Product Life Cycle (PLC):The Product Life Cycle

(PLC) is based upon the biological life cycle. For example, a seed is planted (introduction); it begins to sprout (growth); it shoots out leaves and puts down roots as it becomes an adult (maturity); after a long period as an adult the plant begins to shrink and die out (decline).

Each product may have a different life cycle PLC determines revenue earned Contributes to strategic marketing planning May help the firm to identify when a product needs support, redesign, reinvigorating, withdrawal, etc. May help in new product development planning May help in forecasting and managing cash flow

product life cycle

Sales and Profits ($) Sales

Profits Time Product Development Losses/ Investments ($) Introduction Growth Maturity Decline

Introduction Stage of the PLC

Sales
Costs Profits
Marketing Objectives

Low sales High cost per customer Negative Create product awareness and trial Offer a basic product Use cost-plus Build selective distribution Build product awareness among early adopters and dealers

Product Price Distribution Advertising

Growth Stage of the PLC

Sales Costs Profits

Marketing Objectives

Rapidly rising sales Average cost per customer Rising profits Maximize market share Offer product extensions, service, warranty Price to penetrate market Build intensive distribution Build awareness and interest in the mass market

Product Price Distribution Advertising

Maturity Stage of the PLC

Sales Costs Profits

Marketing Objectives

Peak sales Low cost per customer High profits Maximize profit while defending market share Diversify brand and models Price to match or best competitors Build more intensive distribution Stress brand differences and benefits

Product Price Distribution Advertising

Decline Stage of the PLC

Sales Costs Profits

Marketing Objectives

Declining sales Low cost per customer Declining profits Reduce expenditure and milk the brand Phase out weak items

Product Price Distribution Advertising

Cut price Go selective: phase out unprofitable outlets Reduce to level needed to retain hard-core loyal customers

Example: New Flavor of Pepsi

Stage 1: Market Introduction

Pepsi bottles the new flavored product and places it on the market for consumers. Pepsi also spends a lot of money advertising the new flavor creating awareness.

Stage 2: Market Growth

Customers like the flavor and begin to make routine purchases. Coke introduces their competing flavor.

Stage 3: Market Maturity

More competitors enter the market taking some of Pepsis profits.

Stage 4: Sales Decline

Customers have moved on to the next new flavor. Some loyal fans stay behind.