A product is like a human being. It is born, grows up fast, matures and then finally passes away. The product life cycle discusses the stages which a product has to go through since the day of its birth to the day it is taken away from the market. (Image courtesy – arundelstreet.com)
However, the basic difference in case of human beings and products is that a product has to be killed by someone. Either the company (to bring better products) or by competition (too much external competition). There are several products in the market which have lived on since ages (Light Bulbs, Tubelights), whereas there are others which were immediately taken off the shelf (HD DVD).
Thus the Product life cycle deals with four stages of a products life.
Stage 1 of Product life cycle – Introduction of the product.
The stage 1 is where the product is launched. A product launch is always risky. You never know how the market will receive the product. There have been numerous failures in the past to make marketers nervous during the launch of the product. The length of the introduction stage varies according to the product.
If the product is technological and receives acceptance in the market, it may come out of the introductory phase as soon as it is launched. Whereas if the product is of a different category altogether and needs market awareness, it may take time to launch.
Characteristics of Introductory stages of Product life cycle
- Higher investment, lesser profits
- Minimal Competition
- Company tries to Induce acceptance and gain initial distribution
- Company needs Promotions targeted towards channel to increase confidence in the product
Stage 2 of Product Life Cycle – Growth of the product
Once the introductory phases are over, the product starts showing better returns on investment. Your customers and channels begin responding. There is better demand in the market and slowly the product starts showing profits.
This is a stage where competition may step in to squash the product before it has completely launched. Any marketing mistakes done at this stage affect the product considerably as the product is being exposed to the market and bad news travels fast. Thus special care has to be taken in this stage to ensure competition or bad decisions do not affect the growth stage of the product.
Characteristics of Growth stage of Product life cycle
- Product is successfully launched
- Demand increases
- Distribution increases
- Competition intensifies
- Company might introduce secondary products or support services.
- Better revenue generation and ROI
Stage 3 of Product Life Cycle – Maturity stage of the product
One of the problems associated with maturity stages in a technologically advanced environment is the problem of duplication. Not only is the product available in duplicate markets, but also there are several competing products which arise with the same features and capabilities. As a result, the USP’s of the product become less attrative.
Along with competition, Penetration pricing becomes a weapon for competitors. Competitors sell products with the same features at lesser prices thereby trying to penetrate in the market. Nonetheless, The sales of a product (especially sales from return customers) is at its peak point during the maturity stages. The growth of sales may be lesser, but the sales revenue of the organization is maximum during the maturity stage of product life cycle.
Characteristics of Maturity stages of Product life cycle
- Competition is high
- Product is established and promotion expenditures are less
- Little growth potential for the product
- The major focus is towards extending the life cycle and maintaining market share
- Converting customers product to your own is a major challenge in maturity stage
Stage 4 of Product Life Cycle – Stage of decline
1 product, 10 competitors, minimum profits, huge amount of manpower and resources in use – A typical scenario which a product might face in its last stage. In this stage the expenditures begin to equal the profits or worse, expenses are more than profits.
Thus it becomes a typical scenario for the product to exit the market. It also becomes advantageous for the company as the company can use resources it was spending on the declining product on an altogether different project.
Characteristics of Decline stages of Product life cycle
- Market is saturated
- Sales and profits decline
- Company becomes cost conscious
- A lot of resources are blocked in rejuvenating the dead product.
- There are only three options left with the company
- Re positioning or Rebranding of the product to extend product life cycle
- Maintain the product as it is and reduce costs to get maximum profits till the product can produce profits
- Take the product off the market.
Summary of the product Life Cycle
Characteristics of the Product life cycle
|1. Sales||Low Sales||Rapidly Increasing Sales||Peak Sales||Declining Sales|
|2. Costs||High cost per customer||Average cost per customer||Low cost per customer||Low cost per customer|
|3. Profits||Negative||More Profit||High Profit||Declining Profit|
|4. Customer||Innovators||Early Adopters||Early Majority + Late Majority||Laggards|
|5. Competitor||Few||More in number||Stable number, beginning to decline||Declining numbers.|
Objectives of Product Life Cycle
|Objectives:||Create product awareness and Trial||Maximize market share||Maximize profits and defend market share||Reduce expenses & milk brands|
Strategies of Product life Cycle
|1. Product||Offer basic product||Offer product extension, service, warranty||Diversify brands / models||Phase out weak products|
|2. Price||Change cost +||Price to penetrate market||Price to match better competition||Cut price|
|3. Distribution||Build selective distribution||Build intensive distribution||Build more intensive distribution||Selective phase out of unprofitable unit|
|Build product awareness among early adopters and dealers||Build awareness and interest in mass market||Stress on brand difference and benefits||Reduce to retain hard core loyals|
|Use heavy sales promotion to induce trial||Reduce sales promotion due to increased consumer demand||More sales promotion to encourage brand switching||Reduce to minimum level|
Video on the Product Life Cycle
Also read – Benefits and Limitations of Product life cycle