Meaning of Product Life Cycle
Even the non-living things have life cycle. The goods also have different stages as human beings have childhood, adolescence, adulthood and oldness. Passing through all the stages, goods also die. Any goods or service cannot remain in market for long after it has been produced. Consumers seek better products or services and try to find alternatives. Then the importance of the old products goes on decreasing.
The condition such as introduction, development, maturity and decline of product as a whole is called life cycle. The changes that appear in new technology, competition, changing interest of consumers etc. affect the life cycle of products. Sales of products, profits from the products also differ according to their life cycle.
Demand of all products appeared in the markets does not remain same for long time. Change in demand for some products occurs very soon, while very late for some others. So, market longevity of any product depends on their quality and nature of the products. Demands for quality products continue for long but demands for relatively low quality products go to peter out. So, the life cycle of all products does not remain the same. The nature of products and marketing strategy affect it. Life cycle of some products continues for many whereas some others end after shorter time. It becomes difficult to fix long or short life cycle of any product. However, the life cycle of machines and machinery goods becomes longer than that of the luxury and fashion goods. For easy understanding, some experts and writers have defined life cycle of product as follows:
According to Prof. Kotler, “Product life cycle is an attempt to recognize distinct stages in the sales history of the product.”
According to T. D. Kollat, R. D. Blackwell and J. F. Robinson, “Product life cycle is generalized more of sales and profit trends for a product class or category over a period of time.”
According to Harry L. Hansen, “The cycle has generally been described as an ‘S’ shaped curve consisting of four phases introduction, rapid growth, maturity and decline.”
From all these definitions, we become clear that all the forms/ conditions from production to death of a product as a whole is called life cycle of a product. Producers and suppliers should be well informed about different conditions of the life cycle of products. Such life cycle is often directly affected by the changes in technology, consumers’ interest and market competition. Different marketing strategies should be adopted according to stages of product life cycle.
Stages of Product Life Cycle
A seller has to face different threats, competitions and problems and use opportunities while selling products. Any type of products should go through different stages. They can be classified in four parts. The stage when the products first enter in market is called introduction. At this stage quantity of sale and profit becomes low due to being new in the market. This follows the second stage. At this stage both the quantity and profit increase gradually. Going through these two stages, the products gain maturity. At this stage, a little decrease in sale quantity begins. No remarkable ups and downs in sale quantity and profit can be seen at this stage. After crossing the matured stage, the product reaches the declining stage. At this stage both sale quantity and profit gradually decrease. The following figure makes clear the life cycle of products.
 |
| Stages of Product Life Cycle |
1. Introduction Stage
The childhood stage of any product is called introduction stage. This is the first stage of life cycle of products. This stage is also called pioneering stage. This is the stage to bring new products to the market through special marketing program. At this stage, the possible customers become totally ignorant about the new products. Due to high production cost, the price of the products also becomes high. Personal selling, advertising, promotional activities etc. should massively conducted. The customers do not easily accept the new products appeared in the market. So, different sale promotional activities should be conducted to create demand for the new products. Because of very low sale volume of the new products at the introductory stage, profit also becomes very low. At this stage, competing products also do not appear in the markets.
The introductory stage of the products is very costly as well as risky. If many of customers do not like the new products, there appears failure at the primary stage of the products. So, correct information should be given to the costumers. At this stage, there may be many features of the products. Among them, the main features are mentioned as follows:
- Much expenses should be made on the sale promotional activities of the products at the introductory stage,
- Sales rate growth becomes very low at this stage,
- As the much expense is needed for sales promotional activities, profit becomes nominal or sometimes even loss at this stage,
- Price of the new products at this stage becomes high,
- At this stage, advertising customers are needed, because consumers do not show interest to buy new products.
- The new products need not face competitions at this stage, as considerable competitors do not appear in the market.
They should be impressed that the new product is the best among the others found in the market. This is also one of the strategies to be adopted at the introductory stage. Besides, pricing strategy is the important one. The following strategies should be adopted at the introductory stage of any product:
- Product: Efforts should be made to convince the customers that the new product is better than the others found in the market and has more utility.
- Price: Two important things should be given more attention while adopting price strategy. If it is to earn satisfactory benefit from a certain market, more prices should be fixed. This is called market skimming strategy. If it is to cover wider market, price should be fixed low. This strategy can also be successful at the introductory stage.
- Promotion: Information about quality, feature and utility of the product should be provided to the customers. For this, wide/ heavy advertisement, personal sale, and other promotional programs should be conducted effectively.
- Place: At first a proper channel should be selected to supply new product. After selecting the channel, proper strategy should be adopted to enter suitable market.
2. Growth Stage
The stage when demand of product grows and competitors enter the market is called growth stage. This is the second stage of the life cycle of the product. As new consumers become interested to buy products, it is also called market acceptance stage. There remains possibility of failure at this stage due to economic and technological reasons. The products which become successful at the first stage, they can easily enter market at the second stage. As the customers and well informed about the new product, the number of customers and sale quantity can increase high. Due to daily increase in demand, production quantity increases causing decrease in per unit price.
At this stage, all the competitors request the customers to give priority to their products. as the customers become attracted towards the products, the firms or producers become successful to collect more profit. The number of competitors goes on increasing seeing the producer get success in reaping benefit. So, the producer should bring change in the quality and feature of the product, try to enter new market segment, decrease price and conduct promotional activities more effectively. If market competition cannot be faced through these activities, a new strategy should be adopted to bring improvement in the product.
Competition oriented pricing should be fixed at the developmental stage of the life cycle of the product. Besides this, new product development strategy also should be adopted. At this development stage, the following features prevail:
- Because of large production in development stage, production cost becomes low and profit gradually increases.
- Sale growth rate intensely increases at this stage,
- As good opportunities for sufficient profit appear at this stage, new competitors enter the market and competition also increases,
- Per unit price of product becomes low due to low production cost,
- At this stage, business firm or Production Company brings changes in quality and feature of the product and adopts policy to enter new market segments.
At development stage, any producer or firm may adopt strategy to decrease price of products. At this stage, an arrangement should be made to supply products entering into new channels. Many types of marketing strategies can be adopted. During the developmental stage in life cycle of products, the following strategies can be adopted –
- Product: At first quality of products should be changed. Besides this, new features also should be added to the products. Warranty and after-sale services should be compulsorily given to the customers.
- Price: Taking special consideration for sensitive customers in price, price decreasing strategy should be adopted in right time.
- Promotion: The customers should be provided full information about the products or services. Personal sale, advertisement and promotional activities should be increased.
- Place: Production firm or company should give more importance to market expansion strategy. For this an easy environment should be prepared for entering into new market segment.
3. Maturity Stage
The third stage of product life cycle is called maturity stage. At this stage appears a situation where market related cost and competition increase but price and profit decrease. After passing through development stage, the products get to maturity stage. In the beginning of this stage, the sale quantity goes on increasing at a low rate. Towards the end of this stage, both the sale quantity and profit go on decreasing. This stage is called declining stage of maturity. At this stage the economically weak firms disappear. But the firms which are able to face market competition adopt strategy of product promotion/ development and distinctive strategies. The firms/ companies may revise price, add new features to their products and enter new market segments, which help them maintain market.
At the maturity stage of the product life cycle, different features appear. Among them, the main features are low price, increasing competition, rising cost, declining profits. In short, the features of matured stage are as follows:
- Although profit becomes stable in the beginning of the maturity stage, it gradually goes on decreasing later on,
- Although the sale quantity increases in the beginning of maturity stage, it goes on decreasing later on,
- Comparatively, competition increases at this stage and begins price war. Weak firms or competitors try to retreat from market.
- As price war becomes intense at this stage, there arises compulsion to decrease price repeatedly.
Every firm aims to mobilize its means and resources only in profitable sectors. For fulfilling this objective, weak products should not be brought into new market segments. Specially, at this matured stage strategy towards improvement in product, product marketing and marketing mix modification should be adopted. Mainly the following strategies should be adopted at the matured stage of product life cycle:
- Product: At first quality of the product should be improved. It is also equally necessary to give peculiarity to the products. Change in product mix also is necessary at this stage. Sometimes it becomes necessary to retreat from market competition and stop production immediately. In fact, improved products should be long lasting, attractive and reliable with new taste. For the same, product improvement strategy is adopted.
- Price: At this matured stage healthy competition takes place. So, price should be fixed on the basis of competition. As far as possible the price should be fixed minimum.
- Promotion: At this stage brand/ trade mark loyalty should be given special attention. Sale promotional equipment should be properly conducted and promoted. After-sale service should be made effective. Dependable warranty to fulfill other conditions and services also should be provided.
- Place: At this stage, a business firm should also use new distribution/ supply channels. This helps, to some extent, to make product sale stable.
4. Decline Stage
The situation of decreasing price and profit of product is called decline stage. This is the old stage of product’s life cycle. At this stage, sale quantity, profit and demand decrease. Due to new technology, new development and appearance of new products in market, demand for the old products ceases. The change in the customers’ interests and wants also directly affects demand. It becomes difficult to recover even production cost. Firms find difficulty to maintain their existence, so they focus their attention to seek new opportunities. As the competitors try to find new opportunities, competition also slows down at this time. Even at this stage of product life cycle, a few customers may like the same products. The production firms or companies may sell their products by fixing special price.
This stage of life cycle is very challenging for the products. At this stage, the high level management should take a very rational decision whether to continue the existing production, or bring improvement, or produce new goods, or abandon old production style. If the firm decides to abandon production of the old goods, adoption of any marketing strategy is not needed. But, if such products are to be continued, immediately even short term strategy should be adopted. At this stage, the firm should be ready to produce new and improved goods and bring in market.
At this declined stage profit reaches on the verge of end. This stage is also called ending or weak stage. At this stage, demand for goods descends to the zero degree and goods may almost come to an end. Some customers who do not want to change brand of goods may give continuity to the same goods. Specially, at this stage of product life cycle, the following features of product may appear.
- As the competitors, at this stage, begin to search new opportunities, competition slows down.
- At this stage, sale quantity may decrease due to change in the interest of customers and new technology,
- Profit decreases to zero point, if necessary strategy could not be adopted in time, business firms may suffer direct loss,
- Even at this, some certain customers do not change and like to use old brand products,
At this declined stage, a slight competition may take place. When the demand of products becomes weak, products should be terminated. With this strategy there remains the least possibility of loss. At the declined stage of life cycle of product, the following strategies should be adopted:
- Product: The goods produced by any firm may be of different varieties. Among them weak products should be identified. After the weak products have been identified, decision should be taken to abandon them.
- Price: Price of the products which maintains the market demand should be increased.
- Promotion: Investment is not made on advertisement, personal sale and promotional activities without research and development. However, some special market segments can be promoted for the target customers.
- Place: Declined stage of products is very weak stage. So, only the distribution channels having special capacity should be given permission for product distribution.
FEATURES
OF THE PRODUCT LIFE CYCLE
|
S.No.
|
Features
|
Introduction
|
Growth
|
Maturity
|
Decline
|
| 1 |
Sales |
Low levels |
Rapid growth |
Peak level |
Declining |
| 2 |
Price |
High |
Slightly lower |
Lowest |
Increasing |
| 3 |
Competition |
Little |
Increasing |
Intense |
Decreasing |
| 4 |
Profit |
None |
Rising |
Stable |
Low/none |
| 5 |
Customers |
Innovators |
Mass market |
Mass market |
Loyal |
