Product Life Cycle Meaning, Definition, Objectives, Stages of PLC
Table of Contents:-
Meaning of Product Life Cycle
Alike human beings, all products have a certain life span during which they pass through certain identifiable stages. Through the conception of the product, during its development and up to the market introduction, the product remains in the pre-initial stage
Its life begins with its market introduction and then goes through a period during which its market grows rapidly, eventually, it reaches maturity and then stands saturated. Afterwards, its market declines and ultimately, its life comes to an end.
The product life cycle can be defined as “the change in sales volume of a specific product offered by an organisation, over the expected life of the product.”
Definition of Product Life Cycle
According to Phillip Kotler, “The product life cycle is an attempt to recognise distinct stages in the sales history of the product”.
According to Arch Patton, “The life-cycle of a product has many points of similarity with the human life cycle; the product is born, grows lustily, attains dynamic maturity then enters its declining year”.
According to William J. Stanton, “From its birth to death, a product exists in different stages and in different competitive environments. Its adjustment to these environments determines to a great degree just successful its life will be”.
Product life-cycle (or PLC) is the succession of strategies used by business management as a product goes through its life cycle. The state in which a product is sold (saturation, advertising ) changes over time and must be managed as it moves through its succession of stages.
Objectives of Product Life Cycle
Objectives of the product life cycle are as follows:
1) For Planning: The PLC model is advantageous in planning long-term offensive marketing strategies. particularly when markets and economies are stable. A benefit of following a product life cycle concept is that it helps companies in the planning process.
Realising that the demand for a product typically does not last forever helps it to prepare for the inevitable decline in sales. The company attains a better idea of how to allocate marketing funds by the phase of the cycle the product has entered.
Knowing that it will need to replace even a successful product at some point can also lead to a more prominent focus on product development and innovation.
2) Create a Proactive Approach: Another positive effect of the product life cycle is that rather than ting back and waiting for the ultimate demise of a product, it allows companies to take a more proactive approach to maximise sales and profits during each stage.
For example, if management recognises that a product is beginning to decline, it can attempt to squeeze out profits by eliminating unprofitable distribution channels to minimise expenses as sales continue to wane
3) For Better and More Efficient Product: Today technology offers phenomenal opportunities to firms to develop more user-friendly, low-priced and attractive-looking products. A case in point is Parle Bottling which used developments in packaging to successfully launch their mango-flavoured drink ‘Frooti’.
The tetra-pack did wonders for Frooti, marketing it as convenient, easy to use and carry and also more attractive than other mango drinks in bottles
4) Helps in Forecasting: Predictive tools are always needed by managers that help them clearly navigate a chaotic market, and the PLC model gives managers the ability to forecast product trends on a macro level and plan for the timely execution of relevant competitive moves coupled with actual sales data.
The PLC model can also be used as an explanatory tool in facilitating an understanding of past and future sales advancements. The PLC model helps to make sense of past events as part of any extrapolatory and interpretive approach to building strategy.
5) To Help in Eliminating Dead Products: Nevertheless, most products die and once products are dead they hold no substantial revenue potential and are a toll on a company’s resources.
By combining the elements of time, sales volume and the notion of evolutionary stages, the PLC model helps to determine when reasonable to eliminate dead products.
6) For the Development of New Products: The study of the product life cycle is very helpful in the development of new products and in the improvement of existing products. This study studies the changes taking place in the needs, habits, tastes and attitudes of consumers.
Keeping in view these changes, necessary decisions may be taken for the improvement of existing products and the development of new products.
Stages of Product Life Cycle
Most product life-cycle curves are portrayed as bell-shaped. The curve is generally divided into five stages:
1) Introduction: It is the period of gradual sales growth as the product is newly introduced into the market. Profits are absent in this stage because of the heavy expenses incurred with product introduction.
For a company launching a new product, this stage of the product life cycle could be the most costly. The market size for the product is small, which means sales are low, although they will be increasing.
On the other hand, the cost of things like consumer testing, research and development, and the marketing needed to launch the product can be very high, especially if it’s a competitive sector.
Maturity: Decline stage stage
Total market profit
Figure: Product Life Cycle
2) Growth: The growth stage is the stage of rapid market acceptance and substantial profit improvement. It is typically characterised by strong growth in sales and profits, and because the company can start to benefit from economies of scale in production, the profit margins, as well as the all-around amount of profit, will increase.
This makes it possible for businesses to invest more money in promotional activities to maximize the possibility of this growth stage.
3) Maturity: It is a period of slowdown in sales growth because the product has achieved acceptance by most possible customers. Profits stabilise or decline because of the increased competition in the market.
During this stage, the product is established and the aim for the manufacturer is now to maintain the market share they have built up. This is likely the most competitive time for most products and businesses need to invest wisely in any marketing they undertake.
They also need to consider any product modifications or improvements to the production process in this stage which might give them a competitive advantage.
4) Decline: It is the period when sales show a downward drift and profits erode. The brand may be dropped to make way for new brands so the cycle recommences. Eventually, the market for a product will start to shrink, and this is the decline stage for a product.
This shrinkage could be due to the market being saturated (i.e. all the customers who will buy the product have already purchased and used it), or because the consumers are switching to a different type of product.
While this decline may be unavoidable, it may still be possible for companies to make some profits by switching to less costly production methods and cheaper markets.
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