Product Life Cycle Definition
Product Life cycle shows the typical path or stage of a product. Product life cycle describes the different stages of a product from the period of its first launch in the market to its final withdrawal from the market. The understanding of a product life cycle of a particular product is very important for marketers and company to make adequate decisions like, what is the right time to introduce your new product in the market, what price should be fixed and how to plan effective as well as up to date marketing strategy for your product. Every day you are bombarded by many types of advertisements that tell about various new features of existing products: chips with new flavor, a branded shampoo with new features, and snacks with new delicious fruit flavor. But when you go to retail store you see thousands of such products which are not advertised on regular basis. Some product needs promotional methods and marketing plan, but why do some other products apparently sell themselves? The reason is that the marketing manager and C-suite executives are continuously acting and designing strategy according to product life cycle stages. So all successful and Progressive companies try to remain aware of what is happening throughout the life of their products in terms of the sales and the resultant profits.
Stages of Product Life Cycle
A new product passes through different stages. In this post I would discuss each stage in detail. I would discuss “situation of product” and “organizational strategies” for each phase.
Development or Production Stage
Some analysts not include this stage in the life cycle but this have a vital role in whole cycle.
Situation of the product
- Product is within the firm
- Cost is very high
- Sales/profit is zero
- Customers are curious
- No competitors
- Focus on quality of product
- Focus on design and style of product
- Advertisement (spread info about the product “coming soon”)
This is the initial stage of product in the market. Product is introduced in the market and there is huge amount of investment by companies.
Situation of Product
- Slow growth/ slow sales
- Low profit or no profit
- Cost still high
- No competition as competitors are relaxed that product may not survive
- Pricing strategy (skimming or penetration)
- Focus on most ready buyer
- Offering basic product i.e. without guarantee, warranty or accessories
- Strong advertisements to create awareness about the product & attributes
- Selective distribution
After successful launching of product, in growth stage the sales must start picking up or rise more rapidly. For example iPods were introduced in 2001 and currently iPod are in growth stage of its PLC. Most of the electronic items are in also in growth stage.
Situation of product
- Sales climbing quickly
- Customer become aware & increased
- Profit increased & market share developed
- Cost start decreasing
- Competitors emerged
- Increase the production of product
- Product modification
- Market modification
- Reduce price due to emergence of competitors
- Provide Guarantee, warranty, accessories & repair services
This is the peak and the longest phase for most of the products. The main objective of companies at this stage is to protect their market share.
Situation of Products
- Sales at peak & static
- High profit & market share at peak
- Customer become well familiar
- Strong competition
- Market & product modification
- Market mix modification i.e. decrease price & increase promotions
At this stage the sales of product falls and profit downs. Typewriters and Rexona soup are in the decline stage of the product life cycle.
Situation of Product
- Market share down
- Sales falls/ very low
- Competitors zero
- Cut of brand
- Harvesting ( decrees quality, expenses & price)
- Or make more investment but this happen in very rare cases
Summing up all together, product life cycle is very important for the marketer and companies because until an organization does not know the situation of their product, that cannot make updated strategy for their products. So it helps in better decisions making process on revenue and cost, within a particular stage. It also helps marketing managers and top level management to make better decisions on pricing aspects.