Product life cycle
The Product Life Cycle (PLC) is the model that seeks to describe and explain the sales of a product from its introduction through to its obsolescence and withdrawal.
Each product has a life cycle. The life-cycle of a product varies from a new month to several years. The PLC is has a pattern of expenditure, sale level, revenue and profit over the period from new idea generation to the deletion of product from the product range.
Phases of Product Life Cycle (PLC)
The life cycle of a product consists of four phases viz., introduction; Growth; Maturity; Saturation and Decline.
Introduction: During the introductory phase, a product is launched into the market. Its customers are innovators. Competition is almost negligible and profits are non-existent. At this stage, the company has heavily invested in the resources and the recent performance is not a conclusive indicator of the future survival of the company. Usually, companies adopt several strategies to attract and retain customers at this stage.
Growth: Under the growth phase sales and profit rise, at a rapid pace. Competitors enter the market often in large numbers. As a result of competition, profit starts declining near the end of the growth phase. Some examples of companies under the growth stage are Uber, Airbnb etc. as they recently started getting popular.
Maturity: During the phase of maturity sales continue to increase but at a decreasing rate. When sales level off, the profit of both products and middlemen decline. The main reason is intense price competition, some firms extend their product lines with new models. Some examples are companies like Coca-cola, Dominos and other centuries-old companies still doing well but facing stiff competition from modern competitors.
Saturation and decline: At last a point comes when it starts appearing that market has bought enough of the product. The decline in sales volume characterizes this last phase of the product life-cycle. The need or demand for product disappears. Availability of better and less costly substitutes in the market accounts for the arrival of these phases.
Characteristics of PLC
The major characteristics of the PLC concept are as follows:
(i) The product has finite lives and passes through the cycle of development, introduction, growth, maturity, decline and deletion at varying speeds.
(ii) Product cost, revenue and profit patterns tend to follow predictable courses through the PLC. Profit first appear during the growth phase and after stabilising during the maturity phase, decline thereafter to the point of deletion.
(iii) Profit per unit varies as products move through their life cycles.
(iv) Each phase of the PLC poses different threats and opportunities that give rise to different strategic actions.
(v) Product requires different functional emphasis in each case -such as an R&D emphasis in the development phases and a cost emphasis in the decline phase.
(vi) Finding new uses or new users or getting the present users to increase their consumption may extend the life of the product.