Explain Product Life Cycle? What are its characteristics?
The Product Life Cycle (PLC) is the life span of a product from development, through testing, promotion, growth and marketing, to decline and perhaps regeneration.
Characteristics of PLC
Following characteristics can be seen in the Product Life Cycle concept
1. Each product or goods has a life cycle like human beings, plants and animals.
2. The life cycle of each product begins with its introduction in the market and passes through the phases of market development, maturity, becomes leader and ultimately declines.
3. The speed of movement through various stages of life cycle, cannot be the same for all goods.
4. Profits in the business enterprise, grow quickly in the introduction stage and decline/decrease in the maturity stage due to competitive conditions. However, there is overall increase in sale during the maturity stage.
5. With the decrease in profits in the maturity stage, changes such as research and development, production pattern, marketing and financial control activities etc become essential.
Stages in Product Life Cycle (PLC)
The Product Life Cycle comprises four stages
The introduction stage of the PLC is characterized as follows
- Sales generally are low and somewhat slow to take off.
- Production costs tend to be high on a per unit basis because the firm has yet to experience any significant scale economies.
- Profits, because of low sales and high unit costs, tend to be negative or very low.
- Competitors tend to be few in number, indeed there may be only one major player in the market place-the innovating firm.
- Marketing cost needed to create customer awareness, interest and for introducing the product into the distribution channels are high.
- In the introduction stage of product, same innovative products may be launched
- Product designing
- New ideas
This stage of PLC has the following features
- Sales increase rapidly during the growth stage.
- Costs reduced due to economies of scale.
- Profits rise significantly and rapidly during this stage.
- Competition continues to grow throughout this stage.
- The category of consumers in the growth stage of product is somewhat more price sensitive, more risk averse and therefore, somewhat more hesitant to adopt the product.
This stage of PLC is characterized as follows
- Sales continue to grow during the early part of maturity, but at a much slower rate than experienced during the growth phase. At some point, sales reach the peak. This peak may last for extended periods of time. In fact, the maturity phase of the life-cycle is the longest phase for most products.
- Costs continue to rise during maturity because of market saturation and continually intensifying competitions.
- At this point, the market reaches saturation. Producers begin to leave the market due to poor margins. Promotion becomes more widespread and use a greater variety of media.
- Profit starts to decline in this stage.
- This is the last stage of PLC which is characterised as follows
- At this stage, there is a downturn in the market.
- Profit margins touch a low level, competition becomes severe and customers start using newer and better products.
As per Philip Kotler, stages of product life cycle has been divided into
1. Market Introduction
2. Market Growth
3. Market Maturity
4. Market Decline