MEANING AND DEFINITION OF PRODUCT LIFE CYCLE
According to Philip Kolter: “The product life-cycle is an attempt to recognize distinct stages in the sales history of the product
According to Arch Pattern: “The life-cycle of a product has many points of similarity with the human life cycle, the product is born growth lustily attains dynamic maturity then enters its declining years.'
According to ”Willian J. Stanton: “From its birth to death, a product exists in different stages and in different competitive environment. Its adjustment to these environments determines to a great degree just successful its life will begin.
Uses of the product life cycle concept
• To forecast future behaviour of sales
• To identify deviations from the norm
• To aid the analysis of the firm's product portfolio
• To be a tool of analysis to assist in the formulation of marketing strategies
• To identify deviations from the norm
You can also read :- DIVIDEND POLICY
STAGES OF PRODUCT LIFE CYCLE
1) Introduction
2) Growth
3) Maturity
4) Decline
1. Market Introduction stage
Characteristics
1. Costs are very high
2. Slow sales volumes to start
3. Little or no competition
4. Demand has to be created
5. Customers have to be prompted to try the product
6. Makes no money at this stage
2. Growth stage
1. Costs reduced due to economies of scale
2. Sales volume increases significantly
3. Profitability begins to rise
4. Public awareness increases
5. Increased competition leads to price decreases
3. Maturity stage
1. Costs are lowered as a result of production volumes increasing and experience curve effects
2. Sales volume peaks and market saturation is reached
3. Increase in competitors entering the market
4. Prices tend to drop due to the proliferation of competing products
5. Industrial profits go down
4. Saturation and decline stage
1. Costs become counter-optimal
2. Sales volume dedine
3. Prices, profitablity diminish
4. Profit becomes more a challenge of production/distribution efficiency than increased sales increase market share
Marketing Strategy used in Introduction Stages
- Rapid Skimming- Launching the new product at high price and high promotional level.
- Slow skimming- Launching the new product at high price and low promotional level.
- Rapid Penetration-Launching of product at low price with heavy promotion.
- Slow penetration- Launching the new product at a low price and low level of promotion.
Why a product life cycle?
A company's positioning and differentiation strategy must change as the product, market, and competitors change over the product life cycle(PLC)
i. Products have a limited life.
ii. Products sales pass through distinct stages, each posing different challenges, opportunities and problems to the seller.
iii. Profits rise and fall at different stages of the product life cycle.
iv. Products require different marketing, financial, manufacturing, purchasing, and human resource strategies in each life cycle stages.
Advantages of Product Life Cycle (PLC)
- It helps in planning new products
- It enables a producer to estimate the profits in different stages of the PLC
- It helps in determining the cost of product development
- It helps in designing different strategies for different stges of the product life cycle
- It helps in allocation of resources among different products
- It helps in setting prices
Disadvantages of Product Life Cycle
Varying Market Conditions
Inapplicable to Each Product
Fluctuation in Sales Data
Effect of Other Elements
Delay in Analytic
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