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GEORGE S.

DAY

Each of the articles in this special section makes a distinctive


contribution to the long-standing controversy over the mana-
gerial value of the product life cycle concept. This overview
is designed to put these articles into a broader perspective
by analyzing the major issues of identification, forecasting,
and strategy formulation encountered in any meaningful
application of the product life cycle.

THE PRODUCT LIFE CYCLE:


ANALYSIS AND APPLICATIONS
ISSUES

T HERE is tremendous ambivalence toward the


product life cycle concept within marketing. On
one hand, the concept has an enduring appeal
• What are the factors that determine the
progress of the product through the stages
of the life cycle?
because of the intuitive logic of the product birth • Can the present hfe cycle position of the
—» growth —» maturity —* decline sequence based product be unambiguously established?
on a biological analogy. As such, it has considerable
descriptive value when used as a systematic frame- • What is the potential for forecasting the key
work for explaining market dynamics. parameters, including the magnitude of sales,
However, the simplicity of the product life cycle the duration of the stages, and the shape of
concept makes it vulnerable to criticism, especially the curve?
when it is used as a predictive model for anticipating • What role should the product life cycle con-
when changes will occur and one stage will succeed cept play in the formulation of competitive
another, or as a normative model which attempts strategy?
to prescribe what alternative strategies should be Each of the articles in this special section pro-
considered at each stage. Underlying these criti- vides useful insights into one or more of these
cisms are five basic issues that must be faced in application issues. In addition, each article adds
any meaningful application of the concept: support to the emerging consensus that the product
• How should the product-market be defined life cycle represents the outcome or summary of
for the purpose of life cycle analysis? numerous forces for change present in the relevant
product-market, each force acting in concert with
others to facilitate or inhibit the rate of product
sales growth or decline. This perspective on the
nature of the product life cycle will also guide the
George S. Day is Professor of Marketing, University of analysis of the application issues in this overview
Toronto-
article.

Journal of Marketing
60 / Journal of Marketing, Fall 1981 Vol. 45 (Fall 1981), 60-67.
What Is A Product-Market for the nylon, which is subsequently processed
Purpose of Life Cycle Analysis? further to be suitable for different applica-
tions such as carpeting, tire cord, and ho-
A problem that confronts all strategy analysis is siery? (Levitt 1965) The answer is certainly
the variety of levels of aggregation that characterize no, for each application requires an entirely
hierarchical product structures, ranging from the different strategy. Indeed, it would be more
generic product class and industry, to the product meaningful to construct a hfe cycle for syn-
type or form, and down to variants and brands. thetic carpet fibers, for example.
The extreme positions on the question of appropriate
level of aggregation for life cycle analysis are: look • Technological substitution processes. Until
at all levels, on the grounds that they each yield the mid-sixties, beverage cans were almost
different insights, or forget the whole concept exclusively three-piece steel/tin combina-
tions, until two-piece aluminum cans began
because generic product classes serve such enduring to replace them. Then in the mid-seventies
needs that meaningful trends are not usually two-piece steel cans were developed to re-
apparent, while product forms are so volatile that capture the position of steel (Machnic 1980).
it is difficult to judge with accuracy in which stage But during this period, neither the functions
of the life cycle the form is or when it will proceed nor the customers of metal cans were
to the next stage (Dhalla and Yuspeh 1976). In- changed. Thus a new product hfe cycle was
termediate positions include those who argue that not necessary.
since managers cannot control product forms or
classes, the analysis must be confined to the brand • Sequentially unfolding segments. Some life
level (Enis, LaGarce, and Prell 1977). cycles are a composite of the sequential
The relevant question is which level best cap- introduction and development of a basic
tures the consequences of the underlying forces function/ technology within a series of related
for change. However, there are many dimensions customer segments. Cardozo(1979) describes
along which a product can change. When is a change how a specialized communications system
sufficiently distinct to justify a separate hfe cycle was first accepted for process control ap-
analysis? One useful answer is proposed by Abell plications and then extended to security ap-
(1980), who defines a product as the apphcation plications within the same adopting firms.
of a distinct technology to the provision of a After two years a new segment for combined
particular function for a specific customer group. security and process applications was identi-
Only when there is a change along one or more fied.
of these dimensions that involves a sharp departure
from the present strategies of the participating As each of these examples demonstrates, prod-
competitors is a separate hfe cycle necessary. The uct life cycles summarize the effects of many
advantage of this heuristic can be seen from its concurrent changes. While these influences must
application to problem situations that in the past be understood, they may not dictate an entirely
have fueled enduring doubts about the life cycle: new product life cycle.

• The timeless consumer product. Was the What Are The Underlying Factors
chairman of Procter and Gamble justified in
saying they don't believe in the product life That Determine The Parameters of the
cycle by citing the case of Tide synthetic Life Cycle?
laundry detergent which was introduced in Numerous forces have been hypothesized to in-
1947 and was still growing in 1976? During fluence the sequence and duration of the stages,
the 29-year lifetime, it had undergone 55 the shape of the curve, and the magnitude of sales
significant modifications in response to at each transition to a new stage. Past attempts
changes in consumer preferences, laundry to validate the existence of the hfe cycle have
habits, washing machines, and fabrics (Hop- uncovered many shapes, durations, and sequences
kins 1977). Clearly they have successfully (Buzzell 1966, Cox 1967, PolU and Cook 1969, Rink
adapted this product to extended maturity and Swan 1979). These efforts have not been
without significantly changing either func- matched by systematic research into the reasons
tion, technology, or customer. for the difference between shapes. Yet, this knowl-
• The multiple function material. Is there a edge is critical to informed forecasting and strategy
meaningful hfe cycle for a material such as development. The hmited evidence, however, sug-

The Product Life Cycle: Analysis and Applications Issues / 61


gests that while most of the underlying forces are eration of the relationship of strategic decisions and
operating during several stages, their relative life cycle consequences has come from analyses
importance changes during the transition from one of the effect of cumulative industry experience on
stage to another. average industry costs. This experience effect is
reliably present in high technology industries, where
Initial Trajectory Stage real cost declines of 15-30% with each doubling
Some new products, such as industrial robots, of industry output are consistently encountered
diffuse very slowly into their potential market, while (Abell and Hammond 1979, Boston Consulting
other products virtually bypass this stage. The Group 1972, Yelle 1979). Reduced costs should
determinants of the rate of diffusion (Zaltman and eventually lead to lowered prices, which in turn
Stiff 1973) include: will improve the comparative advantage of the new
product. It is a highly interactive effect, for an
• The perceived comparative advantage of the increased comparative advantage should accelerate
new product relative to the best available the rate of acceptance and hence the rate of accu-
alternative. mulation of experience. Whether this acceleration
• The perceived risk, or the subjective estimate of demand will materiahze depends on the initial
by a prospective buyer of the probability of pricing strategies and the persistence of the remain-
a negative outcome (Webster 1969). This risk ing barriers to diffusion.
is a joint function of the financial exposure Other exogenous factors. The early history of
in the event of failure coupled with uncer- many new products is shaped by factors beyond
tainty as to the outcome. This uncertainty the immediate industry and the potential substitutes.
has many origins, including an unpredictable Included in this category are changes in the position
rate of technical obsolescence, the uneven of complementary products and changes in govern-
quality of early production runs, or a lack ment regulations and pohcies. For example, the
of product standardization. Thus, potential demand for electronic home entertainment products
videodisc buyers may wait to see whether such as television and videodiscs was or is depen-
grooved or grooveless capacitance systems dent on the growth of broadcast capabihties and
will dominate solid-state laser systems, since programming. Similarly, the growth of new compu-
the discs are incompatible. ter-based office services is contingent on the avai-
• Barriers to adoption (such as commitment lability of software. The impact of government
to existing facilities or incompatibility with policies can be especially dramatic, for they fre-
existing values) will slow acceptance even quently are abrupt events. Consider the impact on
when other factors are supportive. demand for automatic teller machines of a ruling
that these machines are not considered branches
• Information and availability. Not only must in states where branch banking is not permitted.
the product be readily available (for purchase
and servicing), but the buyer must be aware The Transition to Rapid Growth
of the product and informed of the benefits.
A number of factors, which were latent during the
Jnßuencing the rate of diffusion. Much of the period when the initial uncertainties were being
research on diffusion of innovations has dealt with resolved, assume importance as growth accelerates.
information variables and the capacity of formal Changes in the relationships with substitute
and informal sources to reduce perceived risk. The products. These changes reflect improvements in
value of this work for the purposes of Ufe cycle the price-performance ratio as experience accumu-
analysis is compromised by taking the comparative lates, designs are improved, new features are added,
advantages of the product as fixed. In reality these and the real price declines. This will determine how
are conditional variables that can be influenced by quickly the new product will replace the substitute,
the strategic decisions of both the pioneer firm and and how much of the volume will be replaced.
the followers. Thus, manufacturers can invest in Substitution will also be triggered by large jumps
promotion and distribution coverage to increase in the price of the substitute, as happened in
awareness, expand sales activity to induce trial, 1974-1975 when powdered soft drink mixes grew
reduce risk by providing technical service, warran- rapidly at the expense of canned fruit juices, which
ties and after-sales service support, and enhance had to absorb large sugar price increases.
the relative advantage by reducing the delivered Competitive entry strategies. In many product-
price or adding new features. markets the strategic window seems to open at
Experience effects. The only systematic consid- roughly the same time for most potential entrants.

62 / Journal of Marketing, Fall 1981


First, the initial acceptance of the product helps back to component suppliers.
reduce the uncertainties that clouded the early Buyer learning. This becomes an increasingly
prospects. This uncertainty may have also en- significant factor with repeat buying and the accu-
couraged experimentation with alternative process mulation of usage experience. The most general
technologies, designs, and marketing strategies. The consequences are systematic shifts in the elasticities
results of these experiments and ongoing marketing or response coefficients. Over the long run, as
research reduce the uncertainty to a level that is products approach a famihar commodity status,
tolerable for larger firms with lower risk profiles— buyers become more price sensitive and less re-
witness recreational vehicles, video games, and sponsive to advertising and promotion efforts either
solar heating (Porter 1980). A second incentive is by the industry or by individual competitors. While
the widespread belief that it is "easier" to gain these hypotheses have almost become conventional
share in high growth markets. The combined impact wisdom, there is growing evidence of their validity
of many competitors, each investment spending to (Erickson and Montgomery 1980).
gain a sustainable market position, may create Competitive turbulence. One version of the
significant acceleration in the rate of growth. product Ufe cycle incorporates a distinct competitive
The influence of repeat buying. Sooner or later turbulence stage (Wasson 1978), preceding the ma-
a significant proportion of sales in a product cate- turity stage. According to this analysis, the slow-
gory will be repeat or replacement purchases. As down in the growth rate that signals impending
Midgeley (1981) shows, the shape of the life cycle maturity reveals excess capacity and triggers a
curve can be explained by the ratio of mean adoption competitive battle for market share. This pattern
time (which depends on the duration of the diffusion has been partially corroborated by Boston Consult-
process) to mean interpurchase time. This analysis ing Group (Conley 1970) analyses of rapid declines
helps explain why the life cycles for many of the in real prices, triggered by an unexpected economic
durable products descnbed by Harrell and Taylor slowdown, the desire of the pioneer to minimize
(1981) in this issue exhibit a primary sales cycle further share erosion, or a major thrust by a new
followed by one or more recycles at a lower level entrant. Despite the importance of these hypothe-
of sales. In markets with shorter repurchase inter- sized relationships of changes in price, competitive
vals, the repeat buying combines with initial pur- structure, and Ufe cycle stage, there is virtually
chases as a further source of growth. no direct empirical evidence. Some indirect support
Does growth induce growth? As the market comes from the analyses of the PIMS data base
expands, there are new opportunities for segmenta- reportedbyThorelli and Burnett (1981) in this issue.
tion, and the adaptation of the product or service There is, however, no support for a further
to better fit the needs of customer groups whose hypothesis that market shares will stabilize after
requirements were previously too modest to be the period of competitive stability. Indeed, Buzzell
served with a tailored offering. These niches, of (1981) has found that mature markets tend to become
course, make the rapidly growing market even more less concentrated as the larger firms lose share
attractive to prospective entrants. because they cannot maintain their initial cost ad-
vantage.
Evolution to Maturity
As the cumulative sales penetration approaches the The Onset of Decline
ultimate market capacity and the growth rate slows, One recent analysis of declining industries (Harrigan
the dominating factor becomes the replacement rate. 1980) observed that there had been virtually no
However, this is not a period of stability, for the attempt to sort out the factors that influence the
ultimate potential is frequently an elusive target strategic choices managers face during a decline.
and new forces come into play. This study found that some declining environments
Expanding market potential. While the market were much more favorable than others in terms
capacity for use or consumption may be stable on of long run sales, profitability, and price stability.
a per capita basis, there still could be expansion Generally, the least favorable environments were
from demographic changes that cause the target the result of fashion or demographic changes be-
market to expand or shrink. At the same time, cause they were much less predictable than declines
changes in social or economic trends infiuencing created by technological change. An important
underlying needs—such as protection against prop- conclusion was that some declining markets were
erty theft, or energy conservation—will affect con- more favorable than others if there were pockets
sumers' demands for end products such as security of enduring demand, which could be protected from
devices and energy saving products, which filters incursions by displaced competitors. It may also

The Product LÜ^Í Cycle: Analysis and Applications Issues / 63


prove useful to distinguish a stage of pétrification • a constraint on long run growth within a level
following decline if sales stabiUze at some lower of saturation
level (Michael 1971). • an S-shaped diffusion curve
• an assumption about the homogeneity of
Can The Present Life Cycle Position consumers
Be Unambiguously Identified? • no explicit consideration of marketing deci-
sion variables
The notion of distinct stages, which reflect different
opportunities and threats with respect to marketing When these assumptions are not unduly limiting,
strategy and profit potential (Kotier 1980), is an and there is sufficient prior sales data to obtain
integral part of the product life cycle concept. The stable parameter estimates (Heeler and Hustad
usefulness of such analyses is frequently compro- 1980), then reasonable forecasts can be achieved.
mised by the elusive nature of the boundaries However, the experience of Tigert and Farivar
between the stages. (1981) with optical scanning equipment for super-
markets, reported in this issue, suggests this fre-
Some of the boundary identification problems quently is not the case.
stem from the sensitivity of life cycle analyses to
the choice of measures (Wind 1981). Should one Improvements to the forecasting accuracy of
use unit volume, current or constant dollar total these models have been sought mainly through the
revenue, or per capita consumption to measure addition of decision variables (Bass 1980, Dolan
sales? What adjustments should be made to elimi- and Jeuland 1981, Lillien 1980, Robinson and Lak-
nate the effects of economic conditions? Consumer hani 1975). However, as Mahajan and MuUer (1979)
durables and industrial materials are especially sus- point out in their review of these efforts, progress
ceptible to changes in economic activity that can has been piecemeal as the extensions have usually
cloud the interpretation of the prospects for the incorporated only one decision variable at a time.
product. This is partly a consequence of attempts to make
the model as generally applicable as possible. Judg-
Further complicating the identification of boun- ing by the success of the proprietary model devel-
daries is the variety of possible life cycle patterns. oped for analyzing the housewares market, de-
This makes it unlikely that a product's position in scribed by Harrell and Taylor (1981) in this issue,
its life cycle can be estabhshed simply by observing there may be a greater payoff from the development
changes in the past sales pattern. The imphcations of models that incorporate a rich array of marketing
of the difference between a temporary or even an variables but are only applicable to a narrow set
extended pause in sales growth versus a true topping of products.
out of growth are profound. Thus, one cannot avoid
forecasting the future sales path of the product if
sensible judgments about the present life cycle Forecasting Repeat and Replacement Sales
position are to be made. The relationship of the initial purchase rate with
the timing of repurchases dictates both the duration
of the rapid growth stage and the eventual shape
What Is The Potential For Forecasting of the life cycle curve. Yet, other than work on
The Key Parameters of the Life Cycle? consumer nondurables (Ehrenberg 1972), httle is
known of the factors that influence the timing of
The ability of a forecasting model to account for repeat or replacement sales. Even this work is of
the driving forces during the various stages of the limited value for it only applies within estabhshed
life cycle generally determines the accuracy of the markets where there is no sales trend. However,
predictions. As support for this assertion we can work by Midgeley (1981) and Harrell and Taylor
contrast the promising track record of diffusion (1981) provides a promising basis for further
models that are suited to the rapid growth stage progress in this area.
with the relative absence of successful forecasting
models for the maturity and decline stages.
Forecasting the Maturity and Decline Stages
First Purchase Diffusion Models A recent review of the state of strategic planning
concluded that "probably the area in which strategic
The most popular models such as the Bass (1969) planning has performed the poorest is with the well
model, share four distinguishing features (Wind estabhshed product line that has only average
1981): growth . . . what has created disaster for the

64 / Journal of Marketing, Fall 1981


planners is the difficulty in accurately determining quences of strategic decisions. This role is recog-
the maturity of a product, particularly when outside nized through the inclusion of product growth rates
forces can change that designation almost over- or life cycle stages as a major dimension in virtually
night" (Business Week 1978, p. 68). No single reason all portfolio classification models. Finally, a product
for the poor forecasting performance has been life cycle forecast is not a fait accompli, which
osilated, other than the general inability of sales can only be reacted to, but instead is only one
forecasting models to incorporate forecasts of of several scenarios that are conditional on
important underlying forces that determine whether competitive actions.
a product will stagnate, decline, or revive. While
many of these factors are undoubtedly industry- A Summary Perspective on Strategic Relevance
specific, there are numerous variables that have The product life cycle is a versatile framework for
been hypothesized to behave as leading indicators organizing contingent hypotheses about appropriate
of the top-out point when product sales growth slows strategy alternatives {Hofer 1975) and directing
to the GNP rate (Patel and Younger 1978, Porter management attention toward anticipation of the
1980, Wilson 1969). Unfortunately there has been consequences of the underlying dynamics of the
no systematic study of the predictive validity of served market. To enhance both the descriptive
these variables. and explanatory value of the concept, much more
The essence of forecasting during the decline attention needs to be directed toward understanding
stage is the recognition that while products provide recurring patterns of successful strategies organized
specific functions, the customers seek the benefits according to the stages of the life cycle models
delivered by the product. Thus, the rate of decline that are adapted to differences in the important
will depend on changes in the demand for the underlying forces.
benefits, or the ability of emerging substitute prod-
ucts to do a superior job of delivering the benefits.
Where the latter threat is dominant the issue is Overview of Papers in the Special
the rate of penetration by the new product, and Section
the forecasting problem has come full circle. This special section was motivated by the continuing
controversy over whether or how marketing deci-
sion makers actually adapt the product life cycle
The Role of the Product Life Cycle in concept to their needs. Consequently, the emphasis
the Formulation of Strategy is on empirical papers that address the realities of
The derivation of generalized strategic prescriptions identifying, forecasting, and applying the concept
for each stage of the life cycle has been widely in a wide variety of contexts.
criticized—and for good reason. Such prescriptions The first set of four papers is devoted to specific
are bound to be misleading for they assume a single applications. Harrell and Taylor discuss the validity
role for the hfe cycle as a determinant of strategy, and strategic value of a model used for assessing
structure, and performance. Unfortunately this role new houseware products. This model supports deci-
is implicitly endorsed by a majority of marketing sion makers effectively because it is built on an
textbooks through an emphasis on strategic guide- intimate understanding of recurring patterns in the
lines appropriate to the various stages. A more housewares market. The second paper by Quails,
realistic view is that life cycle analysis serves several Olshavsky, and Michaels complements this by
different roles in the formulation of strategy, such documenting the rate at which life cycles have been
as an enabling condition, a moderating variable, shortening in the overall appliance industry. Tigert
or a consequence of strategic decisions. and Farivar next show that life cycle models can
The life cycle serves as an enabling condition be effectively adapted to high technology industrial
in the sense that the underlying forces that inhibit markets. Their evaluation of the ability of a modified
or facilitate growth create opportunities and threats Bass model to forecast initial installations of super-
having strategic implications. Market growth—or market optical scanning equipment clearly shows
the expectation of growth—enables competitors to that these models can play a significant supportive
rote so long as the limitations are recognized. The
enter the market and creates opportunities for final paper in the first section by Ayal examines
offerings directed to segments previously uneco- the ability of a well-known extension of the life
nomic to serve. cycle to explain international trade patterns and
The stage of the life cycle also acts as a moderat- finds that astute strategies by exporters can often
ing variable through its influence on the value of defeat the predictions.
market share position and the profitability conse-

The Product Life Cycle: Analysis and Applications Issues / 65


The second set of papers deals with the this special section is the need to incorporate the
soundness of the theoretical framework for product underlying factors and processes within the particu-
Ufe cycle analysis. Thorelli and Burnett set the scene lar market situation into the life cycle model. Sproles
by analyzing characteristic patterns of strategy, demonstrates the value of this perspective by
structure, and performance over time, using the proposing an integrated theory of short and long
PÏMS data base for industrial products. Their results run fashion acceptance. Finally, Tellis and Crawford
cast into doubt any interpretation of the product show that this adaptive view of the hfe cycle is
life cycle as a fundamental dependent variable indeed consistent with comprehensive theories of
guiding strategic decisions. Midgley then addresses biological evolution and that the deterministic life-
a major gap in life cycle theory by examining the death analogy so often used in marketing is wrong.
underlying processes that influence the shape of While each paper in this special section makes
the hfe cycle. The ratio of mean interpurchase time a distinctive contribution, the cumulative impact
to mean adoption time is found to be a very useful of all these papers on the quality of thinking about
forecasting variable. a fundamental element of marketing theory should
An important theme linking all the papers in be much greater than the sum of the parts.

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latory process. Revised from the oral presenta- 250 S. Wacker Drive, Chicago, IL 60606,
tions given, these papers reflect the discussions (312)648-0536.
held at the conference and cover a broad range
of topics. There is a short introduction to each
paper in both English and French.

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