tastes and increased domestic
and foreign competition.
• All lead to overcapacity, increased price cutting and profit
erosion.
• In India, the B & W TV market went into decline phase
because of Colour TV.
• Similarly the advent of Computers, mobiles and VCDs /DVDs
saw the decline of Typewriters , Pager and cassettes
respectively.
• Also the changing consumer preferences saw the demand for
bikes soaring at the cost of scooters.
• The following strategies are available at the
decline stage
• Companies can withdraw from the market or
from select markets
• Companies can reduce the number of variants of
the product in the market.
• Companies cut promotion budget and maintain
minimum advertising and sales promotion.
• Also price cuts are done to ensure some sales