The only thing constant in the world is change. The same is true for the world of marketing. The environment in which a product is sold will change gradually over time. The Product Life Cycle (PLC) theory refers to the progression of stages a product goes through. The Product Life Cycle Management succession used by management is a n attempt to maximize the profit from a given product as it goes through its life cycle.
A product’s life cycle has many phrases and involves many professional disciplines and requires many skills, tools and processes. Due to the need to become as competitive as possible to ensure the survival of a company there is a need to maximize the gains from a particular product before it is time to move on. Thus, the need to employ product life cycle management may be tantamount to the survival of the company. There are four stages in a product life cycle, the Market Introduction Stage, Growth Stage, Mature stage and Decline or Stability Stage. The amount of time a product is in a specific stage varies from product to product the key of production life cycle management is to keep a product in the desired stage for as long as possible.
The Market introduction stage is the starting point for all products. After R&D has completed development and the necessary permits and licenses are made to get the product on the market this is where the product will be.
At this stage the costs will be high. This is because current production is essentially prototype stage product, cost savings and economies of scale have not yet been established. There may also be cheaper sources of raw materials or more efficient methods of production that might be developed as time passes.
Sales volume will be low. In relation to the high costs the low sales volume aggravates the low profitability of the product. The primary reason for low demand is the fact that customer demand has yet to be created. The is great need for marketing and advertising because the customers need to be urged to try the product. The need for a marketing push increases the costs incurred by the company even further. At this stage the company will lose considerable funds as the product still lacks profitability because the is very low demand and there are high costs for pushing the product.
If a product is new and distinct in the market it will also lack competitors. As a new product in the market other companies have not yet developed a ‘me-too’ of the product. Since the product is, as yet, untried and unprofitable there is also very little incentive for competing companies to want to develop a similar product.
A recent example of a product in the Market Introduction Stage is the Solar-powered car. Right now none of the major car companies are adopting solar-powered vehicles into their showrooms. Costs remain high because there is no economy of scale since only a few cards are ordered at a time. Very few customers recognize the long-term benefit and instead see the solar-powered car as slow, inefficient and aesthetically displeasing. Without a major corporation sponsoring adverting campaigns there is little awareness of the product. Solar-powered cars have yet to reach the Growth stage and will not do so in the foreseeable future.
The Second lifecycle stage is the Growth stage. At this stage there is greater levels of public awareness. Increased public awareness results in increased sales volume which in turn generates higher sales volumes. Higher sales volume necessarily involves increases in production which will generate economies of scale for the company. There will also be a reduction of advertising efforts since there is not as much need to generate public awareness for the company. The end result being considerably higher overall profitability.
However the draw back at this stage is that there is now competition in the market. Having demonstrated the products success, the company will now begin to see other companies try to copy their product and sell imitation goods in the market. While the first mover advantage remains with the company the market will continue to expand but the company is no longer going to have a monopoly on market share.
The best example for this stage would be the ipod. Even if it is not the USB music player in the market it was widely seen as sufficiently unique to be a class of its own. Also its unique nature as being able to play only songs downloaded from the Apple iPod website made it stand out from common Mp3 players. It also had many features which were not present in Mp3 format or other types of mobile media players. As a result it was considered a unique product on the market. The iPod enjoyed considerable market success but soon so-called iPod killers came out on the market. The iPod is still the dominant portable media player on the market but there are now copy-cat devices out there. However, the iPod is still the market leader and early large profits for Apple.
Mature Stage is the third stage in a product’s lifecycle. At this stage there is no more need for heavy publicity stunts because the product is already ingrained in the psyche of the people. Costs are now very low since production volumes are very high and the company enjoys vast economies of scale.
However, at the mature stage competitive offerings are now capable of giving the company a run for its money. Other companies are already aware of the value of the product type. They have developed products that can compete with that of the first-mover product. The drive is now for differentiation and showing why a product stands out from many similar products on the market.
Overall the market is as big as it is likely to get. However, because of the intense competition prices and consequently profits are low. At this stage the product is considered a cash cow and little effort will be spent increasing market size or share. Instead a product at this stage is usually left to rest on its laurels while new products are developed.
A product in the mature stage is Guinness beer in Ireland. It’s a beer there are plenty of other beers on the market. Its following of loyal customers are those who have become found of its unique, as beers go, flavor. Guinness is profitable but can not be expected to significantly grow its market share relative to its competitors. An effort to expand the beer drinking market will also benefit competitors in proportion to market share. So there is no incentive for Guinness to do anything drastic in the beer market. Instead future expansion of Guinness and other beer manufacturers will have to be in the form of a new product such as beer derivative because the beer market is already saturated.
At the Decline or Stability Stage the costs have now become counter-optimal and sales volume is at a plateau or may even be declining already. Prices are at an all-time low and profits are likewise low. Profits now come in the form of marginal advantages such as better distribution schemes or production efficiency rather than any marked advantage is sales capability.
An example of a declining or stable market is the automobile market especially with respect to the Detroit car makers. Cars have been cars for over a century now. Changes in style or appearance are nice but really there is little to differentiate a 1990s Ford from a 2000 Mazda apart from minor aesthetic details. The high price of cars vis-à-vis the sub-prime loans crash makes many people adverse to purchasing a new car especially since as mentioned cars have not significantly changed.
Criticism of PLC
Product Lifecycle theory is generally consistent at the level like products. However it does not adequately explain why there is an odd inconsistency in certain situations. All products it says have life cycles. A product will be launched it will grow and later it will die. However, not all products or services die. The health / tonic drink fad may die someday as the PLC suggests but there are some products that seem immortal, like soft drinks or clothing. Magazine like Playboy, Hustler and Penhouse may no longer be in the vogue as they were in the past but they still continue to exist long after conservatives believed that they would die out.
It would appear then that Product Life Cycles (PLC)s only exist in the mind. Even under the most idea conditions and for all intents and purposes they do not exist. In most markets the majority of major brands dominated for at least two decades. The dominant brand appears to be capable of monopolizing multiple markets and is thus in the growth stage almost permanently.
‘…clearly, the PLC is a dependent variable which is determined by market actions; it is not an independent variable to which companies should adapt their marketing programs. Marketing management itself can alter the shape and duration of a brand’s life cycle.(Dhalla & Yuspeh 1976, p. 102)’
According to Dhalla and Yuspeh PLC is merely a useful descriptive tool it can not predict and must always be firmly under the control of the marketer. A brand’s or product’s life cycle is often much longer than the organization’s planning cycle suggests it is. Thus, PLC has little value for the majority of marketers. Even if the PLC really did exist the plans based upon it would have been based upon a mere piece of a curve where the product appears to reside. The view will not be complete. As a matter fact there are some products that have in facts gone from decline to growth again.
One such case is the History of the World Wrestling Entertainment Inc. The company is been run and owned by Vince Mcmahon jr. Since it began from being a parochial wrestling organization back in the 70s the so-called chairman has been in control. The company expanded and went nation-wide defying was the territorial nature of the Wrestling business in those days.
The key to the then World Wrestling Federations success was the brilliant marketing schemes of the owner. As his company went nationwide he banked on the talents of Hulk Hogan, then a relatively unknown wrestler, and his good-guy image to launch the brand and bring it to as many homes in America as it could reach.
The aggressive promotion schemes were not without challenges. The old guard of Wrestling promotions tried to stop Mcmahon’s rise to power even his own father asked him to desist from what he was doing. However he stood his ground and soon the WWF could be seen nationwide. Tens of thousands flocked to see his SuperStar Hulk Hogan do battle with Andrei the Giant for Wrestlemania. From there it appear the company would go uphill. It was differentiated from the local, often statewide only, promotions and promised entertainment on a grand scale.
However tragedy struck, WWF wrestlers were accused to taking illegal substances to maintain their physique. What was worse what that the company’ s boss was the one selling the stuff. Steroids became the ruin of the WWF. The scandal rocked the business and many fans were turned off by the idea that their favorite superstars were in fact, addicts.
The business seemed doom at that point. Not only did the scandal damage the already weak reputation of the company but competition in the form of the World Championship Wrestling franchise was beginning to eat into their market share. Their storylines were also beginning to suffer from a lack of creativity. People were beginning to tire of watching Hulk Hogan beat up who ever he wanted to fight. They wanted to see younger talent. They wanted to see something new. WCW and other competition offered that and so the fans went elsewhere.
Incredibly, WWE went back to the growth lifecycle stage. Fresh talent was brought it. New wrestlers brought new acts to the ring and writers began to make new more creative storylines. Pretty soon the company was back on it feet. In the late 90s they were engaged in a neck and neck battle with the WCW for dominance over the Monday night airwaves. WWE ultimately won that battle and they are now the top. WCW and other competing franchises have since retreated back to being to their home territories leaving the WWE as the only remaining nation-wide wrestling franchise.
The WWE is just one example of a company that was already in the decline stage then went back to the growth stage. This shows that PLC determines stages and is more useful for historical purposes rather than for predicting the future.
References
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Day, G. (1981) The product life cycle: Analysis and applications issues, Journal of Marketing, vol 45, 60-67.
Levitt, T. (1965) Exploit the product life cycle, Harvard Business Review, vol 43.
Dhalla, N.K., Yuspeh, S. (1976) Forget the product life cycle concept, ‘Harvard Business Review’.
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