Product Life Cycle

Just like plants and animals, products have a life cycle. That is they are born, grow up, mature, and finally die. The concept of product life cycle involves an attempt to identify the different stages in the history of a product. The rationale for doing so is that each stage presents different opportunities and problems to the organization. In the market place, most new products go through a product life cycle of four stages.

1.    Introduction: This is the period synonymous with the commercialization stage of a new product development process. It is characterized by slow growth in sales and low or no profits. The product is brand new highly priced, and does not always work well. Market awareness and acceptance of the product is minimal, with sales volume at a low level and growing very slowly. The only customers for the product at this stage are the innovators (adventuresome).

2.    Growth: The product is now accepted in the market place after it satisfies the customers. As a result it starts to make rapid sales gains. This phenomenon occurs because of a combination of repeat buying and first time buying. Customers buy the product with little promoting, but substantial profits gained by the innovating firm lure competition into the market. To maintain the growth in sales, the firm engage in product quality improvement, enter into new markets and shift the emphasis of promoting from informing to convincing potential buyers.

3.    Maturity: Normally this stage is divided into three sub-stages:
 
    i.    Growth where sales continue to increase though very slowly
    ii.   Constant maturity, where sales are constant, and
    iii.  Decaying maturity, where absolute level of sales decreases.

The maturity stage lasts longer than any other stage, and therefore, most products tend to be in this stage. A number of competitors have entered the market. The rate of sales growth begins to slow because of the declining numbers of people who still are unaware of the product. By now, the product has proved itself dependable in performance, and because of increased competition the product now is reasonably priced.

With decaying maturity, nearly everyone who wants the product has bought it. Sales thus level off at a rate determined by population growth. Product promotion is very important in this stage, since the products of competitors differ very little.

4.    Decline or Selinity: This is the stage where the absolute level of sales decreases consistently. The decline may be rapid or slow depending on existing market conditions as well as the strategy adopted by the firm. The stage is identified through an analysis of a number of years of sales decline. The market share and the return on investment are reduced at this stage. The firm has to decide when to quit, since leaving the market too early or too late may be an uneconomical use of the firms scarce resources.