THE PRODUCT LIFE CYCLE (PLC)

 After launching the new product, management wants the product to enjoy a long life and compete with the existing products. Although the company doesn’t expect its product to sell forever, the company wants to earn a normal profit to cover all the effort and risk that went into launching it. The product Life Cycle (PLC) is the course of the sales and profits of a product over its 63 lifetimes. It involves five distinct stages: product development, introduction, growth, maturity, and decline. 

The figure given below shows a typical product life cycle (PLC) although its exact length and shape are not known in advance

Practical Problems of PLC 

  Difficult to identify which stage of the PLC the product is in.

  Difficult to pinpoint when the product moves to the next stage. 

  Difficult to identify factors that affect a product’s movement through stages. 

  It’s not easy to forecast the sales level, the length of each stage, and the shape of PLC. 

  Strategy is both a cause and result of the PLC. 

 

Introduction Stage of PLC 

The introduction stage starts when the new product is first launched. The introduction takes time, and sales growth is slow in the initial phase. Products such as Instant coffee, frozen foods, etc lingered for many years before they entered a stage of rapid growth. In this stage, as compared to the others, profits are negative or low because of the low sales and high distribution and promotion expenses. Much money is needed to attract distributors and build their own inventories. Promotion spending is relatively high to inform consumers of the new product and get them to try it. 

Growth Stage of PLC

If the new product satisfies the market, it will enter a new growth stage in which sales will start climbing quickly. The early adopters will continue to buy and later buyers will start following their lead, especially if they hear the favorable word of mouth. Attracted by the opportunities for profit, new competitors will enter the market. They will introduce new product features, and the market will expand. The increase in competitors will lead to an increase in the number of distribution outlets, and sales jump just to build reseller inventories. Prices remain the same or fall only slightly. Companies keep their promotion spending at the same or a slightly higher level. Profits increase during the growth stage, as promotion expenses are spread over a large volume and as unit manufacturing costs fall. The firm uses several strategies to sustain a rapid market growth rate as long as possible. 

Maturity Stage of PLC

At this stage of PLC, product sales growth will slow down. The maturity stage normally lasts longer than the previous stages and poses substantial challenges to marketing management. In any market, most products are in the maturity stages of the life cycle. Therefore, most of the marketing management deals with a mature product. Competitors begin marking down prices, increasing their advertising and sales promotion, and allocating their R&D budgets to find better versions of the product. These steps lead to a drop in profit. Some of the weaker competitors start dropping out, and the industry eventually contains only well-established competitors. 

Decline Stage of PLC

The sales of most product forms and brands eventually dip. The decline may be slow or rapid depending on the products. Sales may plunge to zero or they may drop to a level where they continue for many years. This stage is the decline stage. As sales and profits decline, some firms withdraw from the market. Carrying a weak product can be very costly to the firm, and not just in profit terms. A weak product often requires frequent price and inventory adjustments. Products falling reputation can cause customers concern about the company and its products. For these reasons, companies need to pay more attention to their aging products. The firm’s first task is to identify those products in the decline stage by regularly reviewing sales, market shares, costs, and profit trends.