The Product Life Cycle (PLC) comprises four distinct stages: Introduction, Growth, Maturity, and Decline. Specific product life cycle strategies are associated with each stage, and understanding which strategies to apply at each phase is crucial for effective PLC management.
1. Introduction Stage:
Characteristics: The product is newly launched, and distribution is limited. Sales growth is slow, and profits are often negative due to high distribution and promotion expenses.
Strategies:
- Launch Strategy: Choose a strategy consistent with the intended product positioning.
- Focus on selling to innovators, the buyers most ready to adopt new products.
- Create product awareness and encourage trials among the target market.
- Produce basic versions of the product, as the market is not ready for significant improvements.
- Use cost-plus pricing to recover incurred costs.
- Selective distribution to target important distributors.
- Heavy sales promotion to entice trials.
2. Growth Stage:
Characteristics: Sales climb quickly as early adopters continue to buy, attracting more competitors. The market expands, and profits increase.
Strategies:
- Maximize market share during this stage.
- Improve product quality and add new features.
- Enter new market segments and distribution channels.
- Maintain or decrease prices to penetrate the market.
- Keep promotion spending at a high level to educate the market and meet competition.
- Choose between high market share and high current profits, making tradeoffs for long-term success.
3. Maturity Stage:
Characteristics: Sales growth slows down or levels off as the market becomes saturated. Competitors increase, leading to price reductions and heightened promotional activities.
Strategies:
- Maximize profit while defending market share.
- Constantly adapt the product to meet changing consumer needs.
- Modify the market, product, and marketing mix to sustain growth.
- Consider increasing consumption by finding new users and market segments.
- Pricing may remain stable or decrease.
- Shift the focus of advertising from building awareness to building product conviction and purchase.
4. Decline Stage:
Characteristics: Sales decline due to various factors like technological advances, changing consumer tastes, and increased competition. Competitors may withdraw from the market.
Strategies:
- Reduce expenditures to maximize profits in the decline stage.
- Cut prices, phase out unprofitable outlets, and reduce advertising and sales promotion.
- Identify declining products early and decide whether to maintain, harvest, or drop the product.
- If maintaining, consider repositioning or reinvigorating the product to move it back into the growth stage.
- Harvesting involves reducing costs and harvesting the last sales.
- Dropping the product may involve selling it to another firm or liquidating it at salvage value. Choosing the right product life cycle strategies is essential for long-term success, and careful attention to aging products helps identify declining products early in the decline stage. Decisions regarding maintaining, harvesting, or dropping a declining product have significant implications for the company’s future.