Product Life Cycle

3 min read

Product Life Cycle

The product life cycle (PLC) is a process that a product undergoes from its inception to the market until its death or removal from the market. Business owners and marketers use the product life cycle analysis to create strategies and informed decisions on advertising, product pricing, demand, and supply. A new product will market differently than a well-established, mature product. This doesn’t mean product lives cannot be extended, but they have a natural life, which eventually comes to an end.

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Product Life Cycle


Assumptions for PLC Analysis

Assumptions for PLC Analysis

There are three major assumptions done by the management team of a product:

  1. Products have a limited life span and run their natural course.
  2. The sales of the product pass through distinct stages, each with a different set of problems, challenges, and solutions.
  3. At each stage, there are different marketing, financial and production requirements.

So, the four stages of the product life cycle are:


1. Introduction

Introduction -Product Life Cycle

After the research and development of the product, it’s time for the product to hit the shelves. At the release of a new product to the market, it’s a high stakes time in the Product Life Cycle, even though it’s not the make or break factor of the product’s success. During this stage, a lot of money is spent on marketing and promotion of the product with no guarantee of sales.

But, the company needs to do market research to see how customers react to the product. Demand needs to be created through awareness campaigns and consumers need to be prompted to try the product. There may be little to no competition in the market, creating a scope for monopoly.

However, product cost is generally higher due to greater initial costs and low sales volumes. Almost no profit is made due to high costs on production and distribution, so it’s a stage when the company bleeds out cash.


2. Growth

Growth - Product Life Cycle

The product gains traction the market and consumers start to take notice. They start to accept the product and demand increases. This results in a greater volume of sales and generates more revenue. But, still it is far away from the breakeven point. Distribution is increased to cover more area, as well as a new form of the advertising strategy, takes shape in the form of word of mouth marketing.

New customers are gained whilst old ones start reordering. If the product did create a monopoly, the market size is fairly large giving access to more revenue. Along with that, feedback and market research help improve the product and stay ahead of the curveball. This creates an image of the company to the consumers that they care about and are constantly trying to improve.

However, competitors start to take notice and new players start flocking to the market. This increased competition leads to price reductions for your product to keep hold of the market share. This may lead to a reduction in profits.


3. Maturity

Maturity

During this stage, the sales peak and the market reaches saturation as competition grows fierce. Sales growth slows down and the product is widely accepted in the market. This is the optimal time to keep the cash flowing for the company, thus they try to prolong this phase to avoid decline which leads to innovations and added features on the product. Breakeven is reached at this stage and the company starts to make a profit on their product. All the initial advertising, promotional and innovation costs are covered up.

The demand for the product eventually declines. To avoid it, the company tries to find a new target market and expands into new uncharted territory through intense distribution networks, promotion and price cuts. Technology becomes widely available and procurement of resources is easier, leading to a further reduction in production costs and ultimately retail prices.


4. Decline

Decline - Product Life Cycle

This is the dreaded stage of any product. The sales of the product eventually go down or become negative. The product is no longer profitable to produce and production will cease to stop. Some companies start dominating the market and you fall behind. Customer demands change, new technology and innovations start to appear which makes may your product obsolete.

There is a decline in sales volume and product prices as competition becomes severe and the product loses popularity. The company does a cost-benefit analysis and realizes that the costs far outweigh the benefits. Thus, the product goes into the termination phase, which is the end of the product life cycle. However, this is not the end of the business cycle and the company now refocuses its attention to a new product and market strategy.


Applications of Product Life Cycle Analysis

Applications of Product Life Cycle Analysis

PLC analysis is the key to understanding the market for any company. This helps them understand customer demand and create a product that will satisfy the customers. They can also price their products competitively and use marketing strategies to better attract their desired target group. And when the dread time comes, it is important to pull the plug on the product despite its success.


In conclusion, the product life cycle is based on assumptions and is just a theoretical model to better understand the real world. The model does not factor in a lot of physical factors involved. Customer taste varies with time and it is hard to predict what they want. Even if you know, not all desires are meant to be fulfilled. Not all products are practical and some are just dangerous.

Not all products die out or lose market share, but for innovation to exist we need to replace one with another, even if it’s not the best one. We try to create better products and meet demands from end-users, whilst trying to make a profit. At the end of the day, the heart of any business is profit. To ensure your business is running smoothly and on track, you have to start paying attention to the product life cycle.

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3 min read

kacnika mom kacnika mom
3 min read

kacnika mom kacnika mom
3 min read

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