Many things in life are cyclical: the life of commercial products is no different. Everything, no matter how popular and innovative, has its time in the sun, then falls in relevancy. All companies understand that every released product has a life cycle until it reaches obsolescence.
As a society, we subconsciously demand more convenience, quicker access and more functionality; because of this, innovation is needed. In recent years, the most glaring example is that of mobile phones. Merely 10 years ago, the thought of streaming high-quality video was fleeting: now, we can easily watch full cinematic releases in 4K, thanks to innovations in both mobile phone technology and data networks. As older products become less and less capable of performing to the demands of today, we observe the tail-end of the product life cycle at play.
However, what is the product life cycle?
What is Product Life Cycle (PLC)?
Product life cycle (often abbreviated as PLC) is the term used to describe the process a product will go through, from when it is first introduced to the market until the point it is withdrawn from sale.ย
Different products will, understandably, have different life cycles – some remaining in maturity for significant periods – all will eventually reach obsolescence and be phased out of the market.ย
Typical factors contributing to the end of a productโs life include:
- Market saturation
- Decreased popularity/demand
- Marketplace competition
- Falling sales
- Technological obsolescence (commonly replaced with an upgraded model/technology)
Businesses will use PLC analysis to produce informed strategies and decision making to prolong the market presence of a product or upgrade it to conform to the demands of the market/incorporate newer technology.
The 6 Product Life Cycle Stages (PLC)
Whilst the typically agreed-upon definition of product life cycle includes four stages – introduction, growth, maturity and decline – it can be argued that six stages are now more appropriate, particularly as smart technology has become so ubiquitous to our lives, and therefore more competitive.
1. Development
Consider this stage as the research and development (R&D) phase that occurs before a product is brought to market. Companies will typically attempt to garner interest in the product at this stage, developing concepts, producing prototypes, testing the effectiveness and planning the launch phase, whilst also trying to attract external investors.
During this phase, companies must be prepared to absorb the expenditure – which can be costly during this stage – as the product under development is not bringing in any revenue. As this stage in the product life cycle is costly, it will ideally be short; however, as product development is never straightforward, therefore it can last a long time, in practice.
Although the product is yet to be developed and hit the market, it can still be beneficial for companies to create relevance by hinting at a new product launch through word of mouth and viral marketing: such phenomena are common in the video game industry for home console launches, as well as flagship smartphones such the Samsung S range and Apple iPhones.
2. Introduction to Market
This is where the product is first launched onto the marketplace, ready for purchase. Marketing experts will typically start to build and cultivate brand awareness, as well as seek out customers: necessary, as, during a product launch, sales will be low.
The size of the company is irrelevant, this stage of the product life cycle will commonly be dominated by a focus on marketing and advertising, whilst also testing the different channels of distribution.
In terms of marketing, for many potential customers, this is the stage of carte blanche, where marketers can get creative and daring, so long as the marketing campaign stresses the education of the customers as to how the product can positively affect their life and why they need it.
3. Growth
At this stage, the product will have, ideally, garnered enough attention that the buying public begins to believe in the product and the brand behind it. Sales will be increasing, as will profits, demonstrating a demand for your product.
If your product is particularly innovative, the growth stage will bring forward marketplace competitors who wish to emulate your product, its success and a share of your market.
4. Product Maturity
Following the period of rapid growth, sales will begin to level off as demand for your product decreases: as more customers own your product, there will be fewer potential customers for it. As marketplace competition intensifies, companies will typically reduce the price of products in order to remain competitive.
Price reductions can also coincide with the manufacturing and distribution maturity of the product, also. The longer the product is on the market, companies will often iron out manufacturing bottlenecks, lower purchasing costs and build trusted relationships with distribution partners.
Strangely, although prices for the product typically fall, this will be the stage of the product life cycle that is the most profitable as sales will increase to a peak as the cost of production declines.
5. Saturation
The saturation is the PLC stage where the majority of competitors will have already emerged and begun taking their portion of the market, simply because some consumers remain loyal to certain products/brands.
This is the phase where marketing departments will attempt to create an image of your product and brand of choice – think of Kelloggโs, Starbucks and Apple – so your product and brand do not creep into the next stage of the product life cycle.
6. Decline
Products and brands will commonly experience a decline if they are not successful in grabbing market share as a preferred brand.
Trends, too, will have an impact on the market presence and relevancy of a product as new technologies and products emerge. A couple of examples include:
VHS > DVD > Blu-Ray/Streaming
Vinyl Disk > Cassette Tapes > CDs > MP3 > Streaming
Floppy Disk – CD-Rom > DVD-Rom > Portable Storage/High-Speed Downloads
The examples demonstrate that it is not always the quality of the product that prolongs the maturity of a product – vinyl is still the most popular method of music consumption for purists – whereas convenience can often, though not always, be a determining factor.
What is Product Life Cycle (PLC) Analysis?
Companies will use product life cycle analysis to make informed decisions regarding the function, design, marketing and pricing structure of a product at various stages of its life cycle. Efficient and detailed product life cycle analysis can assist in marking whether the product (and overall marketing strategy) is effective in attracting the target market.
Product life cycle analysis will often include researching a product as it relates to the marketplace in its entirety, including competitors, sales and expenses: gaining such crucial data can allow companies to make more informed decisions regarding how better to develop their products and extend longevity, or even if they need to produce newer goods entirely.
How Your Business Can Benefit From The Product Life Cycle
Products at different stages of their life cycle will require differing marketing campaigns and advertising strategies and companies will utilise product life cycle and product life cycle analysis to determine such campaigns.
Companies may also use the PLC model to:
- Determine a price strategy: companies will use the life cycle of a product and the stage it is in to draw up price plans and whether lowering the price can increase sales, or even if the product was initially priced too low
- Intervene before the decline of the product: product life cycles can be used to determine when various milestones in the cycle will be met and the company can plan accordingly
- Plan marketing and advertising strategies: wherever a product falls in the marketplace, the product life cycle can be used to focus/refocus marketing efforts on garnering a particular target audience or an alternative opinion of your brand
- Develop marketplace authority: companies can use the analysis of product life cycle to reinforce to the audience the credibility of the product or the strong history of the brand
Common Strategies as a Result of PLC Analysis
Particularly at the introduction stage, companies can use in-depth product life cycle analysis to attempt to bring in sales of a product with very little market presence.
Price Penetration
Simply the undercutting of the more established competitors on the market to establish market presence as soon as possible. Such a pricing strategy can help to build steam through customer awareness, initial sales and, eventually, an increase in demand. As the product gets more popular and brand recognition grows, the price can be increased incrementally.
Price Skimming
This strategy typically involves releasing a product into the market at a high initial price, to systematically and regularly lowering the price to attract more customers as the life cycle continues: this is a common trend in technology, such as high-end televisions and laptops.
Product types that are typically subject to the price skimming strategy initially receive most sales from early adopters who are happy to pay a premium for the product to have it first. Price is then lowered to attract interested customers who may be generally more price-conscious.
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