PLC

After launching the new product, management wants that product to enjoy a long and happy life.
Although it does not expect the product to sell forever, the company wants to earn a decent profit
to cover all the effort and risk that went into launching it. Management is aware that each product
will have a life cycle, although its exact shape and length is not known in advance.

Product Life Cycle (PLC), the course that a product’s sales and profits take over its lifetime. The PLC
has 5 distinct stages:

1. Product Development begins when the company finds and develops a new product idea.
During product development, sales are zero, and the company’s investment costs mount.
2. Introduction Stage starts when a new product is launched. Introduction takes time, and
sales growth is apt to be slow. Well known products lingered for many years before they
entered a stage of more rapid growth.
In this stage, profits are low or negative because of the low sales and high distribution
expenses. Much money is needed to attract distributors and build their inventories.
Promotion spending is relatively high to inform consumers of the new product and get them
to try it. These firms focus their selling on those buyers who are the most ready to buy.
3. Growth Stage: If the product satisfies the market, it will enter a growth stage in which sales
will start climbing quickly. The early adopters will continue to buy, and later buyers will start
following their lead, especially if they hear favourable word of mouth. Attracted by the
opportunities for profit, new competitors will enter the market. They will introduce new
product features, and the market will expand. The increase in competitors leads to an
increase in the number of distribution outlets, and sale jump just to build reseller
inventories. Prices remain where they are or decrease only slightly. Companies keep their
promotion spending at the same or a slightly high level. Educating the market remains the
goal, but now the company must also meet the competition.
Profits increase during the growth stage as promotion costs are spread over a large volume
and as unit manufacturing costs decrease. The firm uses several strategies to sustain rapid
market growth as long as possible. It improves product quality and adds new product
features and models. It enters new market segments and new distribution channels. Firms
may lower prices to attract new buyers.
In the growth stage, the firm faces a trade-off between high market share and high current
profit. By spending a lot of money on product improvement, promotion, and distribution,
the company can capture a dominant positon. In doing so, however, it gives up maximum
current profit, which it hopes to make up in the next stage.
4. Maturity Stage: At some point, a product’s sales growth will slow down, and it will enter the
maturity stage. The maturity stage normally lasts long than the previous stages, and it poses
strong challenges to marketing management. Most products are in the maturity stage of the
life cycle, and therefore most of the marketing management deals with the mature product.
The slowdown in sales growth results in many producers with many products to sell. In turn,
overcapacity leads to greater competition. Competitors begin marking down prices,
increasing their advertising and sales promotions, and upping their product development
budgets to find better versions of the product. These steps lead to a drop in profit. Some of
the weaker competitors start dropping out, and the industry eventually contains only well-
established competitors.
 In modifying the market, the company tries to increase consumption by finding new users
and new market segments for its brands. For example, brands such as Harley Davidson, and
Axe fragrances, which have typically targeted male buyers, have created products and
marketing programs aimed at women. Conversely, Weight Watchers which have typically
targeted women have created products and programs aimed at men.
The company may also look for ways to increase usage among present customers.
Finally, the company can try modifying the marketing-mix – improving sales by changing one
or more marketing mix elements. The company can offer new or improved services to
buyers. It can cut prices to attract new users and competitors’ customers. It can launch a
better advertising campaign or use aggressive sales promotions – trade deals and contests.
In addition to pricing and promotion, the company can also move into new marketing
channels to help serve new customers.
5. Decline Stage: The sales of most product forms and brands eventually dip. The decline may
be slow or plunge to zero or they may drop to a low level. This is the decline stage.
Sales decline for many reasons, including technological advances, shifts in consumer
tastes, and increased competition. As sales and profit decline, some firms withdraw from
the market. Those remaining may prune their product offerings. In addition, they may drop
smaller market segments and marginal trade channels, or they may cut the promotion
budget and reduce their prices further.
Carrying a weak product can be very costly to a firm, and not just in profit terms. There are
many hidden costs. A weak product may take up too much of management’s time. It often
requires frequent price and inventory adjustments. It requires advertising and sales-force
attention that might be better used to make “healthy” products more profitable. A product’s
failing reputation can cause customer concerns about the company. Keeping weak products
delays the search for replacements, creates a lopsided product-mix, hurts current profits,
and weakens the company’s foothold on the future.
For these reasons, companies must identify products in the decline stage and decide
whether to maintain, harvest, or drop them. Management may decide to maintain its brand,
repositioning or reinvigorating it in hopes of moving it back into the growth stage of the PLC.
P&G has done this with several brands, including Old Spice. Over the past decade, P&G has
retargeted, repositioned, revitalized, and extended these old brands, taking each from near
extinction to billion-dollar-brand status. Royal Enfield, one of the oldest brands of
motorcycles, revived the decline stage by improving the product and once again moved back
to the growth phase.
Management may decide to harvest the product, which means reducing various costs (plant
and equipment, maintenance, R&D, advertising, sales force), hoping sales hold up. If
successful, harvesting will increase the company’s profits in the short run. Finally,
management may decide to drop the product from its line. The company can sell the
product to another firm or simply liquidate it at salvage value. If the company wants to sell
the product to another firm, it will not want to run down the product through harvesting. In
recent years, P&G has sold off several declining brands and brands that no longer fit
strategically, Duracell, and others.