Every product goes through a life cycle from development to decline. There are typically five stages: product development, introduction, growth, maturity, and decline. Each stage is characterized by different levels of sales, costs, profits, and competition. Companies employ different marketing strategies such as pricing, distribution, advertising, and promotions during each stage to successfully manage their products through the life cycle.
2. PRODUCT LIFE CYCLE
Product Life Cycle (PLC):
Every product goes through a life cycle
from development to decline
Each life cycle is different
Some products have longer lifecycles than
others
Some companies are very successful in
extending lifecycles
3. PRODUCT LIFE-CYCLE STRATEGIES
Product development
Introduction
Growth
Maturity
Decline
Begins when the
company develops a
new-product idea
Sales are zero
Investment costs are
high
Profits are negative
9 - 3
PLC Stages
4. PRODUCT LIFE-CYCLE STRATEGIES
Product development
Introduction
Growth
Maturity
Decline
Low sales
High cost per customer
acquired
Negative profits
Innovators are targeted
Little competition
9 - 4
PLC Stages
5. MARKETING STRATEGIES: INTRODUCTION STAGE
Product – Offer a basic product
Price – Use cost-plus basis to set
Distribution – Build selective distribution
Advertising – Build awareness among early
adopters and dealers/resellers
Sales Promotion – Heavy expenditures to create
trial
9 - 5
6. PRODUCT LIFE-CYCLE STRATEGIES
Product development
Introduction
Growth
Maturity
Decline
Rapidly rising sales
Average cost per
customer
Rising profits
Early adopters are
targeted
Growing competition
9 - 6
PLC Stages
7. MARKETING STRATEGIES: GROWTH STAGE
Product – Offer product extensions, service,
warranty
Price – Penetration pricing
Distribution – Build intensive distribution
Advertising – Build awareness and interest in the
mass market
Sales Promotion – Reduce expenditures to take
advantage of consumer demand
9 - 7
8. PRODUCT LIFE-CYCLE STRATEGIES
Product development
Introduction
Growth
Maturity
Decline
Sales peak
Low cost per customer
High profits
Middle majority are
targeted
Competition begins to
decline
9 - 8
PLC Stages
9. MARKETING STRATEGIES: MATURITY STAGE
Product – Diversify brand and models
Price – Set to match or beat competition
Distribution – Build more intensive distribution
Advertising – Stress brand differences and benefits
Sales Promotion – Increase to encourage brand
switching
9 - 9
11. MARKETING STRATEGIES: DECLINE STAGE
Product – Phase out weak items
Price – Cut price
Distribution – Use selective distribution: phase out
unprofitable outlets
Advertising – Reduce to level needed to retain
hard-core loyalists
Sales Promotion – Reduce to minimal level
9 - 11
12. PRODUCT LIFE CYCLE
Extending the life cycle
Diversification – have core product but
introduce new flavours/styles etc.
Innovate – use new technology to enhance the
product
Change flavour
Repackage
Advertise to appeal different audience
Re-launch – product that have been withdrawn
can make comebacks if sold right e.g
skateboards, yoyos
14. PRODUCT LIFE CYCLE
Cash Flow and the Product Life Cycle
During the development stage cash flow is
going to be NEGATIVE. Money has to be paid
out for equipment, wages etc but no money is
coming in.
During the launch stage cash flow is still
NEGATIVE. More money is being paid out
than is coming in (as sales are very low at the
moment).
15. PRODUCT LIFE CYCLE
Cash Flow and the Product Life Cycle
During the growth stage cash flow may turn from
NEGATIVE to POSITIVE. Lots of money is coming in
but there are many outgoings because the firm has to
continue to promote the product and may need to
expand production and its workforce.
During maturity/saturation and decline the cash flow
will be POSITIVE. The company spends little money
on promoting it. It doesn’t need to expand production
but sales are still coming in. Only during the decline
stage will sales be so low that cash flow might be
NEGATIVE.