Unit 9. Product Life Cycle and Its Marketing Implications
Whatisaproduct lifecycle?Aproduct'slifecycle(PLC)canbedivided intoseveral stages characterized by the revenuegenerated by the product. If a curve is drawnshowing product revenue over time,it may takeoneof many different shapes,anexampleofwhich is shown inthe next chart.The product life cycle concept may applyto a brand or toa category of product.Its duration may be as short as afew months or a century or more for product categoriessuch as the gasoline-powered automobile. Productdevelopment is the incubation stage of the product lifecycle.There are no sales and the firm prepares to introducethe product.As the product progressesthrough its life cyclechanges in the marketing mix usually are reguired inorderto adjust to the evolving challenges and opportunities
ProductLifeCycleStages(SeeP161Fig.9.1)SalesandSalesProfits ($)ProfitsTimeProductIntroductionGrowthMaturityDeclineDevelopmentLosses/Investments($)SalesandProfits Over the Product'sLife FromInception toDemise
Time Product Develop- ment Introduction Profits Sales Growth Maturity Decline Losses/ Investments ($) Sales and Profits ($) Sales and Profits Over the Product’s Life From Inception to Demise
IntroductionStage Whentheproduct isintroduced,sales will be lowuntil customers become aware of the product andits benefits.Some firms may announce theirproduct before it is introduced,but suchannouncements also alert competitors andremove the element of surprise.Advertising coststypically are high during this stage in order torapidly increase customer awareness oftheproduct and to target the early adopters. Duringthe introductory stage the firm is likely to incuradditional costs associated with the initialdistribution of the product.These higher costscoupled with alowsalesvolume usually maketheintroduction stage a period of negative profits
During theintroductionstage,the primary goal istoestablishamarket andbuildprimarydemandforthe product class.Thefollowingare someof themarketing miximplications of theintroductionstage:Product-one or few products,relatively undifferentiatedPrice-Generally high, assuming a skim pricing strategyfor a high profitmargin as the early adoptersbuy theproduct and the firm seeks to recoup development costsquickly.In some cases apenetration pricing strategyisused and introductory prices are set low to gain marketsharerapidly.Distribution -Distribution is selective and scattered as thefirm commencesimplementation of the distribution planPromotion-Promotion is aimedat building brandawareness. Samples or trial incentives may be directedtoward earlyadopters.5