A former university media communications professor, Sallie, an independent publisher, also writes romantic fiction novels and short stories.
The product life cycle begins when a company develops a new-product. During the phase before the product is introduced to the market--the research and development phase, sales are zero and the company’s investment costs are mounting. After launching a new product, marketers employ strategies to help it to be successful in the market, so that it can enjoy a long and happy life.
Not all products follow the same product life cycle. Some products are introduced quickly, and they die quickly; others stay in the mature stage for a very long time. Some products enter the decline stage of the life cycle and are then recycled back into the growth stage through aggressive and strong promotion or repositioning.
The product life cycle concept can be applied to a product, a product class, or a brand.
The Introduction Stage
The introduction stage of the product life cycle begins when the new product is first launched. The introductory period is one of slow sales growth. The product is new to consumers, so it is being introduced in the market. Profits are usually nonexistent in this stage.
Instead of making money, the product is costing money due to the outlay of expenses involved in product introduction. As compared to other stages of the life cycle, profits are negative or low because of low sales and high costs of distribution and promotion.
A company must choose a product launch strategy that is consistent with the intended product positioning--how they want consumers to think of the new product as compared to competitive offerings. It should realize that the initial strategy is just the first step in a grander marketing plan for the product’s entire life cycle.
The Growth Stage
If the new product satisfies consumers, it will enjoy a growth stage in which sales will begin to climb, quickly. Growth is usually a period of rapid market acceptance and increasing profits.
In the growth stage, consumers called "early adopters" will buy first, and later other buyers will start following their lead. This will happen more rapidly if potential buyers hear favorable word of mouth about the product.
This is also the stage where competitors are lurking, waiting to pounce on a good thing. Attracted by the opportunities for profit, if the product seems to be catching on with consumers, new competitors will enter the market. The new marketers will introduce new product features, and, as new customers seek it, the market for the product will expand.
Profits will increase during the growth stage because promotion costs are now spread over a large volume of units, and unit manufacturing costs will fall. The company will use a variety of sales and marketing strategies to sustain rapid market growth for as long as possible. Some may include:
- Improving product quality and adding new product features and models.
- Entering new market segments and new distribution channels.
- Shifting advertising and marketing expenditures away from strategies designed to build product awareness among consumers, to those that help to build product conviction and purchase.
- Lowering prices at the right time to attract more buyers.
In the growth stage, the company usually will face a trade-off between high market share or high current profit.
The Maturity Stage
The maturity stage of the product life cycle is a period of slowdown in sales growth. The product has achieved acceptance by most potential buyers, and that means profits are leveling off or in decline, because it takes increased marketing outlays to defend the product against its competitors.
A product's maturity stage normally lasts longer than the introduction and growth stages. For this reason, it presents many different challenges to marketing management. At any given time, most products that are on the market are in some phase of the maturity stage of the life cycle. That means that most of what is done in marketing has to do with managing the needs of the mature product.
Some products in the mature stage might appear to remain unchanged for long periods of time. However, most of the successful ones are actually changing, in some way, to meet changing tastes and desires of consumers. Good product management requires more than simply defending mature products. It requires modification, more often than not, of product and marketing strategies. When a product is in the maturity stage, a company might try:
- Modifying the market, the company tries to increase the consumption of the current product.
- Repositioning the brand to appeal to larger or faster-growing market segments. Marketers may also look for new ways to increase usage of the product among present customers.
- Modifying the product—changing characteristics such as improving product quality, adding or enhancing product features, or creating new designs to attract new users, or to inspire more usage.
Modifying elements of the marketing mix—improving sales by making changes in one or more elements of the marketing mix (product, price, place--distribution, or promotion). It can reduce prices to attract new users and competitor’s customers. It can create a better advertising campaign, or adopt more aggressive sales promotions such as trade deals, cents-off, premiums, and contests. It can move into larger market channels using mass merchandisers. Or, it can offer new or improved customer service to customers.
The Decline Stage
Decline is the period when sales fall off and profits drop. The sales of most products and brands will fall, eventually. It may not happen suddenly; it might be a slow decline. On the other hand, sales could drop rather quickly. For many different reasons, sales may plunge to very low levels and remain there for many years.
Sales of a product can go into decline for many reasons, including technological advances, shifts in consumer needs, wants, and tastes, or increased competitive activity. Companies are faced with a decision about whether or not they will continue to make a product that, in this stage, can be very costly to keep on the market. When a product is in the decline stage, it may:
- Take up too much of management’s time.
- Require frequent price and inventory adjustments.
- Usurp great amounts of advertising and sales force attention that might be better spent on making profitable products even more profitable.
Companies are challenged to identify products in the decline stage by regularly reviewing sales, market shares, costs, and profit trends. After identifying which products are in decline, marketing management must decide whether to maintain, harvest, or drop any declining product.
In the final stage of the product life cycle, management can still decide to reposition or reformulate the product in hopes of moving it back into the growth stage. Or, a decision could be made to harvest the product. If this strategy is chosen, various costs will have to be reduced. If successful, harvesting will increase the company’s profits in the short run. Another strategy may be to discontinue the product. The company can decide to sell it to another firm, or simply stop making it.
Dr. Middlebrook is a former college professor of marketing and mass communications. She spent nearly twenty years behind the desk teaching courses in advertising, marketing, public relations, and journalism. In addition, she worked, for many years, as a consultant and as an employee in corporate marketing and communications.
© 2012 Sallie Beatrice Middlebrook PhD