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Marketing Aptitude Study Material – Product Life Cycle (PLC)

Product

A product may be defined as a bundle of utilities consisting of various features and accompanying services. The bundle of utilities or the physical and psychological satisfactions that the buyer receives is provided by the seller when he sells a particular combination of product features and associated services.

Importance of Product

• Product is the central point of all kinds of marketing activites.
• Any marketing activity is not possible without any product.
• Sales, advertisement, sales promotion, etc depend only on product.
• Price of a product, its distribution and policies related to it, are based on it.
• Product planning and its development affects the life of a product.
• Many persons get employment due to the product.
• Decisions related to any product are the main causes of the prosperity or failure of any business.

Classification of Product

Products or goods can be classified into two broad categories depending upon the use for which they are meant. These categories are

Consumer Goods 

goods can he classified as follows

1. Convenient Goods e.g., cold drinks, cigarattes, magazines and newspapers, etc.
2. Shopping Goods e.g., furniture items, dress materials, shoes, etc.
3. Speciality Goods e.g., fancy goods, stamps, coins, etc.

Industrial Goods

Industrial goods can be classified as follows

1. Fabricating Goods e.g., pig iron going into steel, yarn being woven into cloth, etc.
2. Equipment Goods e.g., portable drills, hand tools, etc.
3. Supplies Goods e.g., floor wax, pins, pens, etc. Electrical goods such as TVs, video, stereo systems, etc used for home entertainment are known as brown goods. The goods which are used for their production, are called capital goods.

Difference between Consumer Goods and Industrial Goods

Basis	Consumer Goods	Industrial Goods
Nature of customers	Consumers of consumer goods are the ultimate consumers.	Its consumers are the manufacturing and industrial units.
Market extension	The market of such goods is very large and’extensive.	The market of such goods is not so large and extensive.
Number of customers	Number of customers for consumer goods is very large,	Number of customers for industrial goods is generally limited.
Nature of demand	The demand of consumer goods is called autonomous demand or direct demand.	The demand of industrial goods is called derived demand or indirect demand.
Marketing strategy	Advertising programme and sales promotion methods play an important role in the sale of such goods.	The personal contact with buyers play an important role in the sale of such goods.
Quantity of purchase	Generally, consumer goods are purchased in a small quantity.	Generally, industrial goods are purchased in bulk quantity.

 Qualities of a Product

• Brand name
• Trade mark name
• Fictitious or real
• Mass or weight
• Kind
• Price

Product Life Cycle (PLC)

The Product Life Cycle (PLC) is the life span of a product from the stage of development through testing, promotion, growth and marketing, to the stage of decline and perhaps regeneration.

Characteristics of Product Life Cycle

1. The life cycle of each product begins with its introduction in the market and passes through the phases of market development, maturity, becomes leader and ultimately declines.
2. The speed of movement through various stages of life cycle, cannot be same for all kind of goods.
3. Profits in the business enterprise, grow quickly in the introduction stage and decline/decrease in the maturity stage due to competitive conditions. However, there is overall increase in sale during the maturity stage.
4. With the decrease in profits in the maturity stage, changes such as research and development, production pattern, marketing and financial control activities, etc become essential.

Stages in Product Life Cycle

The product life cycle comprises of five stages

1. Market introduction
2. Market growth
3. Market maturity
4. Market saturation
5. Market decline

 

1. Market Introduction: In this stage, some innovative products may be launched. Innovation means product designing, new ideas and creativity.This stage of the cycle could be the most expensive for a company. The cost of things like research and  development, consumer testing and the marketing needed to launch the product can be very high, especially if it is a competitive sector.
2. Market Growth: This stage is typically characterized by a strong growth in sales and profits. As the company can start to benefit from economies of scale in production, the overall profit margins will increase. Price stabilises or falls slightly, depending on how fast demand increases.
   The category of consumers in the growth stage of product is somewhat more price sensitive, more risk averse and therefore, somewhat more hesitant to adopt the product.
3. Market Maturity: Sales continue to grow during the early part of maturity, but at a much slower rate than experienced during the growth phase. At some point, sales reach at the peak. This peak may last for extended periods of time. In fact, the maturity phase of the life cycle is the longest phase for most products.
4. Market Saturation: In this stage, the amount of product provided in a market has been maximized in the current state of market place and selling price has been constant. At the point of saturation, further growth can only be achieved through product improvements, market share gains or a rise in overall consumer demand.
5. Market Decline: This is the last stage of Product Life Cycle (PLC). At this stage, there is a down turn in the market. Profit margins touch a low level, competition becomes severe and customers start using newer and better products.

Importance of Product Life Cycle

Following are the importance of product life cycle

• Life of a Product is Limited
  According to this concept, the product will die out over a period of time irrespective of the fact that the product had made tremendous progress during the post. Knowing this fact, management always try to improve its existing product or to develop a new product.
• Estimation of Profits
  The quantum and rate of profits increases or decreases with the quantum of turn over. In introductory stage, profits are negligible, then they go up and after sometime they begin to fall and gradually they move to nill. Thus, the management can well predict the firm’s profits in different stages of the life cycle of the product.
• Marketing Programme
  Different policies, procedures and strategies are followed in the different stages of the life cycle of a product. So, management can prepare the marketing programmes accordingly and may get success.

Importance of Product Life Cycle also includes

1. Help in promotional decision.
2. Help in product control.
3. Facilitates sales forecasting.

Factors Affecting Product Life Cycle

• Development of substitute products.
• Product regulatory system.
• Rate of technical change and market acceptance.
• Competitive entry.
• Legal law and government protection.
• Goodwill of the organisation.
• Patent, copyright and trademark.
• Quality of raw material and product.
• Material mix ratio.

Importance of Product Life Cycle also include

1. Help in promotional decision.
2. Help in product control.
3. Facilitates sales forecasting.

Style, Fashion and Fad Life Cycles

We need to distinguish three special categories  of product life cycles: styles, fashions and fads.

• A style: is a basic and distinctive mode of expression, appearing in a field of human endeavour. Styles appear in homes, clothing and art. A style can last for generations.
• A fashion: is currently accepted or popular style in a given field. Fashion pass through four stages. It is always based on some st Distinctiveness, emulation, mass fashion and Decline.
• Fads: are fashions that come quickly in public view, are adopted with great zeal, peak early and decline very fast.

Factors Affecting Product Life Cycle

• Development of substitute products.
• Product regulatory system.
• Rate of technical change and market acceptance.
• Competitive entry.
• Legal law and government protection.
• Goodwill of the organisation.
• Patent, copyright and trademark.
• Quality of raw material and product.
• Material mix ratio.

Product Related Policy Decision

Decisions taken by the producers on the given three aspects

1. Product Item: A detailed description of a product in a list of a producer or seller is called product item.
2. Product Line: It means group of product, which are closely related to each other g, Lakme, Maybline, etc. In product line decision, the marketer has to make decision regarding the product line length which means the number of product in the product line.
3. Product Mix: It means the complete set of product line produced and bold by the company. Nestle produces milk powder, maggie, ghee, etc.

Product Development Steps

The new  product planning involves a series of steps from idea generation to commercialization

1.  Idea Generation It is a continuous, systematic search for new product opportunities. It involves delineating sources of new ideas and methods for generating them.
2. Product Screening After the firm identifies potential products, it must screen them. In product screening, poor, unsuitable or otherwise unattractive ideas are weeded out from futher actions.
3.  Concept Testing A firm needs to acquire consumer feedback about its product ideas. Concept testing presents the consumer with a proposed product and measures attitudes and intentions at this eary stage of development.
4.  Business Analysis Business analysis for the remaining product concepts is much more detailed than product screening. These are some of the factors considered in this stage of planning-demand projections, cost projecitions, competition, etc.
5.  Product Development It converts a product idea into a physical form and identifies a basic marketing strategy. It involves product construction, packaging branding, etc.
6.  Test Marketing It involves placing a product for sole in one or more selected areas and observing its actual performance under the proposed marketing plan.
7.  Commercialization After testing is completed, the firm is ready to introduce the product to its full target market, commercialization involves implmeting a total marketing plan and full production.

Tit-Bits

• Product planning means the act of making out and supervising the search, screening, development and commercialisation of new products, the medification of existing lines and the discontinuance of marginal or unprofitable items,
• Product development includes guarantee and condition of the product, branding, labealling and packaging.
• Reasons behind product innovation are competition and market change, market strategy and risk.
• A phase out approach can be best described as immediately dropping the product from the product mix.
• Price strategies become more mixed during the maturity stage of the PLC.

Check Your Skills

1. Characteristics of introduction stage of PLC is

1. lower demand
2. limited customer
3. low growth rate in demand
4. All of the above
5. None of the above

2. The goods which are used for their production are called [SB I Clerk 2008]

1. durable goods
2. market goods
3. derived goods
4. consumer goods
5. capital goods

3. The importance of product life cycle includes

1. help in promotional decision
2. help in product control
3. facilitates sales forecasting
4. All of the above
5. None of the above

4. In introduction stage of ‘PLC’

1. advertisement is required
2. sales promotion is required
3. research and development is required
4. Both ‘1’ and ‘2’
5. None of the above

5. Which of the following is not the product line policy?

1. Contraction of product mix
2. Development of new uses for existing products
3. Alteration of existing products
4. Costing
5. None of the above

6. ‘PLC’ stands for

1. Product Life Cycle
2. Product Life Cost
3. Product Long Cost
4. Price Long Cost
5. None of these

7. Which of the following is the birth stage of product life cycle?

1. Research and development of price
2. Production development stage
3. Introduction stage
4. Production
5. All of the above

8. In the case of such goods where consumer normally compares price, quality delivery, etc are called [SBI Clerk 2008]

1. shopping goods
2. speciality goods
3. staple goods
4. derived demand
5. luxury goods

9. Product planning means

1. the act of making out and supervising the search, screening, development and commercialization of new
2. products
3. innovation of company
4. pricing
5. selling
6. marketing

10. A fashion is always based on

1. product or service pricing method
2. some style
3. cost
4. brand
5. sales

11. Product development includes

1. guarantee and condition of the product
2. branding
3. packaging
4. labeling
5. All of these

12. Which of the following is the reason for product innovation?

1. Competition and market change
2. Market strategy
3. Risk
4. All of these
5. None of these

13. Which among the following is not an example of convenience goods? [SBI Clerk 2008]

1. Tea
2. Coffee
3. Soap
4. Tooth paste
5. Umbrella in rainy season

14. Which of the following is the life span of product?

1. Product mix
2. Product life cycle
3. Product planning
4. Product development
5. None of these

15. According to whom “The product life cycle is an attempt to recognize distinct stages in the sales history of the product”?

1. Arch Paton
2. Philip Kotler
3. Stanton
4. Bartle
5. None of these

16. The product life cycle includes

1. introduction stage
2. growth stage
3. maturity stage
4. decline stage
5. All of these

17. Which of the following is the feature of introduction stage of product life cycle?

1. Low sales
2. High production cost
3. Low profit
4. Few competitors
5. All of these

18. The stages of the product life cycle in chronological order is

1. introduction, growth, maturity, decline
2. introduction, growth, maturity, stagnation, decline
3. introduction, maturity decline
4. introduction, maturity, stagnation decline
5. All of the above

19. Which of the following is the feature of growth stage of product life cycle?

1. Increase in sales
2. Reduced cost
3. Profit rises
4. All of these
5. None of these

20. Which of the following is the alarming feature of maturity stage of the product life cycle?

1. Sales continue to grow
2. Costs continue to rise
3. Profits start to decline
4. All of the above
5. None of the above

21. Which of the following is the feature of decline stage of the product life cycle?

1. A down turn in the market
2. Profit margins low
3. Severe competition
4. All of the above
5. None of the above

22. What are the two ways by which a company can obtain new products?

1. New product development and acquisition
2. Market mix modification and research and development.
3. Internal development and merger
4. Service development and product extension
5. Line extension and brand management

23. Which of the following is not a stage in product life cycle?

1. Introduction
2. Peak
3. Growth
4. Maturity
5. None of these

24. In which of the following stages of the product life cycle, sale’s growth starts to slow down?

1. Maturity stage
2. Growth stage
3. Decline stage
4. Introduction stage
5. None of these

25. During which stage of new product development does the firm consider profitability?

1. Business analysis
2. Product development
3. Idea generation
4. Testing
5. None of the above

26. Electrical goods such as TVs, videos, stereo systems, etc used for home entertainment are knows as [SBI Clerk 2012]

1. white goods
2. green goods
3. red goods
4. blue goods
5. brown goods

27. Which of the following is are major steps in the development of new product?

1. Test marketing
2. Business analysis
3. idea generation
4. Screening
5. All of these

28. A phase out approach can be best described as

1. a decline of product
2. immediately dropping the product from the product mix
3. stopping the production
4. development of new product
5. None of the above

29. Price strategies become more mixed during the stage of the PLC.

1. maturity
2. growth
3. introduction
4. decline
5. None of these

30. The decline stage of PLC can also be termed as

1. peak stage
2. saturation stage
3. cut-off stage
4. break-even stage
5. None of these

31. Which of the following growth strategies focuses on-developing new products for a company’s existing markets?

1. Product diversification
2. Product development
3. Market penetration
4. Market segmentation
5. None of the above

32. Increasing profits will most likely occur at which stage of the PLC?

1. Introduction
2. Growth
3. Product development
4. Decline
5. Maturity

33. In which of the following stages of PLC, there is little or no competition in the market?

1. Introduction
2. Growth
3. Maturity
4. Decline
5. None of these

34. In which of the following stages of PLC, sales volume is at the peak?

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

35. Product deletion may be defined as

1. an immediate termination of the product
2. happening only with convenience items
3. happening only with costly items
4. sometimes may be opposed by the management
5. None of the above

36. In which of the following stages of PLC, costs become high and detrimental?

1. Introduction
2. Growth
3. Maturity
4. Decline
5. None of these

37. What are the major reasons for sales decline in the final stage of product life cycle?

1. Technological advances
2. Shifts in consumer tastes
3. Increased domestic and foreign competition
4. Both ‘1’ and ‘2’
5. All of the above

38. Which stage in the product life cycle normally lasts longer than other stages?

1. Maturity
2. Decline
3. Introduction
4. Phase in
5. Growth

33. In which of the following stages of product life cycle, costs are very high?

1. Introduction
2. Growth
3. Maturity
4. Decline
5. None of these

40. What are the two by which a company can obtain new products?

1. New product development,, and acquisition
2. Market mix modification and research and development
3. Internal development and merger
4. Service development and product extension
5. Line extension and brand management

Answer Key