Definition: The product life-cycle (PLC) refers to the different stages a product goes through from introduction to withdrawal.
The product life-cycle refers to a likely pathway a product may take. It has implications for the marketing strategy of a firm as it seeks to introduce, grow and maintain market share.
In this case, the product has four stages:
- Introduction – when the product is introduced and struggles to gain brand recognition.
- Growth – advertising and word of mouth helps the product to increase sales. As sales grow, more firms are willing to stock the product which helps the product to grow even further.
- Maturity – When the product reaches peak market penetration.
- Decline – the product gets eclipsed by new products
Example of the Product Life Cycle
- Introduction phase – Self-driving cars. Self-driving cars are still at the testing stage, but firms hope to be able to sell to early adopters relatively soon.
- Growth – Electric cars. For example, the Tesla Model S is in its growth phase. Electric cars still need to convince people that they will work and be practical. As there are more electric charging points and more people adopt them, it becomes easier to sell to those who are more sceptical of new technology like electric cars.
- Maturity – Ford Focus. The Ford Focus is a well-established car. It has a good brand reputation and has reached its peak level of market penetration. It would be difficult to gain a significantly greater market share. The product life cycle of the Ford Focus has been extended by constant upgrades and redesigns to keep the car on top of the market.
- Decline – Diesel cars. Since governments have expressed concern at the level of pollution from diesel cars. Some cities have threatened to ban diesel cars within a few years. Sales have fallen considerably and the market for diesel cars may be in terminal decline.
The usefulness of Product Life Cycle
In the different phases of the product life cycle firms, will need to concentrate on different aspects of marketing and sales
- Raising product awareness through advertising/word of mouth.
- Offering the product at discount – penetration pricing to tempt customers to try the product.
- Target early adopters and influential market leaders. For example, firms may offer free product reviews to influential bloggers in the market.
- Firms need to find willing suppliers who are willing to stock.
- This phase will not be profitable because costs are high, but revenue is relatively low.
- Firms need to capitalise on growth to extend product sales from small retailers to big supermarkets.
- Firms can change marketing from niche areas to a more mass market.
- The firm can adapt to consumer feedback and offer new features/better consumer support.
- With peak market penetration, the firm may seek to increase prices to increase profitability. However, if the market is very competitive the firm may feel the need to keep prices low to defend its market share.
- The firm may concentrate on seeking to improve the product to gain market differentiation and extend the period of maturity.
- In the decline phase, the firm may feel it is best to let the product go – e.g. diesel cars cannot solve issues of pollution and damage to its brand reputation. However, with the iPhone, Apple let old models go, to be replaced by the next model. Decline and discontinuing the product can be a way to force customers to buy an upgrade – next time their contract expires.
- Managed decline by targeting a niche market. For example, vinyl records have declined, but now they have become a very profitable niche for record labels. Total sale revenues from vinyl are close to sale revenues from digital downloads because record companies can charge a premium price for the good.
Different examples of product life cycles
Stable products – Some products have defied time to maintain the period of maturity for a considerable time. For example, products like Marmite, Kelloggs Corn Flakes and Evian mineral water seem fairly stable and immune to technological innovation.
Maturity from the start. Some products are launched to great fanfare and product awareness. For example, the iPhone X is related to previous iPhones so there is no need for an introduction phase. Other products like the Xbox are eagerly awaited. Rather than using penetration pricing, these products can practise price-skimming – where the firm takes advantage of inelastic demand.
Failed products. Many products never really escape the introduction phase. For example, failed product launches such as the mini-disc, Betamax.
Reinvented products. Some products have successfully reinvented themselves and proved to be more successful after a period of decline. For example, in the mid-1990s, Apple computers appeared to be in their decline phase, but in the late 90s and early 2000s, it successfully re-pioneered itself. You could say that the Apple MacBook is a different product from previous Apple computers. It depends on how you define a product. Vinyl records are enjoying a revival.