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 section.
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...