Product Life Cycle

Prof Jayashree Vispute

Product Life Cycles

• Product Life Cycle – shows the stages that products go through from development to withdrawal from the market

• Product Portfolio – the range of products a company has in development or available for consumers at any one time

• Managing product portfolio is important for cash flow

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• The Typical Product Life Cycle (PLC) Has Five Stages– Product Development, Introduction, Growth,

Maturity, Decline– Not all products follow this cycle:

• Fads• Styles• Fashions

Product Life-Cycle Strategies

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Figure 10-2:

Sales and Profits Over A Product’s Life

Product Life Cycle

length• style - comes, goes, comes back• fashion - come, goes away slowly• fad - comes and goes way quickly

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Figure 10-3:

Styles, Fashions, and Fads

The Product Life Cycle Concept is Based on Four PremisesThe Product Life Cycle Concept is Based on Four Premises

Products have a limited life.

Product sales pass throughdistinct stages, each with

different marketingimplications.

Profits from a product vary at different stages

in the life cycle.

Products require different strategies at different

life cycle stages.

The Diffusion Process

Innovators(2.5%)

Early Adopters(13.5%)

Early Majority(34%)

Late Majority(34%)

Laggards(16%)

LaggardsLate

MajorityEarly

MajorityEarly AdoptersInnovators

"The Chasm"

Technology Adoption Process

Customer Profile

Each stage attracts a distinct customer profile

PLC Length and Shape

Sales Sales Sales

TimeTime Time

Style Fashion

Fad

PLC Marketing Strategies

Stage Objective Marketing StrategyStage Objective Marketing Strategy

Introduction Awareness & trial Communicate benefits

Growth Usage of firm’s brand Specific brand communication, lower prices, expand distribution

Maturity Maintain market share Sales promotion, drop price,Extend life cycle expand distribution, new uses

& new versions of product

Decline Decide what to do Maintain, harvest, or divestwith product

Introduction Awareness & trial Communicate benefits

Growth Usage of firm’s brand Specific brand communication, lower prices, expand distribution

Maturity Maintain market share Sales promotion, drop price,Extend life cycle expand distribution, new uses

& new versions of product

Decline Decide what to do Maintain, harvest, or divestwith product

Limitations of the PLC

1. The life cycle concept applies best to product forms rather than to classes of products or specific brands.

2. The life cycle concept may lead marketers to think that a product has a predetermined life, which may produce problems in interpreting sales and profits.

3. It is only a descriptive way of looking at the behavior of a product and the life cycle can not predict the behavior of a product.

1. The life cycle concept applies best to product forms rather than to classes of products or specific brands.

2. The life cycle concept may lead marketers to think that a product has a predetermined life, which may produce problems in interpreting sales and profits.

3. It is only a descriptive way of looking at the behavior of a product and the life cycle can not predict the behavior of a product.

The Product Life Cycle

• PLC can be applied to:– product categories

• have longest life cycles;indefinite maturity stage• examples: cigars, newspapers, cell phones, bottled water

– product forms• example: manual, electric, electronic typewriter

– products– branded products

The Product Life Cycle

• PLC Shapes– Growth-slump-maturity pattern– Cycle-recycle pattern– Scalloped pattern

• Style-Fashion-Fad Life Cycles– Style - distinctive mode of expression– Fashion - currently accepted or popular style– Fad - quick-peak, quick-decline fashions

Product Life Cycle

• Product Life Cycle (PLC):o Each product may have a different life cycleo PLC determines revenue earnedo Contributes to strategic marketing planningo May help the firm to identify when

a product needs support, redesign, reinvigorating, withdrawal, etc.

o May help in new product development planning

o May help in forecasting and managing cash flow

Product Life Cycle

• The Development Stage:• Initial Ideas – possibly large number• May come from any of the following –

o Market research – identifies gaps in the marketo Monitoring competitorso Planned research and development (R&D)o Luck or intuition – stumble across ideas?o Creative thinking – inventions, hunches?o Futures thinking – what will people be

using/wanting/needing 5,10,20 years hence?

Product Life Cycle

• Product Development: Stageso New ideas/possible inventionso Market analysis – is it wanted? Can it be

produced at a profit? Who is it likely to be aimed at?

o Product Development and refinemento Test Marketing – possibly local/regionalo Analysis of test marketing results and

amendment of product/production processo Preparations for launch – publicity,

marketing campaign

Product Life Cycle

• Introduction/Launch:o Advertising and promotion campaignso Target campaign at specific audience? o Monitor initial saleso Maximise publicityo High cost/low saleso Length of time – type of product

Product Life Cycle

• Growth:o Increased consumer awarenesso Sales riseo Revenues increaseo Costs - fixed costs/variable costs,

profits may be madeo Monitor market – competitors

reaction?

Product Life Cycle

• Maturity:o Sales reach peako Cost of supporting the product declineso Ratio of revenue to cost higho Sales growth likely to be lowo Market share may be higho Competition likely to be greatero Monitor market – changes/amendments/new

strategies?

Product Life Cycle

• Saturation:• New entrants likely to mean market is ‘flooded’• Necessity to develop new strategies becomes more

pressing:o Searching out new markets:

Linking to changing fashions Seeking new or exploiting market segments Linking to joint ventures – media/music, etc.

o Developing new useso Focus on adapting the producto Re-packaging or formato Improving the standard or qualityo Developing the product range

Product Life Cycle

• Decline and Withdrawal:o Product outlives/outgrows its

usefulness/valueo Fashions changeo Technology changeso Sales declineo Cost of supporting starts to rise too faro Decision to withdraw may be dependent on

availability of new products and whether fashions/trends will come around again?

PLC- Strategies

Impact on marketing and the strategies to be followed

Introduction Stage:

The firm seeks to build product awareness & develop market for the product.Product-- Branding & quality level is established & intellectual property protection such as patents and trademarks are obtained.Pricing-- May be low penetration pricing to build market share rapidly or high skim pricing to recover development costs.Distribution-- Is selective until customers show acceptance of the product.Promotion-- Is aimed at innovators & early adopters.- Marketing communications seek to build product awareness & to educate potential consumer about the product.

Growth Stage

Firm seeks to build brand preference & increase market share.Product-- Quality s maintained & additional features & support services may be added.Pricing-- Is maintained as the firm enjoys increasing demand with little competition.Distribution-- Channels are added as demand increases & customers accept the product.Promotion-- Is aimed at a broader audience.

Maturity Stage

Strong growth in sales diminishes, competition may appear with similar products, primary objective at this point is to defend market share while maximizing profit.Product-- Features may be enhanced to differentiate the product from that of competitors.Pricing-- May be lowered because of new competitionDistribution-- Becomes more intensive & incentives may be offered to encourage preference over competing products.Promotion-- Emphasizes product differentiation.

Decline StageThe product dies, sales decline. In this case firm has several options.Product- Maintain the product, possibly rejuvenating it by adding new features and finding new uses.- Harvest the product or phase out weak product- Reduce costs & continue to offer it, possibly to a loyal niche segment.Pricing- Cut PriceDistribution- Discontinue the inventory or selling it to another firm that is willing to continue the product.Promotion- Reduce to minimal level

The marketing mix decisions in the decline phase will depend on the selected strategy.e.g. The product may be changed if it is being rejuvenated/ left unchanged if it is being harvested or liquidatedSimilarly price may be reduced drastically If the product is liquidated or maintained if harvested.

Product Life Cycles and the Boston Matrix

Sales

Time

Development Introduction Growth Maturity Saturation Decline

Product Life Cycles and the Boston Matrix

Sales

Time

Effects of ExtensionStrategies

Product Life Cycles and the Boston Matrix

Sales/Profits

Time

PLC and Profits

PLC

Losses

Break Even

Profits

The Product Life Cycle and the Boston Matrix

Sales

Time

AB

C

D

The product portfolio – four products in the portfolio

(1)

(1) ‘A’ is at maturity stage – cash cow. Generates funds for the development of ‘D’

(2)

(2) Cash from ‘B’ used to support ‘C’ through growth stage and to launch ‘D’. ‘A’ now possibly a dog?

(3)

(3) Cash from ‘C’ used to support growth of ‘D’ and possibly to finance extension strategy for ‘B’?

Importance of maintaining a balance of products in the portfolio at different stages of the PLC – Boston Matrix helps with the analysis