The Product Life Cycle in Business Area

Introduction to the Product Life Cycle

Product Life Cycle is the name given to the sequence of stages a product goes through. Kotler and Keller (2006) assert that a company’s positioning and differentiating strategy must adapt to the successive changes in the product, its market, and its competitors throughout the course of the product life cycle (PLC). If one says that a product has a lifecycle, the underlying assumptions are that (a) There is a time limit to the life of a product; (b) All the different stages that product sales go through are distinct in their own right and present different challenges, opportunities, and constraints to the seller; (c) Different stages of the PLC lead to rising and fall in product demand and sales and (d) Each stage of the PLC poses and warrants varying financial, manufacturing, purchasing and human resource strategies for the product.

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As Levitt (1965) presented in his classic paper “Exploit the Product Life Cycle”, the first stage is that of market development. This is when the product is new and is introduced into the market for the first time. This usually takes place when the demand for the product has not been proven yet, and the product has not achieved technical credibility as well in all regards. There is a very high cost associated with this stage but the related sales volume is very low as demand has to be created at this point, and customers have to be enticed towards the product. There is hardly any if at all, competition present here.

The next stage is Market Growth and is also called the Takeoff stage. Costs go down because demand accelerates and the company is able to achieve economies of scale. Sales volume is significantly greater and the size of the total market for the product grows rapidly. The company starts to make profits and there is a lot of public awareness for the product. At this stage, the market becomes established and competition begins to increase (Levitt, 1965).

The third stage is Market Maturity where demand reaches its peak, after which it “grows, for the most part, only at the replacement and new family-formation rate.” The company is well-entrenched in the market, hence costs are low. There is a lot of competition in the market and were previously in the Growth stage the company’s pricing was aimed at gaining the largest share in the market, in this stage, prices tend to decrease because of the proliferation of competitive offerings. There is more focus on brand differentiation and enhancement of features as each market player tries to ensure his product is positioned differently and is distinguished from the products offered by the competition (Levitt, 1965).

The last stage is Market Decline when the sales volumes decline as the product does not enjoy the customer favor it used to. Consumer appeal declines, and so do the prices and profitability. Levitt (1965) likens this stage to “when buggy whips lost out with the advent of automobiles and when silk lost out to nylon.” The company seeks to derive profits at this stage not from an increase in sales, but from attaining efficiencies in production and distribution processes.

Literature Review

The product life cycle concept in the field of marketing has always been perceived with an ambivalent attitude. On the plus side, the concept is said to have an “enduring appeal because of the intuitive logic of the product birth + growth + maturity + decline sequence based on a biological analogy” (Day, 1981). It serves as a well-organized framework and provides substantial descriptive value for elaborating market dynamics. But over the years, it has also been the recipient of a great amount of criticism, primarily because of its simple nature. This has especially been the case when it is employed as a predictive model, to forecast when the succession of stages will take place and the changes proposed by the concept will occur. Critics also outline its limitations when it is used as a normative model which seeks to assist in the development of alternative strategies at each stage of the life cycle.

In support of the PLC

Polly and Cook (1969) attempted to empirically test the PLC as a model of sales behavior. To do this, they conducted tests using the observed sales figures for 140 categories of nondurable consumer goods from three classes of products, namely health and personal care, food, and tobacco. They found that even though as a general model, the PLC would have some applicability problems, but from their test results, they were convinced that it was a good determinant of sales behavior in certain market scenarios, particularly in a situation where different product forms are attempting to attain a share of the same market segment within a general product class. However, they stated that the applicability of PLC depends upon the definition of product as well as how much impact demand has on sales, as compared to supply. In situations where demand factors are highly influential, the model exhibits optimal performance.

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The authors concluded their paper with a vote of support for the PLC as they said, “the intuitive appeal of the product life cycle, the existence of a theoretical foundation in the adoption process, and the results of empirical tests reported in this paper lead to the conclusion that the model is valid in many common market situations” and hence, the PLC can be of great help to marketers for strategic planning and sales forecasting (Polly & Cook, 1969).

Midgley (1981) however brought up an interesting point that should be considered to look at the results above with a new perspective. He pointed out that the buying patterns in durable and nondurable markets are markedly different. The most important determinant of repeat sales in any time span is the purchase frequency exhibited by repeat buyers of the product. This variable is significantly different for durable and nondurable goods which might lead to dissimilar PLCs as well. Hence, the above research validates the PLC for a very small slice of the market and should not be taken as a seal of approval for the efficacy of the PLC across the board. Also, it should be remembered that when Rink and Swan (1979) set out to conduct a detailed review of PLC research, they could identify only 19 publications that actually reported life cycles. They said that this was a very small sample of the real market situation, and was skewed since it was biased in favor of consumer products as compared to industrial products. Also, the different kinds of aggregation used, for e.g., product form vs. brand, made it difficult to generalize and draw suitable conclusions.

Regardless of the above possible loopholes in the PLC’s validity, Kotler and Keller (2006) give examples in support of the use of different marketing strategies in each stage of the PLC to the product’s advantage at that point in time. He cites the example of Yahoo! which used market expansion strategies in its growth stage and from a search engine, became a portal that offered a comprehensive package of information and services. Revenues exceeded $1.3 billion in 2003 and global growth continued with a strong emphasis on Asian and European markets. He also uses the case of Hush Puppies to argue in favor of the PLC and how this is a perfect example of reviving an old brand that had reached its maturity stage. Hush Puppies sold suede shoes, but changes in fashion trends and a sequence of marketing mistakes resulted in low sales levels and an undesirable image. However, the makers of Hush Puppies, Wolverine World Wide, decided to revamp their product range, design, and color combinations to give the product a more fashionable appeal, resulting in all-time sales high in 2002.

Arguments against the PLC

There is no argument about the above examples or Kotler’s theories about the use of different marketing strategies at different stages of the PLC. The problem occurs when the PLC is employed as a tool to be exercised regardless of all the other factors which also determine a product’s sales levels. Moon (2005) discussed in her article how since Levitt introduced marketers to the PLC in 1965 and explained how it would be an instrument of competitive power, the PLC has become a core part of many companies’ marketing and positioning strategies. It helps them understand and manage the systematic progression of their products along the bell-shaped curve, starting from introduction, advancing to growth, maturity, and eventually decline. However, the author is convinced that despite its usefulness over the past four decades, it has led to the development of a “tunnel vision” among marketers.

Marketers get caught in a circle where first, they all perceive there to be one sole trajectory for successful products, and all of these products must conform to this path and progress along the curve. Second, since they all share a common view of the product life cycle, firms tend to come up with the same kind of positioning strategies for products and services as they undergo the stages of the life cycle (Lambkin & Day, 1989). This sort of tunnel vision has many consequences, one of which is “a competitive reflex to augment products as they mature” (Moon, 2005). A typical scenario comprises of marketers going to all lengths to associate new product attributes and benefits when the old already exist, as they try whatever they can to differentiate their products and breathe new life into old products. Where previously toothpaste manufacturers were only concerned with the breath-freshening and cavity-prevention aspects of their product, now they have to offer the consumers an array of attributes which includes everything from gum disease prevention to plaque removal to teeth whitening attributes.

The end result is that marketers get caught in a rut, where it becomes increasingly hard to beat the competition. As Moon (2005) says, “Over time, the augmented product becomes the expected product, and so it must be further enhanced to remain competitive.” The tunnel vision they become caught in causes them to unnecessarily restrict their products to the curve leading to maturity and eventually decline. They become so trapped into following the “rules” of the life cycle that they do not consider the other ways in which they can position or re-position their products to change the way customers perceive their offering. The PLC does not allow them to “rescue” the products which are struggling in the maturity stage and restore them back to the growth stage. It also does not account for “leapfrogging obstacles” that could potentially lead to slower consumer approval and “catapulting” new offerings directly into the growth stage. Hence, there are a number of positioning strategies, which Moon (2005) outlines, which marketers can make use of to cause a mental shift in the way consumers categorize products, but marketers are often blind to these because of their utter dependence on the PLC.

Another very important point made by Polli and Cook (1969) is that changes in product sales are different because of a myriad of reasons. They described the impact of seasonality as well as the swift devaluation of the dollar in times of inflation as possible causes which appear as if they reflect the life cycle trajectory but are in fact not related to the product at all. They build up their argument by stating that the definition of a product itself can lead to changes in sales. For example, while “cars” and “mentholated filter cigarettes” are both products, the first comprises a large number of diverse objects while the second denotes a much narrower range of objects. Also, product classes, product forms, and brands are three different concepts, and the PLC, as a general rule to govern all three can not suffice. Product classes refer to all those objects which differ in their physical nature but cater to the same specific need, such as cars, trains, and bikes all belong to the same product class. Product forms are narrower subsets of product classes, as they include objects that might not be the same physically, but have a significant aspect of homogeneity. Brands are unique, very specific, and contain the trademark of the company which manufactures or distributes them. Hence, the definition of product is a large determinant in the efficacy of the PLC, which the authors do not discount at any time (Wood, 1990).

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Dhulla and Yuspeh (1976) have been oft-quoted as having strongly opposed the mechanics of the PLC. According to them and other critics, life cycle patterns do not conform to anyone’s shape and time duration and marketers can very rarely identify the particular stage the product is in at a particular time. It may appear to them that the product is in the maturity stage when in actuality it might be going through a lull in sales before it undergoes another upward swing. Hence, the PLC pattern should be considered a consequence of marketing strategies and not a predictable pattern that sales must adhere to.

The argument Dhulla and Yuspeh (1976) presently does complement the critiques presented earlier in this paper. They employ the example of a brand that consumers have an affinity towards, but it goes through a drop in sales because of some other factors, possibly unsuccessful advertising, the launch of a “me-too” product by a competitor, or the refusal of a major chain to carry the brand. The company which is trapped in the “tunnel vision” mentioned at an earlier point in this discussion does not think of the corrective measures it should take to rectify this situation. Instead, management starts thinking that their brand is now in the decline stage. They deal with the situation by cutting down the promotion expenditure for this brand and investing this into new products. Understandably, sales dip even further and there is more panic at this miserable performance of the brand. Hence, they reiterate that “the PLC is a dependent variable which is determined by marketing actions; it is not an independent variable to which companies should adapt their marketing programs.” Mercer (1993) also agrees that the PLC is held little value for most of the FMCG markets and should not be considered a credible enough tool to use in marketing planning as it can not be practically applied across industries and products.

Conclusion

Even at first glance, there appear to be a number of problems with the PLC. For one, the length of each stage is predetermined, and the succession of stages appears absolute and irreversible. Does the marketing world allow for such a neat demarcation of stages in a product’s life? Different products go through these stages for different lengths of time and some may leap from the introduction to maturity stage without any growth stage in between. Some brands are introduced and even though they cater to a perceptible need of the segment they target, poor product development or glitches in their marketing strategy spell their doom and they never get to hit the takeoff stage.

Yet there are others such as Listerine Antiseptic (the brand leader in its segment) that have retained their dominant position, having sustained strong competitive pressure even after the entry of a number of new brands (Market Profile on OTC Medicines). Another example is that of Marlboro in the fragmented filter-cigarette market, which emphasizes the same theme, but by focusing on developing different variants of it, has captured the lion’s share of the U.S. tobacco market (U.S. Tobacco Market Share). These brands have stood the test of time and had their marketing managers followed the dictates of the PLC, these brands would have long ceased to exist as they would have ignored the existing brands in blind pursuit of newer products. Hence, the PLC has little validity and should not be considered the be-all-end-all tool for marketing planning, especially in today’s dynamic marketing environment.

References

Cook, R., & Polli, V. (1969). Validity of the Product Life Cycle. The Journal of Business, 42(4), 385-400.

Day, G. S. (1981). The Product Life Cycle: Analysis and Applications Issues. Journal of Marketing, 45(4), 60-67.

Dhalla, N., & Yuspeh, S. (1976). Forget the Product Life Cycle Concept. Harvard Business Review, 102-112.

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Kotler, P., & Keller, K. L. (2006). Marketing Management. 12th ed. Upper Saddle River, NJ: Prentice Hall.

Lambkin, M., & Day, G. (1989). Evolutionary Processes in Competitive Markets: Beyond the Product Life Cycle. Journal of Marketing, 5, 4-20.

Levitt, T. (1965). Exploit the Product Life Cycle. Harvard Business Review, 81-94.

Market Profile on OTC Medicines. Checkout. Web.

Mercer, D. (1993). A Two-Decade Test of Product Life Cycle Theory. British Journal of Management, 4, 269-274.

Midgley, D. (1981). Toward a Theory of the Product Life Cycle: Explaining Diversity. Journal of Marketing, 45(4), 109-115

Moon, Y. (2005). Break Free from the Product Life Cycle. Harvard Business Review, 87-94.

U.S. Tobacco Market Share. Web.

Wood, L. (1990). The End of the Product Life Cycle? Education Says Goodbye to an Old Friend. Journal of Marketing Management, 6(2), 145-155.

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