Product Life Cycle (PLC): Stages, Marketing Strategies & Product Failure Reasons

Product Life Cycle (PLC)

A product, like a human being, passes through different stages during its life. From the time a product is introduced into the market until it is eventually withdrawn, it generally goes through five distinct stages.

The study and analysis of these stages to develop appropriate marketing strategies, reposition the product, and manage its performance in the market is known as Product Life Cycle (PLC) Management.

The five stages of the Product Life Cycle are:

1. Introduction Stage
2. Growth Stage
3. Maturity Stage
4. Saturation Stage
5. Decline Stage

Life Cycle Stages

The above stages of the Product Life Cycle (PLC) can be explained as follows:

1. Introduction Stage

The Introduction Stage is the first stage of the Product Life Cycle. At this stage, a new product is introduced into the market on a large scale for the first time. The market generally responds slowly because consumers need time to become aware of, understand, and accept the new product.

Initially, sales are low and the company may incur losses because of high expenditure on Research and Development (R&D), production, distribution, and promotion. Sales gradually increase as consumers become familiar with the product. However, many new products fail to survive this stage.

Characteristics of the Introduction Stage

• Consumers have limited knowledge and awareness of the product.
• Consumers may or may not have a strong need or desire for the new product.
• If there is a strong existing need, the company may receive ready demand; otherwise, demand develops gradually.
• Sales are generally low.
• Competition is limited, as competitors are usually cautious about entering a new market.
• The company that introduces a new product first is known as the Market Pioneer.
• Costs are high because the company spends heavily on R&D, sales promotion, advertising, distribution, and other marketing activities.
• The company may initially earn low profits or even incur losses.

Marketing Strategies during the Introduction Stage

A company must formulate its marketing policies very carefully during this stage because the initial response can have a significant impact on the future success of the product. Even a small mistake may result in the premature failure of the product.

The following strategies may be adopted:

1. High Price and Heavy Promotion

The company may charge a high price while spending heavily on promotion. This strategy aims to:

• Create strong awareness and demand through intensive promotion.
• Recover the high initial costs and earn profits through a high price.
• Establish brand preference among consumers.

This strategy is suitable when there is a strong demand for the product, the target consumers have relatively high purchasing power, and the product is a consumer specialty.

2. High Price and Low Promotion

Under this strategy, the company charges a high price but spends relatively less on promotion.

This strategy is suitable when:

• The product has a limited market.
• Consumers are already familiar with the product.
• The product has a distinct market position.
• Competition is absent or very limited.

3. Low Price and Heavy Promotion

The company may charge a low price and spend heavily on promotion. This strategy is suitable when:

• Consumers are price-sensitive.
• The potential market is large.
• The company wants to build market demand quickly.
• Long-term growth is more important than immediate profits.

This strategy can generate strong market acceptance and good returns in the long run.

4. Low Price and Low Promotion

The company may charge a low price and spend less on promotion. This strategy is appropriate when:

• Consumers are already well informed about the product.
• The market is large.
• Consumers are relatively price-sensitive.
• There is little or no competition at the initial stage.

This approach helps the company keep marketing costs low while gradually developing demand.

Role of Competitors during the Introduction Stage

During the Introduction Stage, competitors are generally cautious about entering the market immediately. They observe the strategies adopted by the pioneering company and study the reactions of consumers.

By monitoring the market, competitors can identify:

• Strengths and weaknesses in the pioneer company's strategy.
• Consumer responses and preferences.
• Possible defects in the product or marketing approach.
• Opportunities for entering the market with improved products or strategies.

Thus, the Introduction Stage is a critical period in which the company must create awareness, encourage consumer acceptance, establish the product's position, and build a strong foundation for future growth.

2. Growth Stage

The Growth Stage, also known as the Market Acceptance Stage, is the second stage of the Product Life Cycle. At this stage, the product gains wider acceptance among consumers and traders. As awareness and demand increase, sales and profits grow rapidly.

The success of the product also attracts new competitors, leading to greater competition in the market. Companies focus increasingly on building brand preference and strengthening their market position.

Features of the Growth Stage

• Consumers and traders accept the product.
• Sales and profits increase significantly.
• More competitors enter the market.
• Competition shifts from the product category to brand preference.
• Competitors may introduce new features and improvements to their products.
• The distribution network expands to reach more customers and markets.
• The price may be reduced marginally to attract additional buyers and respond to competition.
• Promotional activities focus on creating brand loyalty and preference.

Marketing Strategies in the Growth Stage

During this stage, the company aims to strengthen its market position and maximize the growth of the product. The following strategies may be adopted:

1. Build Brand Preference

The company tries to convince consumers that its brand is superior to competing brands by highlighting its quality, features, performance, reliability, and other benefits.

2. Improve the Product

The company may introduce new models, additional features, attractive designs, or quality improvements to meet changing customer needs and stay ahead of competitors.

3. Expand into New Markets

The company may enter new geographical or customer markets to increase sales. It may also use additional distribution channels to make the product more widely available.

4. Reduce the Price

To attract more buyers and respond to increasing competition, the company may reduce the price moderately. A lower price can encourage new customers to try the product and help increase market share.

5. Expand Distribution

The company strengthens and expands its distribution network so that the product becomes easily available in more locations and through more channels.

In summary, the Growth Stage is characterized by increasing market acceptance, rapidly rising sales and profits, expanding distribution, and growing competition. The main objective of the company is to build brand preference and maximize market share.

3. Maturity Stage

The Maturity Stage is the third stage of the Product Life Cycle. At this stage, the product has achieved wide market acceptance, and the company has to face intense competition from existing and new competitors.

Sales continue to increase, but at a decreasing rate, indicating that the market is approaching saturation. Competition becomes severe and companies use various tactics such as price discounts, promotional offers, product modifications, and improved services to retain customers and protect their market share.

Features of the Maturity Stage

• The product has achieved wide acceptance in the market.
• Sales continue to increase, but at a decreasing rate.
• Competition becomes intense and severe.
• Companies offer discounts and promotional schemes to attract and retain customers.
• Competitors may modify or improve their products by adding new features.
• Companies make greater efforts to retain their existing customers.
• The emphasis shifts towards brand loyalty and customer retention.

Marketing Strategies during the Maturity Stage

During this stage, manufacturers need to take greater responsibility for promoting and strengthening their products. The main objective is to protect market share, maintain sales, and create strong brand loyalty.

The following strategies may be adopted:

1. Strengthen Brand Loyalty

The company promotes its brand extensively to encourage existing customers to remain loyal and to differentiate the product from competing brands.

2. Product Modification

The company may improve product quality, design, features, packaging, or performance to maintain consumer interest and extend the product's market life.

3. Attractive Discounts and Offers

Companies may provide discounts, special offers, and promotional incentives to encourage purchases and compete effectively.

4. Improve Customer Service

Better after-sales service, warranties, support, and customer relationships can help retain existing customers and strengthen brand loyalty.

5. Explore New Market Segments

The company may identify new customer groups or geographical markets to generate additional demand and extend the maturity period.

In summary, the Maturity Stage is characterized by slowing sales growth and intense competition. The primary objective of marketing strategies at this stage is to maintain market share, differentiate the product, retain customers, and build strong brand loyalty.

4. Saturation Stage

The Saturation Stage is the fourth stage of the Product Life Cycle. At this stage, the product reaches its peak level of sales and the market becomes highly competitive. Since most potential customers have already purchased the product, opportunities for further sales growth become limited.

Competition intensifies further, and profits begin to decline due to increased promotional expenditure, price competition, and pressure from competitors. Small or less efficient competitors may withdraw from the market because they are unable to withstand the intense competition.

Features of the Saturation Stage

• Sales reach their peak level.
• The market becomes highly competitive.
• Competition intensifies further among manufacturers.
• Profits begin to decline due to increasing competition and marketing costs.
• Smaller competitors may withdraw from the market because they cannot compete effectively.
• Companies focus on retaining their existing market share.
• Aggressive promotional activities become more common.

Marketing Strategies during the Saturation Stage

At this stage, the marketing manager must try to reposition the product to maintain consumer interest and protect the company's market share. Most marketing strategies are offensive in nature, as each manufacturer attempts to capture or protect market share from competitors.

The following strategies may be adopted:

1. Reposition the Product

The company may reposition the product by targeting new customer segments, highlighting different benefits, or creating a new image for the brand.

2. Aggressive Promotion

Companies may adopt an aggressive promotional policy through advertising, sales promotion, special offers, and other promotional activities to attract customers from competing brands.

3. Protect Market Share

The company attempts to retain its existing customers and market share by improving product quality, customer service, promotional offers, and brand loyalty.

4. Capture Competitors' Market Share

Manufacturers may introduce attractive offers, improved features, or stronger promotional campaigns to win customers from competing brands.

5. Maintain the Existing Sales Level

The primary objective at this stage is to retain the present level of sales and delay the transition of the product into the Decline Stage.

In summary, the Saturation Stage is characterized by peak sales, intense competition, and declining profits. The main objective of marketing is to reposition the product, defend market share, and maintain the existing level of sales for as long as possible.

5. Decline Stage

The Decline Stage is the final stage of the Product Life Cycle. At this stage, the demand for the product gradually decreases as new and improved products enter the market and consumer preferences change.

Sales decline significantly, resulting in a sharp fall in profits. At the same time, costs may increase because of lower production volumes, while the company's market share continues to decrease. Most manufacturers may withdraw from the market, while some may reduce production and concentrate on a limited or specialized market.

Features of the Decline Stage

• Sales decline sharply due to changing consumer preferences and the availability of new products.
• Profits decrease significantly.
• The cost per unit may increase because of lower production levels.
• The company's market share decreases.
• Many manufacturers withdraw from the market.
• Some companies may reduce production and focus on a limited market.
• Competition may gradually decrease as weaker competitors leave the market.

Marketing Strategies during the Decline Stage

The Decline Stage presents one of the greatest challenges to the marketing manager. The manager must decide whether the product should be continued, modified, or discontinued.

The primary objective should be to revitalize demand wherever possible rather than discontinuing the product immediately.

1. Revitalize Demand

The company should explore ways to revive demand by modifying the product, improving its features, targeting new market segments, or changing its positioning.

2. Gradual Withdrawal

If the product cannot be revived, it is generally better to withdraw it gradually rather than discontinue it suddenly. This allows the company to manage customers, inventory, and distribution more effectively.

3. Eliminate Unproductive Distribution Channels

The company may remove costly and unproductive distribution channels and concentrate on those that generate better returns.

4. Modify the Marketing Mix

The company should identify the weak points in the marketing mix—such as product, price, place, and promotion—and modify them wherever necessary.

5. Concentrate on Profitable Markets

Instead of serving the entire market, the company may focus on limited but profitable market segments where demand still exists.

In summary, the Decline Stage is characterized by falling sales, declining profits, increasing costs, and reduced market share. The main objective is to revive demand where possible and, if necessary, withdraw the product gradually while minimizing losses.

Reasons for the Failure of a New Product

Not every new product successfully passes through the Product Life Cycle. A product may fail because of several marketing, technological, financial, and distribution-related factors.

Major Reasons for New Product Failure

1. Poor Marketing Research
   Inadequate research may result in a poor understanding of customer needs, preferences, and market conditions.
2. Failure to Use Up-to-Date Technology
   Outdated technology may make the product less attractive, inefficient, or inferior to competing products.
3. High Price or Excessive Cost
   A product that is priced too high or costs too much to produce may fail to attract sufficient customers.
4. Poor Product Design
   An unattractive, inconvenient, or unsuitable design may discourage consumers from purchasing the product.
5. Inefficient Marketing
   Poor planning and execution of marketing activities can prevent the product from reaching and convincing its target customers.
6. Lack of Cooperation from Middlemen
   Poor cooperation from wholesalers, retailers, distributors, and other intermediaries can limit the product's availability in the market.
7. Improper Promotional Techniques
   Ineffective advertising and sales promotion may result in inadequate consumer awareness and interest.
8. Improper Timing of Product Introduction
   Introducing a product at the wrong time may lead to poor market acceptance, even if the product itself is well designed.

 

Conclusion

A new product's success depends on proper market research, suitable pricing, effective promotion, good distribution, appropriate technology, attractive design, and correct timing. Careful planning at the Introduction Stage can significantly improve the chances of the product surviving and progressing through the later stages of its life cycle.