Essay Use Of The PLC In Strategic Marketing

Submitted By EmfNleeds92
Words: 1669
Pages: 7

Critically discuss the use of the product life cycle theory in strategic marketing.
At first glance, the product life cycle (PLC) looks like a very simple and basic concept of how a product and it’s marketing mix progress through the different phases: introduction, maturity, growth and decline. One of the potential uses of the PLC is that it guides companies on what strategy to use in each phase. However, it is limited in that it is based on the metaphor that products are like living things and therefore inevitably die. This can cause complications; as such metaphors are not always accurate. While the text book PLC is relatively easy to understand, most of the time it is wrong (Duke, 2014). However, just because there is much critical discussion around the flaws of the PLC, does not mean it is a redundant marketing theory. Rather, by understand the ways in which it is wrong it can be made useful. This essay will highlight how the PLC can guide marketing strategy in each of the respective stages and then highlight some of the flaws of this model.
The theory suggests that a product has a life cycle, which can be divided into four stages. The slow introductory phase reflects the difficulty of overcoming buyer inertia and stimulating trial of a new product. Rapid growth then occurs, as many new buyers are attracted once the product is perceived as successful. Saturation of the product’s potential buyers is reached, resulting in a mature market as growth levels out. Finally, decline will set in as new substitute products appear (Doyle and Stern, 2006).
In the intro stage, markets tend to be small with low volumes as customers go through the hierarchy of effects stages (some quicker than others eg, innovators). Therefore companies can expect low revenue, even if you adopt a skimming pricing strategy to capture high margin, as volume is so low. Thus, economies of scale are unlikely and as the product has not been around long firms are not that far along the experience curve, leading to a high cost structure according to the textbook PLC. This phase requires large cash outflows due to heavy investment in production capacity, promotion and product development. Low revenue, high cost structure and heavy investment gives low, zero or negative profit. In addition, according to textbook PLC, a market is created by a solo pioneer but competitors are monitoring market and waiting to see if the product is going to flop.

Considering these market characteristics at this phase, Doyle and Stern (2006) suggest the strategic objective is aggressive entry, with the focus being on non-users. The likely marketing mix is as follows: Product: simple and basic, core product features that customers place very high value. Design, production or process flaws aren’t fatal here as you can shape the industry standard. For example he first flat sceen television proved impossible to produce perfectly, it was common for many of the first ones to have ‘lazy pixels’ – where some of the pixels didn’t change colour. Price is dependent on different objectives, for example you would adopt skimming with an aim of gaining highest possible contribution or penetration pricing may bring growth period sooner as increased volume for lower price. Place: the first customers to make up the market are the innovators – they tend to have specific preferences as to where to shop, so probably specialist, innovative channels are best suited. For example CDs originally confined distribution to specialist hi-fi shops. Promotion: A high promotional spend is needed in this phase to build brand awareness and knowledge of product to the entire potential market. The view of progressing them through the knowledge-purchase stages as quickly as possible. Promotional activity is very much associated with education at this stage.

Next, the growth phase. All of a sudden sales volumes and revenue change dramatically and begin to increase. With cumulative output increasing comes economies of