Anything that satisfies a consumer's need is called a 'product'. It may be a tangible product (clothes, crockery, cars, house, gadgets) or an intangible service (banking, health care, hotel service, airline service). Irrespective of the kind of product, all products introduced into the market undergo a common life cycle. To understand what this product life cycle theory is all about, let us have a quick look at its definition.
Product Life Cycle Definition
A product life cycle refers to the time period between the launch of a product into the market till it is finally withdrawn. In a nut shell, product life cycle or PLC is an odyssey from new and innovative to old and outdated! This cycle is split into four different stages which encompass the product's journey from its entry to exit from the market.
Product Life Cycle Stages
This cycle is based on the all familiar biological life cycle, wherein a seed is planted (introduction stage), germinates (growth stage), sends out roots in the ground and shoots with branches and leaves against gravity, thereby maturing into an adult (maturity stage). As the plant lives its life and nears old age, it shrivels up, shrinks and dies out (decline stage). Similarly, a product also has a life cycle of its own. A product's entry or launching phase into the market corresponds to the introduction stage. As the product gains popularity and wins the trust of consumers it begins to grow. Further, with increasing sales, the product captures enough market share and gets stable in the market. This is called the maturity stage. However, after some time, the product gets overpowered by latest technological developments and entry of superior competitors in the market. Soon the product becomes obsolete and needs to be withdrawn from the market. This is the decline phase. This was the crux of a product life cycle theory and the graph of a product's life cycle looks like a bell-shaped curve. Let us delve more into this management theory.
After conducting thorough market research, the company develops its product. Once the product is ready, a test market is carried out to check the viability of the product in the actual market, before it can set foot into the mass market. Results of the test market are used to make correction if any and then launched into the market with various promotional strategies. Since the product has just been introduced, growth observed is very slight, market size is small and marketing cost are steep (promotional cost, costs of setting up distribution channels). Thus, introduction stage is an awareness creating stage and is not associated with profits! However, strict vigilance is required to ensure that the product enters the growth stage. Identifying hindering factors and nipping them off at the bud stage is crucial for the product's future. If corrections cannot be made or are impractical, the marketer withdraws the product from the market. Read more on types of market research.
Once the introductory stage goes as per expected, the initial spark has been set, however, the fire has to be kindled by proper care. The marketer has managed to gain consumers attention and now works on increasing their product's market share. As output increases, economies of scale is seen and better prices come about, conducing to profits in this stage. The marketer maintains the quality and features of the product (may add additional features) and seek brand building. The aim here is to coax consumers to prefer and choose this product rather than those sold by competitors. As sales increase...