Product life cycle.

Concept of product life cycle –

The product life cycle is an attempt to recognize
distinct stages in the sales history of the product
corresponding to these stages are distinct
opportunities & problems with respect to
marketing strategy & profit potential. By
identifying the stage better marketing plans can
be formulated.
 Market Market Market Sales
Introduction Growth Maturity Decline

+
Total
Industry
Sales

Total Industry
Profit
$0
Time
-
Sales grow Sales growth, Sales levels, Manage it or
slowly, at a but profits but profits say goodbye
cost level off decline
 • Product-market, not brand
Key
Key Points
Points
About
About the
the • Markets may have different
PLC...
PLC... cycles

• Timing of stages may vary

• Strategy must change over

time
 Market Market Market Sales
Introduction Growth Maturity Decline

Total
+ Industry
Sales

Total
Industry
$0 Profit
Tim
- e

Product
One of Few Variety - try “All the Some drop out
to find best same”
product But “favorites
Battle of the may be
Build brand brands profitable for a
familiarity long time!
 Market Market Market Sales
Introduction Growth Maturity Decline

Total
+ Industry
Sales

Total
Industry
$0 Profit
Tim
- e

Place
Build More of the Move toward Find a way to
Channels same, but more reach loyal
more channel intensive laggards
Maybe outlets distribution
selective available
distribution
 Market Market Market Sales
Introduction Growth Maturity Decline

Total
+ Industry
Sales

Total
Industry
$0 Profit
Tim
- e

Promotion
Build Build selective demand
primary
demand Informing/Persuading Persuading/reminding

Frantically competitive!
 Market Market Market Sales
Introduction Growth Maturity Decline

Total
+ Industry
Sales

Total
Industry
$0 Profit
Tim
- e

Price
Skim the Meet competition (especially in oligopoly)
cream at a or
high price Price dealing and price cutting
or or
Low to Value pricing for long-term relationships
penetrate
faster
Introduction –
A period of sales growth as the product is introduced in
the market. Profits are non existence because of heavy
expenses of introduction.
Growth –
A period of rapid market acceptance & substantial profit
improvement.
Maturity –
A period of slow down in sales growth because acceptance
by most potential buyers. Profits stabilized or declined
because of increased marketing outlets to defend the
product against competitors.
Decline –
The period when sales show strong downward drift &
profits erode.
 Product category, product form, brand life
cycle.
 Rational for the product life cycle.
o Innovators – early adopters – middle majority -
laggards.
 Stages & strategies -
 Introduction stage –
a. Sales growth is slow – reasons.
o Delay in expansion of production capacity.
o Technical problems.
o Delay in obtaining distribution.
b. Profits are negative or slow – reasons.
o Low sales & heavy distribution, promotion expenses.
c. High level promotion required – reasons.
o Inform potential customers of new product.
o Induce trial of the product.
o Secure distribution in retail outlets.
d. The prices tend to be higher –
o Few competitors in the market.
o Produce basic versions since market is not ready for
product refinement.
o Easy way to attract buyers i.e. high income group.
o Costs are high due to relatively low output rates.
o Technology problems in productions.
o High margins are required to support high promotion
expenditures.
Marketing strategy in introduction –

Promotion
High Low
High Rapid Slow
skimming skimming
Price
strategy strategy
Low Rapid Slow
penetration penetration
strategy strategy
I. Rapid skimming strategy –
 Large part of potential market is unaware

of the product.
 Aware are eager to have the product &

able to pay asking price.

 Firm faces potential competition & wants

to build up brand preferences.

II. Slow skimming strategy –
 Market is limited in size.

 Most of the market is aware of the

product.
 Buyers are willing to pay high prices.

 Potential competition is not imminent.

III. Rapid penetration strategy –
 The market is large.
 The market is unaware of the product.

 Most buyers are price sensitive.

 There is strong potential competition

 Unit manufacturing cost fall with the

scale of production & accumulated

manufacturing experience.
IV. Slow penetration strategy –
 Market is large.

 Market is highly aware of the product.

 Market is price sensitive.

 There is some potential competition.

Growth stage –
Rapid climb in sales.
New competitors enter the market.
Prices remain the same or fall slightly.
Promotion same or slightly higher to meet competition.
Profit increase as promotion sales ratio declines &
experience curve effect.
Growth initially accelerating then decelerating.
Marketing strategies in growth stage –
The firm improves product quality & adds product
features & improved styling.
The firm adds new models & flanker products.
It enters new market segment.
It increases new distribution coverage.
Shifts from product awareness adds to product
preference advertisement.
It lowers prices to attract next layer of price sensitive
buyers.
 Maturity stage –

1. Growth maturity –
o Sales growth starts to decline.
o No new distribution channels to fill.
2. Stable maturity –
o Most potential buyers tried the product.
o Future sales govern by population growth &
replacement.
3. Decaying maturity –

o Absolute level of sales now starts to decline.

o Customers starts switching to other products &
substitutes.
o Over capacity & intense competition enters niches.
o Increase R&D budget to improve product & flanker
products.
o Increase advertising, trade & consumer deals.
 Marketing strategies in the maturity stage –
a. Market modification –
 Increase no. of brand users.
o Convert non users.
o Enter new market segments.
o Win competitors customers.
 Increase annual usage of brand by current brand
users -
o More frequent use.
o More usage per occasion.
o New & more varied uses.
b. Product modification –
 Quality improvement.
 Feature improvement .
 Style improvement.
c. Marketing mix modification –
 Price.
 Distribution.
 Advertising.
 Sales promotion.
 Personal selling.
 Services.

Decline stage – marketing strategy

 Identifying weak products.
 Determining marketing strategies.
 Drop decisions.
Summery –

Characterist Introduction Growth Maturity Decline

-ics
Sales Low Rising Peak Decline

Cost High Average Low Low

Profits Negative Rising High Decline

Customers Innovators Early Middle Laggards

adopters majority
Competitors Few Growing Stable Decline
Marketing Introduction Growth Maturity Decline
objectives
Awareness Maximize Maximize Reduce
& trial Market profit expenditure
share while & milk the
defending brand.
market
share
Strategies Introduction Growth Maturity Decline

Product Basic product Product Diversify Phase out

extension, brands & weak items.
warranty models
Price Cost plus Penetration Match Cut price
pricing competitors

Distribution Selective Intensive More Go

intensive selective,
phase out
weak outlets
Advertising Awareness Brand Brand Reduce
preference difference level to
retain loyal
Promotion Heavy for trial Reduce Increase Reduce
for brand minimum
switching level