Product Life Cycle

(PLC)
 Topics
• The Four Major Stages:
• Market Introduction
• Market Growth
• Market Maturity
• Sales Decline
• Graph
• Example
• Pros and Cons
The Product Life Cycle
 Stage 1: Market Introduction
• Sales are low as the new idea is first introduced
to the market.
• Customers may not be aware of the product’s
benefits and features and may not be aware of
the product itself.
• Most companies experience losses during the
market introduction stage.
• A lot of money is spent on promotion and product
development to build product awareness.
• Promotion is aimed at innovators and early adopters.
• Pricing:
• Low penetration pricing
• High skim pricing
 Stage 2: Market Growth
• Rapid growth in sales and profits
• More product awareness
• Competitors see the opportunity and enter
the market.
• Some competitors will copy the product or
may try to make it better or more appealing to
other target markets.
• The new entries result in more product variety.
• Additional features and support services
may be added to:
• Combat competition
• Retain customers

• Promotion is aimed at a broader audience.

• More distribution channels are

established.
 Stage 3: Market Maturity
• Most common stage in the cycle.
• Sales begin to level off.
• The competition gets tougher as more
competitors have entered the market.
• Increased competition creates a downward
movement in prices.
• Industry profits are largest, but it is also
when industry profits begin to decline.
• Promotion is targeted to create brand
differentiation.
 Stage 4: Sales Decline
• Sales continue to decline.
• Shrinking market
• New products replace the old.
• Firms will often try to use extension
strategies.
• Companies may be able to keep some
sales by appealing to their most loyal
customers.
• When in the decline stage, a firm may:

• Maintain: enhance the product by finding new

uses or by adding new features.

• Harvest: reduce costs and continue to offer

the product to a targeted niche.

• Discontinue: sell the product to another firm,

or liquidate inventory.
 Example: New Flavor of Pepsi
• Stage 1: Market Introduction
• Pepsi bottles the new flavored product and
places it on the market for consumers.
• Pepsi also spends a lot of money advertising
the new flavor creating awareness.

• Stage 2: Market Growth

• Customers like the flavor and begin to make
routine purchases.
• Coke introduces their competing flavor.
• Stage 3: Market Maturity
• More competitors enter the market taking
some of Pepsi’s profits.

• Stage 4: Sales Decline

• Customers have moved on to the next new
flavor.
• Some loyal fans stay behind.
 Pros

• The product life cycle is a useful model when

deciding possible stages of a product or
service.

• Useful to help demonstrate how marketing

strategies can vary at different stages of a
product's life.
• Promotion
• Pricing Strategies
 Cons

• Tends to be backward looking

• We only know which stage we have been in
after it has been completed.

• Only looks at a single product when most

firms have many products.

• Determinism