As all products have a very specific life cycle, Product Life Cycle (PLC) is the typical process that all products go through from their initial research, design and launch through maturity until their decline and withdrawal from the market.
Products are just like human beings
Marketers like to compare the life cycle of a product to that of the human life cycle. Although the analogy may lack some substance, the stages of the product life cycle do mimic that of humans.
Products, like human beings, are conceived and are born. Like humans, as time passes, products move through infancy, grow and reach maturity and like humans they will eventually decline and die. Like humans death may happen suddenly at any stage.
However, unlike a human, a product’s life is measured in terms of its sales and there is also a possibility that a product may be reborn. In addition, the speed at which a product moves through its life cycle may vary considerably.
What is Product Life Cycle (PLC)?
Product Life Cycle (PLC) is a business tool which marketers use for launching a new product or updating existing products.
In other words, it is an analysis of different phases of sales behavior of a particular product over time.
Product Life Cycle (PLC) is known as one of the main methods in Product Portfolio analysis.
What does Product Life Cycle (PLC) show?
Product Life Cycle (PLC) shows the life of one single product in the marketplace. The life of products is typically measured in terms of sales revenue these products generate over time.
Product Life Cycle (PLC) shows the different stages that the product passes through from its initial design, development and launch to its eventual withdrawal from the market. It illustrates specific pattern of sales from the beginning to the end. Specifically, Product Life Cycle (PLC) shows the sales that can be expected at each stage.
Different stages of the product life cycle are illustrated on the following diagram:
While Product Life Cycle (PLC) never predicts how long a specific product will last in the market, or how long each stage is going to be, it only tells you about the stages that the product is passing through in real time.
Why is Product Life Cycle (PLC) beneficial to a business?
Product Life Cycle (PLC) contributes to strategic marketing planning of the business as it helps with developing new products.
As each and every product may have a totally different life cycle from one another, using Product Life Cycle (PLC) allows a business manager to identify any necessary changes to products. Specifically, to help the firm identify when a product needs support, redesign, reinvigoration, withdrawal, etc.
Marketing managers can also use Product Life Cycle (PLC) to manage all current products to take appropriate action as part of an improved marketing strategy.
As Product Life Cycle (PLC) determines sales revenue earned, this business tool may help in forecasting sales and managing Cash Flow.
How many stages does Product Life Cycle (PLC) have?
Product Life Cycle (PLC) is generally divided into six main stages for most products including Research and Development (R&D), Launch (Introduction), Growth, Maturity, Saturation and Decline.
The main features of each stage include:
1. Research and Development (R&D): Ideas for products are tested and investigated. The firm needs to incur the cost of researching and developing new products and prepare a marketing plan prior to launching them to the market. There is not sales revenue in this stage, hence no profit.
2. Launch (Introduction): High risks of introducing new products to the market. The firm faces high costs of production and marketing while it may not have profits yet. Products are very unlikely to be profitable at this stage. Volume of sales is low increasing slowly. There is less consumer awareness of the product, hence heavy promotional spending. The aim of the promotional strategy is to create awareness of the product.
TIP: The product is mainly purchased by innovators.
3. Growth: Increased consumer awareness. The product penetrates the market,Fast sales growth, but slowing down later. Higher volume of sales leads to benefits from economies of scale, profits grow as sales rise and costs fall. Costs can be covered as profit is made. Competition increases. The firm attempts to build up customer loyalty before entry of competitors.
TIP: The product is bought by early adopters.
4. Maturity: The business enjoys a high market share. Brand loyalty is a crucial factor. Sales continue to rise but at a slower rate. Brand preference is a crucial factor in continuing success. Packaging also plays a major part in the marketing effort. The aims to retain market share by capturing sales from weaker rivals. The firm may need to start planning for extension strategies.
TIP: The product is now bought by the majority.
5. Saturation: Continuation of the mature phase. Sales growth is slower and levels off. Most people have now bought the product, particularly if it is a one-time product. Promotions are aggressive to get any new customers to buy the product. Managers must search for new market segments, or employ other extension strategies.
6. Decline: Sales start to fall as there are many other firms in the market. Sales and profit decrease mainly due to new technology, changing tastes and competitors. In fact, sales and profits decline steadily when substitutes appear and the product now obsolete. The business seeks to cut losses by cutting costs. Promotional spending is cut and prices are reduced.
Elimination process of the product: Is the decline in sales and market share of the product temporary? Is it terminal and irreversible? Is the company capable of making the trend reversed by an adjustment in the marketing? If the product is not contributing, is it being supported by others in the Marketing Mix (it is called cross-subsidization)? If yes, withdraw the product when the decline is permanent, it is unprofitable to continue or a replacement is ready.
Different types of Product Life Cycle (PLC)?
The overall life cycle of different products may vary significantly. While some products have a relatively short Product Life Cycle (PLC) whilst other products will live on the market for a very long time.
To simplify the analysis of Product Portfolio, we can distinguish products with short Product Life Cycle (PLC) and long Product Life Cycle (PLC):
1. SHORT PRODUCT LIFE CYCLE (PLC): Consumer products such as fashion clothing have rather short life cycle. They are introduced into the market, grow quickly within a few weeks or months to reach maturity after a short period of time. In the end, they go into decline and are replaced with the ‘latest’ fashion. For example, mobile phones have a life cycle of less than two years 18 before consumers replace them with newer and better designed models.
2. LONG PRODUCT LIFE CYCLE (PLC): Producer products such as machinery have rather long life cycle. They are introduced into the market, grow slowly within years to reach maturity after a long period of time. In the end, they are replaced by newer models.
For example, Moët & Chandon which sells ‘unique champagnes for every occasion’ has been selling its products since 1743.
When you compare different types of products, you can see how their life cycles last from the shortest (1) to the longest (5):
- Fast-Moving Consumer Goods (FMCG)
- Consumer Perishables
- Consumer Durables
- Specialty Consumer Products
- Product Products
Additionally, every product will have a different slope within each stage of Product Life Cycle (PLC). The length of each stage is not the same for all products either as it varies from product to product.
Advantages and Disadvantages of Product Life Cycle (PLC)
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On the positive side, Product Life Cycle (PLC) helps in managing the Product Portfolio of a business. Mainly, it helps to identify when a new product should be introduced to maintain a balanced product mix.
Product Life Cycle (PLC) assists with planning other Marketing Mix decisions, e.g. how to change pricing and promotion strategies according to different stages. It helps to understand the changes in revenue, profits and cash flow, e.g. sales and profit increases at growth stage improving positive net cash flow at maturity. Finally, the firm has it easier to identify when a product needs extension or extinction.
Product Life Cycle (PLC) is an important part of a marketing audit as it helps to regularly check on the performance of a company’s marketing strategy. Specifically, to assess the performance of the business’s current product range.
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However, Product Life Cycle (PLC) is based on the past and current data. While the product’s sales have grown over the past few years, it does not mean that they will continue. Sales could decrease very quickly without reaching the maturity stage. no chance of an extension strategy being employed. On the contrary, sales of other products can continue growing though. That is why Product Life Cycle (PLC) cannot be used anyhow to predict the future.
In practice, it is difficult to decide when a product moves to another stages, e.g. at which point a product moves from introduction to growth? It is because life cycle varies significantly from product to product, e.g. some products have never-ending lives while seasonal products have highly fluctuating demand.
Product Life Cycle (PLC) alone is of limited use when taking decisions. There are many other factors that should be taken into consideration when creating and launching new products such as marketing objectives, cost of production, market environment, competitors’ actions, etc.
In conclusions, for the Product Life Cycle (PLC) analysis to be really useful to business managers, it needs to be used together with other business tools such as Boston Matrix, Ansoff Matrix, sales forecasting methods, etc. in order to assist with product planning and the Product Portfolio analysis.
