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

This is the most risky stage. Organization put lot of efforts and money because product is just enter to the market it require customer awareness and acceptance. Marketing budget is high due to different promotional strategies, distribution is restricted to limited markets.

In this stage organization faces less competition because adopter for the product is not huge. Production capacity is under utilize because demand of the product is low results in high cost per unit and this is transferred to customer in the form of price.

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 low penetration pricing to build market share rapidly, or high skim pricing to recover development costs.
• Distribution is selective until consumers show acceptance of the product.
• Promotion is aimed at innovators and early adopters. Marketing communications seeks to build product awareness and to educate potential consumers about the product.

 GROWTH STAGE

This is the most profitable stage. In this stage sales start rapidly increasing and product adopted by most of the customer. Organization maintains the quality to build long term relationship with customers. Price for the product is maintained and additional features and support services may be added to gain customer trust.

In the growth stage, the firm seeks to build brand preference and increase market share.

• Product quality is maintained and additional features and support services may be added.
• Pricing is maintained as the firm enjoys increasing demand with little competition.
• Distribution channels are added as demand increases and customers accept the product.
• Promotion is aimed at a broader audience.

 MATURITY STAGE

This is the most negative stage. Product sales reach to the saturation level where growth is slow down due to competitors’ products presence in the market. Distribution and promotion is carried in the same way or even spread more to gain market share. Number of unit produce increase reduces the cost and benefit the customers in the form of price cut.

Competitors offer similar products in this case organization must adopt promotional strategies to differentiate its products from competitors. Every organization wishes that there products remains in maturity stage for the long time to generate high revenues and profits.

The primary objective at this point is to defend market share while maximizing profit.

• Product features may be enhanced to differentiate the product from that of competitors.
• Pricing may be lower because of the new competition.
• Distribution becomes more intensive and incentives may be offered to encourage preference over competing products.
• Promotion emphasizes product differentiation.

DECLINE STAGE

This is the last and critical stage for organization to take critical decision. Competition increase to great extent in this phase result in rapid downward slope graph of sales. Organization might take decision to drop out this product or try to stick with the product and hope for some better results.

As sales decline, the firm has several options:

         Maintain the product, possibly rejuvenating it by adding new features and finding new uses.

         Harvest the product - reduce costs and continue to offer it, possibly to a loyal niche segment.

      Discontinue the product, 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, the product may be changed if it is being rejuvenated, or left unchanged if it is being harvested or liquidated. The price may be maintained if the product is harvested, or reduced drastically if liquidated.