In International market, it is necessary to plan and develop a product according to taste and preferences of foreign customers. In this process, a product and its stages play a crucial role. Product life cycle (PLC) is one of the most important concepts in the field of trade and commerce.
Initially, it was developed by Prof. Theodore Levitt but later on many marketing expert like C.R. Wassen, B. Carthy, D. J. Luck, D. T. Kollat, R. D. Blackwell and J. F. Robenson have contributed in it. As like of a human life cycle a product also have the aging process. This aging process in which all products have to pass is known as Product Life Cycle. As the life of a human being can be divided into various stages like birth, childhood, youth, adult, old age.
Table of Contents
- 1 Definition of Product Life Cycle
- 2 Features of International Product Life Cycle
- 3 Importance of International Product Life Cycle
- 4 Stages of International Product Life Cycle (PLC)
- 5 Factors Affecting International Product Life Cycle
- 6 Extension of Product Life Cycle
- 7 Limitations of Product Life Cycle
Similarly, the life of a product can be divided into introductory, growth, maturity and decline stages. These stages are collectively known as Product Life Cycle (PLC). A product is introduced in the International market for sale, slowly demand and familiarity of product increased, reaches its saturation, from where it starts decline. This concept is also known as effective lifespan of a product.
Definition of Product Life Cycle
According to Philip Kotler, “The product life cycle is an attempt to recognize the different stages in the sales history of a product-sales history pass through four stages. These are known as introduction, growth, maturity and decline. By identifying the stage that a product is in or maybe headed towards, companies can formulate better marketing plans.”
According to William J. Stanton, “The product life cycle concept is the explanation of the product from its birth to death as a product exist in different stages and in different environments.”
Features of International Product Life Cycle
- It is the aging process of a product.
- It is as like the life cycle of human being i.e. birth, childhood, youth, adult, old age.
- It include four stages i.e. introductory, growth, maturity and decline.
- No two product have same product life cycle i.e. it is different for different products.
- Profit increases as the sale of product increases and decrease when the sale of product starts decline.
- Duration of each stages can be different for different product. It may be from one day to few months or years.
- It helps in developing efficient and effective marketing strategies for the different stages of a product.
- It is not necessary that all product have to pass through all stages. Some product can fail in initial stage and others may reach at maturity stage.
- Speed can be vary in different stages. Some product can direct move from introduction to maturity or decline stage or from introduction to growth or decline stage.
Importance of International Product Life Cycle
Different marketing experts have different opinion about the utility of product life cycle. The concept can be used as a forecasting tool as it alerts management that its product will inevitably face saturation and decline, and the host of problems these stages pose.
Some of other have an opinion that it can be used in useful in framing and taking sound decisions regarding marketing strategy over the different stages of the product life cycle. It is also helpful in various promotional devices such as advertising, sales promotion, publicity and personal selling.
Some other expert have the opinion that to achieve the projected sales target, it formulates promotional, pricing and distribution policies.
- Helpful in sales forecasting
- Helpful as a predictive tool
- Helpful in development of product
- Helpful in price determination
- Helpful in framing of International marketing program
- Helpful as a planning and controlling tool
- Estimation of Profits
Helpful in sales forecasting
With the help of PLC accurate information about sales of a particular product can be estimated. In this process, various methods of sales forecasting can be used for the establishment of cause and effect relationships.
Helpful as a predictive tool
The firm can prepare an effective product plan by knowing the product life-cycle of a product. If the product life-cycle is predictable, the management can be cautious in taking proactive steps before the decline stage, by adopting various decisions like product modification, pricing strategies, distinctive style, quality change etc.
Helpful in development of product
The life of a product is always limited. A product will die after a period of time irrespective of the fact that the product had made tremendous progress during the past. Knowing this fact, management always tries to improve its existing product or to develop a new product.
Helpful in price determination
PLC help in determining the price of a product. The marketer can fix high as well as low price policy. If in introduction stage marketer fixes a high price for their product then he can earn huge profits. But after it some new competitors can enter into the International market and due to high competition profit can decrease in future. On the other hand, marketers also can fix low price.
Helpful in framing of International marketing program
Different policies, procedures and strategies are followed in the different stages of the life cycle of a product. So, management can prepare the International marketing programs accordingly and succeed. In introduction stage advertising and personal selling can be effective, sales promotion activities in growth and maturity stages, cut in sales promotion activities in decline stage.
Helpful as a planning and controlling tool
The study of product life cycle is an important tool in the hands of planners. This study reveals the marketing strategies and policies of competitors. It also reveals the effect of their policies and strategies upon sales and profit of the enterprise. On the basis of this information, marketing manager of the enterprise can prepare his marketing plan.
The study of product lifecycle also helps in controlling the marketing activities of an enterprise. With the help of this study the marketing manager can make necessary arrangements to make the product available according to the demand.
Estimation of Profits
The quantum and rate of profits increases or decreases with the quantum of turnover. At the introductory stage, profits are negligible, then they go up and after some time they begin to fall and gradually become nil. Thus, the management can well predict the firm’s profits in different stages of the lifecycle of the product.
Stages of International Product Life Cycle (PLC)
With the production process starts the life cycle of a product begins. The product life cycle has four stages namely introduction, growth, maturity and decline stage. As the move of a product from one stage to another, the profit and sales change. The product life cycle is the graphic presentation of the sales history of a product as shown in figure 1 below.
It is the first stage of PLC. After production planning and development, the product is launched in the International market with full-scale production and marketing programs. This period requires greater investment in product-related activities.
This investment should be gradually recouped as the sales pick up. This stage is characterized by low and slow sales, high/low product price depending upon pricing strategies, high promotional and distributional expenditure, low profit and narrow product line.
It is skimming the milk stage. In this stage as soon as the customers starts to buy the product both sales and profits will begin to rise. In the growth stage, the product gets considerable approval from the International market. In this stage, marketers must consider the values of promotion, advertising and distribution as these are the key factor.
Competition begins to rise as similar other new products appear in the International market as substitutes. This stage is characterized by a rapid increase in sales, increase in competition, increased in sales and profits, reduction in price, strengthening the distributional channels and improvement in the product.
When the household demands are satisfied and distributional channels are full then the marketer feel saturated. In this stage, the manufacturer introduces new models or adapts methods such as trading-in etc. to promote the sale of their brands with a view to retaining their market position.
Some of the promotional efforts (as the supply exceeds demand) may lengthen the span of this stage, but it will not be a permanent solution. This stage is characterized by increasing sales at a decreasing rate, less profit, price stability, modifications in a product, high dealer’s support, less promotional expenses.
This is the final stage of PLC, in this stage profit margins touch a low level, competition becomes severe and customers start using new or better products or substitutes. Product life cycle concept may be used as a managerial tool. This stage is characterized by a decrease in sales, no promotional expenses, a decrease in price, and no further production.
Marketing strategies must change as the product goes through its life cycle. Repositioning a product can lead to a new growth cycle. Repositioning is basically changing the image or perceived uses of the product.
Factors Affecting International Product Life Cycle
There are many factors that affect the product life cycle. According to Joel Dean, “The length of the product life-cycle is governed by the rate of technical change, the rate of market acceptance and the cease of competitive entry.” Important factors affecting the product life-cycle are followings:
- Rate of technical change
- Rate of International market acceptance
- Ease of competitive entry
- Risk bearing capacity
- Economic and managerial forces
- Protection by patent
- Personnel strategy
- Govt policy
Rate of technical change
Rate of technical change affects the product life-cycle. In developed countries like USA and UK the life span of a product is shorter in comparison to less develop or underdeveloped countries due to the vast technological changes new product takes place at a very fast rate. On the other hand, if the rate of technical changes in a country is not so high, the life-cycle of the products in the country may be longer.
For example, rate of technical changes in India is lower when compared with that of other developed countries. As a result of it, the lifecycle of products in our country is higher than that of the developed countries.
Rate of International market acceptance
It means the tendency of customers of a country to accept the new product in place of old product. If the rate of International market acceptance of a product is high then the lifecycle in that country will be shorter. It is because the customers who have accepted the new products today can accept another product tomorrow and the existing products will soon stand out of the International market.
Similarly, if the customers accept the product at a slow rate, the life cycle of the products may be longer. For example, in India, the economic conditions, level of education, tradition allows the very slow International market acceptance therefore, the PLC of the products is very long.
Ease of competitive entry
If the competitor’s entry into an international market is very easy, the lifecycle of the product will be very short because the competitors can enter easily with new products and drive the old products out. On the contrary, if the competitor’s entry into an International market is slow, the lifecycle of products in such an international market can be fairly long.
Risk bearing capacity
If the enterprises have the high-risk bearing capacity, then they can keep their product alive in the International market for a long period as they can face the challenges of the International market very effectively. On the other hand if the enterprises have low-risk bearing capacity then the product life cycle will be shorter.
Economic and managerial forces
Economic conditions and managerial skills of a company determine the success of that company. Strong economic and managerial forces, can keep their products alive in the International market and the lifecycle of their product will be longer than the lifecycle of the products of those business enterprises having weak economic and managerial bases.
Protection by patent
A patent is the monopoly rights to manufacturers and distributors. If the product is patented, the lifecycle of the product can be longer and if the patent of a product is not got registered, the lifecycle of the product gets cut short.
Product lifecycle is also affected by the personnel strategy used in marketing. The different stages of PLC requires personnel with various abilities and capacities. A firm generally appoints Research and Development expert in the case of introduction stage, a marketing expert in case of the growth & maturity stage and financial advisor in the declining stage.
If the reputation of business enterprises is good in the International market its product will last long in the International market as compared to the products of those business enterprises whose reputation is not good in the International market.
Govt. policies, rules and regulation affect business decisions at a very fast rate. If these are in favour of a particular product or business unit then its life will be longer as compared to others. For example, if a business unit introduce a product in the International market and after some time Govt. impose restrictions on the sale of that product then it directly moves in the declining stage from the introduction stage.
Extension of Product Life Cycle
After the declining stage, a product is almost dead as like human being. But the product life cycle of a product can be extended for some time with some effort.
To extend the PLC of a product the marketer takes the following steps:
- Product modification
- Entry in the new market
- Promoting frequent use
- Developing different usage
- Use of modern adverting and sales promotion techniques
Product design, quality, style, package, size, color etc. are the main fields in which a marketer try to modify their products. These are helpful in extension and proper maintaining of growth and maturity stages.
Entry in the new market
Entry into new market can be a good source of extension of PLC of a product. It is helpful in re-cycling the product life cycle into a new market. For example, if we are selling our product into India, now we can enter into USA.
Promoting frequent use
More frequent uses of a product can extend the PLC. It helps in popularizing the product into the masses.
Developing different usage
Uses of a product in various usage can extend PLC of a product. For example, milk can be used for multiple usage i.e. for drinking, for sweet, for making ghee. Similarly, an electric fan can be used for cool air, lighting the house, music also can be listened from fan if Bluetooth connectivity is given to customers.
Use of modern adverting and sales promotion techniques
If we use more adverting and sales promotion tools to promote the life cycle of a product then it can be helpful to extend the PLC stage.
Limitations of Product Life Cycle
The concept of PLC does not apply to all products rather it depends upon the nature of the product. For example, a perishable product like bread, vegetables, butter, biscuit etc. has lower PLC, these products do not show the marketing behaviour according to stages of a product life cycle, on the other hand, cycle, cars, shoes, shirts etc. has longer PLC as per stages of the product life cycle.
The followings are the main limitations of a product life cycle:
- Not apply to all products
- Not a tool to measure the capacity of a product
- Stage span fluctuation
- Difficulty in determining the stage of product life cycle
- Changes in the product sale
- Long and prosperous maturity stage
Not apply to all products
As we have a general conception that PLC can be applied to all products, but it is wrong. All products have different nature so the chances of application of PLC is also different. Some products complete all the stages of PLC, some others pass through an introduction to directly decline, some others from growth to decline.
For example, Coca Cola and Pepsi are examples of two products that have existed for many decades but are still popular products all over the world. Both modes of cola have been in maturity for some years, not in decline till now.
Not a tool to measure the capacity of a product
Some product may be unsuccessful in introduction stage of PLC. At that time if marketer thinks that the product is failed to meet the required demand of customers and should withdraw from market. Marketer have to face further losses. It may be possible that the product have full capacity to meet the demand but due to management failure or other factors, it became unsuccessful.
Stage span fluctuation
All product has different length and pattern of PLC. It is not necessary that all product have to pass through all four stages of PLC. Some can move from introduction to decline, some may decline through the growth stage. This stage span fluctuation is the main problem in the study of PLC.
Difficulty in determining the stage of product life cycle
The duration of PLC stages is unpredictable because it depends upon a number of factors which are uncontrollable or outside the purview and control of any single company. It is difficult for a corporate unit to measure accurately the stage of a product is on its PLC graph. It is not easy to predict when the growth stage ends and when the decline would start.
Changes in the product sale
Sale of products can fluctuate from so many factors like an increase in demand, reduce competition, good govt. policy, reduce in price, R & D etc. So it will quite difficult to measure the sale of a product on a particular time. PLC is the result of marketing activities and it should never be accepted as a cause of variability in sales.
Long and prosperous maturity stage
Some products enjoy maturity stage from decades, their sale seldom meet the decline stage of PLC some others maybe not. Maturity stage of former products is long and prosperous, and marketer need not to change the marketing strategies for such products.
For example, a fad product would hold a steep-sloped growth stage, a short maturity stage, and a steep-sloped decline stage. On the other hand product like Coca Cola and Pepsi would experience growth, but also a constant level of sales over a number of decades.