The product-mix of a firm is not always the same. It is adjusted from time to time. New products are added to the product line and absolute and uneconomic products are dropped. The decision is based on product life cycle concept. All products, like people have a certain length of life during which they pass through certain stages, Management should know the life cycle stage its product is in at any particular time. Changes in the competitive situation occur from one stage to the next. Consequently, marketing strategies and actions require adjustment.
Philip Kotler has defined product life cycle as follows : “The life time sale of many branded products reveal a typical pattern of development known as the product life cycle.”
Stages of Product Life Cycle
There are gradual stages in a Product Life Cycle of a particular product. This also has a great significance in the formulation of marketing strategy. A product life cycle has the following six stages:
(1) Introduction or Market Pioneering— The first stage is of product introduction. During this stage the main problem is to stimulate primary demand. There being virtually no competition, the innovating company sets out to inform the target market segment and intervening middlemen of the product’s existence. Generally, this is done through aggressive promotion. Limited distribution is obtained and sales rise very slowly. Technical imperfections in the product frequently appear during this stage. Thus, the market pioneering stage is a period of heavy promotion, demand creation and market capturing.
(2) Growth— When pioneering stage of product is over, the growth in sales of the product begins. The main problem during this stage is to produce the product in sufficient volume and to market the output with minimum delay. During this stage, the manufacturing and distribution efficiency become important keys to marketing success. Demand generally continues to outplace the available supply. Competition also increases rapidly. Advertising and personal selling also change the nature. In the introduction stage, it was directed mainly to getting new outlets, while now emphasis shifts to ‘selling against competitors‘. During the stage, competition becomes very acute and keen.
(3) Maturity— During this stage, competition becomes more intense. Sales continue to increase, a decreasing rate eventually leveling it of _as the market becomes saturated. The mass market is now buying the product and opportunities for increasing sales further are limited. During this period, marketing techniques become highly important. Competitors heavily promote their brands, emphasizing the subtle difference. Supply exceeds demand and replacement sales dominate the market. Industry sales remain relatively stable and only those companies which have extremely effective marketing programme, succeed in enlarging their markets.
(4) Saturation— This period is of stability. The sales of the product reach the peak and there is no possibility of further increase. The substitute brands begin to be popular.
(5) Decline— This stage is characterized by the product’s gradual dis-placement by some new innovation evolving change in consumer buying behavior. During the state of decline industry sales drop off and the number
of competitors shrinks. Production overcapacity puts increasing pressure on the surviving firms to scramble for the available business and price tends to become the main competitive weapon. Cost control is increasingly important and some competitors manage to use it effectively in keeping the product profitable.
(6) Obsolescence— The last stage is obsolescence. At this stage, there is no chance of profitable sale of the product and the product becomes totally out of date. Hence the management has to drop it from the product line.
The Importance of the concept of Product Life Cycle
It is a very important concept in marketing. The great value of the product life cycle concept is that management, knowing what typically happens at different stages in a product’s life, is able to improve its forward planning. It always reminds the management that the life of a product is limited so the management should not depend only on it. It should try to develop new products in order to earn profit.
It help the management in chalking out the suitable marketing plan for the products, and well-timed and effective implementation of specific marketing action may succeed in extending or stretching out a product’s life specially if steps are taken soon enough in the markets maturity stage. The management can estimate the future income for the products and can plan expansion accordingly. Different suitable price policies can he followed with the help of this concept.
USA based research company Frost & Sullivan’s analysts follow a 10-step process to evaluate product line strategy and assess their fit with best practice criteria and Award candidates . They also adopt 360 degree analysis in the field.