The product life cycle Products are born, they

prosper and die.

1.INTRODUCTION PHASE
A. Characteristics: Sales – are low
Costs - high per customer
Profits - negative
Customers - innovators
Competitors - few

B. Marketing Objective: create product awareness and trial

C. Marketing Strategy:

Product: basic offering

Price: use cost-plus - tends to be on high side

Distribution: build selective distribution

Advertising: build product awareness among early adopters and dealers

Sales Promotion: use heavy sales promotion to entice trial

The company has to decide how much money to spend on promotions, bearing in mind limited resources.
Demand must be calculated carefully in order to estimate units that can be sold at the correct price. A lot
of money was spent on research and development, so the aim is to recover costs as soon as possible and
start making a profit. Fifty percent of new product ideas fail.

The company must do ongoing consumer research and stay in touch with customers to evaluate reaction
to the new product.

2.GROWTH Phase
A. Characteristics:
Sales - rapidly increasing
Costs - average per customer
Profits - rising
Customers - early adopters
Competitors - growing number

B.Marketing Objective: maximise market share

C. Marketing Strategy:

Product: offer product extensions, services and warranties

Price: to penetrate market

Distribution: build intensive distribution

Advertising: build awareness and interest in the mass market

Sales Promotion: reduce to take advantage of heavy consumer demand Initially a few customers only
accept the new product. Word of mouth promotion encourages more people to purchase. Sales increase
rapidly and the company starts making a profit. Competitors enter the market with similar products. You
may lose sales to competitors especially if improved or new varieties are introduced by competitors - a
small car using even less petrol, offering more attractive payment terms (see competitive advantage).
Total sales in the industry increase. Hold on to and increase market share. Focus on building relationships
with customers, ensure consistent quality of your product, its availability and service back-up. Start a
customer newsletter or have an annual customer day.

3.MATURITY Phase
A. Characteristics:
Sales – peak
Costs - low per customer
Profits - start to decline
Customers - middle majority
Competitors - stable number but beginning to decline

B. Marketing Objective: maximise profit while defending market share

C. Strategy:

Product: diversify brands and models

Price: price to match or beat competitors

Distribution: build more intensive distribution

Advertising: stress brand differences and benefits Sales

Promotion: to encourage brand switching

Competition is fierce, sales grow steadily and level off.

Profits start declining, more money is spent on promotions (discount offers, coupons, 2 for 1 price deals,
competitions). Some competitors start price cuts. New firms still try to enter the market. This can be very
expensive as newcomers need to capture market share from companies already in the market. The new
company may go for a niche market - a specific market segment not catered for by other competitors, e.g.
exclusive fashion sold on a party plan basis, not in boutiques.
Most customers in the target market will be using the product. Sales may only increase in line with
population increases. Update and modernise the product (improve the packaging, add new ingredients,
add more raisins to our breakfast cereal mix) and offer price deals (month end special, back to school
offers). Reduce the number of target markets you are aiming at, rationalise your product line or mix.

4.DECLINE Phase
A. Characteristics

Sales – declining

Costs - low per customer

Profits - declining

Customers – laggards

Competitors - declining number

B. Marketing Objective: reduce expenditure and milk the brand

C. Strategy:
Product: phase out weak items
Price: cut price
Distribution: go selective, phase out unprofitable outlets
Advertising: reduce to level needed to retain hardcore loyals

Sales Promotion: reduce to minimal level New product ideas start a new product life cycle - the
electric vehicle. Customers now start buying the new product (the innovators first, the early adopters
etc.). Sales start dropping. There comes a time when the company realises that it makes no financial
sense to keep the product in the market.

Concluding remarks

Marketing oriented companies put new products on the market in time, to have profitable products
on sale when old products die and come off the market.