Behavior of the Product Life Cycle

The product life cycle (PLC) represents the stages a product moves through from its introduction to the market to its disappearance from the market. Our discussion of the product life cycle will deal with the new product innovation or product class. The product life cycle can also be applied, with some modification, to a firm’s specific brands.

The product moves through four stages: introduction, growth, maturity, and decline. It should be emphasized, however, that the product life cycle concept is the idealization and will not capture the behavior pattern of all products. For example, products that are fads – Rubic’s cube, the hula-hoop, mood rings – may be introduced, grow rapidly and then quickly vanish from the market within twelve or eighteen months, never reaching the maturity stage. Other products, such as flashlights and automatic washing machines, have been on the market for decades and will not reach the decline stage in the foreseeable future.

In the introduction stage, sales grow slowly because customers are unfamiliar with the product and few people choose to be innovators. Throughout most of this stage, industry profits are negative, because production and marketing costs are high relative to sales volume and no scale economies (i.e. declining unit costs as output decreases) are being realized.

During the growth stage, sales grow rapidly because consumer trust and faith in the product rise dramatically and becausethe innovation begins to reach the masses. Profits climb rapidly because fixed production and marketing costs can be spread over a larger volume. Toward the end of the growth stage, however, profits begin to decline because of intensified competition as more companies enter this market. Most companies, like consumers, are not innovators and wait until the growth stage of a product before entering the market to compete for market share.

The maturity stage is the longest stage in the PLC. Industry sales level off in the maturity stage, and purchasing occurs -for replacement demand and population increases. Profits continue to decline as competitlon further intensifies. Marketing expenditures, especially for promotion, are very high because many competitors are fighting for a share of a no-growth market.

Finally, in the decline stage, marketers cut back on brand promotion because industry sales have dropped and consumers have found more suitable replacements. For examples, sales of black and white TVs declined because of the introduction of color TV, and wringer washer sales declined because of the invention of automatic washing machines. Although industry profits drop for obvious reasons in the decline stage, there may be a profit potential for a limited number of firms that continue to produce. For example, wooden wagon wheels reached the end of their product life cycle eighty years ago, but firms that continue to make them have a lucrative market niche because there is still a small but constant demand and little or no competition, For the same reason, even though there is little demand for wringer washers, Speed Queen continues to produce them.

Дата добавления: 2015-11-14