PRODUCT LIFE CYCLE

The product life cycle  describes the stages a product goes through from when it was first thought of until it finally is removed from the market. Not all products reach this final stage. Some continue to grow and others rise and fall. PLC is associated with the changes in the marketing situation, thus impacting the marketing strategy and the marketing mix.

If you are considering entering an industry and making a product, knowing where the product is in its life cycle can provide valuable information of how to position your product in the market in terms of price, promotion and distribution.Each product may have a different life cycle.The product’s life cycle - period usually consists of five major steps or phases: Product development, Product introduction, Product growth, Product maturity and finally Product decline.

1.       PRODUCT DEVELOPMENT PHASE:

Product development phase begins when a company finds and develops a new product idea. This involves translating various pieces of information and incorporating them into a new product. A product is usually undergoing several changes involving a lot of money and time during development, before it is exposed to target customers via test markets. Those products that survive the test market are then introduced into a real marketplace.During the development phase, sales are zero and revenues are negative. It is the time of spending with absolute no return.

2.       INTRODUCTION PHASE:

The introduction phase of a product includes the product launch with its requirements to getting it launch in such a way so that it will have maximum impact at the moment of sale.Large expenditure on promotion and advertising is common. A company must be prepared to spent a lot of money and get only a small proportion of that back.  Having the product in every counter is very important and is regarded as an impossible challenge. Some companies avoid this stress by hiring external contractors or outsourcing the entire distribution arrangement. This has the benefit of testing an important marketing tool such as outsourcing.

3.       GROWTH PHASE

The growth phase offers the satisfaction of seeing the product take-off in the marketplace. This is the appropriate timing to focus on increasing the market share. If the product has been introduced first into the market then it is in a position to gain market share relatively easily. A new growing market alerts the competition’s attention. The company must show all the products offerings and try to differentiate them from the competitor’s ones. A frequent modification process of the product is an effective policy to discourage competitors from gaining market share by copying or offering similar products. Other barriers are licenses and copyrights, product complexity and low availability of product components. 

4.       MATURITY PHASE

When the market becomes saturated with variations of the basic product, and all competitors are represented in terms of an alternative product, the maturity phase arrives. In this phase market share growth is at the expense of someone else’s business, rather than the growth of the market itself. This period is the period of the highest returns from the product. A company that has achieved its market share goal enjoys the most profitable period. During this period, new brands are introduced even when they compete with the company’s existing product and model changes are more frequent. Pricing and discount policies are often changed in relation to the competition policies i.e. pricing moves up and down accordingly with the competitors one and sales and coupons are introduced in the case of consumer products. Promotion and advertising relocates from the scope of getting new customers, to the scope of product differentiation in terms of quality and reliability.

5.       DECLINE STAGE:

The decision for withdrawing a product seems to be a complex task and there a lot of issues to be resolved before with decide to move it out of the market. Dilemmas such as maintenance, spare part availability, service competitions reaction in filling the market gap are some issues that increase the complexity of the decision process to withdraw a product from the market.Sometimes it is difficult for a company to conceptualize the decline signals of a product. Usually a product decline is accompanied with a decline of market sales.This is the time to start withdrawing variations of the product from the market that are weak in their market position. This must be done carefully since it is not often apparent which product variation brings in the revenues.

Extending the Product Life Cycle:

What can businesses do to extend the product life cycle?

Extension strategies extend the life of the product before it goes into decline. Again, businesses use marketing techniques to improve sales. Examples of the techniques are:

   a)      Advertising – try to gain a new audience or remind the current audience.

   b)     Price reduction – more attractive to customers.

   c)     Adding value – add new features to the current product, e.g. improving the specifications on a smartphone.

   d)    Explore new markets – selling the product into new geographical areas or creating a version targeted at different segments.

   e)   New packaging – brightening up old packaging or subtle changes.