PRODUCT LIFE CYCLE

Product life-cycle (PLC) Like human beings, products also have a life-cycle. From birth to death, human beings pass through various stages e.g. birth, growth, maturity, decline and death. A similar life-cycle is seen in the case of products. The product life cycle goes through multiple phases, involves many professional disciplines, and requires many skills, tools and processes. Product life cycle (PLC) has to do with the life of a product in the market with respect to business/commercial costs and sales measures. To say that a product has a life cycle is to assert three things:

Products have a limited life, Product sales pass through distinct stages, each posing different challenges, opportunities, and problems to the seller,

Products require different marketing, financing, manufacturing, purchasing, and human resource strategies in each life cycle stage.

It is claimed that every product has a life period, it is launched, it grows, and at some point, may die. A fair comment is that at least in the short term not all products or services die. Jeans may die, but clothes probably will not. Legal services or medical services may die, but depending on the social and political climate, probably will not.

Product life-cycle management (or PLCM)

is the succession of strategies used by

business management as a product goes through its life-cycle. The conditions in which a product is sold (advertising, saturation) changes over time and must be managed as it moves through its succession of stages.

STAGES OF PRODUCT LIFE CYCLE There are four main stages of a Product Life Cycle , which are as follows: 1. Introduction Stage 2. Growth Stage 3. Maturity Stage 4. Decline Stage

1. INTRODUCTION The growth stage is a period of rapid revenue growth. Sales increase as more customers become aware of the product and its benefits and additional market segments are targeted. Once the product has been proven a success and customers begin asking for it, sales will increase further as more retailers become interested in carrying it. The marketing team may expand the distribution at this point. When competitors enter the market, often during the later part of the growth stage, there may be price competition and/or increased promotional costs in order to convince consumers that the firm's product is better than that of the competition.

During the growth stage, the goal is to gain consumer preference and increase sales. The marketing mix may be modified as follows:

Product - New product features and packaging options; improvement of product quality.

Price - Maintained at a high level if demand is high, or reduced to capture additional customers.

Distribution - Distribution becomes more intensive. Trade discounts are minimal if resellers show a strong interest in the product.

Promotion - Increased advertising to build brand preference.

2. GROWTH The growth stage is a period of rapid revenue growth. Sales increase as more customers become aware of the product and its benefits and additional market segments are targeted. Once the product has been proven a success and customers begin asking for it, sales will increase further as more retailers become interested in carrying it. The marketing team may expand the distribution at this point. When competitors enter the market, often during the later part of the growth stage, there may be price competition and/or increased promotional costs in order to convince consumers that the firm's product is better than that of the competition. During the growth stage, the goal is to gain consumer preference and increase sales. The marketing mix may be modified as follows:

Product - New product features and packaging options; improvement of product quality.

Price - Maintained at a high level if demand is high, or reduced to capture additional customers.

Distribution - Distribution becomes more intensive. Trade discounts are minimal if resellers show a strong interest in the product.

Promotion - Increased advertising to build brand preference.

3. MATURITY The maturity stage is the most profitable. While sales continue to increase into this stage, they do so at a slower pace. Because brand awareness is strong, advertising expenditures will be reduced. Competition may result in decreased market share and/or prices. The competing products may be very similar at this point, increasing the difficulty of differentiating the product. The firm places effort into encouraging competitors' customers to switch, increasing usage per customer, and converting non-users into customers. Sales promotions may be offered to encourage retailers to give the product more shelf space over competing products. During the maturity stage, the primary goal is to maintain market share and extend the product life cycle. Marketing mix decisions may include:

Product - Modifications are made and features are added in order to differentiate the product from competing products that may have been introduced.

Price - Possible price reductions in response to competition while avoiding a price war.

Distribution - New distribution channels and incentives to resellers in order to avoid losing shelf space.

Promotion - Emphasis on differentiation and building of brand loyalty. Incentives to get competitors' customers to switch.

4. DECLINE Eventually sales begin to decline as the market becomes saturated, the product becomes technologically obsolete, or customer tastes change. If the product has developed brand loyalty, the profitability may be maintained longer. Unit costs may increase with the declining production volumes and eventually no more profit can be made. During the decline phase, the firm generally has three options:

Maintain the product in hopes that competitors will exit. Reduce costs and find new uses for the product.

Harvest it, reducing marketing support and coasting along until no more profit can be made.

Discontinue the product when no more profit can be made or there is a successor product.

The marketing mix may be modified as follows:

Product - The number of products in the product line may be reduced. Rejuvenate surviving products to make them look new again.

Price - Prices may be lowered to liquidate inventory of discontinued products. Prices may be maintained for continued products serving a niche market.

Distribution - Distribution becomes more selective. Channels that no longer are profitable are phased out.

Promotion - Expenditures are lower and aimed at reinforcing the brand image for continued products.

INDUSTRY LIFE CYCLE

A concept relating to the different stages an industry will go through, from the first product entry to its eventual decline. There are typically five stages in the industry lifecycle With respect to global industry analysis, there are many key elements related to return expectations.

1. 2. 3. 4.

Demand analysis Value Creation Industry life cycle Competition

1. Demand To begin with global industry analysis, an estimation of demand is needed. This could also include an analysis of substitutes for the companys product. In this context demand analysis is based on worldwide demand. 2. Value Creation This element focuses on the sources of value that can be extracted through the value chain. The value chain consists of suppliers of raw materials, but also the delivery firms that deliver the finished product to the consumers. 3. Industry Life Cycle Analyzing the industry life cycle in a global context is important much like it is in domestic industry analysis. It is important to understand an industrys growth prospects to determine an appropriate growth rate. 4. Competition Competition in a global industry is much more complicated as the analysis is done with global industries and laws in mind.

STAGES OF INDUSTRY LIFE CYCLE

1. Pioneering Phase 2. Growth Phase 3. Mature Growth Phase 4. Stabilization/Maturity Phase 5. Deceleration/Decline Phase

1) PIONEERING PHASE This phase is characterized by low demand for the industrys product and large upstart costs. Industries in this phase are typically start-up firms, with large upfront costs and few sales.

2) GROWTH PHASE

After the pioneering phase, an industry can transfer into the growth phase. The growth phase is characterized by little competition and accelerated sales. Industries in this phase have typically survived the pioneering phase and are beginning to recognize sales growth.

3) MATURE GROWTH PHASE

After the growth phase, an industry will reach the mature growth phase. The mature growth phase is characterized above average growth, but no longer accelerating growth. Industries in this phase now face increasing competition and, as a result, profit margins begin to erode.

4) STABILIZATION/MATURITY PHASE

After the growth phases, an industry will enter in the stabilization/maturity phase. The stabilization/maturity phase is characterized by growth that is now average. Industries in this phase have significant competition and the return on equity is now more normalized. This is typically the longest phase an industry will go through

5) DECELERATION/DECLINE PHASE

The deceleration follows the growth and maturity phases. The deceleration/decline phase is characterized by declining growth as demand shifts to other substitute (new) products.

CHART ON PLC (PRODUCT LIFE CYCLE)

SERIAL NO. 1

STAGES 1. 2. 3. 4. 5. 6.

CHARACTERSTICS costs are very high slow sales volumes to start little or no competition demand has to be created customers have to be prompted to try the product makes no money at this stage

Introduction stage

Growth stage

1. 2. 3. 4. 5.

costs reduced due to economies of scale sales volume increases significantly profitability begins to rise public awareness increases competition begins to increase with a few new players in establishing market 6. increased competition leads to price decreases

Maturity stage

1. costs are lowered as a result of production volumes increasing and experience curve effects 2. sales volume peaks and market saturation is reached 3. increase in competitors entering the market 4. prices tend to drop due to the proliferation of competing products 5. brand differentiation and feature diversification is emphasized to maintain or increase market share 6. Industrial profits go down

Saturation and decline stage

1. 2. 3. 4.

costs become counter-optimal sales volume decline prices, profitability diminish profit becomes more a challenge of production/distribution efficiency than increased sales