The product life cycle goes through multiple phases from its introduction into the market to its disappearance form the market. All the products have to go through the same phases though the duration of each phase is different for different products.
May stay in the growth or maturity phase for a very high period of time
May stay in the maturity phase for unlimited period
May enter directly to decline phase from growth phase and disappear within a short period of time.
The product life Cycle is mainly divided into 4 phases based on the sales, growth and profit of the product. The phases are shown in the below diagram.
Product Life Cycle
Now the characteristics of each phase are explained below:
Product: Product introduced in the market
Sales: Slow sales growth and low sales due to low awareness
Lower Market size
Costs: High cost per customer
Profits: No Profit as expenses is very high. Profits is lower for rapid skimming market strategy
Marketing costs may be high in order to launch the product ,undergo promotion and set up distribution channels
Competitors – Few in the market
Period of rapid market acceptance and rapid growth in sales and profits
Sales: High increase in sales due to higher growth
Costs: Average cost per customer. Average cost reduces at this stage due to increased volume and break-even
Profits: More Profit
Customers: Early Adaptors
Competitors – Increase in numbers depending on the popularity of the product
High promotional and marketing investment at this stage to sustain the high growth
The most common stage for all markets
Period of slowing growth rate
Sales: Pick sales and lower sales growth
Costs: Low cost per customer as very high volume of sales
Profits: High Profit due to lower cost and increased sales volume. Profits stable first and then decline to fight competition
Customers: Early majority and late majority. New customers start adopting the product
Competition is most intense as companies fight to maintain their market share
Price: Price decline to maintain market share, increase sales volume and attract new customers
Marketing and Finance spend have to be monitored carefully
Declining sales due to obsolete product and availability of superior products because technological advancement
Costs: Low cost per customer as it has already attained the desired volume
Profits: Declining Profit due to decline in sales and high stocks. At this time, companies look for price discounts and other options to clear old stocks
Price: Price dropped to the lowest level to sustain competition from new advanced products
Customers: Laggards or customers who buy at the lowest price
Competitors: Decline in numbers and some players exit from the market due to decline in sales and profit
Some product categories like skin care, oral care etc. have largest Product Life Cycle. Some of them many stay in maturity stage of PLC indefinitely.
Product forms follow (white liquid, Tooth Powder, Tooth Paste, Pastry etc.) PLC structure (like Introduction, Growth, Maturity and Decline) faster than other product categories
Brands have shorter PLC’s than the actual products but they can be restructured very easily by using the existing brand image (i.e. Dove Soap to Dove Shampoo etc.)
Different marketing strategies are followed for different phases of Product Life Cycle (PLC). They are explained in the subsequent posts.