Like human beings products also have a life span. The product life cycle begins when after going through the various stages of development it is introduced into the market for the first time on a commercial basis. After its introduction it passes through various stages till it is finally abandoned i.e., discontinued from the market.
The product life cycle, helps marketers visualise the stages of market acceptance. Its greatest practical use, however, is as a planning tool.
Many successful marketing companies build their strategies around the, concept, graph financial and market data against product life cycles, develop long- and short-range plans that complement each stage.
The five main stages of product life cycle are: 1. Introduction Stage 2. Growth Stage 3. Maturity Stage 4. Saturation Stage 5. Decline Stage.
Product Life Cycle Stages: Introduction Stage, Growth Stage, Maturity Stage, Saturation Stage and Decline Stage
Product Life Cycle Stages – 4 Main Stages: Introduction Stage, Growth or the Market Acceptance Stage and Few Others
The product life cycle concept derives from the fact that a product’s sales volume and sales revenue follow a typical pattern of four phase cycle. The life cycle is a fact of existence for every product. It is similar to the human life cycle. The length of the life cycle, the duration of each phase and shape of the curve vary widely for different products.
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A product passes through certain distinct stages during its life span; this is termed as Product Life Cycle. The ‘Product Life Cycle’ (PLC) indicates that a product is born or introduced, grows, attains maturity in a particular market and sooner or later it is found to enter in its declining stage. The ‘Product Life Cycle’ (PLC) should be termed as product market life cycle as it is related to a particular market.
1. Introduction Stage:
Also known as the pioneering stage. It is characterised by very little competition. Heavy promotional activities are required to create an awareness and demand for the product. This stage is expensive and risky. It is a no-profit stage because of the heavy promotional expenses.
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i. Product is introduced in the market with the intention to build a clear identity and heavy promotion is done for maximum awareness.
ii. Before actual offering of the product to customers, the product passes through product development, involves prototype and market tests.
iii. Companies incur more costs in this phase and also bear additional cost for distribution. On the other hand, there are a few customers at this stage, means low sales volume.
iv. During the introductory stage company’s profits shows a negative figure because of huge cost but low sales volume.
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v. At this point in the life cycle, the organisation will typically control very little market share and the sales volume will be very low. This is usually due to the simple fact that not a lot of people are aware of the product.
vii. As a result, the fixed costs cannot be spread out very well, which leads to a high cost per customer. The combination of low sales volume and a high cost per customer typically result in negative profits.
viii. At this point in the life cycle, the organisation will want to create a marketing mix strategy that has the sole purpose of educating the target market.
viii. Likewise, the organisation should ensure that market segmentation is considered and it is important to determine whether or not the organisation is actually targeting the right customers. Often times, post-launch market research can be much more beneficial that pre-launch market research.
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2. Growth or the Market Acceptance Stage:
Sales and profits are on the rise. Competitors enter the market in large numbers. It is in this stage that the product establishes itself in the market.
i. As the product enters the growth phase of the product life cycle, sales volume should start to rise rather rapidly.
ii. As people become aware and start to buy the product, the overall cost per customer will ultimately decrease.
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iii. With more customers and a lower cost per customer, the product’s profitability should start to increase. During the growth phase, competition will start to take notice and will likely enter the market with a similar product.
iv. At this point in the product life cycle, the organisation will want to adjust their marketing mix strategy to address the concern about competition.
When laying out the revised marketing mix strategy, the following questions should be looked at:
a. What has been learned about market segmentation and how accurate were the initial assumptions?
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b. In regards to competition, which competitors present a real threat to the business?
c. How much would it cost to implement the necessary marketing mix strategy?
d. Is there a substantial profit motive to move forward with the product?
e. How much market share could be ultimately captured as the product moves through the product life cycle stages?
3. Maturity Stage:
It is also known as the stagnation or plateau stage. In the beginning part of this stage sales do increase but at a decreasing pace, because of intense competition.
i. This is the stage where sales increases at a decreasing rate. New users cannot be added indefinitely and sooner or later the market approaches saturation.
ii. Normally, this is the longest stage of the product life cycle. Many major household appliances are in the maturity stage of their life cycles.
iii. For shopping products and many specialty products, annual models begin to appear during the maturity stage. Product lines are lengthened to appeal to additional market segments. Service and repair assume more important roles as manufacturers strive to distinguish their products from others. Product design changes tend to become stylistic (how can the product be made different?) rather than functional (how can the product be made better?)
iv. As prices and profits continue to fall, marginal competitors start dropping out of the market. Dealer margins also shrink, resulting in less shelf space for mature items, lower dealer inventories, and a general reluctance to promote the product. Thus, promotion to dealers often intensifies during this stage in order to retain loyalty. Heavy consumer promotion by the manufacturer is also required to maintain market share.
v. Another characteristic of the maturity stage is the emergence of “niche marketers” that target narrow, well-defined, under-served segments of a market.
vi. Because the product is selling in such large volumes, the overall cost per customer should be very low. As a result, the product’s profitability should be at its highest point yet.
viii. During the maturity phase, it’s likely that the number of competitors in the market has become stable, possibly even declining some.
viii. At this point, how the product has performed as it’s moved through the different product life cycle stages is to be considered. This insight will help in creating a marketing mix strategy for this particular stage of the life cycle.
ix. Some questions that need to be looked at in this stage –
a. Is there a profit motive to continue to put in money into marketing this product?
b. Is there still market share to be captured? And how much would it cost to capture that market share?
c. What has been learned from the previous product life cycle stages and how can that knowledge be applied at this stage in the life cycle?
4. Decline Stage:
For most products decline is inevitable. Here profits and sales volumes both decline.
i. A long-run decline in sales signals the beginning of the decline stage. The rate of decline is governed by how rapidly consumer tastes change or substitute products are adopted. Many convenience products and fad items lose their market overnight, leaving large inventories of unsold items.
ii. Due to the declining sales volume, the product’s profitability will eventually start to decline. During the decline phase, competitors will likely leave the market.
iii. Some firms have developed successful strategies for making products in the decline stage of the PLC. They eliminate all non-essential marketing expenses and let sales decline as more customers discontinue purchasing the products. Eventually, the product is withdrawn from the market.
iv. Consumers can be grouped according to how quickly they adopt a new product. On the one extreme, some consumers adopt the product as soon as it becomes available. On the other extreme, some consumers are among the last to purchase a new product.
Product Life Cycle Stages – 4 Main Stages
The product life cycle, helps marketers visualise the stages of market acceptance. Its greatest practical use, however, is as a planning tool. Many successful marketing companies build their strategies around the, concept, graph financial and market data against product life cycles, develop long- and short-range plans that complement each stage.
The true value of the product life cycle is realised by those who understand the changes in competitive conditions and consumer behaviour that occur at each stage and why they occur. The product life cycle highlights the fact that conditions will change and that the product in question might well die unless careful planning for changes in marketing strategy is undertaken.
For example, the product life cycle concept encourages the marketing planner to develop product improvements, or even totally new products, to protect the organisation against an early demise of its market offering.
The history of business and of nonprofit organisations is filled with stories of one-product companies that disappeared when their goods or services were no longer in demand. In contrast, long-lived and successful companies have adjusted to inevitable change, saving themselves from a similar fate.
Strategy Changes through the Product Life Cycle:
Marketers can use the product life cycle as a basis for developing market strategies. Overall marketing strategy and various marketing mix aspects are likely to be adjusted as a product moves through the life cycle stages.
We will discuss each stage of the product life cycle, as well as the timing of certain marketing strategies:
(1) The Introductory Stage — Gaining Acceptance:
The introductory stage of the product life cycle is a period of attempting to gain market acceptance. The marketing effort is focused not only on finding first-time buyers and using promotion to make them aware of the product’s existence but also on creating channels of distribution — attracting retailers and other intermediaries to handle the product.
It is also a tune when most of the research and development costs associated with the product need to be recouped. During this period, product alterations or changes in manufacturing may be required to get the bugs out of the new market offering. The introduction stage, then, is typically a high-cost/low-profit period. (It may even be a no-profit period.) Although it is an exciting time, it is also a time of uncertainty and anxiety because the new product must survive this now-or-never situation.
Selecting strategies appropriate to the introductory stage of a product life cycle is important, yet organisations differ widely in their strategy choices. Some companies believe that being a pioneer and risk taker is the best approach — the greater the risk, the greater the reward.
Thus, in many industries, such as – tyres and aircraft, the same companies are the leaders in new product development over and over again. Other companies quickly follow the pioneer’s lead and jump into the market during the introductory stage. Still others hold back and wait to see whether the new product will actually take off into a growth period. Each approach has obvious advantages and risks that management must weigh.
The length of the product life cycle introductory stage varies dramatically. Personal computers and home video games gained market acceptance rapidly. Television, in contrast, took years to reach widespread popularity, although that delay was partly due to the diversion of technological assets necessitated by World War II.
The concentrated laundry detergent product category presents another example of slow market acceptance. The first serious effort to introduce a product that cleans a whole wash load with only a quarter cup of powder was made in 1976 with the appearance of Colgate-Palmolive’s Fresh Start, a powder in a plastic bottle.
Rapid sales growth for the category did not occur until 1990, when two other brands, Ultra Tide and Fab Ultra, were successfully introduced. Their success is in part due to stressing the environmental advantage of small packages. Today, virtually every detergent marketer has a concentrated brand. The market for the product is mature.
(2) The Growth Stage — Taking Off:
The growth stage begins when the product begins to break even. When a product enters its growth stage, it has shown that it may have a future in the marketplace. As a result, the number of competitors and the level of marketing activity can be expected to increase.
Pioneering firms are often required to alter their products because competitors, having the advantage of learning from the pioneers’ mistakes and the time to study the market, may have improved on the original. Competition also increases because of the recognition of an untapped potential market – There seems to be enough profit to go around, and competing firms may be able to grab a sizable share of market without taking away from one another.
Products still in their growth stages include cellular phones, camcorders and computerised information and interactive shopping services. The profits associated with these products will rise (although not for every company) and peak at the end of the growth period. Distribution costs will be brought under control as channels become more organised and able to perform their tasks routinely.
Product quality will be stressed and improved. Persuasive efforts to create brand preference will become the emphasis of promotion. Promotion expenses will be adjusted as rising sales and profits indicate the product’s potential.
(3) The Maturity Stage — Reaching a Peak:
Most products on the market are in their product life cycle’s maturity phase. During this stage, competition is likely to be intense. After all, one of the goals of effective marketing is to achieve brand maturity status and to maintain it for as long as the market supports the product.
Further, because a product in the maturity stage has achieved wide market acceptance, the primary means for any one company to increase its market share is market share away from competitors.
For example, in the mature automotive business, strategies to maintain market share and defend against inroads from foreign competition are common. As competition intensifies, profits begin to decline. The American automobile industry in the 1990s provides an example of this stage.
One strategy to increase market share is to produce private brands distributors. Thus, private labels emerge in the mature stage. An organisation selling a mature product may pick up new business in the price-conscious segment of the market as other; less competitive companies withdraw from the market.
Persuading existing users to use more of the product may be a major objective for marketers of mature brands. Many food products advertise recipes that require their product as an ingredient to foster increased usage.
Organisations in mature markets have solved most of the technological problems encountered early in the product life cycle. The products require little technological improvement. The bugs are gone; therefore, changes in the product become largely a matter of style.
Radios, for example, are now offered in tiny sizes and in big sizes, with tape decks and without, with belt clips for joggers and with handles for toting down the street. They run on house current, batteries, solar power, and car cigarette lighters. Fashionable designs and model variations become important during the product’s maturity; whereas early in the product life cycle the emphasis is on making sure products work.
Although industry profits generally peak near the end of the growth stage of the product life cycle, many individual fires in mature market situations are very profitable. A major reason for this is the experience gained during the earlier stages. Development of economies of scale also play a part.
Organisations in mature markets whose brands are profitable typically use the funds these brands generate to support other items in the product mix. The laundry detergent industry is certainly in its mature stage, but industry leader Procter & Gamble uses the sizable profits generated by Tide and Cheer to pay for the development and introduction of new product items and lines.
Successful marketing managers, recognising the maturity pattern, investigate the causes of that maturity. Once sales have peaked, the possibility of decline starts to appear. The marketer may find that a product is in the mature stage because it has become, and remains, widely used (like roofing supplies or tyres) and that sales volume remains stable.
In contrast, sales may have peaked because an alternative product or brand has become popular due to some environmental change. The effective marketer needs to know why; a product is in its maturity stage not just that it is there.
(4) The Decline Stage — Winding Down:
The decline stage in the product life cycle is one of falling sales and, on an industry-wide basis, falling profits. There is likely to be a shakeout in the number of items in the industry as managers become aware that the product has entered the decline stage. A few firms, or even a single firm, may survive and even do well by catering to the remaining buyers.
Makers of parts for DeLorean and Edsel automobiles are neither large nor numerous, yet they can survive by catering to car collectors. Blacksmiths are not as common as they once were, but some still survive.
The consumers who continue to use the product are experienced and often brand loyal. Thus, promotional efforts are minimal. Additionally, organisations try to minimize the cost of distribution and other marketing expenses. Prices generally stabilize and can often rise because of the reduced number of competitors.
The few firms that continue to market the products may continue to earn a profit, but the declining sales volume means total profits decline.
Marketing managers should take care to assure themselves that what they see as entry into the decline phase of their product’s life cycle is in fact just that. A downward movement of sales may be due instead to some short-term influence or to a downturn in the economy’s business cycle.
Again, it is clear that the key to using the product life cycle concept is understanding the causes of the cycles, shifts, and fluctuations so that their implications for the organisation’s own industry and product can be considered.
Is there life after decline?
Occasionally, a product life cycle changes slope, reversing the downward trend associated with the late maturity and decline stages. Some products and brands approach extinction only to suddenly achieve a new-found popularity. Such a turn of events may be due to nostalgia or to the sudden realisation that an old, familiar brand or product was really pretty good after all.
A change in the marketing environment could bring this about. In the last decade, considerable medical attention has been given to proper nutrition as a means of maintaining good health. Fiber in the diet has been an important issue. Some new products appeared in response to this, and certain old products were suddenly more in demand.
Granola, soups, and natural sweeteners, such as – honey, were among these products, and they are marketed accordingly. Erector sets also may experience a revival, as the accompanying Competitive Strategy feature describes.
Products that appear to have stable or declining sales may increase in popularity because of their close tie-ins with other products or because of changing social values. The popularity of products such as – the video tape recorder has increased consumer interest in quality colour television sets.
The U.S. physical fitness craze helped the sales of jogging shoes, jump ropes, bicycles, and exercise machines.
Product Life Cycle Stages – Top 5 Stages
A product life cycle decides total life period of a product.
During its life a product undergoes the following five stages:
1. Introduction stage – It deals with new products, does not work very well, prices are high, market awareness and acceptance of the product is low, growth rate is slow. Market of the product requires to develop.
2. Growth stage – The product is improved, standardized, dependable and lower in price. The product begins to sell in larger quantities as it becomes a product of common use.
3. Maturity stage – The product is mature, dependable in performance, reasonably priced, does not change from time to time; sales volume may fall as everyone owns one.
4. Saturation stage – The sales remain on a plateau. At this stage the critical analysis is required.
5. Decline stage – The product is edged out.
As many product goes for life cycle and finally become obsolete, the company must opt for change in design or develop new products.
Product Life Cycle Stages – Product Development, Introduction, Growth, Maturity and Decline Stage
Various stages of product life cycle are:
1. Product Development Stage:
It begins when the company finds and develops a new product idea. During product development, sales are very low and the company’s investment costs add up. Demand has to be created and developed. Customers have to be prompted to try out the product. This stage poses several problems like which pricing policies to be followed – skimming or penetration.
Note – Product development stage is a new concept which is helpful in showing the sales and profit during the development process. This stage is illustrated in the diagram showing sales and profit during various stages of PLC.
2. Introduction Stage:
Customers may not be ready for the product. Sales are very low at this stage. Profits are non-existent at this stage because of heavy expenses of product introduction.
3. Growth Stage:
It is a period of rapid market acceptance and increasing profits. The customers become familiar with the products. Competitors enter with a similar or a slightly different version of the product. So the firm has to be very careful and alter the marketing policies accordingly.
Some of the major point that needs to be taken into consideration are:
i. Pricing
ii. Strategy
iii. Promotion activities.
4. Maturity:
Maturity is a period of sales growth because the product has achieved acceptance by most potential buyers.
Here:
i. Brand differentiation must be done
ii. Dealers become multi brand dealers
iii. New modifications on firm’s end becomes necessary
iv. Finding of new segments to avoid decline
v. Stress on profitability
Characteristics:
i. Relatively low price
ii. Tough competition
iii. Increased marketing costs
iv. Less profits
5. Decline Stage:
At this stage the sales fall and profit drops. It is due to availability of new and advanced technology products. Price and margins get depressed, total sales, profit and demand goes down. Marketer may try to develop the sale of these products with some other premium products that they have developed and thus try to stretch the life of declining products. Some firms even keep new products ready to fill the vacuum created at this stage.
It is not necessary that every product will face every stage. It depends upon its condition.
Product Life Cycle Stages – 4 Main Stages
Product life cycle can be divided in the following four stages:
1. Market Introduction Stage:
This is the first stage of the product and it is called an introduction stage.
Following are the prime characteristics of this stage:
(i) The institution has not to cope with excess competition because the competitive institution cannot enter into the market.
(ii) The consumers do not have sufficient knowledge regarding products and even if some have the knowledge, they too hesitate while buying any product.
(iii) The institution can market the product in a limited field and the quantum of sale increases gradually.
(iv) A firm requires broad advertisement and sale promotion efforts to execute. As a result of this, the cost is increased and this stage becomes more competitive and risky.
(v) As the quantum of sale at this stage is meagre and promotion cost are increased, the concern has to sustain losses.
2. Market Expansion Stage:
The consumers begin to accept the product and sale starts increasing at this stage. This stage provides with profit and competitive firms enter into the market.
Following are the prime things of this stage:
(i) The customers are well-informed of the product owing to the sales promotion efforts and they begin to accept the product.
(ii) The profits are increased at this stage and profits to the manufacturer, distributors and retailers rapidly increase.
(iii) The quantum of increased profit lures the competitive firms to come into the market. It gradually increases the competition and every firm introduces its brand and trademark. In the circumstance, the buyers begin to buy another brand when they do not receive the brand of their preference.
(iv) A number of important decisions are made at this stage. For example, selection of particular distribution channel, research for market expansion, selection of an advertisement policy etc.
(v) The cost of production is reduced at this stage and the managers are required to execute the following acts-
(a) An attention should be given to the variety, quality, size and the shape of the product.
(b) Instead of examine any product, an advertisement policy to take benefit of brand should be made.
(c) Increase an efficiency of production and the distribution.
3. Market Maturity:
It is also called a saturation stage. Two stages arise here. The first stage is called the stage of maturity and the other is called the stage of saturation.
(i) Maturity Stage:
(a) Profits begin to decline but sale increases.
(b) Profits decline and the sale increases with decreasing rate.
(c) Supply increases more than the demand because on account of considerable expenses made by the rival firms on sales promotion. This stage requires demand stimulation and dealer support.
(d) Marketing expenses start rising and price of the product starts decreasing
(e) The manufacturer has to go directly to the consumer and thus, creative sale is generated.
(ii) Saturation Stage:
(a) Sale of substituted products in the market starts rising
(b) Sale of undertaking starts declining after a reach on the apex point. A throat cut competition has to be faced
(c) The profits start declining on account of sales rising fast
(d) Production processes become obsolete and a requirement and a necessity to introduce modern modification is felt.
At the stage of several kinds of products, the time for maturity and the saturation stage is different. In case of convenience goods, market maturity and the saturation stage may be long as much as several months or years.
The sale of these products does not decline rapidly even after a reach at the saturation point and it remains stable for long period. The eatables, cigarette, soap etc., fall under the category of these products. The products like furniture, electric devices, and the watches etc., can be used for prolong period and the stage of their life cycle has different time span.
These products after their stage of development are immediately accessed to the saturation point but their sale is increased matching with the period of their re-institution demand and the total market again attains stability.
4. Market Decline Stage:
This final stage of the product life cycle is known as a market decline stage or market death stage. The product at this stage either becomes obsolete or it has to remove from the market.
At this stage, a co-ordinated control on all kinds of cost of production is necessitated. A new product is favoured more than such obsolete product so that the new product so introduced can receive the place of that old product.
Product Life Cycle Stages – Introduction, Growth, Maturity and Decline Stage
Like human beings products also have a life span. The product like cycle begins when after going through the various stages of development it is introduced into the market for the first time on a commercial basis. After its introduction it passes through various stages till it is finally abandoned i.e., discontinued from the market.
These stages taken together are known as “The product life cycle”. The life cycle of a product comprises of four stages i.e. introduction, growth, maturity and decline. However it should be noted that this is purely a theoretical concept.
1. Introduction Stage:
During this stage the product is introduced into the market for the first time. As the product is new a lot of promotional expenditure has to be incurred in order to make the people aware about the characteristics and features of this new product. As the consumers are unaware about the availability of the product sales are slow to pick up, and profits are negligible.
During this stage there is virtually no competition, as the product is yet to make its mark in the commercial world. This stage witnesses a large number of product failures and hence competitors are vary of entering the market at this stage. It is only when the product shows signs of promising profits that competition enters the scene.
This stage is marked by the following features:
a. High investment in promotional expenditure.
b. Limited sales and low profits.
c. Limited competition.
2. Growth Stage:
After the introduction of the product, it gradually starts gaining acceptance with the customers and sales start increasing. As the sales pick up other competitors who were keenly watching the market come up with competing products. The sales keep rising and the market expands. Production increases. The number of distribution outlets increase.
As this stage witnesses an increase in competition usually firms try to improve the quality of the products during this stage. Further a reduction in the price of the product is also done in order to increase the market share. During this stage even though the promotional expenditure is still high the promotion to sales ratio is lesser than the introduction stage as in this stage the sales are high.
This stage is characterised by the following:
1. Increase in competition.
2. Increased volume of sales.
3. Improvement in the quality of the product.
4. Price reduction.
5. Reduction in the promotional expenditure to sales ratio.
3. Maturity Stage:
As time passes the sales of the product stabilises and the growth slows down. At this point of time the product is said to have entered the maturity stage. During this stage the sales increase but at a diminishing rate. The maturity stage lasts much longer than any other stage. It is the most vital stage and all efforts must be made to prolong this stage.
This stage can be divided into three parts:
a. Growth maturity
b. Stable maturity
c. Decaying maturity
a. During the growth maturity stage the sales start falling due to a saturation in the distribution system. There are no new areas of distribution to cover, nor any new and distinguished channel member available to push the sales.
b. During the stable maturity period the sales start falling because of a total saturation of market demand. All the potential buyers have tried the product. The purchase and replacement and repeat demand has already been consumed.
c. During the third stage of decaying maturity the market no longer accepts the product, as a new product has already taken its place. The sales thus start declining.
As this stage witnesses a gradual fall in the sales of the product the competition gets severe. All efforts are made to capture what is left of the market. In order to do this a lot of promotional expenditure is incurred. Because of this the weak competitors leave the market.
The surviving competitors usually witness a promotional war with each trying to maximise his sale by luring the customers with attractive offers. A lot of efforts are made to modify the product and increase this stage. Some of the areas in which modifications are possible are product, market and marketing mix modifications.
This stage is characterised by the following features:
(i) Increase in sales at a decreasing rate
(ii) Cut throat competition.
(iii) Exit of poor competitors.
(iv) New changes in the product.
(v) Increase in promotional efforts.
4. Decline Stage:
During this stage the sales of the product starts falling. This is because the demand has been channelised elsewhere. The reasons for the fall in demand may be the introduction of a new and better substitute product, change in fashion, tastes and preferences of the customers, changes in technology etc.
During this stage the sales fall to near zero level, and the product is gradually pushed out from the market. This stage is inevitable for most products. Usually companies decide upon a discontinuation of the product during this stage and withdraw from the market. One or two big companies remain in the market till the end in order to mop up the last bits of demand.
This stage is characterised by the following features:
a. A drastic reduction in sales.
b. Decline in profits.
c. Exit of the product from the market.
Product Life Cycle Stages – 5 Important Phases: Introduction or Innovation, Growth, Maturity, Saturation and Decline Phase
Product life cycle is one of the very important aspect in evolving an effective advertising strategy. The stage in the life cycle of the product is one of the determinants of the promotion mix. The product life cycle theory suggests that all products have certain length of life during which they pass through certain identifiable stages. The theory recognises five phase process of development success and decline.
These five phases are:
1. Introduction or innovation,
2. Growth,
3. Maturity,
4. Saturation, and
5. Decline
Since the conception of the product, during its development and to the market introduction, product remains in the prenatal stage. Its life begins with its introduction in the market. It follows a period during which its market grows rapidly, eventually, it reaches maturity and than stands saturated. Afterwards, its market declines and finally its life comes to an end.
During the introduction stage, the sales will take some time before they pick up because the target consumer is not aware of the new product. The organisation must discover that the substantial promotional expenditures are necessary. Various promotional programmes are carried out to inform the target consumers of the existence of the new product stating the advantages of the product over the rival products that exist in the market. The product is made popular among its users through promotional activities at this stage, high levels of advertising, sales promotion and publicity are vital to gain consumer acceptance.
As soon as the product gains consumer acceptance, it enters its growth stage. During the period of market growth, the sales of organisation keep increasing as the product gains popularity among its target consumers. Consequently, profits of the firm start go up and up because of the two primary reasons- (i) The firms gets large scale production economics due to increase in demand, and (ii) Advertising and distribution costs per unit expenditures is reduced considerably due to increase in production. High profits are likely to attract the competitors in the field.
At the third stage, immaturity stage, the competition is severe though the sales of the product go up but at a lower speed. The innovator has to struggle hard to survive. The total industry, sales are high and a number of organisation, including the innovator must have a share in them.
The competitive situation leads some organisations to spend, a substantial sum in promotional activities in order to retain at least the existing market share. At this stage profit rate begins to decline. The producer searches for new markets. Market and marketing research expenditures go up.
Next comes the saturation point. The sales volume comes to standstill in spite of the best efforts but it is at all-time high. Competition is also at its peak in this period. It brings the costs of promotional efforts and distribution to a new peak. Prices begin to fall and therefore profit comes down. Fresh efforts are made at this stage to survive the position and new markets are tried.
The last stage in the cycle is the decline stage. This stage is brought out by product’s gradual displacement by some new innovation or change in consumer behaviour. Technological changes and market conditions lead the competitors to enter the market with improved substitutes of the product which naturally reduces the demand of the old existing product. The sales and profits start going down and finally, the demand of the product dies. At this stage, it is advisable to stop the production of the product and hive off to some other products.
Advertising Strategies and Product Life Cycle:
Advertising is a life for the business. It is needed at each stage of the product life cycle, although, the strategy of advertising differs at each stage. The promotion mix, appeal, creativity and medium all carry different impact on target consumers at each stage.
Now in the following discussion, we shall try to explain different strategies which are usually adopted by the manufacturing in advertising in the different stages of product life cycle:
1. Introduction:
It is the first stage of the product life cycle. As the product is newly introduced in the market the buyer or target consumer is not well informed. So, the prime objective of advertising at this stage is to inform the consumers about the characteristics and qualities of the product taking into account the similarities and differences of the rival products. Heavy expenditures on advertising, sales promotion and publicity are made to inform the public of the existence of the new product.
In case of industrial goods, personal selling may be useful but it should be effective. In case of consumer items, the promotional efforts should centre on generating a primary rather than a selective demand for the individual brand. Since there are few competitors at this stage, mass selling efforts may be concentrated on the basic information job. Initial advertisements should be designed to draw enquiries.
2. Growth:
As soon as the product gains popularity and recognition from the target consumers, it enters the second stage, i.e., growth stage. Due to heavy dose of promotional efforts at introductory stage, the demand and sales volumes increase tremendously. Profits go high competitors are likely to enter the market. So the main aim of the marketer, at this Stage is to capture the sizeable share of the market and for this purpose, he concentrates on generating the selective demand of the brand.
Due to increasing trend of sales and the likely competition, the marketer is induced to incur substantial promotion expenditure to obtain a differential advantage. The management now has a capacity to appropriate higher budget due to heavy profits, to capture a sizeable market of the brand.
At this stage, the main thrust of the marketer still is to persuade customers to buy and stay with the company’s product, although informing and convincing them is still important. As now more potential buyers are trying and adopting the product, mass selling may become more economical.
The management may utilise sales promotion efforts like ‘reduced price’ or ‘free samples’ or ‘off coupons’, etc., in order to maintain or increase the sales. Likewise ‘advertising’ and ‘personal selling’ expenditures are sizeable to overcome the efforts of the competitors to capture increasingly larger shares of the market.
3. Maturity Stage:
The competition at this stage, is severe. The total sales and profits of the concern go up but at lower speed. The producer at this point, has to struggle hard to survive and spend a large sum on advertising and personal selling in order to retain its share of the market. The promotion approach is persuasive rather than informative. Mass selling efforts dominate the promotion blends of consumer products. The firms that have achieved a strong consumer support, use reminder type advertising rather than persuasive advertising, just to remind the customer of the product or producers name and this may be more economical.
4. Saturation Stage:
The competition at this stage is at the peak. Sales are not getting tempo in spite of best efforts. At this stage, a balanced promotion mix is used to maintain the sales level. Moreover, the marketer must try to improve the product at this stage by expending more on the product or market research and to bring with the new usages of the product, or new markets should be tried.
5. Decline Stage:
At this stage, the sales go down. The marketer is of the belief that any attempt to compete is unprofitable and therefore, he does not allocate more funds to advertising and promotional activities. Some organisations however use aggressive personal selling programmes to further penetrate specific market segments.
In general, marketers slow down on all forms of promotion efforts at this stage. It may also invest in new market research to locate areas of weakness or possible improvement. Since the product, remains acceptable to some people) more targeted promotion is required to reach such customers, and such as reminder-type advertising.
Product life cycle theory assumes that every product has five phases in its life. It means every product is to die out in spite of best promotional efforts by the marketer. The period of life cycle may differ from product to product and from market to market experience shows that this theory does not apply to every product-and there has been some criticism of it on these grounds.
There are three stages of the product life cycle which are also of interest in advertising and public interest:
(i) There is recycled product life cycle which applies to long lived product which suffers no decline, but has periodic market challenges. These threats are met by injections of product modification.
(ii) When one product is replaced by another this has leap-frog effect.
(iii) There is the very interesting staircase effect where the life cycle continues to take off from the point of maturity as new uses and markets are discovered. Passenger shipping is the five example of it, when shipping line met the competition of the aeroplane by developing car ferries and container ships.
Thus, the conclusion may be drawn that every product with few exceptions has this cycle and the advertising efforts differ with each successive stage till the product becomes unprofitable.