Understanding the Product Life Cycle (PLC) is of critical importance to a firm launching a new product. It helps a firm to manage the risk of launching
a new product more effectively, whilst simultaneously maximising the sales and profits that could be achieved throughout the
product's life cycle.
1. What is the product life cycle?
The PLC indicates that products have four things in common: (1) they have a limited lifespan; (2) their sales pass through a number
of distinct stages, each of which has different characteristics, challenges, and opportunities; (3) their profits are not
static but increase and decrease through these stages; and (4) the financial, human resource, manufacturing, marketing and
purchasing strategies that products require at each stage in the life cycle varies (Kotler and Keller, 2006). Whilst
there is a common pattern to a product's life cycle, which is bell-shaped in nature, this pattern does vary depending on the
specific characteristics of a given product. These life cycle patterns are illustrated and discussed in the subsequent
2. What are the main aspects of the product life cycle?
The typical PLC consists of five main aspects: (1) product development; (2) introduction;
(3) growth; (4) maturity; and (5) decline. In the diagram below, the respective sales (in red) and profits (in blue)
across these five stages are illustrated.
The PLC begins with product development, during which time the firm devises and creates a new product. Whilst
the end aim of this development process is to have a profitable, well-performing product on the market, this initial stage
is characterised by zero sales, the firm bearing the costs of such development, typically resulting in negative profitability
(Kotler and Armstrong, 2004). Recent product developments include the likes of the iPod by Apple and the Serene by Bang and Olufsen. However, despite the importance of the product development process, the PLC literature tends to focus on the subsequent
four stages, which are discussed in more detail below.
The introduction of a new product onto the market
is typically characterised by very slow sales, which may grow only very slightly over a long period of time. Whilst
profits will gradually improve during this stage, it may take until near the completion of the introductory stage in the PLC
before the company witnesses positive profitability. The reason for such low profitability during this stage is not
so much the limited success of the product – measured in terms of low, albeit growing, sales – but the high costs
of production and promotion that are required to try to develop customer awareness. Depending on the nature of the product,
the firm many need to invest in building inventories or acquiring fixed assets such as plant and machinery. Whilst this
stage in the process can take a long time and consume considerable resources, firms must not be tempted to try to obtain early
profitability at the expense of long-term product viability. For example, introducing a new product at a low price may
encourage a lot of consumers to make an immediate purchase, but the firm not only sacrifices long-term sales because too many
people have bought the product early on but also may considerably reduce its margins, making it more difficult and time consuming
before the product first becomes profitable and hits its break-even level. As such, firms must make careful choices
over their marketing strategies; in particular, their pricing, promotional and placement decisions (Porter, 1980; 1985; Kotler
et al., 1996; Blackwell et al., 2001; Grant, 2002; Kotler and Armstrong, 2004).
The growth stage in the
PLC typically involves a rapid growth in sales as early adopters replace pioneers as the main consumer group. Whilst
pioneers are characterised as those consumers who purchase products almost immediately when new products are launched, early
adopters wait until the price starts to fall and some of the product's potential weaknesses are ironed out. Nonetheless,
over time the risk of purchasing a new product – one that is not as well tested and supported – decreases and
increasing numbers of people become interested in, and purchase, the product. Towards the second half of the growth
stage, later buyers will start to adopt the product as they receive positive word-of-mouth recommendations from people they
trust. Whilst profits start to increase during this period, they do not match the growth in sales. This is because
the awareness of the new product and growth in product sales make the market for the product more attractive to potential
new entrants and competitors. During this period of high sales growth, many competitors may choose to enter the market,
reducing the company's relative market share and, in the process, its profitability. As the sales volume increases,
the manufacturing and promotional spend per unit decreases, which also helps to increase profitability. Nonetheless,
if the firm wants this growth phase to continue rapidly without petering out, it must invest in adding new product features
or improving the quality of the product. This may not only attract existing customers to upgrade their current product
purchase but it may also attract different customer demographics that would ordinarily not have been drawn to the product's
features and functionality. Alternatively, improvements in customer support or the creation of easy-to-use functionality
can help the firm acquire more risk-averse consumers who require greater product support. Over time, the company may
choose to reduce prices considerably in an attempt to attract more customers, or bundle the product with other offerings that
may be approaching the end of their growth stage. Nonetheless, it is typically just a matter of time before the product's
growth starts to waiver (Porter, 1980; 1985; Kotler et al., 1996; Blackwell et al., 2001; Grant, 2002; Kotler and Armstrong,
The maturity stage in the PLC is a key point for a firm because it marks the turning point in the
product's success. Typically, the growth in sales decreases quite significantly and manufacturer's over-capacity (that
is, larger than required inventories) results in a reaction by the firm and its competitors to slash prices. Whilst
this prolongs the maturity stage and the total number of sales for some time, the drop in prices has an adverse effect on
the product's profitability, and profit level, whilst still positive, starts a downward slide. Many firms, especially
single-product firms, will look to every possible marketing management technique known to revitalise product sales, whether
this involves starting new users or market segments, or making significant modifications to the product, perhaps improving
its quality, reliability or some aesthetic feature. Companies such as HERSHEY'S have managed to prolong this stage considerably
through intelligence branding, promoting the fact that their chocolate bars are "unchanged since 1899". Indeed, whilst
Coca-Cola manages to increase global sales through entry into additional markets, many of its core products have remained the same
over significant periods; it has just been their branding that has changed. Ultimately, the maturity stage becomes the key
turning point for companies because at some point during this period, sales will start to decrease and potentially never experience
positive growth again (Porter, 1980; 1985; Kotler et al., 1996; Blackwell et al., 2001; Grant, 2002; Kotler and Armstrong,
In most cases this eventually leads to the decline stage during which time the product's
sales drop significantly and in some cases, rapidly, with profits continuing to fall until profitability becomes so low that
the product is discontinued or a company leaves sales to continue but accepts that the product has passed its core selling
years. During this stage, a few laggards adopt the product but these are rarely a profitable customer group. Such
a decline may be the result of technological developments, changes in consumer purchasing behaviour or significant increases
in competition (Porter, 1980; 1985; Kotler et al., 1996; Kotler and Armstrong, 2004; Grant, 2002). In the case of the
latter, international products may suffer from the loss of a patent licence or import protections that have otherwise kept
a product's sales high long after its offering became relatively uncompetitive. As such, barriers to entry decrease;
products may be substituted by cheap imports that benefit from lower costs of production and an established distribution network.
During this period, firms in more advanced nations tend to refocus their efforts on creating new, high-value, technology-backed
products that can again achieve a high price and start another PLC for the company (Doole and Lowe, 2004).
Not all products
follow the classic introduction, growth, maturity and decline cycles. Some products are able to find ways to re-invest
themselves at the end of their growth stage or before they witness the negative side of the maturity stage. In so doing,
they achieve what Kotler and Keller (2006) call a scalloped pattern. As the authors comment: "Here
sales pass through a succession of life cycles based on the discovery of new-product characteristics, uses, or users" (323).
As a classic example, they point to nylon sales which have found numerous need users, such as car tyres, carpeting, hosiery,
parachutes and shirts, amongst others. For example, companies such as Levi's have managed to re-invent their jeans brand through the use of different fabrics and cuts that have given their product a
new, youthful look.
In addition to those variations to the common PLC, the concept can also be used to describe (1) fads,
(2) fashion, and (3) style. Fads are fashions that are introduced and adopted very quickly, but just as quickly can
fall. They typically have a limited following, but are nonetheless adopted with real zeal, such as the hula-hoop.
Fashions grow more slowly but still quite quickly before eventually witnessing a decline. However, in some cases these
become a style; that is, they come back into fashion. For example, Beanies and Yo-Yos were in fashion during the 1950s
and 1960s respectively before largely dropping off the radar until the 1990s when both products witnessed a revival (Kotler
et al., 1996; Kotler and Keller, 2006).
3. How do you use product life cycle analysis?
PLC analysis can be used both proactively and retrospectively.
Proactively, companies need to assess how they think that their product will perform through its PLC and the marketing strategies
and marketing mix that should accompany each stage. After all, a company should aim to prolong the growth stage of its
product and look at ways of revitalising the product during its maturity stage. However, firms should assess how they
are going to do this well before they reach each stage. The proactive approach is particularly useful for market pioneers,
such as Amazon.com, Coca-Cola and Hallmark because they are often not only introducing a new product, but also creating a whole new market. Alternatively,
the PLC can be used as a retrospective tool to assess when a firm should enter an existing market with a new product.
This is important because firms need to examine what marketing strategies and marketing mix will enable them to differentiate
their product offering from those of existing firms. If implemented effectively, imitators and later entrants can make
significant inroads into a market and, in some cases, overtake incumbents. Classic examples include Compaq, Dell and Gateway.
4. Where can you find information on the product life cycle?
When engaging in a PLC analysis, a researcher may benefit from using some of the following
resources: (1) annual reports; (2) academic and commercial marketing journals and magazines; (3) news reports on the internet;
and (4) product reports. Annual reports are a particularly good source for finding out when products were introduced
onto the market and finding out sales figures for those products over time. Academic and commercial marketing journals
and magazines can be useful in understanding the theoretical and practical use of products already introduced, as well as
pointing to the marketing strategies and marketing mix being used by firms. News reports on the internet help identify
when new products are introduced, as well as how popular such products are and whether they are likely to become fashion,
fads or are a reinvention; that is, style. Finally, product reports, whether these are found in magazines or trade journals
help to show customer opinion and support (or otherwise) for a product.
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Doole, I. and Lowe, R. (2004) International Marketing Strategy: Analysis, Development
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Grant, R.M. (2002) Contemporary Strategy Analysis: Concepts, Techniques, Applications.
Oxford: Blackwell Publishing.
Kotler, P., Armstrong, G., Saunders, J. and Wong, V. (1996) Principles of Marketing,
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Kotler, P. and Armstrong, G. (2004) Principles of Marketing, 10th edition. Upper
Saddle River, NJ: Pearson Education.
Kotler, P. and Keller, K.L. (2006) Marketing Management, 12th edition. Upper Saddle
River, NJ: Pearson Education.
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New York: Free Press.
Porter, M.E. (1985). Competitive Advantage: Creating and Sustaining Superior Performance.
New York: Free Press.
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