PRODUCT LIFE CYCLE

1. Background. The idea of the Product Life Cycle was first developed in 1965 by
Theodore Levitt in an article entitled “Exploit the Product Life Cycle” published in the Harvard
Business Review on 1 November 1965.

2. Benefit of the Product Life Cycle model

a. For a business, having a growing and sustainable revenue stream from product
sales is important for the stability and success of its operations.
b. The Product Life Cycle model can be used by consultants and managers to
analyse the maturity stage of products and industries. Understanding which stage
a product is in provides information about expected future sales growth, and the
kinds of strategies that should be implemented.

3. Product Life Cycle model

The “Product Life Cycle” is the name given to the stages through which a product passes
over time. The classic Product Life Cycle has four stages:

a. Introduction
 b. Growth
c. Maturity
d. Decline

3. Introduction
a. At the market introduction stage the size of the market, sales volumes and sales
growth are small.
b. A product will also normally be subject to little or no competition.
c. The primary goal in the introduction stage is to establish a market and build
consumer demand for the product.
d. Substantial research and development costs may have been incurred, for example,
thinking of the product idea, developing the technology, determining the product
features and quality level, establishing sufficient manufacturing capacity,
preparing the product branding, ensuring trade mark protection, etc.
e. Marketing costs may be high in order to test the market, launch and promote the
product, develop a market for the product, and set up distribution channels.
f. The market introduction stage is likely to be a period of low or negative profits.
As such, it is important that products are carefully monitored to ensure that sales
volumes start to grow. If a product fails to become profitable it may need to be
abandoned.
4. Some of the considerations in the introduction stage include:
a. Product development. Rresearch and development of the basic technology
and product concept, determining the product features and quality level.
b. Pricing. Sshould penetration pricing or a skimming price strategy be used?
A skimming price strategy might be appropriate where there are very few
competitors.
c. Distribution. Distribution might be quite selective until consumer acceptance of
the product can be achieved.
d. Promotion. Marketing efforts are aimed at early adopters, and seek to build
product awareness and to educate potential consumers about the product.
5. Growth
a. If the public gains awareness of a product and consumers come to understand the
benefits of the product and accept it then a company can expect a period of rapid
sales growth, enter the “Growth Stage”.
b. In the Growth Stage, a company will try to build brand loyalty and increase
market share.
c. Profits are driven by increased sales volume (due to growth in market share as
well as an increase in the size of the overall market).
d. Competition in the Growth Stage remains low, although new competitors are
expected to enter the market.
e. When competitors enter the market a company might be subject to price
competition and increase its marketing expenditure.
6. Some of the considerations in the Growth Stage include
a. Product improvement. Product quality might be improved, additional
features and support services added, and packaging updated.
b. Pricing. Iif consumer demand is high the price might be maintained at a
high level.
c. Distribution. Distribution channels might be added as consumer demand
increases.
d. Promotion. Promotion is aimed at a broader audience. A company might
spend a lot of resources on promotion during the Growth Stage to build brand
loyalty.

7. Maturity
a. When a product reaches maturity, sales growth slows and sales volume eventually
peaks and stabilises.
b. This is the stage during which the market as a whole makes the most profit.
c. A company’s primary objective at this point is to defend market share while
maximising profit.
d. In this stage, prices tend to drop due to increased competition. A company’s fixed
costs are low because it is has well established production and distribution.
 e. Since brand awareness is strong, marketing expenditure might be reduced,
although increased marketing expenditure might be needed to retain market share
and fight increasing competition.
8. Some considerations for the mature product market include:-
a. Product differentiation. Increased competition in the mature product market
means that a company must find ways to differentiate its product from that of
competitors. Strong branding is one way to do this.
b. Pricing. Prices may be reduced because of increased competition. Firms in
the market should be careful not to start a price war.
c. Distribution. Distribution intensifies and incentives may be offered to
encourage preference to be given over competing products.
d. Promotion. Promotion will focus on emphasising product differences and
creating/maintaining a strong brand.

9. Decline
a. A product enters into decline when sales and profits start to fall.
b. The market for that product shrinks which reduces the amount of profit available
to the firms in the industry.
c. A decline might occur because the market has become saturated, the product has
become obsolete, or customer tastes have changed.
d. A company might try to stimulate growth by changing their pricing strategy, but
ultimately the product will have to be re-designed, or replaced.
e. High-cost and low market share firms will be forced to exit the industry.
10. As sales decline, a company has three strategy options:-
a. Hold. Maintain production and add new features and find new uses for the
product. Reduce the cost of manufacturing (e.g. move manufacturing to a low cost
jurisdiction). Consider whether there are new markets in which the product might
be sold.
b. Harvest. Continue to offer the product, reduce marketing expenditure, and sell
possibly to a loyal niche segment of the market.
 c. Divest. Discontinue production, and liquidate the remaining inventory or sell
the product to another firm.

11. Some considerations for a declining market include:-

a. Product consolidation. the number of products may be reduced, and
surviving products rejuvenated.
b. Price. Prices may be lowered to liquidate inventory, or maintained for continued
products.
c. Distribution. Distribution becomes more selective. Channels that are no longer
profitable are phased out.
d. Promotion. Expenditure on promotion is reduced for products subject to the
Harvest and Divest strategies.

The Product Life Cycle is only one of many considerations that a company must bear in mind.
The product life cycle of many modern products is shrinking, while the operating life for many
of these products is lengthening. For example, the operating life of durable goods like household
appliances has increased substantially. As a result, a company that produces these products must
take their market life and service life into account when planning.
 Product life cycle

1. The product life cycle goes through multiple phases, involves many professional
disciplines, and requires many skills, tools and processes. Product life cycle (PLC) has to do with
the life of a product in the market with respect to business/commercial costs and sales measures.
To say that a product has a life cycle is to assert four things:

a. That products have a limited life.

b. Product sales pass through distinct stages, each posing different challenges, opportunities,
and problems to the seller.
c. Profits rise and fall at different stages of product life cycle.
d. Products require different marketing, financial, manufacturing, purchasing, and human
resource strategies in each life cycle stage.

2. The different stages in a product life cycle are:

Stage Characteristics

1. costs are high

2. slow sales volumes to start
3. little or no competition - competitive manufacturers watch for
Market
acceptance/segment growth losses
introduction stage
4. demand has to be created
5. customers have to be prompted to try the product
6. makes no money at this stage

Growth stage 1. costs reduced due to economies of scale

2. sales volume increases significantly
3. profitability begins to rise
4. public awareness increases
5. competition begins to increase with a few new players in establishing
market
 6. increased competition leads to price decreases

1. costs are lowered as a result of production volumes increasing and

experience curve effects
2. sales volume peaks and market saturation is reached
3. increase in competitors entering the market
Mature stage
4. prices tend to drop due to the proliferation of competing products
5. brand differentiation and feature diversification is emphasized to
maintain or increase market share
6. Industrial profits go down

1. costs become counter-optimal

2. sales volume decline or stabilize
Saturation and
3. prices, profitability diminish
decline stage
4. profit becomes more a challenge of production/distribution efficiency
than increased sales

3. Request for Deviation. In the process of building a product following defined

procedure, an RFD is a request for authorization, granted prior to the manufacture of an item, to
depart from a particular performance or design requirement of a specification, drawing or other
document, for a specific number of units or a specific period of time.

a. Market Identification

(1) A "micro-market" can be used to describe a Walkman, more portable, as

well as individually and privately recordable;

(2) Then Compact Discs ("CDs") brought increased capacity and CD-R
offered individual private recording...and so the process goes.

(3) The below section on the "technology lifecycle" is a most appropriate

concept in this context.
 (4) In short, termination is not always the end of the cycle; it can be the end of
a micro-entrant within the grander scope of a macro-environment.

(5) The auto industry, fast-food industry, petro-chemical industry, are just a
few that demonstrate a macro-environment that overall has not terminated
even while micro-entrants over time have come and gone.

5. Lessons of the product life cycle (PLC)

a. It is claimed that every product has a life period, it is launched, it grows, and at
some point, may die.

b. A fair comment is that - at least in the short term - not all products or services die.
Jeans may die, but clothes probably will not. Legal services or medical services
may die, but depending on the social and political climate, probably will not.

c. In most markets the majority of the major brands have held their position for at
least two decades. The dominant product life-cycle, that of the brand leaders
which almost monopolize many markets, is therefore one of continuity.

6. Limitations

a. It is difficult for marketing management to gauge accurately where a product is on

its PLC graph.

b. A rise in sales per se is not necessarily evidence of growth. A fall in sales per se
does not typify decline.

c. Furthermore, some products do not (and to date, at the least, have not)
experienced a decline. Coca Cola and Pepsi are examples of two products that
have existed for many decades, but are still popular products all over the world.
Both modes of cola have been in maturity for some years.

d. Another factor is that differing products would possess different PLC "shapes".
e. A fad product would hold a steep sloped growth stage, a short maturity stage, and
a steep sloped decline stage.

f. A product such as Coca Cola and Pepsi would experience growth, but also a
constant level of sales over a number of decades.

g. It can probably be said that a given product (or products collectively within an
industry) may hold a unique PLC shape, and the typical PLC model can only be
used as a rough guide for marketing management. This is why its called the
product life cycle.