Session 3 

Product life cycle

The Product Life Cycle (PLC) refers to the stages a product goes through from its initial development to its eventual decline and withdrawal from the market. Understanding the PLC helps businesses strategize at each stage, optimize marketing efforts, and manage their products more effectively. The product life cycle typically consists of five stages:

1. Introduction Stage

This is the phase when the product is first launched in the market. It is often characterized by high investment costs and slow growth in sales. At this stage, the product is unfamiliar to the target audience, and it takes time to gain awareness.

Key Features:

• Product Development Costs: High, as research, design, and manufacturing costs are incurred.

• Sales Growth: Slow, as the product is new, and customers need time to learn about it.

• Marketing Strategy: Focus is on awareness and education. Businesses invest in advertising, public relations, and other promotional efforts.

• Pricing Strategy: Companies might use penetration pricing (low price to attract customers) or skimming pricing (high price for early adopters and to recoup R&D costs).

• Competition: Limited competition as the product is new, but may face challenges as similar products may enter the market.

• Profitability: Negative or low profits due to high promotional and distribution costs.

Objectives at this Stage:

• Create awareness and generate interest.

• Educate customers on the product’s features, benefits, and how it solves a problem.

• Build distribution channels.

2. Growth Stage

Once the product gains awareness and customers start adopting it, the product enters the growth stage. During this phase, sales grow rapidly, and the product begins to gain traction in the market. Competitors may enter the market, but the product is now more established.

Key Features:

• Sales Growth: Rapid growth as customer adoption increases. Word of mouth and repeat purchases also contribute to rising sales.

• Profitability: Increased profitability as fixed costs (like R&D) are spread over a larger volume of sales, and manufacturing costs decrease due to economies of scale.

• Marketing Strategy: Focus shifts to differentiation and reinforcing the product’s advantages over competitors. Advertising is ramped up, and the product’s brand image is solidified.

• Competition: More competitors enter the market, increasing the need for differentiation.

• Product Improvements: Companies may introduce new features, models, or versions to maintain interest.

Objectives at this Stage:

• Establish the product as a leader in the market.

• Increase market share by targeting a broader audience.

• Improve and enhance the product based on feedback.

• Start building customer loyalty.

3. Maturity Stage

In the maturity stage, the product has reached its peak in terms of sales and market penetration. At this point, competition is at its highest, and market saturation occurs, meaning most potential customers have already adopted the product.

Key Features:

• Sales Growth: Growth slows down as the market becomes saturated. Sales plateau, and competition often leads to price reductions.

• Profitability: Profits begin to stabilize or decline slightly due to intense competition and price pressures.

• Marketing Strategy: Marketing becomes more focused on brand loyalty and retention. Promotional efforts may center around loyalty programs, special offers, or bundling.

• Competition: There are many competitors, and businesses may resort to competitive pricing, improved customer service, or marketing strategies to maintain market share.

• Product Strategy: The focus is on product modifications, diversification, and extensions (e.g., new flavors, colors, or features) to keep the product fresh.

Objectives at this Stage:

• Maximize market share and profitability.

• Differentiate from competitors through innovation or brand positioning.

• Reduce costs and improve operational efficiency.

• Encourage repeat purchases and customer loyalty.

4. Decline Stage

Eventually, the product’s sales begin to decline. This can happen due to technological advancements, changing consumer preferences, new substitutes, or market saturation. In this stage, the product is phased out.

Key Features:

• Sales Decline: Sales start to fall due to decreased demand, obsolescence, or the availability of better alternatives.

• Profitability: Profits decline as sales fall and companies may reduce marketing and promotional spending.

• Marketing Strategy: Focus may shift to reducing costs or finding niche markets to prolong the product’s life.

• Competition: Fewer competitors may be involved, as many drop out of the market.

• Product Strategy: Some businesses may discontinue the product, or they may try to reposition it for niche markets or low-cost segments.

Objectives at this Stage:

• Manage the product’s exit from the market efficiently.

• Decide whether to harvest the product (reduce investment and maximize short-term profits) or divest (discontinue or sell the product).

• Minimize losses by managing costs and maintaining a loyal customer base.

5. Extension Stage (Optional)

In some cases, businesses may attempt to extend the life of the product before it enters the decline phase. This could involve new marketing campaigns, product upgrades, or diversification into new markets.

Key Features:

• Sales Stabilization: New product features, rebranding, or market expansion may temporarily revitalize the product.

• Profitability: It may temporarily increase as the product experiences a revival.

• Marketing Strategy: Businesses might introduce innovations, redesigns, or repackage the product to make it appealing again.

• Competition: New competitors may emerge with similar features or updated products.

Objectives at this Stage:

• Revitalize the product’s appeal in the market.

• Target new customer segments or geographic regions.

• Explore additional uses or variations of the product.

Understanding the Product Life Cycle helps businesses tailor their strategies to maximize the product’s success at each stage. Each stage requires different marketing tactics, pricing approaches, and competitive strategies to ensure the product remains relevant in the market for as long as possible.