Every product passes through four stages in its life namely, introduction, growth, maturity and decline. The concept of Product Life Cycle (PLC) highlights that sooner or later all products die and that if an entrepreneur wishes to sustain its revenues, he must replace the declining products with the new ones.
Every firm makes sales forecasts during introduction, growth, and maturity stages of the PLC. To achieve the sales target, it formulates promotional, pricing and distribution policies. Thus the concept of PLC facilitates integrated marketing policies relating to product, price, promotion and distribution
The advantages of forecasting the life cycle of a product to a firm are as follows:
1. When the PLC is predictable, the entrepreneur must be cautious in taking advance steps before the decline stage, by adopting product modification, pricing strategies, distinctive style, quality change, etc.
2. The firm can prepare an effective product plan by knowing the PLC of a product.
3. The entrepreneur can find new uses of the product for the expansion of market during growth stage and for extending the maturity stage.
4. The entrepreneur can adopt latest technological changes to improve the product quality, features and design.
STAGES IN PRODUCT LIFE CYCLE
The product moves through the four stages namely, introduction, growth, maturity and decline. As the product moves through different stages of its life cycle, sales volume and profitability change from stage to stage as shown in the figure below. The entrepreneur’s emphasis on the marketing mix elements also undergoes substantial changes from stage to stage. A brief discussion of the marketing strategies in different stages of the PLC is given below:
Introduction: The first stage of a product life cycle is the introduction or pioneering stage. Under this state the fixed costs of marketing and production will be high, competition is almost non-existent, markets are limited and the product is not known much. Prices are relatively high because of small scale of production, technological problems and heavy promotional expenditure. Profits are usually non-existent as heavy expenses are incurred for introducing the product in the market.
To introduce the product successfully, the following strategies may be adopted:
a. Advertisement and publicity of the product. ‘Money back’ guarantee may be given to stimulate the people try the product.
b. Attractive gift to customers as an ‘introductory offer’.
c. Attractive discount to dealers.
d. Higher price of product to earn more profit during the initial stages.
Growth: The sales as well as the profits increase rapidly as the product is accepted in the market. The promotional expenses remain high although they tend to fall as a ratio to sales volume. Quite often, smaller firms move into the market during the growth phase. With their flexibility they can move very quickly and capture a valuable part of the market without the huge investment risks of the development phase. In this stage, the competition increases and distribution is greatly widened. The marketing management focuses its attention on improving the market share by deeper penetration into the existing markets and entry into new markets. Sometimes major improvements also take place in the product during this stage.
The following strategies are followed during the growth stage:
a. The product is advertised heavily to stimulate sale.
b. New versions of the product are introduced to cater to the requirements of different types of customers.
c. The channels of distribution are strengthened so that the product is easily available wherever required.
d. Brand image of the product is created through promotional activities.
e. Price of the product is competitive.
f. There is greater emphasis on customer service.
Maturity: The product enters into maturity stage as competition intensifies further and market gets stabilized. There is saturation in the market as there is no possibility of sales growth. The product has been accepted by most of the potential buyers. Profits come down because of stiff competition and marketing expenditures rise. The prices are decreased because of competition and innovations in technology. This stage may last for a longer period as in the case of many products with long-run demand characteristics. But sooner or later, demand of the product starts declining as new products are introduced in the market. Product differentiation, identification of new segments and product improvement are emphasized during this stage. In order to lengthen the period of maturity stage, the following strategies may be adopted:
a. Product may be differentiated from the competitive products and brand image may be emphasized more.
b. The warranty period may be extended.
c. Reusable packaging may be introduced.
d. New markets may be developed.
e. New uses of the product may be developed.
Decline: This stage is characterized by either the product’s gradual displacement by some new products or change in consumer buying behaviour. The sales fall down sharply and the expenditure on promotion has to be cut down drastically. The decline may be rapid with the product soon passing out of market or slow if new uses of the
product are found. Profits are much smaller and companies need to assess their investment policies, looking towards investing in newer and more profitable product lines. As far as possible, attempts should be made to avoid the decline stage. But if it has started, the following strategies may be useful:
a. The promotion of the product should be selective. Wasteful advertising should be avoided.
b. The product model may be abandoned and all the good features may be retained in the new model of the product.
c. Economical packaging should be introduced to revive the product.
d. The manufacturer may seek merger with a strong firm.
No comments:
Post a Comment