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The Product Life Cycle

A new product progresses through a sequence of stages from introduction to growth, maturity, and decline. This sequence is known as the product life cycle and is associated with changes in the marketing situation, thus impacting the marketing strategy and the marketing mix. The product revenue and profits can be plotted as a function of the life-cycle stages as shown in the graph below:

Product Life Cycle Diagram

Introduction Stage In the introduction stage, the firm seeks to build product awareness and develop a market for the product. The impact on the marketing mix is as follows:

Product branding and quality level is established, and intellectual property protection such as patents and trademarks are obtained.

Pricing may be lower because of the new competition.   Pricing may be low penetration pricing to build market share rapidly. Distribution channels are added as demand increases and customers accept the product. the strong growth in sales diminishes. Promotion is aimed at a broader audience. the firm seeks to build brand preference and increase market share.     Product quality is maintained and additional features and support services may be added. . Competition may appear with similar products. Pricing is maintained as the firm enjoys increasing demand with little competition. Maturity Stage At maturity.     Product features may be enhanced to differentiate the product from that of competitors. Marketing communications seeks to build product awareness and to educate potential consumers about the product. or high skim pricing to recover development costs. Distribution becomes more intensive and incentives may be offered to encourage preference over competing products. The primary objective at this point is to defend market share while maximizing profit. Promotion is aimed at innovators and early adopters. Distribution is selective until consumers show acceptance of the product. Promotion emphasizes product differentiation. Growth Stage In the growth stage.

possibly rejuvenating it by adding new features and finding new uses.reduce costs and continue to offer it.Decline Stage As sales decline. Harvest the product . Discontinue the product. The price may be maintained if the product is harvested. the product may be changed if it is being rejuvenated. liquidating remaining inventory or selling it to another firm that is willing to continue the product. The marketing mix decisions in the decline phase will depend on the selected strategy. For example. possibly to a loyal niche segment. the firm has several options:    Maintain the product. or left unchanged if it is being harvested or liquidated. or reduced drastically if liquidated .

. Product development is the incubation stage of the product life cycle. Its duration may be as short as a few months for a fad item or a century or more for product categories such as the gasoline-powered automobile. it may take one of many different shapes. There are no sales and the firm prepares to introduce the product. changes in the marketing mix usually are required in order to adjust to the evolving challenges and opportunities. an example of which is shown below: Product Life Cycle Curve The life cycle concept may apply to a brand or to a category of product. If a curve is drawn showing product revenue over time.The Product Life Cycle A product's life cycle (PLC) can be divided into several stages characterized by the revenue generated by the product. As the product progresses through its life cycle.

the primary goal is to establish a market and build primary demand for the product class.one or few products. the goal is to gain consumer preference and increase sales. Sales increase as more customers become aware of the product and its benefits and additional market segments are targeted.Promotion is aimed at building brand awareness. assuming a skim pricing strategy for a high profit margin as the early adopters buy the product and the firm seeks to recoup development costs quickly. The marketing mix may be modified as follows:  Product .Introduction Stage When the product is introduced. When competitors enter the market. sales will be low until customers become aware of the product and its benefits. Advertising costs typically are high during this stage in order to rapidly increase customer awareness of the product and to target the early adopters. but such announcements also alert competitors and remove the element of surprise. During the introductory stage the firm is likely to incur additional costs associated with the initial distribution of the product. Growth Stage The growth stage is a period of rapid revenue growth. The marketing team may expand the distribution at this point.New product features and packaging options. The introductory promotion also is intended to convince potential resellers to carry the product. sales will increase further as more retailers become interested in carrying it.Distribution is selective and scattered as the firm commences implementation of the distribution plan.Generally high. Distribution . . The following are some of the marketing mix implications of the introduction stage:     Product . Samples or trial incentives may be directed toward early adopters. During the introduction stage. Some firms may announce their product before it is introduced. relatively undifferentiated Price . During the growth stage. These higher costs coupled with a low sales volume usually make the introduction stage a period of negative profits. Promotion . In some cases a penetration pricing strategy is used and introductory prices are set low to gain market share rapidly. Once the product has been proven a success and customers begin asking for it. improvement of product quality. there may be price competition and/or increased promotional costs in order to convince consumers that the firm's product is better than that of the competition. often during the later part of the growth stage.

The firm places effort into encouraging competitors' customers to switch. Trade discounts are minimal if resellers show a strong interest in the product. they do so at a slower pace. Distribution . Reduce costs and find new uses for the product.   Price . If the product has developed brand loyalty. Sales promotions may be offered to encourage retailers to give the product more shelf space over competing products. and converting non-users into customers. or customer tastes change.New distribution channels and incentives to resellers in order to avoid losing shelf space.Maintained at a high level if demand is high. Unit costs may increase with the declining production volumes and eventually no more profit can be made. advertising expenditures will be reduced. the primary goal is to maintain market share and extend the product life cycle. During the decline phase. Because brand awareness is strong.Modifications are made and features are added in order to differentiate the product from competing products that may have been introduced. .Increased advertising to build brand preference. increasing usage per customer. Maturity Stage The maturity stage is the most profitable.Emphasis on differentiation and building of brand loyalty. While sales continue to increase into this stage. Decline Stage Eventually sales begin to decline as the market becomes saturated. Distribution . Competition may result in decreased market share and/or prices. Price . Incentives to get competitors' customers to switch. During the maturity stage. Promotion . increasing the difficulty of differentiating the product. the product becomes technologically obsolete. the firm generally has three options:  Maintain the product in hopes that competitors will exit. the profitability may be maintained longer. Promotion .Possible price reductions in response to competition while avoiding a price war. Marketing mix decisions may include:     Product . The competing products may be very similar at this point. or reduced to capture additional customers.Distribution becomes more intensive.

Consequently. . Prices may be maintained for continued products serving a niche market. Promotion . Distribution . Discontinue the product when no more profit can be made or there is a successor product. but products do not have such a predictable life and the specific life cycle curves followed by different products vary substantially.  Harvest it. For example. It also is useful for monitoring sales results over time and comparing them to those of products having a similar life cycle. Furthermore.The number of products in the product line may be reduced. critics have argued that the product life cycle may become self-fulfilling.Prices may be lowered to liquidate inventory of discontinued products. reducing marketing support and coasting along until no more profit can be made. Price . Channels that no longer are profitable are phased out. if sales peak and then decline. the product life cycle concept helps marketing managers to plan alternate marketing strategies to address the challenges that their products are likely to face. Limitations of the Product Life Cycle Concept The term "life cycle" implies a well-defined life cycle as observed in living organisms. managers may conclude that the product is in the decline phase and therefore cut the advertising budget. thus precipitating a further decline.Expenditures are lower and aimed at reinforcing the brand image for continued products. the life cycle concept is not well-suited for the forecasting of product sales. The marketing mix may be modified as follows:     Product .Distribution becomes more selective. Nonetheless. Rejuvenate surviving products to make them look new again.

2. depending on the industry... 4. Introduction Failure rate for new products can range from 60%-90%.PUSH strategy. Price penetration.set a low price in order to avoid encouraging competitors to enter the market. Introduction Growth Maturity Decline The following material refers to the PLC as far as the product category is concerned unless otherwise stated.. Develop primary demand/pioneering information. A product does not have to be an entirely new product. . Price skimming. also helps increase demand and therefore allows the company to take advantage of economies of scale. as opposed to the brand name of the particular product.Product Life Cycle Popularized by Theodore Levitt.. since there will be little competition at this stage and you need to educate consumers of the product's benefits.set a high price in order to recover developmental costs as soon as possible. communications should stress the benefits of the product to the consumer.. can be a new model (car). Marketing Mix(MM) considerations Need to build channels of distribution/selective distribution Dealers offered promotional assistance to support the product. 3. 1965 PLC can be applied to:    product category (Watch) product style (Digital) a product item/brand (Timex) Four Stages to the Product Life Cycle: 1..

Return to Content List Maturity Sales curve peaks-severe competition. MM considerations May need to perform some type of product modification to correct weak or omitted attributes in the product.. since consumers are more aware of the products benefits and there is more competition. competitors are entering the market place. May need to pursue further segmentation.. Profits begin to decline late in the growth stage.Coca Cola Launches Fruit-Drink line. Price dealing/cutting or meeting competition. MM Considerations A product may be rejuvenated through a change in the packaging.Growth Need to encourage strong brand loyalty. must differentiate your offering from your competitors.. New competitors like Coca Cola will help grow the size of the market. communications should stress the brand of the product. consumers are now experienced specialists. Move to more intense distribution Price dealing/cutting or meeting competition . especially if previously adopted a price skimming strategy. May begin to move toward intensive distribution-the product is more accepted..$325m Coca Cola's entrant--Fruitopia expect sales this year to reach $400m Fruitopia is in the Introductory stage when the Alternative Beverage market is in the Growth stage. Advertising focuses on differentiating a brand. Need to build brand loyalty (selective demand). Category doubled in size last year to about $300m . therefore intermediaries are more inclined to risk accepting the product. new models or aesthetic changes. Handout. sales promotion aimed at customer (PULL) and reseller (PUSH).

use line extensions Reposition Product Handout. need to consider introducing new (and competing) products as the existing product is still in the growth stage of its life cycle. .Taste vs. moment Line extension. Generally cash cows that can support other products. Need to manage product mix through their respective life-cycles. Strategies during maturity include:   Modification of product. When to decide to introduce new (modified) products that compete with the current product offering. With high-tech products.. breath savers. Handout. MM Considerations Some competition drop out Need to time and execute properly the introduction. alteration and termination of a product. Decline Sales fall off rapidly.Cannibalism Is a Virtue in Computer Business Problems with high-tech products.. Need to decide to eliminate or reposition to extend its life..Provides company with a large.. relate to Product Adoption Process etc.. loyal group of stable customers. holes (unsuccessful) Licensing name Weaker competition will have left the market place.New Life Savers Ads Grab Hold of Taste Reposition... gummy savers.. Can justify continuing with the product as long as it contributes to profits or enhances the effectiveness of the product mix. Can be caused by new technology or a social trend.

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