Product Life Cycle

Video Transcription

Hi, I'm Jeff. And in this lesson, we'll learn about the product life cycle and how the four P's change through each stages of the lifecycle. So let's get started. The Product Lifecycle or PLC is the cycle that each item, tangible or intangible, goes through from the debut to the downturn.

We can compare the lifecycle of a product to that of a person. A product is born. It develops in maturity. It ages, and then it eventually dies. As this occurs, sales revenue will also grow then fall off. And for each stage in the project lifecycle, marketing should change also.

Let's walk through each stage, using Apple and their iPod as an example of a product lifecycle. We'll use the marketing mix model called the four P's of product, price, place, and promotion to show how marketing adapts to each stage. This diagram represents the PLC. The vertical axis is the number of consumers. And the horizontal axis is time.

As you can see, where the arrow points is the first stage introduction. At this stage, customers are either barely aware or completely unaware of the product. If we are discussing Apple and the iPod, how do the four P's apply to this stage? for them?

Product, there should be few variations of the product. And in an Apple's case, there were only small changes in iPod models. The company should also be ready to modify the product quickly in case the customers want significant changes.

Price, the skimming or penetration price model should be used. And pricing should be set based on anticipated reaction. Place, for most companies, small distribution in a limited location should be used at introduction so the company can respond quickly to demand.

Apple, however, had greater resources. So they distributed widely. Promotion, promotional plans are to inform at the introduction stage. And Apple did this very well with their presentations, advertisements, NPR.

A current example of this is the information promotion appearing for electric cars, which are just now moving into the growth stage. Growth is the next stage in the PLC. Sales are increasing and customers are becoming more aware of the product.

With the growth stage, there are often three parts, early, middle, and late. And growth will grow, stabilize, and start to ebb in these stages. For the four P's in the growth stage, there are increased variation in the product as demand has increased.

Apple, for example, began to introduce newer models and different sizes of the iPod. It's the goal to stabilize the product and increase brand loyalty in this stage. Prices may lower, because the cost to produce the product may go down as greater economies of scale occur due to the higher sales.

Competitors may also enter the market. And this can impact price in our iPad example. Other manufacturers started to introduce products that were very similar. And this impacted prices.

For place, there is increased distribution. And promotions are increasingly focused on product differentiation. Apples promotion began selling the iPad as a status item, instead of just a product. And this helped drive sales even higher.

Maturity is the third stage of the PLC. It's at this stage that sales have peaked and are starting to decline. In some industries, unless more innovative products are released, the industry profits as a whole can decline. In Apple's case, they began to focus upon the iPhone as a replacement for the iPad.

At this stage, products become more simplified since demand has dropped. Consumers begin to care even more about price. So pricing becomes more competitive, and sales incentives are offered. Apple's competitors began cutting their prices significantly during this stage.

For place, there is stable and focused distribution. And promotions become more aggressive and are often centered around price. More reminders are pushed out to consumers during holidays and other sales events.

For example, when the DVD was being replaced by the Blu-ray standard, DVD player manufacturers held significant sales during the holidays. Finally, a product enters the decline stage. Sales volume only goes down during this stage. And competition begins leaving the market.

At this stage, the choice is made to limit the production of or even eliminate the product. Apple hasn't eliminated the iPod line yet, but new versions are becoming rare. Price is now at its lowest. And the product is often bundled with other products.

Distribution is limited, stable, and tightly focused. Production is often just focused on the most profitable versions. And promotions are nearly always price and reminder-driven, if there are any promotions at all.

For example, Tab soda was once one of the most popular sodas in the United States, but it began to decline in 1982 due to the release of diet cola. Now, it isn't promoted and is barely distributed. And that's the total of the product lifecycle.

Good job. In this lesson, we went through the four stages of the product lifecycle, introduction, growth, maturity, and decline. Thanks for your time, and have a great day.