With respect to the revenues generated by a product over a period of time, there are various stages that are achieved by any product. This is called a product’s life cycle (PLC). A product life cycle mainly consists of below mentioned four stages.
Product Life Cycle (PLC) Four Stages:
a. Introduction Stage:
This stage refers to the period when the product is introduced in the market. During this phase the sales of the product is generally low till consumers become responsive of the product and its features. During this stage the firm aims to create awareness of the product among the customers and hence the advertising costs typically are high. Since at this stage the product is still trying to gain foothold in the market, additional costs with initial distribution etc are higher. The main objective during the introduction stage is to generate demand for the introduced product or service and establish a market for its operations.
b. Growth Stage:
During this stage more customers become responsive of the product and its attributes. This leads to rapid revenue growth as the sales increase. At this stage of the product, firms also target additional market segments. During this stage the distribution of the product can be expanded as the product is gradually establishing due to its high quality and features. The main objective during the growth stage is to further boost the demand for the product by gaining consumer inclination and further increase the sales. As the competition increases firms may have to incur additional promotional costs in order to make the consumers aware of the differentiating attributes of the product offered by the firm as opposed to that of the competitors.
c. Maturity Stage:
During this stage sales continue to increase although at a slower pace. Maturity stage is considered as the most lucrative in the life of a product. Advertising expenses are relatively lower in this stage as the product is well established in the market by now, and brand consciousness is strong. The main objective during the maturity stage is to sustain market share and broaden the product life cycle. The competition during this stage is highly rigorous as the competing products may be highly similar at this point, thereby increasing the complexity of differentiating the product. In order to gain more shelf space from the retailers firms need to implement different promotional activities to attract their attention.
d. Decline Stage:
This stage witnesses a decline in the sales as the market becomes saturated. Since the product has been in the market for a long time now, its features become technologically obsolete with respect to customer’s changing tastes. Finally a stage will be attained where the product will be in no position to generate profits. In such a scenario a firm can either:
- Retain the product at reduced costs and try to innovate with respect to product uses.
- Withdraw the product from the market when no more profit can be generated.
The product life cycle concept is useful for monitoring sales results over time and comparing them to those of products having a similar life cycle and therefore helps marketing managers to plan future marketing strategies to deal with the challenges.