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A Presentation on

Product Life Cycle (PLC)


&
Marketing Strategies
By
Dr.J.R.Das
Associate Professor
SOA University
The Product Life Cycle Concept is Based
on Four Premises
Product Life Cycle (PLC)
Styles, Fashions, and Fads
Style: basic and distinctive mode of expression

Fashion: currently accepted or popular style in a given field

Fad: a fashion the enters quickly, adopted with great zeal, peaks
early, and decline very fast
PLC & Marketing Strategies
Characteristics: Introduction Growth Maturity Decline
Sales Low Rapidly rising sales Peak Declining sales
Costs High cost Average cost Low cost Low cost
per customer per customer per customer per customer
Profits Negative Rising profits High profits Declining profits
Customers Innovators Early adopters Middle majority
Competitors Few Growing number Stable number

Marketing objectives:
Create product Maximize market Maximize profit &
awareness and trial share defend market share

Strategies:
Product Offer basic product Offer product Diversify brand and
extensions, service models
Price Use cost-plus Price to penetrate Price to match or
market best competitors
Distribution Build selective Build intensive Build more
distribution distribution intensive distribution
Advertising Build awareness Build awareness & Stress brand differences
early adopters/dealers interest mass market and benefits
Sales promotion Heavy sales promotion Reduce promotion due Increase to encourage
to entice trial to heavy demand brand switching

Source: Philip Kotler and Peggy Cunningham, Marketing Management: Analysis, Planning, Implementation,
and Control, Canadian 11th Edition, Pearson Education Canada, Toronto, Ontario, 2004, p. 347
Marketing Strategy During the Product Life Cycle
Product Life Cycle
• The PLC concept is used by the marketers to forecast product
performance or to develop marketing strategies.

• But all products do not follow the PLC in the same way. Some
products are introduced and die quickly; others stay in the
maturity stage for a long time. Some enter the decline stage and
are then cycled back into the growth stage through strong
promotion or repositioning.

• The major drawbacks of this cycle is that it is difficult (1) to


identify which stage of the PLC the product is in, (2) to
determine the factors that affect the product’s movement through
the stages, to forecast the (3) sales level at each PLC stage, (4)
the length of each stage, (5) the shape of the PLC curve.
Introduction Stage
• The introduction stage starts when the new product is
first launched.

• Here, sales growth is slow, profits are negative or


low, because of low sales and high distribution and
promotion expenses.

• Promotion spending is high to inform consumers of


the new product and get them to try it.

• The company and its competitors produce the basic


versions of the product because the market is not
ready for the different versions of the product yet.
• The introduction stage strategies are;

– Rapid-skimming strategy (high price/high


promotion); here the company targets the “cream” of
the buyers (buyers with high income) so the price of the
new product or service is set high. When the company
wants to attract these people rapidly (quickly), it
heavily promotes the product.

– Slow-skimming strategy (high price/low promotion);


the difference between slow- and rapid-skimming is in
the amount spent on promotion. Here less money is
spent on promotion.
Rapid-penetration (low price/high promotion); the price
level is the key difference between penetration and skimming
strategies. When the market is price sensitive, penetration is
a better strategy. In penetration, prices are set low to capture
as many buyers as possible. When most of the potential
buyers are unaware of the product, they use heavy
promotion. Here the risk is attracting heavy competition
because a lot of companies may like to copy.

– Slow-penetration strategy (low price/low promotion); here


the new product or service is introduced at a low price with a
low level of promotion. Again, the potential market is large
and price sensitive but aware of the new service or product
that is why, the level of promotion is low.
Growth Stage
• If the new product satisfies the market, it will enter a
growth stage, in which sales climb quickly.

• Early adopters buy the product.

• New competitors enter the market when they are


attracted by the opportunities for profit. They introduce
new product features so the market expands.

• Sales increase, prices remain the same or fall slightly,


promotional spending stays the same or increase
slightly.
• Profits increase as promotion costs are spread over a
large volume (sales) and as unit production costs fall.

• The growth stage strategies are;


– improving product quality and adding new product
features and models
– entering into the new market segments
– entering into the new distribution channels
– shifting some advertising from building product
awareness to building product conviction and
purchase
– lowering prices at the right time to attract more
buyers
in order to sustain its rapid growth and meet
competition.
• By spending a lot of money on product
improvement, promotion, and distribution, the
company can gain a dominant position in the
market but, as a result of this, it gives up
maximum current profit and hopes to make it in
the next stage.
Maturity Stage
• At some point, a product’s sales growth will slow down,
and the product will enter a maturity stage which lasts
longer than the previous stages.

• Here, competition is greater because of the


overcapacity. They drop their prices, increase
advertising and sales promotions, and increase their
R&D budgets to find better products. As a result, profits
decrease, weaker competitors leave the market and only
the well-established competitors remain.
• The product managers should consider modifying their market,
product and marketing mix rather than defending their product.
The maturity stage strategies are;

– In modifying the market, the company looks for new users


and market segments e.g. Johnson & Johnson Baby Shampoo
is marketed to adults + looks for ways to increase usage
among present customers e.g. “Sut icin Sut icirin” campaign
of Mis Sut. Or the company may want to reposition the brand
to appeal to a larger or faster-growing segment.

– Or the company may try modifying the product by


changing its product’s features, quality or style to attract new
users e.g. Sony adds new styles and features to its Walkman
and Discman lines, Algida adds new flavors and ingredients
to its current products, Burger King introduces its new Fish
Burgers or car
manufacturers restyle their cars to attract buyers
who want a new look.
– Or the company can try modifying the
marketing mix by changing one or more
marketing mix elements to improve sales. They
can cut prices to attract new users and
competitors’ customers. They can launch a
better advertising campaign or use heavy sales
promotions. The company can also move into
larger market channels - mass merchandisers.
Or the company can offer new or improved
services to buyers.
Decline Stage
• Most product forms and brands’ sales decline.

• Here, the sales may become zero suddenly or may


drop to a low level where they continue for may
years.

• As sales and profits decline, firms withdraw from the


market.

• The remaining companies prune their product


offerings, drop smaller segments or channels, cut the
promotion budget or reduce their prices further.
• Here, the company should decide whether to maintain, harvest,
or drop its product in the decline stage.
– Management may decide to maintain its brand without
changing it in the hope that the competitors would leave the
market. Or management may decide to reposition the brand
in the hope of moving it back into the growth stage of the
product life cycle.
– Management may decide to harvest the product by reducing
costs (equipment, advertising, sales force) hoping that sales
will remain.
– Or the management may decide to drop the product from the
line by selling it to another firm or simply liquidate it at
salvage value.
Thank You

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