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16.1 PRODUCT LIFECYCLE

A product passes through certain distinct stages during its life & this is
called the Product Life Cycle (PLC). The PLC is normally presented
as a sales curve spanning the products course from introduction to exit.
The utility of the PLC concept lies in the fact that each stage in the cycle
is characterized by a typical market behavior & consequently, each
stage lends itself to the application of certain specific marketing
strategy. Understanding the PLC concept & managing it effectively can
help in prolonging the profitable phases of a products lifespan.

The Four Distinct Stages in PLC

A typical product passes through 4 distinct stages during the course of
its life:

Market Pioneering Stage

Market Growth Stage
Market Maturity Stage AND
Market Decline Stage

Market Pioneering Stage

During the pioneering stage, the product is in its introductory stage. At
this stage, there may not be a ready market for the product. Sales are
low; the product undergoes teething troubles; profits seem a remote
possibility; demand has to be created & developed; and customers have
to be prompted to try out the product.
Obviously, this stage poses several problems for the marketer. The
complexities of the problems & the duration of the stage depend upon
the nature of the product, its price, its technological newness & the
consumers view of the product. One of the crucial decisions to be taken
in this stage is the pricing strategy to be adopted.

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16.2 GROWTH, MATURITY & DECLINE STAGES
THE GROWTH STAGE
During this stage, demand for the product increases & the size of the
market grows. The pioneers sales & profits go up. But by the time the
pioneer settles down with his product, competitors may enter the scene
with similar or slightly improved versions. The pioneer may then have
to alter his marketing strategies. He has to stay ahead of his competitors
& persuade his customers to go for his brand. He cannot dictate price to
the customer. If he had resorted to skimming strategy at the time of
pioneering stage, it is now time for him to reconsider his pricing
strategy.

THE MATURITY STAGE

Here demand tends to reach a saturation point. And, there is enough
supply from several competing sources. Dealers may dictate terms to the
various competing firms. Price competition becomes intense & the
pioneer tries to distinguish his brand by subtle product differentiation
& exploits the brand loyalty he has built up. The pioneer feels
compelled to communicate directly with the consumers, since by now,
dealers have become multi-brand dealers.

THE DECLINE STAGE

In the declining stage, sales begin to fall. The demand for the product
shrinks, probably due to new& functionally advanced products
becoming available in the market or the market becoming apathetic to
the product. In any case, prices & margins get depressed; total sales &
profits diminish. Some of the firms at this stage may try to link up the
sales of theses products with some other premium products they have
developed & thus try to stretch the life of the declining product.
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16.3 ROLE OF PLC IN MARKETING STRATEGY
The duration of each phase of the PLC will depend on the product, its
newness, its functions & the marketing strategy of the firm. The firms
success in reaching out to the innovators, early adopters etc., will
depend on the duration of each PLC stage. Innovation diffusion, new
product adoption & PLC are closely interrelated concepts.
With appropriate marketing strategies, the firm can exploit this linkage
& manipulate various stages in the PLC to its advantage. And therefore
the marketing strategy plays an important role. Put differently, the
utility of the PLC arises out of the following facts:
A product has to necessarily pass through certain stages during its
life
What happens to it in each stage depends on market behavior
By manipulating market behavior, the stages of the PLC can also be
manipulated
PLC concept helps marketing strategy formulation
Facilitates pre-planning the product launch
Facilitates prolonging the profitable phase
Facilitates investment decisions on products
Facilitates choice of appropriate entry strategy
Facilitates choice of the right time to exit
Provides useful clues for managing customers
Actually the PLC concept can be of help in different ways in pre-

planning the new product launch; in prolonging the profitable life phase
of an existing product; in reacting to competition in a planned way; in
deciding the long-term investment in products.
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16.4 ROLE OF PLC IN MARKETING STRATEGY
Facilitates pre-planning the product launch
Many firms are seen to slip in pre-planning new product launch. As a
result, they face butter experience of suddenly entering the market with
a new product & struggling with it, not knowing how to handle the
problems peculiar to that stage. This does not mean that with PLC, the
actual phase & events in a products lifecycle can be exactly predicted &
appropriate, foolproof plans prepared in advance. The actual position
will usually vary from what is projected. But elaborate pre-planning
does render the marketing man equipped to charter the course of the
product. It provides him valuable lead-time. He can use the insights
from the exercise in understanding the life cycle of his product.

Facilitates prolonging the profitable phase

Normally, the following are the strategic routes available to a firm for
extending the profitable stages of the lifecycle of the product:

Finding out new users for the product

Finding out new uses for the product
Popularizing more frequent use of the product
Making the product more distinctive to the consumers
Adding real &/or psychological value to the product

Facilitates investment decisions on products

In a firms long-term planning too, the PLC can be of help. In modern
days, product portfolio planning is becoming a crucial subject. PLC is a
tool that can help anticipate product successes. This, in turn, will help
investment decisions on the product; the firm can assign investment to
the right products & avoid committing heavy resources on wrong
products.
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16.5 ROLE OF PLC IN MARKETING STRATEGY
Facilitates choice of the right time to exit
The PLC concept can even help in deciding the right time to exit from a
market & minimize the damages & costs of exit.

PLC can be a useful tool in managing customers

Customer experience with the company changes as the product passes
through its PLC. As such, the PLC concept can be a useful tool in
managing customers. As a product moves through the various phases of
its life cycle, the consumer also moves on the path of his experience in
respect of the product.
Though this change is reflected in the shifts in the demand for the
product through the PLC stages, the marketer will gain a great deal if
he knows what actually happens to the consumer during this process.
The change in the experience level of the consumer has some
implication for the company-consumer relationship & consequently,
knowledge of this change will help effective management of customers.
Buyers of various products, especially hi-tech business products, evolve
from a stage of inexperienced generalists to experienced specialists. As
the experience level of the customers change, the benefits they seek from
the company also keep changing. Companies, which can sense &
anticipate this customer experience factor, can be ready with suitable
strategies to keep the customers with them.
In India, the phenomenon of product evolution & customer experience
change has been taking place for the past few years in the computer
business. The pioneering stage of the PLC was over some years ago. The
product is in its early growth stage & dozens of manufacturers are
already there with competing offers. The buyers, who were
inexperienced generalists a few years back, have become experienced
specialists now. The seller has to understand when & how such
transitions take place in the experience level of the customer, as his
product moves along its lifecycle.
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16.6 ROLE OF PLC IN MARKETING STRATEGY
Linkage between PLC concept & entry strategy
As a new product travels through its life, different firms join the market
with their respective versions at different stages. Basically, 4 distinct
entry postures are possible for a firm seeking entry into the market:
1. Entry as an INNOVATOR: Innovators should have large
resources to innovate & introduce new products. They must have
the capacity to absorb the cost of product failures. Only the firms
having all relevant strengths can afford to take the position of an
innovator.
2. Entry as FOLLOWER: Those who join the life cycle, as
followers in the early growth stage of the product have to be good
market watchers. They must closely watch the innovators
programs & if their market intelligence show that a product
introduced by the innovator is picking up well, they should
quickly join in with their version. They need not invest heavily in
R&D because they essentially copy the innovator.
3. Entry as SEGMENTOR: The segmentors enter with their
brands still later, i.e. when the product enters the late growth
stage. They identify certain market segments with less
competition & concentrate on them; they bring in products that
are appropriately modified to suit the selected segments.
4. Entry as ME-TOO: The me-too firms enter their versions at a
time the product enters the maturity stage of its life cycle. These
firms do not need much R&D efforts. But, they need a strong
marketing organization to compete with the already established
competitors. They normally compete on price, keeping their costs
as low as possible. Production cost is their main concern & all
their decisions, including those on product features & design, are
dominated by the concern to reduce production cost.

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16.7 OPERATION OF PLC
PLC usually operates at 3 levels:
The PRODUCT level
The product SUB-CATEGORY level AND
The BRAND level
To describe the above with an example, let us carry on with the same
computer example. Computer as a product category is in the growth
stage in its life cycle.
The product category involves all configurations of computers super
computers, main frames, micro/mini & PCs.
PC is a product sub-category within computers. This sub-category is
evolving in a particular pattern within the overall category of
computers. Within the sub-category of PCs, HP is one brand, Wipro is
another & Dell is a third.
At the brand level, HP, Wipro & Dell are evolving on their own paths.
Thus, the product category of computers has a life cycle of its own; the
product sub-category of PCs has a life cycle of its own & the Wipro
brand of PC has a life cycle of its own.
In other words, when Wipro attempts to project the life cycle of its PC,
it cannot make a realistic analysis unless it studies the life cycle of the
product sub-category, PCs, as a whole.
Wipros life cycle at the brand level cannot evolve totally independent of
the other brands of PCs in the market. The strategies put forward by
the competing brands & the reaction of the market to those strategies
will certainly impact Wipro.