PLC Basic
PLC Basic
PLC Basic
The product life cycle (PLC) is the course of a product’s sales and profits over its
lifetime.
The goals of product life cycle management (PLM) are to reduce time to market,
improve product quality, reduce prototyping costs, identify potential sales
opportunities and revenue contributions, and reduce environmental impacts at
end-of-life. To create successful new products the company must understand its
customers, markets and competitors. Product Lifecycle Management (PLM)
integrates people, data, processes and business systems. It provides product
information for companies and their extended supply chain enterprise. PLM
solutions help organizations overcome the increased complexity and engineering
challenges of developing new products for the global competitive markets
PRODUCT LIFE CYCLE STAGES
There are five distinct product life cycle stages:
Product Development. When the company finds and develops a new product
idea, product development starts. During product development, sales are zero,
and the company’s investment costs increase.
Introduction. Sales slowly grow as the product is introduced in the market.
Profits are still non-existent, because the heavy expenses of the product
introduction overweigh sales.
Growth. The growth stage is a period of rapid market acceptance and increasing
profits.
Maturity. In the maturity stage, sales growth slows down because the product
has achieved acceptance by most potential buyers. Profits level off or decline
because marketing outlays need to be increased to defend the product against
competition.
Decline. Finally, sales fall off and profits drop.
Identifying the stage of a product is an art more than a science, but it's possible to
find patterns in some of the general product features at each stage. Identifying
product stages when the product is in transition is very difficult.
Stages
Identifying
Introduction Growth Maturity Decline
features
Sales Low High High Low
High (lower
Investment
Very high than intro Low Low
cost
stage)
Low or no
Competition High Very high Very High
competition
(а) ‘Money back’ guarantee may be offered to encourage the people to try
the product.
(b) Attractive gift as an ‘introductory offer’ may be offered to customers,
(c) Attractive discount to dealers.
(d) Some unique feature built into the product.
2. Growth Stage:
As the product gains acceptance, demand and sales grow rapidly. Competition
increases and prices fall. Economies of scale occur as production and
distribution are widened. Attempt is made to improve the market share by
deeper penetration into the existing market or entry into new markets. The
promotional expenditure remains high because of increasing competition and
due to the need for effective distribution. Profits are high on account of large
scale production and rapid sales turnover.
During the growth stage, following strategies may be adopted:
(a) New versions of the product may be introduced to satisfy the
requirements of different types of customers.
(b) Brand image of the product is created through advertising and publicity.
(c) The price of the product is made competitive.
(d) Customer service is enhanced.
(e) Distribution channels, to make the product easily available wherever
required.
3. Maturity Stage:
During this stage prices and profits fall due to high competitive pressures.
Growth rate becomes stable and weak firms are forced to leave the industry.
Heavy expenditure is incurred on promotion to create brand loyalty. Firms try
to modify and improve the product, to develop new uses to the product and
to attract new customers in order to increase sales.
In order to prolong the maturity stage, a firm may adopt the following
strategies:
(a) The product is differentiated from the rival products.
(b) Brand image of the product may be emphasized.
(c) New markets may be developed.
(d) New uses of the product are developed.
(e) Reusable packaging is introduced.
4. Decline Stage:
Market peaks and levels off during saturation. Few new customers buy the
product and repeat orders disappear. Prices decline further due to stiff
competition and firms fight for retaining market share or replacement sales.
Sales and profits inevitably fall unless substantial improvements in the
products or reduction in costs are made.
The product is gradually displaced by some new products due to changes in
buying behaviour of customers. Promotion expenditure is drastically reduced.
The decline may be rapid and the product may soon disappear from the
market. However, decline may be slow when new uses of the product are
created.
In order to avoid sharp decline is sales, a firm may adopt the following
strategies:
(a) New features may be added in the product.
(b) The packaging may be made more attractive.
(c) Selective distribution may be adopted to reduce costs.
Extension of Product life cycle
Figure shows the impact of the extension strategies on the product life cycle.
PRODUCT LIFE CYCLE - EXTENSION STRATEGIES
If the firm decides to continue selling the product as it reaches saturation or enters
the decline phase, it is likely to extend the life of the product by changing aspects of
the marketing mix to rejuvenate the offer. This can be illustrated by looking at the
sales during the time period of the product. A branded good can enjoy continuous
growth, such as Microsoft, because the product is being constantly improved and
advertised, and maintains a strong brand loyalty. Strategies will include:
Repackaging and new sizes: the appearance of the product can be crucial gaining a
customer's attention and developing interest
Repositioning
Additional features
Lower prices to maintain interest or liquidate surplus stock
New advertising campaigns
Altering the channel of distribution, such as online shops
Finding new markets - this may be locally, nationally or internationally.
Encourage people to use product more
Tips for extending your Product Life Cycle-
1. Keep Refining Your Offers to Maximize Profitability- Pricing Adjustments
Advertising and Promotion
Increasing Penetration with Customer Base
Finding New Customer Segments
2. Update Products to Keep and Escalate Customer Relationships
3. Constantly Innovate and Improve Your Products and Services
4. Explore New Markets and Niches
5. Consider Continuity Programs or Other Recurring Revenue Programs to
Extend the Life Cycle
PLC as a guideline for
Marketing Strategy
Introduction Growth Maturity Decline
Product Offer a basic Offer product Diversify brands Phase out weak
product extensions, and models items
service, warranty
6. Cost reduction:
Selling a high-priced product at a lower price or at a concessional rate becomes a
new product. For those who could not afford the product in the past, now they
can use the same product as a new.
Essentials or Requirements for Successful Development of New Products:
Based upon possible causes leading to new product failures, following factors
(also called essentials, precautions or requirements) must be considered:
1. Adequate market demand
2. Market trends and economic conditions
3. Compatibility with the present production and marketing structure
4. Availability of funds
5. Competitiveness
6. Managerial experience and ability
7. Suitability with objective, image, and goodwill of company
8. Time period
9. Legal and social aspects
10. Internal integration and cooperation.
Characteristics of successful product
development