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Product life cycle is a business analysis that attempts to identify a set of common stages in the life of commercial products. In other words the 'Product Life cycle' PLC is used to map the lifespan of the product such as the stages through which a product goes during its lifespan.
In the development stage, the product goes through testing and a prototype is developed. This is after considerable market research to identify consumer needs and wants. If the product is deemed commercially viable, then the product may be put into mass production and launched.
It is important to remember at this stage expenditure for the company is high. No income is being received as there are zero sales.
This is the stage in which a new product is first made available in the market. In the introduction stage, customers are few, competition is less, sales are low, risk is high and profits are low or nil. There are heavy distribution and promotion expenses. This stage is full of risks and uncertainties. prices are also high because(1) costs are high due to low level of output.(2) technological problems in production may not have been solved, and(3) high profit margins are required to support the heavy promotion expenditure.
If the product is popular with consumers, then sales will start to rise. It may be a rapid growth or a slower one. Rapid growths that fall away just as quick are called 'Fads'.
Advertising is often still heavy at this point.
Once the product is well established and consumers are satisfied, then the product is widely accepted and growth slows down. Before long, however, a successful product in this phase will come under pressure from competitors. The producer will have to start spending again in order to defend the product's market position or introduce extension strategies.
It may only be in the Maturity stage where companies will received a return on their original expenditure and investment due to potentially high start up and development costs.
At the very end of the Maturity stage, and where there is no further growth possible, saturation occurs. This is also referred to as Saturation Point.
This is when little or no advertising is needed and sales are leveling off.
Sooner or later sales fall due to changes in consumer tastes or new choices available from competitor's products.
Again, extension strategies may be open to the company to keep the product alive.
Use in Marketing
The product life cycle is an important concept in marketing. It includes stages that a product goes through from when it was first thought of until it is eliminated from the industry. Not all products reach this final stage. Some continue to grow and others rise and fall.
Stages of Product Life Cycle Can Vary in Length
"Branded product life cycles vary in length and shape. Product category and product form life cycles also possess degrees of variability, depending on the type of product under consideration. One extreme is the very short life cycle associated with the product fad. Fads move almost immediately into the growth stage of the PLC. Some fads possess significant residual markets that keep them around for a while, but even these products move fairly rapidly into and through decline." Fads: "A temporary fashion with a short life cycle (Hula Hoop, Frisbee, Wristbands) Some products can have extremely long maturity phases, but others may have very long introductory phases. It may take some products a substantial amount of time to catch on in the market before they enter their growth phases. These products have been referred to as "high learning products." These products often are complex to understand or use, may be extremely expensive, may not be easy to sample before committing to purchase, or may not be compatible with existing social values." (courcesunt.edu). "There are five different product adoption groups during the product's life cycle 1.Innovators-well-informed customers who are able to try unproven product 2.Early adopters-usually educated opinion leaders 3.Early majority-careful consumers, who tend to avoid risk 4.Late majority-somewhat skeptical customers 5.Laggards-those who avoid change The rate of adoption depends on many factors and correlated with the product life cycle."
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6) (Philip Kotler, "Marketing Management: Analysis, Planning, Implementation and Control", 9th Ed.(Upper Saddle River, NJ: Prentice- Hall,cocourses.unt.edu).
7) Free MBA Notes (India)