PRODUCT LIFE PRODUCT LIFE CYCLECYCLE

Mehmet KUZU

PRODUCT LIFE CYCLEPRODUCT LIFE CYCLE

Like human beings, products Like human beings, products also have their own life-cycle. also have their own life-cycle. From birth to death human From birth to death human beings pass through various beings pass through various stages e.g. birth, growth, stages e.g. birth, growth, maturity, decline and death. A maturity, decline and death. A similar life-cycle is seen in the similar life-cycle is seen in the case of products. To say that a case of products. To say that a product has a life cycle is to product has a life cycle is to assert four things: assert four things:

Market Pioneering StageMarket Pioneering Stage

Market Pioneering Features:Market Pioneering Features:

Costs are high,Costs are high, Slow sales volumes to start,Slow sales volumes to start, Little or no competition,Little or no competition, Demand has to be created,Demand has to be created, Customers have to be prompted Customers have to be prompted

to try the product,to try the product, Makes no money at this stageMakes no money at this stage

Market Growth StageMarket Growth Stage

Growth Stage FeaturesGrowth Stage Features

Costs reduced due to economies of Costs reduced due to economies of scale, scale,

Sales volume increases significantly,Sales volume increases significantly, Public awareness increases, Public awareness increases, Competition begins to increase with Competition begins to increase with

a few new players in establishing a few new players in establishing market, market,

Increased competition leads to price Increased competition leads to price decreases. decreases.

Market Maturity StageMarket Maturity Stage

Maturity Stage FeaturesMaturity Stage Features

Costs are lowered as a result of production Costs are lowered as a result of production volumes increasing and experience curve volumes increasing and experience curve effects,effects,

Sales volume peaks and market saturation Sales volume peaks and market saturation is reached,is reached,

Increase in competitors entering the market Increase in competitors entering the market Prices tend to drop due to the proliferation Prices tend to drop due to the proliferation

of competing products, of competing products, Brand differentiation and feature Brand differentiation and feature

diversification is emphasized to maintain or diversification is emphasized to maintain or increase market share, increase market share,

Industrial profits go down. Industrial profits go down.

Market Decline StageMarket Decline Stage

Decline Stage FeaturesDecline Stage Features

costs become counter-optimal, costs become counter-optimal, sales volume decline or sales volume decline or

stabilize, stabilize, prices, profitability diminish, prices, profitability diminish, profit becomes more a profit becomes more a

challenge of challenge of production/distribution efficiency production/distribution efficiency than increased sales. than increased sales.

In Pioneering StageIn Pioneering Stage

Pricing strategy should be Pricing strategy should be adopted: Market skimming or adopted: Market skimming or market penetration. market penetration.

In Growth StageIn Growth Stage

The pioneer may has to change The pioneer may has to change his marketing strategies,his marketing strategies,

Has to persuade the customer Has to persuade the customer to prefer his brand.to prefer his brand.

In Maturity StageIn Maturity Stage

May try out product and May try out product and packaging modifications, and packaging modifications, and promotional deals and make promotional deals and make special offers to new market special offers to new market segments. segments.

In Decline StageIn Decline Stage

Some firms may try to link up Some firms may try to link up the sale of these products with the sale of these products with some other premium products. some other premium products.

May begin to prepare new May begin to prepare new products.products.

PLC CONCEPT AS A TOOL IN PLC CONCEPT AS A TOOL IN FORMULATING MARKETING FORMULATING MARKETING STRATEGYSTRATEGY

Each stage of product life cycle is an outcome of market behaviour/repsonse.

The utility of PLC arises out of The utility of PLC arises out of following facts:following facts: A product has to necessarily A product has to necessarily

pass through certain strategies pass through certain strategies during its life,during its life,

What happens to it each stage What happens to it each stage depends on market behaviour, depends on market behaviour,

By manipulating market By manipulating market behaviour, the life cycle stages behaviour, the life cycle stages of the product can also of the product can also manipulated.manipulated.

PLC Concept Helps Marketing PLC Concept Helps Marketing Strategy FormulationStrategy Formulation

Facilitates pre planning the Facilitates pre planning the product launch,product launch,

Facilitates prolonging the Facilitates prolonging the profitable phase,profitable phase,

Facilitates investment decisions Facilitates investment decisions on products,on products,

PLC Concept Helps Marketing PLC Concept Helps Marketing Strategy FormulationStrategy Formulation

Facilitates choice of appropriate Facilitates choice of appropriate entry strategyentry strategy

Facilitates choice of the right Facilitates choice of the right time to exittime to exit

Provides useful clues for Provides useful clues for managing customersmanaging customers

Facilitates Pre – Planning the Facilitates Pre – Planning the Product LaunchProduct Launch Elaborate pre – planning does Elaborate pre – planning does

render the marketing man render the marketing man equipped to charter the course equipped to charter the course of product.of product.

It provides him valuable lead It provides him valuable lead timetime

He can keep strategic options He can keep strategic options ready in anticipation of the ready in anticipation of the range of events in the market.range of events in the market.

Facilitates Prolonging the Facilitates Prolonging the Profitable PhaseProfitable Phase

Strategic routes for extending profitable Strategic routes for extending profitable stage: stage:

Finding out new users Finding out new users Finding out new uses for the productFinding out new uses for the product Popularising more frequent use of Popularising more frequent use of

the productthe product Making the product more distinctive Making the product more distinctive

to the consumersto the consumers Adding real and/or psychological Adding real and/or psychological

value to the productvalue to the product

Facilitates Investment Facilitates Investment Decisions on ProductDecisions on Product

This, in turn, will help investment This, in turn, will help investment decisions on products; the firm decisions on products; the firm can assign investment to the can assign investment to the right products and avoid right products and avoid committing heavy resources on committing heavy resources on wrong products.wrong products.

Linkage Between PLC Linkage Between PLC Concept and Entry StrategyConcept and Entry Strategy

Different firms join the Different firms join the market with their perspective market with their perspective versions at different stages. versions at different stages. Basically four distinct entry Basically four distinct entry postures are possible for a firm postures are possible for a firm seeking entry into the market:seeking entry into the market:

Linkage Between PLC Linkage Between PLC Concept and Entry StrategyConcept and Entry Strategy

As an “innovator” at the As an “innovator” at the introduction stage in the life introduction stage in the life cycle of the productcycle of the product

As an “early follower” in the As an “early follower” in the early growth stage.early growth stage.

As a “segmenter” in the late As a “segmenter” in the late growth stagegrowth stage

As a “me – too” maturity stage As a “me – too” maturity stage

Entry as InnovatorEntry as Innovator

Innovators should have large Innovators should have large resources to innovateresources to innovate

They must have the capacity to They must have the capacity to absrob the cost of product absrob the cost of product failures failures

They must also have qualified They must also have qualified people on the R&D and people on the R&D and marketing frontmarketing front

Entry as Early FollowerEntry as Early Follower

They have to be good market They have to be good market watcher. watcher.

They also need invest heavily in They also need invest heavily in R&D because they essentially R&D because they essentially copy the innovatorcopy the innovator

They must have an organisation They must have an organisation capable of putting productcapable of putting product

Entry as SegmenterEntry as Segmenter

They identify certain market They identify certain market segments with less competition segments with less competition and concentrate on themand concentrate on them

Entry as me – too Entry as me – too

They don’t need much R&D They don’t need much R&D effortsefforts

But they need a strong But they need a strong marketing organisation to marketing organisation to compare with already compare with already established competitorsestablished competitors

PLC can be a Useful Tool in PLC can be a Useful Tool in Managing CustomersManaging Customers

As a product moves through the As a product moves through the various phases of its life cycle, various phases of its life cycle, the consumer also moves on the the consumer also moves on the path. path.

PLC can be a Useful Tool in PLC can be a Useful Tool in Managing CustomersManaging Customers

The marketing man will gain a The marketing man will gain a great deal if he knows what great deal if he knows what actually happens to the actually happens to the consumer during this processconsumer during this process

PLC can be a Useful Tool in PLC can be a Useful Tool in Managing CustomersManaging Customers

The seller has to understand The seller has to understand when and how such transitions when and how such transitions take place in the experience take place in the experience level of customerslevel of customers

PLC can be a Useful Tool in PLC can be a Useful Tool in Managing CustomersManaging Customers

The changing expectations The changing expectations through different strategy routes:through different strategy routes:

Strenthening company customer Strenthening company customer relationshiprelationship

Augmenting the productAugmenting the product Improving service support and Improving service support and

modifying the pricing modifying the pricing approachesapproaches

PLC OPERATES AT THREE PLC OPERATES AT THREE LEVELS**LEVELS**

The product levelThe product level The product sub – category The product sub – category

levellevel The brand levelThe brand level

** See the book’s examples about ** See the book’s examples about this titlethis title

Limitations of PLCLimitations of PLC

It’s difficult to measure where It’s difficult to measure where the product is on its PLC graphthe product is on its PLC graph

Furthermore, some products Furthermore, some products have not experienced a decline. have not experienced a decline. E.g. Coca Cola and PepsiE.g. Coca Cola and Pepsi

Limitations of PLCLimitations of PLC

Another factor is that differing Another factor is that differing products would possess different products would possess different PLC "shapes". A fad product would PLC "shapes". A fad product would hold a steep sloped growth stage, a hold a steep sloped growth stage, a short maturity stage, and a steep short maturity stage, and a steep sloped decline stage. A product such sloped decline stage. A product such as Coca Cola and Pepsi would as Coca Cola and Pepsi would experience growth, but also a experience growth, but also a constant level of sales over a constant level of sales over a number of decades. number of decades.