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Product life cycle management

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The conditions a product is sold under will change over time. The Product Life Cycle refers to the succession of stages a product goes through. Product Life Cycle Management is the succession of strategies used by management as a product goes through its life cycle.

The product lifecycle goes though many phases and involves many professional disciplines and requires many skills, tools and processes. Product life cycle management (PLC) is to do with the life of a product in the market with respect to business/commercial costs and sales measures; whereas Product Lifecycle Management (PLM) is more to do with managing descriptions and properties of a product through its development and useful life, mainly from a business/engineering point of view.

Contents

The stages

A Typical Product Life Cycle
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A Typical Product Life Cycle

Products tend to go through five stages:

  1. New product development stage
  2. *very expensive
  3. *no sales revenue
  4. *losses
  5. Market introduction stage
  6. *cost high
  7. *sales volume low
  8. *no/little competition - competitive manufacturers watch for acceptance/segment growth
  9. *losses
  10. Growth stage
  11. *costs reduced due to economies of scale
  12. *sales volume increases significantly
  13. *profitability
  14. *public awareness
  15. *competition begins to increase with a few new players in establishing market
  16. *prices to maximize market share
  17. Mature stage
  18. *costs are very low as you are well established in market & no need for publicity.
  19. *sales volume peaks
  20. *increase in competitive offerings
  21. *prices tend to drop due to the proliferation of competing products
  22. *brand differentiation, feature diversification, as each player seeks to differentiate from competition with "how much product" is offered
  23. *very profitable
  24. Decline or Stability stage
  25. *costs become counter-optimal
  26. *sales volume decline or stabilize
  27. *prices, profitability diminish
  28. *profit becomes more a challenge of production/distribution efficiency than increased sales

Management of the cycle

The progression of a product through these stages is by no means certain. Some products seem to stay in the mature stage forever (e.g., milk). Marketers have various techniques designed to prevent the process of falling into the decline stage. In most cases however, one can estimate the life expectancy of a product category.

Marketers' marketing mix strategies change as their products goes through their life cycles. Advertising, for example, should be informative in the introduction stage, persuasive in the growth and maturity stages, and be reminder-oriented in the decline stage. Promotional budgets tend to be highest in the early stages, and gradually taper off as the product matures and declines. Pricing, distribution, and product characteristics also tend to change.

Customers respond to new products in different ways. Diffusion of innovations theory, pioneered by Everett Rogers, and other diffusion models posit that people have different levels of readiness for adopting new innovations and that the characteristics of a product effect overall adoption.

Microsoft has publicly released the dates at which its various products will be discontinued or unsupported, even before they are released.

The first two stages, introduction and growth, are often seen as offensive in nature. The second two stages, mature and decline stage, are often seen as defensive in nature. The defensive stage is sometimes called the armadillo phase because of that animal's defensive technique of hiding in its shell. There is also a saturation stage after the maturity stage where the product isn't affected by marketing.

Market evolution

Market Evolution is a process that parallels the product life cycle. As a product category matures, the industry goes through stages that mirror the five stages of a product life cycle:

  1. Market Crystallization - latent demand for a product category is awakened with the introduction of the new product
  2. Market Expansion - additional companies enter the market and more consumers become aware of the product category
  3. Market Fragmentation - the industry is subdivided into numerous well populated competitive groupings as too many firms enter
  4. Market Consolidation - firms start to leave the industry due to stiff competition, falling prices, and falling profits
  5. Market Termination - consumers no longer demand the product and companies stop producing it

Market Identification

A "micro-market" can be used to describe a market for a specific product, eg., 8-track tapes and players. A "macro-market" could thus reflect a larger scope, eg, personal media. So, whereas the market for 8-track cassette tapes and players went through a product and market evolution towards termination, the market for personal media is really what is at issue, as technology simply reinterprets HOW people manage media. Thus, people want to listen to lectures, seminars, sermons and speeches on some form of personal portable media, and listen to 8-tracks, and then cassette tapes became more flexible, and, with the advent of the Sony Walkman, more portable, as well as individually and privately recordable; and then Compact Discs ("CDs") brought increased capacity and CD-R offered individual private recording...and so the process goes. The below section on the "technology lifecycle" is a most appropriate concept in this context.

In short, termination is not always the end of the cycle; it can be the end of a micro-entrant within the grander scope of a macro-environment. The auto industry, fast-food industry, petro-chemical industry, are just a few that demonstrate a macro-environment that overall has not terminated even while micro-entrants over time have come and gone.

Technology life cycle

The underlying technology subsumed within a product or product category can go though similar stages. This is typically referred to as the Technology lifecycle.

Lessons of the Product Life Cycle (PLC) [

It is claimed that every product has a life cycle. It is launched, it grows, and may, at some point, die. A fair comment is that - at least in the short term - not all products/services die. Jeans may die, but clothes probably won't. Legal services, medical services, may die, but depending on a social political climate, probably won't...etc... But, on the other hand, even the dinosaurs eventually died out; though what they thought of their life cycle is not on record!

Even though its validity is questionable, it can offer a useful 'model' for managers to keep at the back of their mind. Indeed, if their products are in the introductory or growth phases, or in that of decline, it perhaps should be at the front of their mind; for the predominant features of these phases may be those revolving around such life and death. Between these two extremes, it is salutary for them to have that vision of mortality in front of them.

The most important aspect of product life-cycles is, however, that - even under normal conditions - to all practical intents and purposes [they often do not exist] (hence, there needs to be more emphasis on model/reality mappings)! In most markets the majority of the major (dominant) brands have held their position for at least two decades. The dominant product life-cycle, that of the brand leaders which almost monopolize many markets, is therefore one of continuity!

In the most respected criticism of the product life cycle, Dhalla & Yuspeh [cite] state;

"...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."

Thus, the life cycle may be useful as a description, but not as a predictor; and usually should be firmly under the control of the marketer! The important point is that in many, if not most, markets the product or brand life cycle is significantly longer than the planning cycle of the organisations involved. It, thus, offers little of practical value for most marketers. Even if the PLC (and the related support) exists for them, their plans will be based just upon that piece of the curve where they currently reside (most probably in the 'mature' stage); and their view of that part of it will almost certainly be 'linear' (and limited), and will not encompass the whole range from growth to decline.

See also

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