Product Life Cycle
A product life cycle is the length from when a product is introduced to market until it taken off shelves. Four stages in a products life cycles introduction, growth, maturity and decline.
Role and function of product life cycle is to help in marketing and sales decisions from pricing and promotion to expansion or cost cutting. The product life cycle is the length of time that a product is available to customers. A product has life cycle is to assert four things –
- Products have a limited life.
- Product sales pass through distinct stages each posing different challenges, opportunities and problem to the seller.
- Profits rise and fall at different stages of the product life cycle.
- Products require different marketing, financial, manufacturing and human resource strategies in each life cycle stage.
Most product life cycle curves are portrayed as bell shaped. The curve is typically divided into four stage: introduction, growth, maturity and decline.
Product Life Cycle Stages
Product also has various stages of life as human beings. From the time a product is introduced, till it is withdrawn from the market, it goes through 4 stages. Analysis of these stages for the purpose of repositioning the product in the market is called Product Life Cycle management.
Introduction Stages
In this stage, a new product is introduced on a large scale for the first time. Market reacts slowly to the introduction. In other words, consumers take time to accept the new product. Initially, the company may suffer losses, sales improve gradually. Most of the products fail in this stage itself. In simple word, A period of sales growth as the product is introduced in the market. Profits are non-existent because of heavy expenses of product introduction.
Following are the characteristics or features of this stage:
- Consumers do not have the knowledge of the product
- Consumers may or may not be strongly in need of the new product.
- If there is a need for the product, the company gets readymade demand. Otherwise, it increases slowly.
- Sales are minimum
- The competition is less, in fact the company, which introduces new product is called as a Market Pioneer.
- The cost of it is very high because the company spends money heavily on Research & Development, Sales, Promotion, etc.
Marketing Strategies during the Introduction Stage
A company has to prepare the policies very carefully in the stages because it has a great impact on the image of a new product. Even a minor mistake results in the premature death of a product. The following are the strategies that the company may adopt in this stage:
- It may spend heavily on promotion & fix high price. This meets two objectives. Firstly, heavy promotion creates large demand & high price, brings immediate profits. This strategy also helps to create brand preference in the minds of the consumer. It is normally followed when there is a great need for the product, when the product belongs to the richer class & when products are consumer specialties.
- This second strategy is to fix high price but to spend less on promotion. This is preferred when the product has limited market, in which people have knowledge about the product & the competition is completely absent.
- Another strategy is to charge low price & spend heavily on promotion. This is preferable when consumers are sensitive to the price & market is wide enough. This strategy brings good returns in the long run.
- The company may charge low price & spends less on promotion. This is preferable when the consumers are informed about the product, market is very large & there is no competition for the time being.
- Pioneer advantage – studies indicate that the market pioneer gains the most advantage. For example – companies like coca cola, hallmark, and amazon developed sustained market dominance.
- Pioneers’ advantages sources early users will recall the pioneers brand name if the product satisfies them like amazon.
- The pioneers brand normally aims at the middle of the market and so capture more users.
- Customer inertia also plays a role
- There are producer advantage economics of scale, technological leadership, patents, ownership of scare assets and other barriers to entry.
- Successful imitation thrives by offering lower prices, improving the product more continuous etc.
In the introduction stage, the competitors are very cautious. They do not enter the market immediately. They study the strategies of a company & watch the reaction of the consumers. This helps them to find out the defects of the company’s strategy.
Growth Stage
A period of rapid market acceptance and substantial profit improvement so, it is called the market acceptance stage. At this stage market saturated with the product, competition is now higher than at other stages and profit margins start to shrink. At some point the rate of scale growth will slow and the product will enter a stage of relative maturity. This stages normally lasts longer than the previous stage and poses big challenges to marketing management. The sales slowdown creates overcapacity in the industry which leads to intensifies competition. They increase advertising and trade and consumer promotion. They increase research and development to develop product improvements and line extensions.
Following are its features:
- Consumers & traders accept the product
- Sales & profit increase
- More competitions enter the market
- The focus of competition is on the brand rather than the product
- Competitors may introduce new features to the product
- Distribution network increase
- The price will be reduced marginally.
Marketing Strategies in the Growth Stage:
- The company tries to impress upon the consumers that its brand is superior
- It may introduce new models or improve the quality
- It may enter new market & sell its products with new distribution channels
- To attract more buyers, it may reduce the price.
Maturity Stage
A slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profits stabilizes or decline because of increase competition. This stage indicates the capacity to face the competition, sales increases at a decreasing rate. Competition becomes severe. It is reflected in various ways such as offering discounts, modifying products etc. a major change begins and weaker competitor withdraw. The industry eventually consists of well entrenched competitors whose basic drive is to gain or maintain market share. Some companies abandon weaker products and concentrate on more profitable product and on new products.
Marketing Strategies during Maturity Period or Stage: In this stage, the manufactures have to take responsibility to promote his product. This strategy aims at creating brand loyalty.
Market Modification
Company should try to expand the market for its mature brand. Sales volume depends on two factors
Sales volume = number of brand users × usage rate per user
Company can try to expand the number of brand users by converting non users as sachet concept or by entering new market segment. For example, J & J promoted its baby shampoo to adult users also mild. Pear’s soap introduced in pink coloured soap target at children.
Sales volume can also be increased by convincing current users to increase their brand usages
- Use more of the product on each occasion. Drink a larger glass of orange juice, two-time brush must
- Use the product on more occasions. Example milkmaid for mithais and desserts at home. Monaco biscuits toppings serve as excellent snacks.
- Use the product in new ways for example Eno.
Product Modification
Company also tries to increase sales by modifying the product characteristics through quality improvement, feature improvement or style improvement.
- Quality improvement – It means increasing the products functional performance. A manufacturing can often overtake its competition by launching a “New and improved” product
- This strategy is effective to the extent that the quality is improved, buyer accept the claim of improved quality and a sufficient number of buyers will pay for higher quality. For example – Food product fresh
- Feature Improvement – It means adding new features for example size, weight, materials, additives, accessories that expand the products performance, versatility, safety or convenience for example car and phone
- Style improvement – it means increasing the product styling appeal. The periodic introduction of new models is largely about style competition as is the introduction of new packaging for consumer products. For example, Car, soap.
Marketing Program Modification
Marketer might also try to increase sales by modifying other marketing program elements.
- Advertising – Marketer can step up steps up sales promotion trade deals, discount coupons, rebates, warranties, gifts and contests.
- Prices – Marketer can cut the price to attract new buyers. If so should the list price be lowered or should process be lowered through prices specials volume or early purchase discount etc.
- Distribution – marketer can introduce the product into new distribution channels? Marketer can penetrate more outlets.
- Personal selling – Marketer can increase the number or quality of sale people sales territories can be revised? Sales force incentive can be revised.
- Service – Marketer can speed up delivery it can extend more technical assistance to customers.
Decline Stage
For all products, sales invariably decline as new products enter the market. Sales show a downward drift and profit erode. In this stage, there is a sharp decline in the profits, cost increases & market share comes down. Most of the manufactures withdraw from the market. Some may reduce production & concentrate only on a limited market. Not all product exhibits a bell-shaped product life cycle.
In final phase of product life cycle, sales start declining. Sale decline reasons technological advances, shift in consumer tastes and increased domestic and foreign competition etc. all lead to overcapacity increased price cutting and profit erosion. As sales and profits decline some firm withdraw from the market. Those remaining may reduced the number of products they offer. They may cut their promotion budget or cost cutting and reduce prices further.
Marketing Strategies
This stage offers one of the greatest challenges to the marketing manager. He has to decide whether or not to continue with the product. The main task of marketing manager is to revitalize the demand instead of discontinuing the product immediately. It is better to withdraw gradually. Those channels of distribution, which are costly & unproductive maybe removed. In the meantime, the weak points of the marketing mix maybe identified & altered as required.
- Increasing the firm’s investment to determine the market or strengthen its competitive position.
- Maintaining the firm’s investment level until the uncertainties about the industry are resolved.
- Decreasing the firm investment level selectively by dropping unprofitable customer groups while simultaneously strengthening the firm’s investment in lucrative niches.
Decline might be slow in the case of sewing machines or rapid in the case of the 5.25 floppy disks. The product review committees make a recommendation for each product leave it alone modify its marketing strategy or drop it. The lower the exist barrier the easier it is for firm to leave the industry and the more tempting it is for the remaining firms to stay and attract the withdrawing firms’ customers. For example, procter and gamble stayed in the declining liquid soap business and improved its profits as others withdrew.
Reasons for the Failure of New Product:
- Poor marketing research
- Not using the up-to-date technology
- High price or to costly products
- Poor design
- Inefficient marketing
- Non-cooperation from the middlemen
- Improper promotional techniques
- Improper timing of introduction of the new product.
FAQ's
Can a product skip stage?
Yes. Some products fail early and go from Introduction straight to Decline due to poor demand, high competition, or lack of marketing.
How long does each stage last?
- It varies by industry, product type, and market conditions.
- Tech products may have short cycles, while FMCG items may last decades in maturity.
