Product life cycle
Production Management
According to Willian J. Stanton
“from its birth to death, a product exists in different
stages and in different competitive environments. Its
adjustment to these environments determines to great
degree just successful its life will be”
Characteristics Stages in Life Cycle
Introduction Growth Maturity Decline
Objective Attract innovators Expand Maintain Cut back,
and opinion leaders distribution differential revive, or
to new product and product advantage as terminate
line long as possible
Industry Sales Increasing Rapidly Stable Decreasing
increasing
Competition None or small Some Substantial Limited
Industry Profit Negative Increasing Decreasing Decreasing
Customers Innovative Affluent mass Mass mrkt Laggards
mrkt
Product mix One or two Basic Expanding Full product line Best sellers
models line
Distribution Depends on Rising no of Greatest no of Decreasing
product outlets outlets no of outlets
Promotion Informative Persuasive Competitive Informative
Pricing Depends on Greater range Full line of Selected
product of prices prices prices
Strategies in different phases of PLC
Introduction phase: this phase marks the launch of the
product.
According to [Link], management can pursue one of
the four strategies on the basis of high low price and
promotion.
1. Rapid skimming strategy
2. Slow skimming strategy
3. Rapid penetration strategy
4. Slow penetration strategy
Rapid skimming strategy
This strategy of high price and high promotion works
effectively only when the customer awareness for the
product is not very high, or those who are aware,
willingness to pay any price to possess or buy it is
high.
Here the marketers want to cover the cost as much as
possible during the launch phase of gather product.
This strategy also works when the market size for the
product is large and the threat from competition is
imminent.
Slow skimming strategy
This is based on the assumption that the firm has
sufficient time to recover its pre-launch expenses.
Here the company launches the product at high price
but spends lesser money on the promotion.
The resultant profitability is more as company is able
to charge higher price but the marketing costs are
lower.
This happens when the technology being used by the
firm is highly sophisticated and competition will have
to invest substantial resources to get this technology.
Rapid penetration strategy
This is based on same assumption and environmental
conditions as the ones mentioned under the rapid
skimming.
The only difference between rapid skimming and
penetration is the firm’s long term objectives
Here they charge low price and spends heavily on the
promotional efforts
If the objective is marked share and profit
maximization in the long run and intensive
competition or other entry barriers characterize the
market, a firm may choose to enter the market with
this strategy.
Slow penetration strategy
This delivers result when the threat from competition
is minimal, market size is large, market is
predominantly price sensitive and majority of the
market is familiar with the product.
Here, the company launches the new product at lower
price, and low promotional efforts and expenditure.
The lower price enables the company to penetrate the
market whereas the low promotional costs enable the
company to have better profitability.
Growth phase
The introduction phase is indeed the most crucial one,
because more than 95% of products fail at this phase.
The 5% of lucky products that enter the growth phase
meet with a more strengthened and increased
competition.
This competition now offers greater choice to the
customer, in the form of different product types,
packaging and prices.
The market base expands as more customers come in
to buy the product .
more trade channels are now willing to keep the
product and one generally observes softening of prices.
According to [Link]
Strategies is adopted to sustain the market growth as
long as possible.
1. Improve products quality.
2. Add new product features and improved styling
3. Enter into new market segments.
4. Enter into new distribution channels.
5. Reduce the prices to attract buyers.
6. Increase promotional activities.
Maturity phase
Most products that survive the heat of competition and
even customers approval enter the maturity phase .
This phase is characterized by slowing of growth rates
of sales and profits .
in fact, a decline in profits seems to appear now
It tends to narrow down towards price and promotion
war
For an effective management, the marketing manager
should:
1. Improve the quality of the product
2. Give proper attention to increase the usage among
the current customers
3. Try to convert non-users into users of the product
that is, creating new buyers
4. Give proper emphasis to advertisement and
promotional programmes
5. Try to discover new uses for the product.
Decline stage
Most crucial phase
Sales may decline for no of reasons – technical
advances, arrival of new products at low cost, changes
in fashion, consumer preference etc.
If the substitutes are more attractive and in latest
fashion, buyers may turn their eyes towards them.
According to Stanton
Improve the product in functional sense.
Make sure the marketing and production programmes
are as efficient as possible.
Streamline the product assortment by pruning out
unprofitable sizes and models. Frequently this tactic
will decrease sales and increase profits.
“run out” the product that is, cut all costs to the bare
minimum level that will optimize profitability over the
limited remaining life of the product.
Abandon the product.
