What is the Product Life Cycle and What are Phases of PLC
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 few months to several years. The PLC has a pattern of expenditure, sale level, revenue, and profit over the period from new idea generation to the deletion of a product from the product range.
The product life cycle might vary depending on the product and product category. However, not all products pass through each phase, and the duration of each phase varies. Some items, for instance, never see market share increase and are removed from the market.
Phases of Product Life Cycle (PLC)
The life cycle of a product consists of four phases viz., introduction, Growth; Maturity; Saturation and Decline.
The introduction stage of a product’s life cycle is the initial phase. The introduction phase is identical to commercialisation’s last phase of the new product development process. This level often has larger marketing expenses than the preceding phases. As an illustration, consider the difference between the quantity of fuel a plane requires for takeoff and when in flight. Similar to how an aeroplane needs additional fuel for takeoff, a new product or service requires additional funding for its launch to the market.
Communication (promotion) is required to create product awareness and encourage consumers to try the product, while placement options and supply chains are required to bring the goods to customers. Due to the research and development expenditures and marketing expenses required to introduce a product, profits are often low in the introduction phase.
If a product is recognized by the market, its life cycle advances to the growth phase. The growth phase is characterised by rising sales, increased competition, and increased profitability. Unfortunately for the company, the boom phase attracts swiftly entering competitors. For instance, after Diet Coke’s tremendous popularity, Diet Pepsi was introduced by Pepsi. Coca-Cola and Pepsi have comparable competing products in the beverage business, including their own bottled water, juice, and sports drinks.
As more customers begin to purchase the product, manufacturers must ensure that the product remains in stock, or they risk losing customers to competitors. For instance, video gaming system manufacturers, such as Nintendo’s Wii, could not meet public demand when the device was originally introduced. As a result, several users acquired competitor game consoles, such as the Xbox by Microsoft.
A corporation will sometimes boost its promotional spending during a product’s growth phase. However, instead of urging people to try the product, advertising frequently emphasises the product’s specific features and value relative to competitors. In other words, although the company must continue to educate and update its clients, it must also compete with its rivals. In the face of competition, highlighting the benefits of a product’s brand name might help a company sustain sales.
After a large number of competitors enter the market and the number of prospective new customers decreases, the sales of a product often tend to stabilise. This denotes that a product’s life cycle has reached its maturity stage. The majority of consumer goods are at the mature phase of their life cycle, and the majority of their consumers are repeat customers as opposed to new ones. Profits decline due to intense competition until only the strongest players survive. The stage of maturity lasts longer than the preceding stages. Quaker Oats and Ivory Soap are mature products; they have been on the market for more than a century.
In the maturity stage, given the competitive environment, many items are heavily advertised to customers by stronger competitors. Promotional item techniques frequently emphasise the offering’s value and advantages, providing a competitive edge. During the mature stage, promotions directed at a company’s distributors may also expand. Companies may reduce the price of mature items in order to compete with the market.
Saturation and decline Stage
When sales begin to decline and continue to fall, a product has reached the decline phase of its product life cycle. Changes in customer preferences, technological advancements, and substitutes that satisfy the same need can contribute to a fall in product demand during the decline phase.
How many of you do you believe have used a typewriter, a calculator, or a slide rule? Computers have replaced typewriters and calculators have replaced adding machines and slide rules. Inquire with your parents about eight-track tapes, which were popular before cassette tapes, CDs, MP3 players, and Internet radio. Some products depreciate gradually. Others experience a rapid rate of decline.
Young people’s fads and styles typically have very short life cycles and “fall out of style” very rapidly. (If you’ve ever borrowed clothes from your parents from the 1990s, you may be amused by how much fashion has changed.) Similarly, many students who do not own landline phones or VCR players cannot believe that people still use “outdated” equipment. Some old devices, such as payphones, vanish nearly entirely when they become obsolete.
Characteristics of Product Life Cycle
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 appears during the growth phase and, after stabilising during the maturity phase, declines 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) Different functional emphases are required 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.