In this article we describe the Product Life Cycle (PLC), a portfolio analysis which provides a picture of the phase that a product endures.
What is Product Life Cycle (PLC)?
The portfolio Analysis often makes use of the Product Life Cycle (PLC). The model provides a picture of the phase that a product endures. The speed with which a product goes through the cycle is dependent on, among others, market demand and the marketing mix instruments employed. It is thus possible to include the Product Life Cycle of a product in the strategic policy of an organisation. There are countless strategies conceivable based on the Product Life Cycle (PLC).
- Examples: Product in growth phase --- directed at market potential
- Product in saturation phase --- focus on taking sales away from competition
How does the Product Life Cycle look like?
A business has succesfully developed a product and put it into the market. There are relatively few sales done and there is no profit. In this phase there is an issue of little competition because it concerns a new product.
Make sure that for the most part the product makes the step towards the following phase by getting the product recognised. Whenever the consumer gets to know the product, more sales should take place and the product should automatically inch towards the growth phase. A promotion campaign can be very effective in this phase.
The product is succesfully introduced and begins to yield money. The product is profitable and the sales are growing. The competitors proceeds to imitate the product and bring their own version into the market. Thereby the competition grows. Emphasise the advantages that the product offers and with it conquer the market. At the end of this phase the whole market will be approximately at the peak of the new product. The aim in this phase is to recover the introduction costs.
This phase is characterised by decreasing growth. The emphasis from now on turns to cost control by which the lifecycle can be prolonged. Price-lowering and sales promotion are important instruments.
There is a slight drop in the demand for the product. The market is mature. Weak companies eliminate the product and the strong suppliers keep on. Here the emphasis is also on cost control. As long as a product is profitable, the lifecycle can be prolonged.
Now the demand for the product moves on to decline very sharply. There are better alternatives available. A company can now opt to stop the product.