Product Life Cycle and Industry Life Cycle

Similar to the human life cycle, the change in variables along the course of the product's life cycle, plays a vital role in defining the segmentation and differentiation approach. Let us understand this concept in greater depth in terms of Maggi Pasta.

 

 

PRODUCT LIFE CYCLE (PLC)

A new product passes through set of stages known as product life cycle. The time-span of a product life cycle varies from product to product. Modern product life cycles are becoming shorter as products falling in mature stages are being renewed by market segmentation and  product differentiation.

Companies always attempt to maximize the profit and revenues over the entire life cycle of a product. In order to achieving the desired level of profit, the introduction of the new product at the proper time is crucial. If new product is appealing to consumer and no stiff competition is out there, company can charge high prices and earn high profits.

CHARACTERISTICS OF PRODUCT LIFE CYCLE

• PRODUCTS HAVE LIMITED LIFE

• PRODUCT SALES PASSES THROUGH DIFFERENT STAGES, EACH POSES A DIFFERENT CHALLENGE AND OPPORTUNITY.

• PROFITS RISE AND FALL AT DIFFERENT STAGES OF LIFE CYCLE.

• PRODUCTS REQUIRE DIFFERENT STRATEGIES IN DIFFERENT LIFE CYCLES.

STAGES OF PRODUCT LIFE CYCLE

Product life cycle comprises four stages:

1. Introduction stage
2. Growth stage
3. Maturity stage
4. Decline stage

INTRODUCTION STAGE

Product is introduced in the market with the intention to build a clear identity and large scale promotion is done for creating awareness. 

Companies incur more costs in this phase and also bear additional cost for distribution. On the other hand, there are a few customers at this stage, which means low sales volume. So, during introductory stage company’s profits shows a negative figure because of huge cost but low sales volume.

At introduction stage, the company core focus is on establishing a market and raising demand for the product. So, the impact on marketing mix is as follows:

Product

Branding, Quality level and intellectual property and protections are obtained to stimulate consumers for the entire product category. Product is under more consideration, as first impression is the last impression.

Price

High pricing is used for making high profits with intention to cover initial cost in a short period and low pricing is used to penetrate and gain the market share. company choice of pricing strategy depends on their goals.

Place

Distribution at this stage is usually selective and scattered.

Promotion

At introductory stage, promotion is done with intention to build brand awareness. Samples/trials are provided that is fruitful in attracting early adopters and potential customers. Promotional programs are more essential in this phase. It is as much important as to produce the product because it positions the product.

Maggi pazzta entered the market when there was only a single leader in the pasta category, Sunfeast. Also since, the brand maggi was already established in India for years, the launch of maggi pasta was welcomed by the consumers.

GROWTH STAGE

In this stage, company’s sales and profits starts increasing and competition also begin to increase. The product becomes well recognized at this stage and some of the buyers repeat the purchase patterns. During this stage, firms focus on brand preference and gaining market share. It is market acceptance stage. But due to competition, company invest more in advertisements to convince customers so profits may decline near the end of growth stage.

Effect on 4 P’s of marketing is as under:

Product

Along with maintaining the existing quality, new features and improvements in product quality may be done. All this is done to compete and maintain the market share.

Price

Price is maintained or may increase as company gets high demand at low competition or it may be reduced to grasp more customers.

Distribution

Distribution becomes more significant with the increase demand and acceptability of product. More channels are added for intensive distribution in order to meet increasing demand. On the other hand re-sellers start getting interested in the product, so trade discounts are also minimal.

Promotion

At growth stage, promotion is increased. When acceptability of product increases, more efforts are made for brand preference and loyalty.

Maggi Pasta is in its growth stage, where it uses several promotional tools like recipe contests over internet, TVCs, and so forth.  Maggi pasta recently added two new variants to the existing ones, Tomato twist and Mushroom Penne.

MATURITY STAGE

At maturity stage, brand awareness is strong and sale continues to grow but at a declining rate in comparison to the past. At this stage, there are more competitors for the same products. Companies tend to defend the market share and attempt to extend their product life cycle, rather than make profits, by offering sales promotions to encourage retailer to give more shelf space to the product than that of competitors. At this stage, loyal customers are a key ingredient in the recipe for a winning hand.

Marketing mix decisions include:

Product

At maturity stage, companies add features and modify the product in order to compete in market and differentiate the product from competition. At this stage, it is the best way to get dominance over competitors and increase market share.

Price

Because of intense competition, at maturity stage, price is reduced in order to compete. It attracts the price conscious segment and retains the customers.

Distribution

New channels are added to face intense competition and incentives are offered to retailers to get shelf preference over competitors.

Promotion

Promotion is done in order to create product differentiation and loyalty. Incentives are also offered to attract more customers.

Maggi is yet to hit its maturity stage where the sales would become constant. For now maggi sales are increasing in a subtle way and thus it is time for maggi pasta to hit this stage.

DECLINE STAGE

Decline in sales, change in trends and unfavorable economic conditions are important factors of the decline stage. At this stage, market becomes saturated and sales declines. This may be due to technical obsolescence or change in customer's taste and preferences.

At decline stage company has three options:

1. Maintain the product, Reduce cost and find new uses of the product.
2. Harvest the product by reducing marketing cost and continue offering the product to loyal niche until zero profit.
3. Discontinue the product when there’s no profit or in the case of availability of  a possible successor or selling out to competitors who want to keep the product.

Maggi pasta has not hit the declining stage and it will not be hitting the stage any sooner because of the less direct competition in the category. Sunfeast and Pasta are the only ready to eat pasta makers in India for now.

LIMITATIONS OF PRODUCT LIFE CYCLE (PLC)

Product life cycle is criticized that it has no empirical support and it is not fruitful in special cases. Different products have different properties so their life cycle also vary. It shows that product life cycle is not best tool to predict the sales. Sometimes, managerial decisions affect the life of products in this case Product Life Cycle is not playing any role. product life cycle is very fruitful for larger firms and corporations but it is not hundred percent accurate tool to predict the life cycle and sales of products in all the situations.

Industry Life Cycle (ILC)

Industry Life cycle is essentially a larger variant of the Product life cycle where the development of the industry (encompassing all kinds of brands and product offerings under the umbrella of the same industry) is traced through stages of Growth, maturity and decline. It is not directly applicable in the case of Maggi Pazzta but according to the larger operating math,  the ready to eat segment in the instant food industry as a whole can both be classified under the growth stage of the ILC.

An important integrated concept that needs to be understood is the marketing mix as it is THE COMPLETE product of a marketing process and is tailor-made in keeping with the phases in the Human Life Cycle, PLC, BLC and ILC.