Product Life-Cycle (PLC)
The Product Life-Cycle (PLC) concept indicates as to what can be expected in the market for a new product at various stages i.e. introduction, growth, maturity and decline. It is used as a forecasting tool and helps the management to check whether its product is in saturation or decline stage. This will help in taking sound marketing decisions at different stages of the Product life cycle. Many authors define the term ‘Product Life-Cycle (PLC)’ in the following manner:
- Philip Kolter: “The product life-cycle is an attempt to recognize distinct stages in the sales history of the product.”
- Arch Pattern: “The life-cycle of a product has many points of similarity with the human life cycle, the product is born growth lustily attains dynamic maturity then enters its declining years.”
- Willian J. Stanton: “From its birth to death, a product exists in different stages and in different competitive environment. Its adjustment to these environments determines to a great degree just successful its life will be.”
Stages in Product Life-Cycle (PLC)
Every product moves through the four stages viz. introduction, growth, maturity and decline. As the product moves through different stages of its life cycle, sales volume and profitability changes from stage to stage. The different stages of PLC are as given below:
Introduction (Pioneering) Stage
Here, the new product or service is launched in the market. In it, the demand for the product is generated slowly and growth in sales volume is at a lower rate because of lack of knowledge on the part of the customers and difficulties in making the product available to the customers. In this stage, pricing, promotion and distribution decisions are to be handled and monitored carefully to ensure growth in demand. This stage requires heavy expenses on advertising and sales promotion as the product or service is almost new to the consumers. Thus, the prices are usually high during the introduction stage because of small scale of production, technological problems and heavy promotional expenditure. Under this stage, competition is negligible; markets are limited and the product innovation in not known much.
As the product gains popularity it moves into the second phase of its life-cycle, i.e., the growth stage. It is the period during which the product is accepted and demanded by consumers. This stage signifies growth in demand, fall in prices, increase in competition and widening of distribution. Here, the firms focus on brand preference and gaining market share by deeper penetration into the existing markets and entry into new markets. The falling ratio of promotional expenditure to sale leads to increase in profitability during this stage.
In this stage, brand awareness is strong so sale continues to rise but at a decreasing rate as compared to past. Here, maturity of the product is reflected through high and saturated sales volume and profits, well-established brand name in the market, increased customer loyalty and increased market share. In this stage, the number of competitors stabilizes and the companies concentrate on maintaining its market share, rather than making the profits. There is saturation in the market as there is no possibility of sales increase. Thus, many business enterprises adopt product modification, product up-gradation and product differentiation to give extension to maturity stage.
This is the final and crucial phase of the product life cycle. It resembles the decline in sales and profit, change in trends and unfavorable economic conditions. It is mainly caused by obsolescence, changes in customer preferences, technological advances, new regulatory requirements, such as environmental protection laws, global competition, etc. Thus, this stage is characterized by either the product’s gradual displacement by some new products or change in consumer buying behavior.
By understanding the product life cycle of all the products and services of the company, marketing manager must change his marketing strategies, policies and programmes by keeping in view the changing circumstances of the market. He must have a close eye upon the policies and strategies of his competitors. By doing this, he can guarantee a regular source of profit for all of his company’s products.