Product life cycle

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Product life cycle

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Product life cycle

As consumers, we buy millions of products every year. And just like us, these products have a life cycle. Older, long-established products eventually become less popular, while in contrast, the demand for new, more modern goods usually increases quite rapidly after they are launched.

Because most companies understand the different product life cycle stages, and that the products they sell all have a limited lifespan, the majority of them will invest heavily in new product development in order to make sure that their businesses continue to grow.

Product Life Cycle Stages Explained

The product life cycle has 4 very clearly defined stages, each with its own characteristics that mean different things for business that are trying to manage the life cycle of their particular products.

Introduction Stage – This stage of the cycle could be the most expensive for a company launching a new product. The size of the market for the product is small, which means sales are low, although they will be increasing. On the other hand, 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’s a competitive sector.

Growth Stage – The growth stage is typically characterized by a strong growth in sales and profits, and because the company can start to benefit from economies of scale in production, the profit margins, as well as the overall amount of profit, will increase. This makes it possible for businesses to invest more money in the promotional activity to maximize the potential of this growth stage.

Maturity Stage – During the maturity stage, the product is established and the aim for the manufacturer is now to maintain the market share they have built up. This is probably the most competitive time for most products and businesses need to invest wisely in any marketing they undertake. They also need to consider any product modifications or improvements to the production process which might give them a competitive advantage.

Decline Stage – Eventually, the market for a product will start to shrink, and this is what’s known as the decline stage. This shrinkage could be due to the market becoming saturated (i.e. all the customers who will buy the product have already purchased it), or because the consumers are switching to a different type of product. While this decline may be inevitable, it may still be possible for companies to make some profit by switching to less-expensive production methods and cheaper markets.

 

Product Life Cycle Examples

It’s possible to provide examples of various products to illustrate the different stages of the product life cycle more clearly. Here is the example of watching recorded television and the various stages of each method:

1. Introduction – 3D TVs
2. Growth  – Blueray discs/DVR
3. Maturity  – DVD
4. Decline  – Video cassette

The idea of the product life cycle has been around for some time, and it is an important  principle manufacturers need to understand in order to make a profit and stay in business.

However, the key to successful manufacturing is not just understanding this life cycle, but also proactively managing products throughout their lifetime, applying the appropriate resources and sales and marketing strategies, depending on what stage products are at in the cycle.

Product Life Cycle

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What is the product life cycle?

The product life cycle is an important concept in marketing. It describes the stages a product goes through from when it was first thought of until it finally is removed from the market. Not all products reach this final stage. Some continue to grow and others rise and fall.

What are the main stages of the product life cycle?

The main stages of the product life cycle are:

Introduction – researching, developing and then launching the product

Growth – when sales are increasing at their fastest rate

Maturity – sales are near their highest, but the rate of growth is slowing down, e.g. new competitors in market or saturation

Decline – final stage of the cycle, when sales begin to fall

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The product life cycle is an important concept in marketing. It describes the stages a product goes through from when it was first thought of until it finally is removed from the market. Not all products reach this final stage. Some continue to grow and others rise and fall.

The Product Life Cycle


A new product progresses through a sequence of stages from introduction to growth, maturity, and decline. This sequence is known as the product life cycle and is associated with changes in the marketing situation, thus impacting the marketing strategy and the marketing mix.
The product revenue and profits can be plotted as a function of the life-cycle stages as shown in the graph below:


      Product Life Cycle Diagram  

Introduction Stage

In the introduction stage, the firm seeks to build product awareness and develop a market for the product. The impact on the marketing mix is as follows:

• Product branding and quality level is established, and intellectual property protection such as patents and trademarks are obtained.
• Pricing may be low penetration pricing to build market share rapidly, or high skim pricing to recover development costs.
• Distribution is selective until consumers show acceptance of the product.
• Promotion is aimed at innovators and early adopters. Marketing communications seeks to build product awareness and to educate potential consumers about the product.

Growth Stage

In the growth stage, the firm seeks to build brand preference and increase market share.

• Product quality is maintained and additional features and support services may be added.
• Pricing is maintained as the firm enjoys increasing demand with little competition.
• Distribution channels are added as demand increases and customers accept the product.
• Promotion is aimed at a broader audience.

Maturity Stage

At maturity, the strong growth in sales diminishes. Competition may appear with similar products. The primary objective at this point is to defend market share while maximizing profit.

• Product features may be enhanced to differentiate the product from that of competitors.
• Pricing may be lower because of the new competition.
• Distribution becomes more intensive and incentives may be offered to encourage preference over competing products.
• Promotion emphasizes product differentiation.

Decline Stage

As sales decline, the firm has several options:

• Maintain the product, possibly rejuvenating it by adding new features and finding new uses.
• Harvest the product - reduce costs and continue to offer it, possibly to a loyal niche segment.
• Discontinue the product, liquidating remaining inventory or selling it to another firm that is willing to continue the product.

The marketing mix decisions in the decline phase will depend on the selected strategy. For example, the product may be changed if it is being rejuvenated, or left unchanged if it is being harvested or liquidated. The price may be maintained if the product is harvested, or reduced drastically if liquidated.