SAL INSTITUTE OF MANAGEMENT

Topic: EXPLAIN PRODUCT LIFE CYCLE Sem. : 4 (Marketing) Submitted to: Dr. Ritika Jain Submitted by: Shah Jimmy(128070592133)

PRODUCT LIFE CYCLE

A product life cycle refers to the time period between the launch of a product into the market till it is finally withdrawn from it. In a nut shell, product life cycle or PLC is an odyssey from new and innovative to old and outdated! This cycle is split into four different stages which encompass the product's journey from its entry to exit from the market.

This cycle is based on the all familiar biological life cycle, wherein a seed is planted (introduction stage), germinates (growth stage), sends out roots in the ground and shoots with branches and leaves against gravity, thereby maturing into an adult (maturity stage). As the plant lives its life and nears old age, it shrivels up, shrinks and dies out (decline stage).

On the same lines, a product also has a life cycle of its own. A product's entry or launching phase into the market corresponds to the introduction stage. As the product gains popularity and wins the trust of consumers, it begins to grow. Further, with increasing sales, the product captures enough market share and gets stable in the market. This is called the maturity stage. However, after some time, the product gets overpowered by latest technological developments and entry of superior competitors in the market. Soon the product becomes obsolete and needs to be withdrawn from the market. This is the decline phase. This was the crux of a product life cycle theory and the graph of a product's life cycle looks like a bellshaped curve. Let us delve more into this management theory. 1. Introduction Stage After conducting thorough market research, the company develops its product. Once the product is ready, a test market is carried out to check the viability of the product in the actual market, before it can set foot into the mass market. Results of the test market are used to make correction if any and then launched into the market with various promotional strategies. Since the product has just been introduced, growth observed is minimal, market size is small and marketing costs are steep (promotional cost, costs of setting up distribution channels). Thus, introduction stage is an awareness creating stage and is not associated with profits! However, strict vigilance is required to ensure that the product enters the growth stage. Identifying hindering factors and nipping them off at the bud stage is crucial for the product's future. If corrections cannot be made or are impractical, the marketer withdraws the product from the market. 2. Growth Stage Once the introductory stage goes as per expected, the initial spark has been set, however, the fire has to be kindled carefully. The marketer has managed to gain the consumer's attention and works on roping in loyal customers. He also works on increasing his product's market share, by investing in aggressive advertising and marketing plans. He will also use different promotional strategies like offering discounts, etc. to increase sales. As output increases, economies of scale are seen and better prices come about, conducing to profits in this stage. The marketer maintains the quality and features of the product (may add additional features) and seeks brand building. The aim here is to coax consumers to prefer and choose this product over those sold by competitors. As sales increase distribution channels are added and

the product is marketed to a broader audience. Thus, rapid sales and profits are characteristics of this stage. 3. Maturity Stage This stage views the most competition as different companies struggle to maintain their respective market shares. The clich 'survival of the fittest' is applicable here. Companies are busy monitoring product's value by the consumers and its sales generation. Most of the profits are made in this stage and research costs are minimum. Any research conducted will be confined to product enhancement and improvement alone. The manufacturer is constantly on the look out for new ideas, to improve his product and make it stand out among the competitor's products. His main aim is to lure non-customers towards his customer base and increase the existing customer base. Since consumers are aware of the product, promotional and advertising costs will also be lower, as compared to the previous stage. In the midst of stiff competition, companies may even reduce their prices in response to the tough times. The maturity stage is the stabilizing stage, wherein sales are high, but the pace is slow, however, brand loyalty develops, thereby roping in profits. 4. Decline Stage After a period of stable growth, the revenue generated from sales of the product starts dipping due to market saturation, stiff competition and latest technological developments. The consumer loses interest in the product and begins to seek other options. This stage is characterized by shrinking market share, dwindling product popularity and plummeting profits. This stage is a very delicate stage and needs to be handled wisely. The type of response contributes to the future of the product. The company needs to take special efforts to raise the product's popularity in the market once again, either by reducing the cost of the product, tapping new markets or withdrawing the product from the market. The manufacturer will cut down all non-profit distribution channels and continue focusing on improving the product design and features, so as to gain back the lost customer base. However, if this strategy fails, the manufacturer will have no option, but to withdraw the product from the market.

Example - Family Car Product Life Cycle The car is manufactured at a production plant. Raw materials, recycled materials and components enter the factory at one end of the enormous building. Completed cars are driven out of the opposite end and transported to their owners. The car is driven throughout its useful life time. During this time at may be used for work, business and pleasure. It consumes petrol or diesel and pollutes the atmosphere. From time to time it needs servicing and repairing. Eventually, after many years, it cannot be repaired any further and it breaks down for the last time. This may be after ten years or more. The decision has to be taken regarding what to do next. The car is taken to the scrap yard. Once upon a time this would have been the final resting place of most cars. It would have been stripped of useful components and left to rust. Today the useful parts are still stripped from the car. This may include a wide range of materials and components. These will include the alloy wheels, recyclable rubber, plastics and metals. These parts/materials will be sold on to companies that can reclaim the materials for further use. For example, the rubber from the old types can be turned into granules and reused. Many of the plastics used in modern cars can be recycled in a similar way, turning old plastic into granules that can be used to manufacture many modern products. The reminder of the car is crushed into blocks. These are melted down in special furnaces, the waste is removed leaving the usable metal (normally steel). The recycled metal can be used to manufacture new cars of other products.