A product is a physical good or intangible service provided by a business to its customers. The product life cycle (PLC) refers to a theory created by American economist Raymond Vernon in 1966. The PLC shows the different stages that (most) products go through from their research and development (R&D) stage to their final removal from the market (when there is no longer demand for the product). The PLC diagram plots the product’s sales revenue on the y-axis and the timeline along the x-axis.

The key stages of the product life cycle, as shown in the diagram above, are:

• Research and development (R&D) – investigating, designing and developing a product before it is launched on the market for sale.

• Launch – the product is introduced onto the market. Early adopters will buy the product, but most customers will not be aware of the new product, so advertising and promotion are vital in order to boost and sustain sales. A firm that is first on the market to launch a successful product is able to again what is known as a first mover advantage (FMA). For example, Pfizer, an American pharmaceutical giant, was able to enjoy competitive advantages, market share, and customer loyalty gained by being the first firm in an industry to successfully launch a vaccine for the coronavirus in late 2020.

• Growth – sales revenue increases as the product becomes known in the market and the business gains market share. Competitors are likely to enter the market at this stage.

• Maturity – sales revenue peak or plateau, as sales growth slows and the firms contend with their rivals. Sales become saturated, so the firm relies on product differentiation strategies and product extension strategies to prolong the life cycle of mature products. Firms might also strive to reposition their product to prolong sales.

• Decline – sales revenue continually decline, leading to the eventual withdrawal of the product. This is usually due to changing fashions, habits and tastes or due to technological advances and R&D which make the product obsolete (outdated).

Given these different phases in a product's life cycle, it is important for managers to be aware of their product portfolio. For example, a business needs to have products in the growth and maturity stages to earn profit. This can be used to fund research and development. They also need to invest in R&D in anticipation that some products in the decline phased will be withdrawn from the market.

As a real world example, take a look at this visual stimulus of the product life cycle for Apple's iconic iPod, which was launched in 23rd October 2001 and officially withdrawn on 10th May 2022. To remain successful, Apple would need to have other products in its portfolio, knowing the sales of the iPod went into decline from around 2006. To be successful, the business would also need to ensure an appropriate marketing mix (the 7 Ps) is devised and implemented.

Source: Statista

 Watch this 15-minute video clip for a detailed explanation of the product life cycle:

The relationship between the PLC and the marketing mix

It is important for a business to stay up to date with market changes and trends. Marketing myopia exists when a business becomes complacent (care-free, reckless, or unaware of danger signals) about its product strategy, thereby failing to retain any competitive advantage in the market.

The marketing mix for a product will change depending on the specific stage of the product life cycle (PLC) that is being examined. The section below outlines some generic examples of this.

Research & Development (pre-launch)

• Market research conducted to discover what products would appeal to potential customers.

• Creating prototypes and test marketing activities.

• Discussion with key stakeholders about pricing, packaging, promotion and distribution prior to launching the product.

• There are no sales during this phase of the product life cycle, but expenditure will be high.

• Investment costs will be very high (especially for R&D), profit will be negative, and cash flow will be negative.

Developing a prototype is part of the PLC

Introduction (launch)

• A promotional mix is used to raise awareness of the product (a question mark in the Boston Matrix), e.g. advertising, point of sale promotion, direct mail and sales promotions.

• A high price might be set in an attempt to recoup the costs of R&D, especially if there is very limited competition in market. Alternatively, for some products, a low price might be more suitable in order for the business to establish itself in an existing market and/or to gain market share.

• There are limited distribution channels as the product is targeted at early adopters and most customers are not (fully) aware of the product. Hence, it is unlikely that the product is profitable at this stage.

• Marketing expenditure will be high in order to raise the profile of the product and to generate sales growth.

• Investment costs will be high (especially for marketing), profit will be negative, and cash flow will be negative but more favourable as the product gets noticed.

 Watch this video showing Steve Jobs launching the very first iPhone back in 2007:

 ATL Activity 1 - Apple’s iPod

Read this case study from The Economist, and answer the questions that follow about how Apple’s iPod revolutionised the digital music industry.

Questions

1. When did Steve Jobs reveal the first iPod?

2. ---

   How many songs could the original iPod’s hard drive hold?

3. ---

   What was the price of the iPod at launch?

4. ---

   By 2007, how many iPods had been sold?

5. ---

   At its peak, what percentage of Apple’s sales revenue came from the iPod?

6. ---

   In which country was Spotify founded?

7. ---

   What percentage of music sales in the USA are accountable for by streaming platforms such as Spotify?

8. ---

   When did Apple launch its iconic iPhone, which ultimately superseded the iPod?

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 Teacher only box

Answers

1. When did Steve Jobs reveal the first iPod?
   23rd October 2001

2. ---

   How many songs could the original iPod’s hard drive hold?
   Enough for 1,000 songs

3. ---

   What was the price of the iPod at launch?
   $399 (about $580 today)

4. ---

   By 2007, how many iPods had been sold?
   120 million (that’s about 54,795 iPods sold every day in its first 6 years!)

5. ---

   At its peak, what percentage of Apple’s sales revenue came from the iPod?
   40%

6. ---

   In which country was Spotify founded?
   Sweden

7. ---

   What percentage of music sales in the USA are accountable for by streaming platforms such as Spotify?
   Nearly 80%

8. ---

   When did Apple launch its iconic iPhone, which ultimately superseded the iPod?
   Late 2007

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Watch this video clip to see Steve Jobs launching the iPod back in 2001:

Growth

• Sales revenue increases as marketing efforts make the product and brand known to the market. The rising star is likely to be earning profit for the business at this stage.

• The larger customer base warrants a larger number of distribution channels.

• The marketing mix focuses on product development (improvements to the product), brand preference (with the aim of getting potential customers to switch from competing brands) and customer loyalty.

• Pricing strategy may need to change due to competition in the market and to facilitate continued growth.

• Investment costs will be high (especially for marketing purposes), profit will materialise, and cash flow will be positive as product recognition and sales grow.

Maturity

• Marketing is extensive and the product is well known in the market.

• The marketing mix focuses on keeping the product as a cash cow for as long as possible in order to maximize profits. Profit will be high and generally stable.

• Brand loyalty and brand value are vital aspects of product differentiation in order to prolong this stage of the life cycle.

• There is also price competition as the product competes in a mature market with well-established suppliers.

• Extension strategies may be required in order to lengthen the product’s life cycle. Examples include adding new features to the product or launching a limited edition to spark renewed interest.

• Investment costs will be low as the product become well-established and mature, profit will be peak, and cash flow remain positive.

Decline

• This is the final stage in a product’s life cycle, with products eventually becoming dogs (products with low market share in declining markets). Customers have lost interest in the product at this stage of its life cycle.

• Prices need to be lowered in order to sell such products, especially those that are obsolete (outdated) and are soon to be replaced with newer models.

• Businesses need to decide whether (and for how long) to continue marketing the product or to withdraw it from the market.

• Profits drop at this stage, and financial losses might be incurred.

• Divestment is likely to occur at some point during this stage as profits drop at this stage (financial losses might even be incurred). Cash flow is likely to become negative.

 Watch this 9 minute video to consolidate and review your understanding of the product life cycle:

 ATL Activity 2 - The Segway

Read this BBC article titled "Segway: End of the road for the much-hyped two-wheeler", about the withdrawal of the Segway in 2020, by clicking the link here.

Questions

1. When was the Segway first launched?

2. ---

   Who invented the Segway?

3. ---

   When did production of the Segway end?

4. ---

   In which 2009 comedy movie was the Segway famously featured in?

5. ---

   What was the main reason for the decline of Segways?

6. ---

   What happened to Usain Bolt, the record-breaking Olympic athlete, in 2015?

7. ---

   Who was Jimi Heselden?

8. ---

   What happened to Jimi Heselden just 10 months after buying the firm?

9. ---

   Where did Segway debut the S-Pod, the company's prototype of its wheelchair?

10. ---

    What happened to the prototype wheelchair when it was being debuted?

 Teacher only box

Answers

1. When was the Segway first launched?
   2001

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2. Who invented the Segway?
   Dean Kamen

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3. When did production of the Segway end?
   15th July, 2020

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4. In which 2009 comedy movie was the Segway famously featured in?
   Paul Blart: Mall Cop

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5. What was the main reason for the decline of Segways?
   They have also been the subject of mockery as well as high-profile collisions including a tragic death

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6. What happened to Usain Bolt, the record-breaking Olympic athlete, in 2015?
   He collided with a cameraman while doing his 4th consecutive World 200m title race

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7. Who was Jimi Heselden?
   The owner and self-made millionaire of the Segway company, which he bought outright in 2009

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8. What happened to Jimi Heselden just 10 months after buying the firm?
    He tragically died from falling off a cliff in the UK whilst using one of his Segways motorised scooters

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9. Where did Segway debut the S-Pod, the company's prototype of its wheelchair?
   The Consumer Electronics Show (CES) exhibition in Las Vegas (Nevada, USA)

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10. What happened to the prototype wheelchair when it was being debuted?
    The S-Pod - a self-balancing electric wheelchair - was being tested by a journalist at the time, who had accelerated the vehicle before accidently crashing into a wall 

 ATL Activity 3 - The longevity of arcade games

Which arcade game do you think is the best-selling product of all time? Read this article from Statista to find out if you were correct. Answer these questions from the article.

Questions

1.  How old was Pac-Man in May 2020?

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2.  Which Japanese company developed Pac-Man?

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3.  What was the value of sales of Pac-Man by 1990?

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4.  Why did Pac-Man become popular with female players?

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5.  What was the name of the spin-off of the Pac-Man game and was it also a hit?

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6.  Name the top 5 arcade games, according to the article.

 Teacher only box

Answers

The best-selling arcade game of all time is Pac-Man...

1.  How old was Pac-Man in May 2020?
     40 years old

2.  Which Japanese company developed Pac-Man?
     Namco

3.  What was the value of sales of Pac-Man by 1990?
     $3.5 billion - not many arcade games can claim to be multi-billion dollar products three decades on

4.  Why did Pac-Man become popular with female players?
     Pac-Man is credited as a pioneering non-violent arcade gameplay, unlike Street Fighter and Mortal      Kombat.

5.  What was the name of the spin-off of the Pac-Man game and was it also a hit?
     Ms. Pac-Man; yes, according to US Gamer, Ms. Pac-Man was also a huge hit and made the top 5 of the best-selling arcade games

6.  Name the top 5 arcade games, according to the article.
     Pac-Man, Space Invaders, Street Fighter II, Ms. Pac-Man, and NBA Jam.