Understanding Products

What is Product Life Cycle (PLC)

 Product Life Cycle

• The distinct stages in the “sales life-time” of a product

• Typically, 4 stages:
– Introduction stage (birth and crawling phase of the product) – Adoption phase

– Growth stage (the flourishing phase of the product) – Acceptance phase

– Maturity stage (the plateauing phase of the product) – Stabilization phase

– Decline stage (the fading out and death of the product) – Aging phase

• Each phase has its own opportunities and challenges

• Each phase has different sales and profit potential, and

therefore require different strategies to manage them
 The Product Life Cycle
Competitive
Consolidation
Saturated adoption
Slowdown in sales growth
Stable or declining profits
Competitive Mass adoption Sales
Rapid sales growth
Cluttering
Rising profits
Exiting consumers
Sales
Declining sales
Declining profits
Early adoption
Low sales growth
No or low profits
Profits

Introduction Growth Maturity Declining

Time

“Period lengths” and “shape” of PLCs may vary from product category to category
Factors Affecting Product Life Cycles

• Capital / Investment

• Resources availability

• Level of competition

• Technology changes

• Lifestyle changes

• Fashions and fads

Understanding Products

Managing Product Life Cycle Stages

Introduction Stage – Key Characteristics

• Low product awareness and adoption. Mainly among

innovators and early adopters

• Usually low ‘introductory’ pricing to develop the market.

Creating awareness and demand critical for further growth

• Profits are often low (or even negative) – low prices, high costs

• Often the product distribution is selective

Introduction Stage – Key Strategic Challenges

• Creating adequate product and brand awareness

• Selective targeting and distribution (staggered marketing)

• Viable pricing

• Keeping costs low – increasing sustenance power

• Managing the flows of funds

 Growth Stage – Key Characteristics

• Gets triggered with increasing adoption of the product by the

consumer majority

• Period of rapid demand growth - sales and profits multiply

• Competition intensifies. Increasing ‘market share’ becomes the

key drive – leading to brand differentiation, product mix expansion and penetration

• Prices may or may not go up, but economies of scale in

production, distribution and marketing makes profits soar
 Growth Stage – Key Strategic Challenges

• Scaling up (marketing, production, distribution, resources, technology, team,…)

• Market expansion - width vs. depth balance

• Product mix optimization (and not maximization)

• Leveraging economies of scale for competitive advantage

• Building ‘sustainable’ market share

• Building the brand (building consumer preference, relationship and loyalty)

 Maturity Stage – Key Characteristics

• Usually the longest stage of the product life cycle. Demand starts
saturating and sales growth slows down (as few new customers left to tap)

• Defending market share and profits is often the key motivation

• Not much scope to increase prices due to heavy competition

• Sales is sustained more and more by qualitative value additions

and differentiations (leading to increasing costs, declining profits)

• Product mix rationalization and consolidation may kick in

 Maturity Stage – Key Strategic Challenges

• Scale and cost rationalization, managing overcapacities

• Understanding demand patterns better (especially emerging changes)

• Offering newer, better consumer values and benefits (new user

groups, new product usages, new features, new variants, new geographies,…)

• Exploring (or investing in) emerging demand technologies

• Consolidate market position - reduce competition, stay dominant

 Declining Stage – Key Characteristics

• Sales and profits continue to deteriorate

• Costs often continue to rise due to competitive pressure

• New set of competition (products) may emerge. Customers may

start drifting towards the newer, better products

• Option of either moving to a new product technology, or to milk

the product for profits till its discontinuance, or to sell-off
Declining Stage – Key Strategic Challenges

• Trying tp extend the product’s life and profitability

• Which new product technology to invest in? Will it

give adequate returns (The “Disruptive Innovation Paradox”)

• When to transit to a new technology or new product,

When to kill the old one, or sell it off? ‘Timing’ as
important as the ‘timelines’
 Limitations of PLC Model

• Most of the times, markets are too dynamic and complex to follow
such straight, stage-wise paths and patterns

• Even of they do, it is too difficult to predict the beginning and end
of stages (false alarms and false interpretations may galore)

• Equally difficult to figure out what stage (and at what level of that stage)
the product may be in at any given point of time

• Too product-centric. Undermines the role and ability of ‘brands’

(being need-centric) to keep the business afloat, or grow profitably
 Product Life Cycle as a Subset
of Demand Life Cycle

Demand (Need)
Life Cycle
Sales

Technology Life Cycle

Product Life Cycle

Time

• Each new technology or product may satisfy the need in a superior way
• Multiple technologies and products may co-exist at a given point in time