Product Life Cycle

Product life cycle refers to the stages a product transits during its existence as market offer. The life cycle can be analyzed on several levels: product, brand, model.

When analyzing a life cycle, the following aspects must be considered:

  • Products have a limited life regardless of their nature
  • Product sales fluctuate during their life cycle, generating changes, opportunities and threats for the manufacturer
  • Profits grow or decline depending on the life cycle stage the product is in
  • Marketing strategies differ according to the life cycle stages of the product.

The main stages of the life cycle together with sales and profits evolution are pictured in the following chart:

Introduction begins with the product release when the sales are zero. Assuming that the product is designed according to the marketing philosophy and it complies with customers’ requirements, the sales will increase gradually but this rhythm is rather slow because of several factors:

  • The consumers do not know the product
  • Its price is rather high
  • The consumers are conservative
  • The delivery channels are not enough developed.

The profits in this period are basically inexistent, the expenses are greater than the income due to high market launching costs, or fixed costs that are distributed on only a small amount of products sold.

Growth. As soon as the introduction stage passes, the product follows an ascending sales track and gains a continually higher number of customers. The profit begins to emerge and the product is more and more interesting for the competitors. This is a critical stage because the competition tightens. Each of the competitors tries to win a bigger market segment and their promotion costs arise, diminishing the profit. The competitive tension depends of the barriers from entering the market. The higher the barriers, the fewer the competitors, but each of them very powerful.

Maturity. In this stage the sales increase of a product decreases considerably until reaching a maximum point, followed by a light downfall. Most of the customers adopted the product and the sales are sustained only by repeated usage or replacement in long term usage products. Maturity is the stage when new competitors on the market are not a threat anymore. The total sales of the product are big enough to provide a good profit, the competition is only focused on maintaining the already acquired market segments. Most of the products on the market at a certain time are at the maturity stage.

Decline. As soon as a product is consumed or used on a large scale, it is obvious that it does not offer new development perspectives for the producer. The competition requires the company to continually perfect its products, generating even technological revolutions that lead to new products, with completely superior features, that follow the same development stages mentioned above. In the decline stage most of the producers abandon the product because the profits are diminishing and the costs to maintain the competitive advantages are increasing. Usually, the producers that survive this stage are those that have a big enough market share to capitalize the mass distribution advantages and scale economies. We witness constantly the disappearance of such products from the market. For example, just a while ago, the CD was a popular optical storage device that now is in decline in the favor of USB sticks, DVD and Blu-Ray discs.

Product life cycle strategies
During the product life cycle the producers can use various marketing strategies, depending on their objectives and the competition on the market.

  • Introduction stage strategies
    • High price, little advertising – suitable for strict necessity goods, where competition treats are insignificant;
    • High price, sustained advertising – the product is of high quality, promoted through intensive communication;
    • Fast penetration strategy – low price, strong advertising. With serious competitor threats, the company tries to win a bigger market share;
    • Slow penetration strategy – low price, little advertising. Suitable for situations when the competition is not a thereat.
  • Growth stage strategies
    • Improving the product quality and adding new product features
    • Penetrating new market segments
    • Developing the distribution network
    • Diminishing the price
  • Maturity stage strategies
    • Market development – expanding the usage to new consumer segments
    • Product development – improving the product quality, design, style in order to attract new customers
    • Marketing innovation – efficient combination of the marketing mix elements in order to attract competitor’s customers (sales, extra services, alternative distribution channels)
  • Decline stage strategies
    • Abandonment strategy – the product is uneconomic
    • Maintaining strategy – attracting the resigning customers of competitors.