PRODUCT LIFE CYCLE

AND ITS APPLICATIONS

The PLC represents an important tool managers
use to plan their marketing activities.
Product life cycle

 The Four Stages

 Introduction/Launch

 Growth

 Maturity

 Decline
 The stages in a product’s life cycle
Sales per period

O Time
fig
 The stages in a product’s life cycle
Product not
becoming
obsolete
Sales per period

Product
becoming
obsolete

O (1) (2) (3) (4) Time

Launch Growth Maturity
fig Decline
PRODUCT LIFE CYCLE

Each Product goes through a life cycle of

introduction, growth, maturity & decline
The PLC explains how features change
over the life of a product
Pricing & Marketing strategies must
change and evolve as a product moves
through the PLC
PLC APPLICATIONS
Product class has the longest life cycle (e.g. telephones)
Product form tends to have the standard PLC shape (e.g.,
dial/mobile telephone)
Brand can change quickly because of changing competitive
attacks and responses (e.g., Nokia)
Style is a basic and distinctive mode of expression (e.g.,
formal clothing, modern furniture)
Fashion currently popular products that tend to follow
recurring life cycles
Fad - Fashions with abbreviated life cycles - only popular
with certain groups
 Product Life-Cycle Strategies
Characteristics Introduction Growth Maturity Decline

Sales Low Rapidly rising Peak Declining

Costs High per customer Average per Low per customer Low per
customer customer

Profits Negative Rising High Declining

Customers Innovators Early adopters Middle majority Laggards

Competitors Few Growing number Stable number Declining number

beginning to
decline
Marketing Create product Maximize market Maximize profit Reduce
awareness and trial share while defending expenditures and
Objectives market share milk the brand
9-7
 Product Life-Cycle Strategies
Strategies Introduction Growth Maturity Decline
Offer basic product Offer product Diversify brand and Phase out weak items
Product extensions, service, models
warranty
Use cost-plus Price to penetrate Price to match or best Cut price
Price market competitors

Build selective Build intensive Build more intensive Go selective, phase out
Distribution unprofitable outlets

Build product Build awareness and Stress brand Reduce to level needed
Advertising awareness among early interest in the mass differences and to retain hard-core
adopters and dealers market benefits loyals
Use heavy sales Reduce to take Increase to encourage Reduce to minimal
Sales promotion to entice advantage of heavy brand switching level
Promotion trial consumer demand

9-8
PRODUCT LIFE CYCLE
INTRODUCTION
Stages of a product life cycle….
INTRODUCTION
New product developed keeping in mind needs of a set of consumers
Low volume sales, high failure rate
Little competition
Limited distribution
High marketing (advt, promotion)
Focus on creating awareness and primary demand
Intensive personal selling to channel members
Innovators buy the product
Demand has to be created
Costs are high
Customers have to be prompted to try the product
Company makes no profit at this stage
GROWTH
GROWTH
Sales grow at an increasing rate
Profits are healthy
Promotion emphasizes brand advertising and comparative ads
Wider distribution
Toward end of growth stage, prices fall
Early adopters and Early Majority begin to buy
Public awareness increases due to advertising and word of mouth.
Costs reduce because of economies of scale.
Competition begins to increase with a few new players entering the
market.
Increased competition compels the company to reduce price.
Food for thought
Concept of the “tipping point”—the
transition between introduction and
growth when the product either
gains market acceptance or must exit
the market. The majority of new
products fail at this point.
MATURITY
 MATURITY
Rate of growth of sales declines, though volume of sales keeps on increasing. Small &
declining number of potential buyers
New models emphasize style, not function
Product lines are widened or extended
Heavy promotions - sales promotion
Late majority begins to buy the product.
Advertising focused on brand diversification and feature diversification to maintain or
increase market share.
Sales volume peaks and market saturation is reached.
Costs are lowered as a result of production volumes increasing and experience in product
manufacturing and handling.
Increase in competitors entering the market.
Prices & profits tend to drop due to the increase in number of competing products.
Net profit per product goes down but if overall sales remains high profit increases
DECLINE
 DECLINE
Laggards enter the market
Sales volume decline or stabilize, competitors have entered the
market
In order to promote the product much more advertising is
needed which may not be justified.
Costs become sub-optimal meaning they are higher than desired.
Prices, profitability keep falling.
It becomes a challenge to find ways to earn profit.
Rate of decline is governed by how rapidly consumer tastes
change or how rapidly substitute products are adopted.
Falling demand forces many out of market
Types of customers at different stages

The Product Life Cycle is closely linked to the type of buyer.

Depending on the stage in the products life cycle a certain type of
buyer will be predominant
This influences the purchasing behaviour and also the marketing
strategy.
Innovators
Early Adopters
Early Majority
Late Majority
Laggards
 Types of customers at different stages

Innovators are a very small part of the total target audience but they are a
very important part.
They the first individuals to adopt an innovation and prompt the
others to begin to use the product.
Innovators are willing to take risks in trying out new products.
These types of buyers are predominant during the introduction of
the product.
They are
a. Usually the youngest in age
b. Belong to the highest social class
c. Financially they are sound and have significant surplus.
d. Are very social and keep abreast with the latest products and innovations.
Types of customers at different stages
Early Adopters
This category of individuals is second fastest to adopt an
innovation and follow the Innovators.
They have a greatest influence on the opinion amongst the others in
the target segment
Early adopters are
a. Typically younger in age,
b. Have a high social status,
c. Advanced education,
d. Are also financially sound and have surplus
e. They are more socially forward than late adopters
Both the Early Adopters and Early Majority are a significant
part of the growth phase of the product.
 Types of customers at different stages
Early Majority
Adopt an innovation after a varying degree of time.
This time of adoption is significantly longer than the innovators and
early adopters.
Early Majority tend to be slower in the adoption process.
The Early Majority have
a. Above average social status,
b. They are influenced by the Early adopters and are usually in
contact with them.
c. This category also influences the opinion of other categories of
adopters though to a lesser extent.
 Types of customers at different stages
Late Majority
The Late Majority customers will enter the market during the
maturity phase of the product life cycle.
Adopt an innovation after a large part of the adopters have
already adopted the product.
These individuals look at an innovation or a new product with a high
degree of suspicion about its effectiveness.
The Late Majority are
a. Generally suspicious of an innovation or new product
b. Belong to a below average social status,
c. They do not have very much financial surplus
d. They are in contact with others in late majority and early majority,
e. They have very little opinion leadership
Types of customers at different stages

Laggards
The Laggards enter the market near the end of the maturity phase or during the
decline phase of the PLC.
They will wait for the product to be absolutely tried and tested and for the prices to have come
down to the minimum.
Are the last to adopt an innovation.
These individuals typically
a. Have an dislike for change of any type and tend to resist change.
b. They tend to be older in age.
c. These individuals in general tend to be focused on traditions
d. And they are at the lowest social status and lowest financial surplus
e. They are usually in contact with only family and close friends and exert very little to no
opinion leadership.
Understanding the profile of the customers at various stages of the PLC helps a
marketer understand the target market & accordingly plan the product & marketing
strategy
Strategies Based on the
Product Life Cycle
 Strategies at different stages of the PLC

Just like the human life cycle where each stage of life requires different
strategies and different skills the various stages of the Product Life
Cycle also need different tools and processes.
As the product passes through various stages of its life cycle we
see that:
Each stage has a limited period,
Each stage poses different challenges, provides opportunities, and
creates problems to the seller,
The profits rise and fall at different stages of product life cycle, and
Products require different marketing, financial, manufacturing,
purchasing, and human resource strategies in each life cycle stage
Pricing: Stages of a product life cycle

Most products have something of a “perishable

distinctiveness” whereby they generate into
common commodities over time - “cycle of
competitive degeneration”
As product moves to the next stages the sellers’
control over prices keeps on reducing
On the basis of life cycle a new product can be
classified into two stages:
A pioneer stage of product development
A mature stage of product development
Pioneer Pricing
Two main lines of strategy open:
Skimming pricing
Penetration pricing
Skimming pricing
Set a high price for a while & ”milk”
the customers who are willing to pay
& at a later time charge less
After competitors have entered reduce P D
the price
Follows from temporary monopoly
power due to innovation or advertising
Due to a less elastic demand
Price declines over time
Those who wish to get it first pays the
highest price, others are willing to
wait e.g. New electronic goods, mobile
phones, computers etc
TIME
mples of Price skimming
NOKIA 8250

NOKIA 6600

NOKIA 9500 Communicator

Rs Rs 42000 Rs 21000-22000
18000

Rs 24000
Rs15000-16000

Rs 10500 Rs 8000-10000 Rs 26000 Rs 9000-10000

Price Skimming
Advantages:
Demand likely to be price inelastic in early
stages
Can segment the market based on elasticity
of demand
Safe policy for a new product
Advisable for products with short lifespan
Advisable for products that use complex
technology as new firms cannot enter easily
New Product Pricing: Reasons for
Using a Skimming Price

Product
ProductBenefits
Benefitsthat
thatCustomers
Customers
Want
Wantat
atAny
AnyCost.
Cost.

Skimming
SkimmingPrice
Price--
Charging
Charging Little
LittleChance
Chancethat
thatCompetitors
CompetitorsCan
Can
aaHigh, Enter
Enterthe
theMarket
MarketQuickly.
High,Premium
Premium Quickly.
Price
Price

Several
SeveralCustomer
CustomerSegments
Segmentswithwith
Different Levels of Price Sensitivity.
Different Levels of Price Sensitivity.
Penetration Pricing

Offering a new product at a low introductory price.

“Widen the market” by getting customers acquainted
with the product
When introducing a new product or moving into new
geographical market
Mass production & wide market will reduce cost of
production
Goals: (1) to build market share and (2) earn profits
from future sales
e.g. Mass Market Products – FMCG- chocolates, soaps,
biscuits, shampoo etc.
 Penetration Pricing
- Average fare was
substantially lower than
the average fare charged
by other airlines for the
same routes.

- They cleverly reduce the

costs by serving on-board
meals only to those who
need them and they pay
for that.
 Penetration Pricing

Advantages:
Where short period elasticity is high
Where cost of production reduces sharply due to increase in
production
Where product is mass consumption item
• Results in faster penetration and product adoption
• Creates early adopter goodwill
• Creates tremendous cost reduction pressures from the
beginning
• Discourages the entry of competitors
STRATEGIES FOR INTRODUCTION
STAGE
Rapid skimming: High price, high
promotion
Higher price
Higher promotion
Potential market unaware of product, willingness
to pay high
Also works when market size is large
e.g. Consumer electronics
Skim the cream off the market to reduce break
even time
Also works when strategy is guerilla warfare-
vacate before the going gets tough
 STRATEGIES FOR
INTRODUCTION STAGE
Slow skimming: Based on assumption that firm
High price, low has sufficient time to recover its
promotion pre launch expenses
Higher price When technology used is highly
sophisticated
Lower promotion
Market size for product limited
Market aware of and those who are aware willing
product to pay any price
Competition not e.g. industrial products, renewable
intense energy sources, laser technology,
Customers ready to petrochemicals
pay higher prices
 STRATEGIES FOR
INTRODUCTION STAGE
Rapid penetration: Based on the same assumption as Rapid
Skimming
low price, high
promotion Only difference is in the firm’s long term
objectives
Lower price
If it is market share & profit maximization
Higher promotional in long run and intensive competition firm
levels can choose this strategy
Market is large e.g. Japanese firms adopted this to launch
Customers unaware their products in N America & Europe
Intense competition In 1980s S Korea, Taiwan, Hongkong used
Price sensitive it to uproot Japan for same market
India- Nirma, T series audio cassette
STRATEGIES FOR INTRODUCTION
STAGE

Slow penetration: low Lower price

price, low promotion Lower promotional levels
Gives result when threat Large market
from competition is Customers aware of product
minimal, market size is Price sensitive
large, market is price Less competition
sensitive & familiar with Firm offers only limited version
the product of the product at the
introduction stage e.g. Maruti
Objective is to maximize 800
sales or profits in long
run
Pricing….
High skimming price needs costly
promotional efforts, low penetration
price requires low promotional
expenditure
High skimming price generates high
cash flow early in the life cycle
Setting
Setting Initial
Initial Product
Product
Prices
Prices
Market
Market Skimming
Skimming Market
Market Penetration
Penetration
> Setting a High
Initial Price for a > Setting a Low Price
New Product that is for a New Product in
lowered over time Order to Attract a
to Skim Maximum Large Number of
Revenues from the Buyers.
Target Market. > Results in a Larger
> Results in Fewer, Market Share.
More Profitable
Sales.
Market Entry Strategies for New
Products

High Rapid Skimming Slow Skimming

Price Rapid Penetration Slow Penetration

Low
High Promotion Low
 STRATEGIES FOR GROWTH STAGE
Aggressive pricing:
Price cuts
Attract price sensitive customers
Product Benefits:
Emphasis on benefits
Create a niche market
Improvement:
Improve product quality
Adding new features & models
Other changes like color, flavor, size
Introduce product into new markets
Pricing in Maturity Stage
Reaches this stage when its distinctiveness experiences
"competitive degeneration”
Consumers’ preferences are reducing
Imitation has reduced product distinctiveness
Price war fatal at this stage
Reduce the price to the extent demand elasticity
permits
In the battle for soft drinks, a very mature market,, a
1% market share switch between Coke and Pepsi
can account for millions of dollars in revenue.
STRATEGIES FOR MATURITY STAGE
Products:
Abandon weaker products
Concentrate on profitable products
Promotion:
Increase advertising
Increase sales promotion
New packaging
Product re-launches
Improvements:
Invest more in R & D
Improve Product
Improve Product line extensions
STRATEGIES FOR DECLINE STAGE
Tackling: Reduce no. of products in a product line
Reduce promotional budgets
Reduce prices
Reduce distributors
Withdrawal from weaker segments
Marketing objective: reduce costs and milk the brand,
or drop it.
STRATEGIES FOR DECLINE STAGE
Firms can make innovation just when existing product is about to enter decline
stage and new product life cycle starts
The company has to take a decision on how long it would like to sustain this
product.
Companies have to see whether they can continue to support their products
profitably or not.
Many times products that have become strong consumer brands can be
retained for a sustained period of time profitably.
This does not mean that the company does not have to innovate.
Sometimes companies make some adjustments in its product‘s positioning to
remain in the market.
Let us take the example of Lifebuoy soap – this product has remained
between the maturity and decline phase for a very long time.
Lifebouy – resurgence after decline
Lifebuoy was sold in India as early as 1895 when the country was in the grip
of a plague epidemic, but was officially launched and marketed from
1935.With its positioning as a powerful germicidal and disinfectant, and with a
strong carbolic smell, it was what the nation was looking for at that time.
Lifebuoy, rapidly grew as a reliable brand of India, reaching millions of rural
customers with a promise of health and hygiene‘ as a platform of its business.
Its famous advertising jingle―tandurusti ki raksha karta hai
Lifebuoy was so famous that it enabled the brand Lifebuoy to be perceived as
a red carbolic soap for several decades. Lifebuoy had a 21% market share in
the overall soap market and was a category leader in the carbolic soap
segment with a 95% market share. For over hundred years since the brand
first came to India, Lifebuoy has been associated with health and well-being.
Its ads reiterated the message that Lifebuoy washed away germs and kept
one protected and healthy. The brand went through a major re-launch for the
first time in 1964, with a change in product formulation, shape, and
packaging. But the health advantage was lost over time as competitors came
out with soaps that promised both health and beauty.
 Lifebouy – resurgence after decline
The brand passed through prolonged stages of growth and maturity during
most of the second half of 20th century. It was faced with a decline stage
during the last stages of the 20th century and early 21st century with sales
falling at a very rapid rate of 15%–20% per year. The downward trend of
Lifebuoy carbolic soap sales made Hindustan Lever Ltd. reposition the product
during 2002 and rejuvenate the brand with prudent marketing strategies by
optimally utilising the brand image. In 2002 the product moved from being a
hard soap to a mild soap that delivered a significantly superior bathing
experience. The new soap had a refreshing fragrance and its overall positioning
changed, painting its promise of health in softer, more versatile and responsible
hues—for the entire family. The packaging was also changed: The rugged
looking packs were soon replaced with a softer pinkish cover. This was followed
by a series of ads highlighting the soap‘s germ fighting benefits. Lifebuoy had
become a family soap with hygiene as its core promise. A soap that had been
relegated to toilets, Lifebuoy has added new values in an age where more
consumers are getting more and more concerned about germs and cleanliness.
Lifebuoy has 112 years of existence in India and has constantly reinvigorated
itself.
E.g. Product-OHP:
used as a projector in 1940s, till 1970s growth stage, from mid 1980s
maturity,1990s decline
Food for thought.....
If your company’s product were in its
decline stage, how would you
determine whether to update the
product, continue offering it for a
small segment, or exit the market
completely?
Product Life Cycle Strategies
Market modifying
Product modifying
Marketing mix modifying
Product Life Cycle Strategies
Market modifying strategy is when a
company tries to increase consumption of
the current product
 New users
 Increase usage of existing users
 New market segments
Product modifying strategy:
 Innovations in the product
Product Life Cycle Strategies
Marketing mix modifying strategy is
when a company changes one or more
of the marketing mix elements
 Product
 Price
 Promotion
 Distribution channels
Pricing Strategy Over the
Product Life Cycle
Application of the Product Life Cycle/PLC
as an aid to Product Planning

PLC offers a useful 'model' for managers to understand

and keep at the back of their mind.
Understand what to do if their products are in various
stages
This will be critical in differentiating between the life
and death of a product.
Allows managers to understand that a product may die
prematurely if they are not able to undertake key
actions at the right time.
Application & Limitations of the Product Life Cycle

• PLC often does not exist in the way we study them.

• Majority of the major brands have held their position for at
least two decades.
• Dominant PLC of the brand leaders is therefore one of
continuity.
•Means that the growth stage of the product will last for much
longer
•There is no way to know precisely what stage they are
in.
•Misdiagnosis can lead to managers falling into a self-fulfilling
prophecy.

•What happens to a product that is misdiagnosed as being

in the decline stage? Answer: It will surely decline!
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Application & Limitations of the Product
Life Cycle

PLC is not a given pattern to which companies should adapt

their marketing programs.
The Product Manager through skillful use of his
marketing can change the shape and duration of a
brand's life cycle: The PLC should be under the Product
Manager’s control
PLC may be useful as a tool to understand the product‘s stage
and actions needed, but cannot be used as a given pattern
the product will follow.
More critical is understanding how to continue
activities that will affect the product positively during
the planning period.
Application & Limitations of the Product
Life Cycle
Hard to identify which stage of the PLC the product is in.
Hard to pinpoint when the product moves to the next stage.
Hard to identify factors that affect product’s movement through
stages.
Hard to forecast sales level, length of each stage, and shape of PLC.
Strategy is both a cause and result of the PLC.
Decrease or increase in sales is not necessarily an indication of the
product being in the growth or decline stage – this could be for a other
reasons.
Many strong brands have not shown a decline despite being in the
market for many years.
Products like Colgate, Coke, Pepsi have been in the market for several
decades but are still popular. They are mature products and show no
likelihood of decline.
DO IT YOURSELF.....
I
Take a Brand / Product
Study the history of the Brand
Trace its Life cycle
What happened to the Brand at various stages of its life cycle
Price changes made in the Brand as it evolved
What stage is it now?
II
At each stage of the lifecycle, the marketing mix elements change
in response to the marketplace.
List products that currently exist in each of the stages.
What marketing mix would you design for each of these products?
What challenges do firms face in each of these stage?