The Product Life Cycle

There are many stages to the product life cycle and they involve different aspects of business planning.  Based on where your product is in its life cycle there are going to be different sales and cost expectations along with different business strategies for maximizing the products profit.  The products profits and expenses will rise and fall as it progresses through its life cycle. 

When you accept that a product has a life cycle you also accept four additional truths about products.  That is they have limited life spans, sales fluctuate with the stages, profits will also rise and fall during the stages of life and lastly products require different marketing strategies based on the stage of their life cycle.

Stage - Introduction to the Market

• Customer prodding to try product
• Quality and branding are established
• Little competition
• Selective distribution
• Two methods to pricing
  • Low pricing for market penetration
  • Higher pricing for recovery of start up costs
• Marketing aims to educate and build awareness
• Costs are typically high
• Volume of sales is typically low

Stage - Product Growth

• Costs diminish
• Prices are set to create maximum market share
• Distribution channels grow with increased sales volume
• Achieve profitability
• Product is promoted to a wider target market
• Public awareness for the product grows

Stage - Maturity

• Products are enhanced with new features to gain differentiation
• Competition increases and promotion is geared to differentiate
• Competition may cause pricing to fall
• Product hits peak sales volume
• Features are enhanced to differentiate from competitors
• Incentives begin to be offered in distribution channels to gain an edge on competition
• Profits begin to decline

Stage - Stability or Decline

• The volume of sales can either decline or stabilize
• Price erosion causes profits to dwindle
• Costs can become prohibitive
• Profit declines can cause companies to
  • Add new features to rejuvenate the product
  • Discontinue the product or sell the division off to another firm
  • Harvest with further cost reductions

It is fair to say that not every product falls into the product life cycle.  Look at an item such as polo shirts.  It is true that polo shirts may die off, but clothing itself will probably live on.

The product life cycle is a valid model for managers to monitor their products but is not a predictor as it can be altered by the actions of management.  The life cycle of a product can be extended and reversed by management’s actions in marketing and development of new features.