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Product life cycle management, commonly referred to as PLC, is the management of a product as it enters its various stages of life. Due to the fact that the conditions of a product will change over time, management needs to be aware of these changes in order to effectively manage them.
In order to effectively market a product, most companies realize that nearly all products are dependent on business costs and sales measures. Therefore, companies will try to maximize the amount of revenue generated from sales of all products, based on the following assessments:
- Products pass through various stages, challenges, problems, and opportunities.
- Products have a limited life.
- Products require different approaches to each life cycle stage, whether it's marketing, purchasing, financial, or manufacturing.
- Products increase or decrease in demand at various stages of the life cycle.
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What Are the Stages of Product Life Cycle Management?
Based on a company's understanding of the above-stated assessments, managers begin to develop distinct stages that products enter in order to meet each challenge corresponding to each stage. Therefore, management teams that study product life cycles state that products go through four major stages of life. They are:
Stage 1: Market Introduction Stage
Due to the introduction of a new product, management expects that sales will be low and cost will be high at this initial stage. Also, the company is focused on creating a “buzz” around the product so that customers will try it out. There is also very little competition, initially, at this level.
Stage 2: Growth Stage
As awareness is created around this new product, the sales volume increases dramatically. Profitability begins to increase as the cost factor is reduced. Also, competition begins to drive the price down, as there is now competition from other companies to get a “piece of the pie."
Stage 3: Maturity Stage
Due to the increase from competitors entering the market, uniqueness of brand and/or product features become key. Companies must differentiate their brands in order for their products to stay relevant with consumers. Sales volume peaks at this point, and there is product saturation of the market. The price continues to drop due to the competition of other brands. Cost also lowers, due to production volume increases.
Stage 4: Saturation and Decline
At this stage, sales becomes stabilized or even decline. Profitability decreases, as does price. The product may be losing some of its relevancy with consumers.
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Product Life Cycle Management is Not Always Fail-Proof
The product life cycle is a very important tool for managers of most companies. By studying these concepts, companies are able to create alternate strategies to combat all challenges that are associated with each stage. However, it is important to remember that the product life cycle model is not fail-proof, and it does have some inherent limitations. For instance, just because a product is in the maturity stage does not automatically mean that the product will enter the decline stage.
Specifically, Coca Cola has been in the maturity stage for decades and has never entered the decline stage. As you may well know Coca Cola still continues to be the drink of choice for many people all over the world
Therefore, product life cycle managers are aware of these limitations, but will continue to use the product life cycle model, in addition to all other resourceful information.
Image Credit: sxc.hu, business by ilco