Question

Which product characteristics influence the length and shape of a product is PLC? What changes might a company make in its product design to lengthen its life cycle? Be specific and provide detail and examples.

Answer 1

Meaning and Definition of Product Life Cycle
Product’s life begins with its market introduction, then goes through a period during which its
market grows rapidly, eventually it reaches at maturity and then stands saturated. Afterwards, its
market declines and finally its life come to an end. Thus a product passes through different stages.
The stages through which a product passes are collectively known as product life cycle.

Product Life Cycle Stages
A product life cycle is divided into four stages – introduction (a need is planted), Growth
(root takes place and leaves come out), Maturity (adulthood takes place), and Decline (plant begins to
shrink and finally die). The various stages of product life cycle are discussed as follows.

1.Introduction: This is the first stage in the life of a product. After testing, a product enters the
introduction stage and the product will then become available in the market. During this stage the
sale are low.
2. Growth: During the growth stage, more customers begin to buy the product. This is because
customers who purchased during the introduction stage are purchasing again or have recommended
the product to colleagues, friends and family. Sales will begin to grow and the company, which has
been incurring losses, begins to make profit. At this stage, competitors may enter the market. Sales
reach their optimum level but the sales growth slows down. Cell phones and internet shopping sites
are currently experiencing rapid growth.
3. Maturity: This stage has the longest duration. In the maturity stage, the demand for the product
reaches a saturation point. Competition becomes severe. During this stage the manufacturers
introduce new model or adopt methods such as trading in etc. to promote sales.
4. Decline: At this stage, sales began to fall. There may be a little or no profit. The production cost
and inventory cost become larger. At this stage the competition becomes severe. Customers go for
newer and better products due to technological development, change in taste etc. Therefore, sales
start declining. This stage will lead to gradual phasing out of the product. Carbon paper, B & W
Television sets, telegrams, typewriters, fountain pen etc. Are products that have entered decline stage
(now telegram is no more). Demand for Kodak’s film products is falling rapidly because the
popularity of digital photography is rising.

Marketing strategies indifferent stages of PLC
Different stages of PLC require different marketing strategies. Let us examine the various
marketing strategies that a company shall adopt in each stage of its PLC.

Introduction Stage
Pricing and Promotion Strategies: In this stage the management can adopt one of the
following four strategies as far as pricing and promotion of new products are concerned.

(a)Rapid skimming strategy: This is the strategy of fixing a high price with high promotion
expenses. This is done to earn more profits, develop the brand image and convince the buyers about
the superior features of the product through high promotional efforts. This strategy will succeed when
competition and market sizes are limited.
(b)Slow skimming strategy: Under this strategy, the price of the product is kept at a higher level but
the promotional expenses are low. This is done to earn more profits by keeping the marketing
expenses at a lower level. This strategy is usually adopted when the target market is small; potential
buyers are aware of the product and are ready to pay a high price because of the non-availability of
substitute products.

Product Strategies: During the introduction stage, the management can adopt the following
strategies with regard to product:

(a) Basic product offering: During the introduction stage, the company should offer, the basic
version of the product.
(b) Quality: More importance should be given to quality of the product
(c) Product trial: Product must be provided for trial basis

Distribution Strategies: The following distribution strategies may be adopted in the introduction
stage.
a).Selective distribution.During the introduction stage, it is desirable to distribute the product only
through selected dealers in each area.

Growth Stage
Product Strategies: With regard to product, the following strategies may be adopted in the growth
stage:

(a)Skimming strategy (Premium pricing strategy): If the firm has adopted penetration strategy
during the introduction stage, the company can raise the price to some extent. This is done only if the
product is clicked in the market.
(b)Penetration strategy: If the firm has used price skimming in the introduction stage, it may switch
to low penetration when a large number of competitors appear or reduce the price step by step as
more and more competitors enter the market.

Promotion Strategies: During the growth stage, the following strategies can be adopted for
promotion:

(a)Product conviction: Under this strategy, the emphasis is shifted from product awareness to
product conviction or product preference. Here, the company makes efforts to convince the buyers
that its products are superior compared to other brands, through advertisement.
(b)Unique product positioning: Under this strategy, unique positioning is created through the use of
advertising.

Distribution Strategies: During growth stage, a company shall apply the following strategies for
distribution:

(a)Intensive distribution: This is the strategy of distributing the product through several outlets. The
objective is to maximise availability of the product.

Maturity Stage
Product Strategies: With regard to product, certain strategies are available. They are:

(a)Market modification: In order to increase the consumption, the company looks for:

• New users,
• New market segments
• Product modification
• Innovation
• Diversification

Pricing Strategies: The following strategies are available for price in the maturity stage:

(a) Keeping the price rigid: If oligopolistic conditions prevail, it is desirable to keep the price rigid
(do not raise or cut the price).
(b) Cost based pricing strategy: If conditions of monopolistic competition exist, the marketer
should set their prices on the basis of costs rather than on competitor’s prices.

Promotion Strategies: During the maturity stage, companies shall resorts to some strategies with
regard to promotion. Important strategies are as follows:

(a)Launching a better advertisement campaign: In order to stimulate sales, company may
launched a better advertising campaign.
(b)Aggressive sales promotion: Company may use aggressive sales promotion such as trade deal,
price off, premium, gifts, contests etc.

Distribution Strategies: For distribution, the following strategies are available during maturity
stage:
(a)More intensive distribution: During maturity stage, this sales growth decline. Hence to promote
sales, companies attempt to distribute its products through as many outlets as possible.
(b) New type of distribution channels: A company can try new type of distribution channel for
expanding the market.

Decline Stage
Product Strategies: A company can adopt the following product strategies during decline stage:

(a) Maintain: Hoping that with passage of time, the competition will drop out; the company decides
to continue with the product. For example, P & G stayed in the declining liquid soap business and
improved its profits as the others withdrew.
(a) Harvest: This is the strategy of reducing the overall costs (production, maintenance, advertising,
sales force etc.) and hoping that sales will be profitable for some item to come. For example,
Hindustan Motors continue to produce Ambassador Cars.

Pricing Strategies: With regard to price, the company can follow the following strategies during
decline stage:

(a) Break even pricing: In order to continue the production and marketing of the product, the firm
can use break even pricing. Under this strategy the firm will set the price at the level of total cost.
There is neither profit nor loss.

Distribution Strategies: In the decline stage, the company may resort to the following strategies
in connection with distribution.

(a) Reducing distributing outlets: Under this strategy, the unprofitable outlets are stopped
(b) Developing new distributors: Under this strategy, the firm can enter new markets and develop
distributors.

Promotion Strategies: During decline stage, it is necessary to device appropriate promotion
strategies to revive the product or market. The various promotion strategies that may be adopt by a
firm in decline stage are as follows:

(a) Reduce promotion expenditure: Marketer may reduce expenditure on promotion (advertising,
sales promotion, research and development) of weak products.
(b) Credit facility: In order to attract customers, credit facility and easy installment facility may be
offered.