Product Life Cycle

Video Transcription

Hello, and welcome to this tutorial on product life cycle. Now, as always with these tutorials, please feel free to fast forward, pause, or rewind as many times as you need to get the most out of the time that you're going to spend here.

So let me ask you a question. How are products like people? Well, just like people, as we age, we change. Things that were important before no longer are that important. And a product has a definite life cycle, just like people so.

During this lesson, we're going to be looking at the product life cycle. We're also going to be looking at the different phases, the introduction, the growth, the maturity, and decline. The key term for this lesson is going to be, product life cycle, or PLC. So let's go ahead and define product life cycle. Product life cycle is the cycle that each item, tangible or intangible, goes through from the debut to the downturn.

So let's talk a little bit about the product life cycle. Well, products, like I mentioned before, they're like people. They begin, they develop, they mature, and finally, they die. Now during this life cycle, sales for that particular product are going to go up and down, depending on where it is in it's life.

And marketing will change for where a product is in its product life cycle. Let's take a look at this graphically for a second. If you look all the way over here on the left, you'll see introduction. And now this graph is done in terms of sales, so this is the number-- this is the amount of sales that are happening for particular product during its particular life cycle. You see over here during the introduction, there's not a lot of sales happening. And during its growth phase, that's when we really start to see sales pick up.

Maturity at the top here is where sales peak, and it begins to turn down just a little bit. And finally, at the end of a product's life cycle, you start seeing sales dramatically fall, until finally, there's no more sales at all.

So let's talk about each one of these individually, each one of these phases. Well first, you have the introduction. The product has a low variation, and there's also probably a very limited supply, because you've just started making it.

Let's take a look at Apple and the iPhone. When it was first introduced, there was only one phone available, the iPhone, instead of various models that we have now. There was also a very limited supply. It was hard to get a hold of one of these things.

Customer awareness during this particular cycle is going to be very, very low. So we're going to have to fix that with our marketing. Now, our organization is going to have to be able to modify the product fairly quickly depending on the feedback they get and promotional plans are typically there to inform.

Now pricing, we're looking at well, we have to make a decision. Are going to skim, or are we going to penetrate? Are we going to skim it by generating buzz about it because it's priced so high and it's so exclusive, or are we going to price it lower so that we can actually enter into the market competitively?

Distribution is going to be very small, on a very limited scale. I'm going to try test markets first to see if the product actually has a future. And promotion here is mainly concerned with informing customers about the product. I need them to understand that the product is out there.

For example, electric cars. Electric cars are definitely in their introduction, but as they gain in popularity, they're starting to move into the growth stages because sales are beginning to pick up.

Now during the growth stage, what you're going to see is, customer awareness is going to be increased. Also, sales are going to be increasing because customers are more aware of it.

So necessarily, you're going to have to have increased distribution, as well as increased variation of the product. While it was perfectly fine for Henry Ford to market all of his cars in black at the beginning, customer preference soon dictated that, you know what? I may want to try something different.

Now, the price is going to stabilize. Now possibly you're going to have economies of scale here. Now, what we mean by economies of scale is that as the production ramps up, it becomes cheaper per unit to make the product. So you're going to start to see the price come down from a little bit.

Now, the place, we had increased distribution. More sales, more demand equals more places I need to place the product. If you remember the Chevrolet Volt was only started in two different markets, now you can buy one anywhere in the US. And promotion is going to be focused on differentiation. How is my product different than the competitors that are now coming into the field?

And when we get into stabilizing, as we talked about before, it's important to understand brand loyalty. With Apple, for instance, I have an automatic brand loyalty there, so I'm going to try to appeal to those customers, and it's going to be very important to build and maintain that particular brand loyalty with my company or my product.

And even within the growth stage, some people say we have three different phases-- early, middle, and late as it goes toward maturity. Now maturity is where the product is, well, it's been on the market for awhile, and the-- and we're going to have a simplified line up.

The reason we have this is, the product and sales have started to peak, and it actually, well, they've actually started to decline just a little bit. And industry profits as a whole with this particular product start to decrease. So as a result, I'm going to simplify my product. Since there's not as much demand, especially later in the maturity phase, I don't need to offer as many types of variations.

Now pricing becomes very important. It's extremely competitive here. I had all the competition I'm going to have enter the market now, so as the price and as the sales start to go down, I need to make sure my pricing is competitive and to be able to maintain those sales as long as I can.

Distribution is going to be-- it's going to be limited. It's going to be focused. But it's going to be stable, I don't have to worry about growing the market very much. I've already established myself in these markets, and I want to make sure that I'm focusing on to get the most sales that I can. Also, promotion is going to be very, very aggressive and it primarily is going to be price and reminder-driven. Hey, look at this great product. Remember?

And I'm going to be focused on the price. You think about Coca Cola, they are, well, they've stayed in the maturity stage for a long, long time, and their primary promotion is reminder-driven. Also, when you get into the store, you're looking at price, sales versus a particular competitor.

Lastly, we have the decline stage. In this one, we have limited variation, or we may even discontinue the product altogether. Sales volume is only downward, we don't see any increasing at-- any increases at all in the amount of sales that we have.

Competition is starting to leave the market. Prices are the lowest they're going to be for a product here, and they're often bundled with other things. We're trying to get rid of our inventory and make as much money as we can off of this particular product. So you might see it bundled with another product just to give out the door.

Place is going to be limited, stable, and focused just like before with the maturity stage, only this time we're only focusing on those most profitable markets. We're going to delete the product from places where it's no longer profitable.

And promotion, we're looking at price and reminder-driven once again, and that's if we had any promotion at all. We may end up having to delete the product, or get rid of it, so in that case, we may not be wanting to spend a lot of money marketing that product.

An example, if anyone remembers, is Tab soda. Tab soda, it's hard to find if you can find it at all, because there's no money in that product. So there's no promotion for it.

So what did we cover today? Well, we looked at the product life cycle and those four phases in a product's life cycle. The introduction, the growth, the maturity phase, and finally, the decline phase. Well now, we have to make a decision. Do we want to re-engineer that product to get it back to maturity, or do we just want to let it go?

As always, I want to thank you for spending some time with me today. I hope you had a good time, I know I did. Hey, we'll see you next time.