Product Life Cycle (PLC)
Everyone would agree on the fact that success or failure of an organization depends
mostly on its products. A product would not remain on the market forever, just like
human beings; products also have a life span or life cycle. There is the birth of a new
baby is like a new product is introduced on the market, then the baby grows to be a
child so this would is the growth stage of a product, then the child becomes a man, this
would be the maturity stage for the product, after that the product goes in the decline
stage which would be that the man becomes old. Finally death which would be
withdrawal for the product. Therefore it can be said that the product life cycle is the
different stages in which a product passes from its introduction till its withdrawal on the
market. The above explanation shows why the product life cycle is based upon the
biological life cycle.
So, a product consist mainly of 6 stages, which are mainly the development stage, the
introduction stage, the growth stage, the maturity stage, the decline stage and the
withdrawal stage. A product life cycle will state the following:
1. That products have a limited life
2. Product sales pass through distinct stages, each posing different challenges,
opportunities, and problems to the seller
3. Profits rise and fall at different stages of product life cycle
4. Products require different marketing, financial, manufacturing, purchasing, and
human resource strategies in each life cycle stage.
Profitability is determined by selling a product, therefore product life has a direct
relationship with profit of the organization. In the following diagram shows us that at
different stages, the profit of the organization would vary. We can also see the
product life line is the same as the profit line but smaller. At the development and
introduction stage we can see a loss, it would be in the growth stage the product
would start generating profit.
In the case of MHC, the PEL is the product and it is operating at the decline stage as it is
mentioned that existing schemes have not evolved much since being introduced twenty years
ago. No negotiations, based on specificities of customers, are allowed, compared to other
financial institutions. This has driven away many young professionals that presented high
1 | P a g e possibility of cross selling. The quality of the service being unsatisfied to customers has resulted
in MHC losing customers to its competitors. Therefore sales of PEL is declining the revenue
curve is going downwards but is still on the market. The following diagram shows this:
The PLC is an important component in marketing. Managers use it because it highlights
the need for a firm to change its marketing policies at the different stages of a products
life. A concept known as the Product life cycle management helps marketers in planning
out their marketing strategies to get the best out of the product that it is selling. An
organization might draw out a Product Lifecycle to identify the stage at which its product
is at in the lifecycle, from there they can decide what to do to keep the product alive or
to maintain high sales. In other words, the PLC can be used as a retrospective tool to
assess when a firm should enter an existing market with a new product or withdraw a
dead product from the market. Since an increase in profits is the major goal of most
organization that introduces a product into a market, the product’s life cycle
management is very important with its ability to quickly identify potential sales
opportunities and revenue contributions. This is why the most successful organizations
are the one that reacts and take actions for its product at different stage. So, an
understanding of the product life cycle concept enable the MHC to determine its position
in the market compared to competitors and the product’s success or failure.
STAGES OF A PRODUCT LIFE CYCLE:
At different stages a marketer would use different marketing strategies to ensure its
1 STAGE: DEVELOPMENT STAGE
The development stage is the most expensive stage in a life of a product. The costs of research,
both technical and marketing have to be borne and the product is not yet contributing revenue to
2 | P a g e the business. It is where a marketer would make use of marketing research to analyze the
market, this is may be important as it can give us an indication if our product (service) would be
successful or not. The business would be making a loss at this stage. The main problem with
MHC is that it has never set up a real marketing department, so MHC had not done any
rndearch before launching PEL.
2 STAGE: INTRODUCTION STAGE
This stage represents the launch of the new product form by one or more companies and there
is a high risk of product failure. Introduction of the product is done only after the marketer has
created a detailed Marketing Plan. In many cases tactical marketing decisions (i.e., product,
price, promotion, distribution, and target market) have already been adjusted as the product has
gone through the Development stage.
At this stage, the product is introduced on the market and it is unknown. For this reason
sales are very low. There may be already competitors with similar products or no
competitor at all. Thus the main objective of the business is to do advertising mainly
informative one to attract customers for its product. During the introductory stage the
firm is likely to incur additional costs associated with the initial distribution of the
product. These higher costs coupled with a low sales volume usually make the
introduction stage a period of negative profits. In the first diagram we have seen this
where there is loss at the introduction stage.
The organization’s intention is to ensure that the new product would meet all the customer
requirements, that it is able to attract sufficient customers for the new product, that the product
is successful. Moreover a business may want an earlier payback of investment cost, they would
want to increase return on investment. During the introduction stage, the primary goal is to
establish a market and build primary demand for the product class. Hence, at this stage MHC
Ltd would seek to build product awareness (i.e. awareness of PEL) and develop a market for
the PEL. The following are some of the marketing mix implications of the introduction stage that
MHC could have use:
1. Product: MHC would want to know is the service is facing competition on the
market and how the service is different from the other business.
2. Price: This would depend on the number of competitors on the market, the
business may use a penetration pricing strategy on order to gain market
share quickly. However most of the time it would be price could be a
skimming strategy, high price would be charge as there is no competitors and
the business may want to recover development cost. In the case of MHC
which is offering a service, thus price could be the amount deposited for the
3. Distribution: Distribution is selective and scattered as the business
commences implementation of the distribution plan. In the case of MHC could
select its different branches which are not close to each other.
4. Promotion is aimed at building brand awareness. Samples or trial incentives
may be directed toward early adopters. The introductory promotion also is
intended to convince potential resellers to carry the product. For MHC, could
use promotion like higher interest for the 2000 first people, but moreover
MHC should do informative advertising in Housing magazines.
3 STAGE: Growth Stage
3 | P a g e As the introduction stage of product life cycle ends, the product has spent considerably
moderate time into the market where customers / consumers get familiar to the product
and start buying the product (or consuming it). As the product is now into the market it
becomes more strengthened, the business starts making higher profits and additional
markets segments are targeted. Once the product has been proven a success and
customers begin asking for it, sales will increase further; therefore the growth period is a
phase of fast income growth. More trade channels are now willing to keep the product
and one generally observes softening of prices for this reason the marketing team may
expand the distribution at this point. At this time the company soon starts operation on
economic levels. There are less product bottlenecks hence cost is low.
Later in the growth stage competitors are attracted by this profit and thus the product
faces more intense competition. This competition now offers greater choice to the
customer in the form of different product type, packaging and price. To remain
competitive over a period of time the firm initiates product improvement or modification
in the product to remain customers or attract new one. The market base will keep on
expanding as more customers want the product but profits taper off at the end of this
phase and will stabilize afterwards.
Hence, at this stage MHC Ltd faces an improvement in its sales as consumers’ demand
increases. The market of MHC Ltd grows hence acquiring greater market share, facing
moderate competition. MHC Ltd should adopt the following strategies:
1. Product: New product features and packaging options should be added in order
to compete with other businesses with similar products or attract more customers
and also improve the product quality. Concerning PEL, it is a service could
introduce internet banking for the account.
2. Pricing: This would depend on the external factors like competition, in case the
organization is facing competition, there may be a competitive price adopted. But
most of the time demand is high, so price would be high however the business
could choose to lower the price to be able to get more market share. For PEL,
MHC may put a high amount to be deposited or a low one.
3. Distribution: At this stage, distribution becomes more rigorous, there channels
should be added as demand increases and the customers accept the product.
Trade discounts are minimal as resellers show a strong interest in the product.
Here MHC could use other stated owned companies to let people open an
4. Promotion: It should be carried forward for a broader audience, to expand market
share. There should be also increased advertising to build brand preference.
Moreover in case of competition there should be increased promotional costs in
order to convince consumers that the organization’s product is better than that of
the competitors. In the case of PEL, it is a service a in the growth stage, MHC
could readjust the interest given to customers.
4 STAGE: MATURITY
This now brings the product to its maturity stage. T