CBSE Class 12 Marketing Managing Product Life Cycle Notes

 

Each product goes through a life cycle which includes the following stages of growth, maturity and decline. The product life cycle indicates the sales and profit of the product over a period of time. Most of the products follow the ‘S’ shaped curve with certain products deviating showing a sharp growth followed by a sharp decline, or remain in the maturity phase for a long time, and may not face a decline. Trends and Fashion can be grouped in the first category;

products in closed economies or in a monopolistic market represent the second type. In this category one may also have commodities like steel, cement, and food products, where the demand remains inelastic, relative to other manufactured products. In India, cars, refrigerators, and television sets etc. did not experience a decline until 1991 as there were very operating in the pre-liberalization era with less competition. But things started to change after 1991 with opening up of the markets and increase in competition. In the current scenario the product life cycles are also shortening with high competition and changing demands. As we move through the product life cycle, it is observed that profits are rarely a part of the introduction stage; the growth stage brings profits with a onset in decline in profits being observed in the maturity stages

 

“The product life cycle (PLC) depicts a products sales history through 4 stages:

1) Introduction

2) Growth

3) Maturity and

4) Decline

Adjustment and changes need to be made in the product’s marketing mix as the product moves through its life cycle because of changes in the environment, buyer behavior, and the composition of the market.

 

The PLC concept can be applied to a product category (soaps), to a particular product form (soap bars, liquid soaps) or to a particular brand (Lux). The life cycle of the product category is

the longest and that of the brand is shortest usually.

The PLC is applied most directly to product forms. Product forms like soaps, gel pens and televisions and mini-skirts go through a sales history of introduction, growth, maturity and decline. Product categories often tend to stay in the maturity stage for longer duration, while the life cycles of individual brands can be extremely inconsistent depending on the effectiveness of their marketing programs.

 

 

 

In this stage a new product (from brand or category) is introduced and it is called the introductory stage. Introducing a new product is always a risky proposition, even for a skillful marketer. A new product category requires a long introductory period because primary demand i.e. demand for the product category must be aroused. E.g. When “Allout” in 1990 introduced liquid vaporizers as mosquito repellent, it was a pioneer in the product category as till then there

were mosquito coils. This is true for those brands which have achieved acceptance in other markets and require introduction in new markets. This is followed by the selective demand i.e. a demand for a specific brand within a product category. E.g. Once the product category was tapped competition followed. The other product categories include Mortein, Good night brands which were competitors for Allout brand.

 

This phase marks the launch of the product in the market. The basic goal in the introductory stage is to induce acceptance and attain initial distribution. Promotion is needed to inform potential buyers of the product’s availability, nature and uses, and to encourage wholesalers and retailers to stock it. This stage is characterized by high operational costs, arising out of inefficient production levels or bottlenecks, high learning time, unwillingness of the trade to deal in the product, demand of higher margins or extended credit terms. In this stage funds are invested in promotion on the expectation of future profits. In this stage most of the customers have low awareness and those who are willing to try the product do so in small quantities called trial purchase. Competition is limited to few firms, and is from indirect or substitute products. The marketing task of the firm is to stimulate demand for the new product and also reduce the break even time.

 

In the introductory stage the profits are negative because the sales volume is low, distribution is limited and promotional expenses are high. An organization must choose its launch strategy consistent with its intended product positioning. It ought to understand that the initial strategy is just the foremost step in a larger marketing plan for the product’s entire life cycle. In case, the marketer chooses the launch phase to make a quick buck, he will be sacrificing the long-term interests of the product. For example Quaker Oats were launched in India in the year 2006 as a breakfast Cereal.

 

 

The growth stage is the second stage where the product has been launched successfully with the sales beginning to increase rapidly in this stage, as new customers enter the market and old customers make repeat purchases. This is stage where competition increases with the customer having greater choices in form of different types of product, packaging and prices. At this point of time more new dealers and distributors are added. This is the stage of peak profits. As new customers are attracted, the market expands, attracting competitors who copy and improve on the features of the new product. New product forms and brands enter. Competition strengthens and industry profits begin to recede at the end of the growth stage, but total sales of the industry are still rising. The company faces a trade-off between high market share and high current profit. The company tries to capture a dominant position by creating a selective demand. It also spends a lot of money on identifying new uses, developing the product, promotion, and distribution,. In doing so however, it gives up current profit and hopes to make it up in the next stage. The mobile handsets are in the growth stage, with new models being continuously launched. Apple launched its iphone 7 recently.

 

 

Products that withstand the heat of competition and customers’ approval enter the maturity stage. There are greater number of competitors, competitive product forms, and brands at this stage. Rivals copy product features of successful brands and become more alike. The price wars begin along with heavy focus on unique brand features that still exist. Industry sales peak and decline as the size of potential markets begins to shrink and wholesaler and retailer support

decreases because of declining profit margins. Middlemen also introduce their own brands, which makes the competition even tougher further lowering profits in industry. Most of the times the sales are repeat sales of earlier buyers as the product’s growth potential is limited. It is during this stage that marketers are focusing effort on extending the lives of their existing brands. In this stage many products exist in the markets but only the successful ones are evolving to meet changing consumer needs. Product managers have to play a very important role for carving a niche within a specific market segment through increase in service, image marketing and by creating new value image and strengthening through repositioning. They should also consider modifying the market, product and marketing mix to fight competition and take it closer to the customer so as to register adequate profits to remain in the business.

 

 

This is the phase where sales decline as the customer’s preferences have changed in favour of more efficient and better products. Product forms and brands enter into decline stages while product categories last longer. The number of competing firms also gets reduced and generally the industry has limited product versions available to the customer. Sales and profits decline rapidly and competitors become more cost conscious. Brands with strong loyalty by

some customer segments may continue to produce profits. There are hidden costs in terms of management time, sales force attention, frequent stock re-adjustments and advertising changes. For these reasons, companies need to pay attention to their dying products. At times management may decide to maintain its brand without changes in the hope that some competitors will leave the market or it may decide to re-position the product in the hope of moving it back to the growth phase in a new image or eventually prune the product from the line.

 

1) The product can be maintained by either by adding new features or finding new uses.

2) The costs can be reduced and it can be offered to loyal segment.

3) The product can be discontinued or sold to another firm that is willing to continue the product.