Week 7.2 Product Life Cycle

Four Stages of a Product's Life Cycle in the Marketplace (~2 min)

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In this lesson, we will examine these four stages. Each stage of the life cycle has its own characteristics.

This table summarizes the marketing objective, 4Ps, and competition in each one of the four stages of the life cycle. 

 Marketing ObjectiveGain AwarenessStress DifferentiationMaintain Brand LoyaltyHarvesting, Deletion
Competition Few More Many  Reduced 
Product One More versions Full product line Best sellers
Price Skimming or penetration Gain market share, deal Defend market share, profit Stay profitable
Place (distribution) Limited More outlets Maximum outlets Fewer outlets
Promotion Inform, educate Stress points of difference Reminder-oriented Minimal promotion

Introduction Stage 

This is the stage in which the life cycle starts. The product is a brand new offering in this stage.

Characteristics of the introduction stage include: 

  • Profit is minimal, and negative in many cases.
  • Sales grow slowly as the promotional efforts raise awareness for the new product. 
  • The marketing objective in the introduction stage is to create consumer awareness and stimulate trial.
  • The goal is to initiate the initial purchase of the product by consumers.

Companies often spend heavily on advertising in the introduction stage. Building awareness and stimulating product trial requires large spending in marketing activities. Advertising and promotion expenditures are often made to stimulate primary demand. Primary demand refers to demand for the product class rather than demand for a specific brand. Once the life cycle progresses, competitors come in and introduce their own brands. In those stages companies focus on creating selective demand, which is the demand for a specific brand. 

Pricing in the introduction stage could be either high or low. A high initial price is known as skimming pricing strategy. It helps the company recover the high costs of development and commercialization. Another benefit of skimming pricing is that it allows the company to take advantage of the price insensitivity of early buyers.  

There are disadvantages of skimming pricing strategy, one of which is that high prices tend to attract competitors. Other firms see high prices as a signal of high profits. In order to discourage competitors, businesses can start their initial offering with a low price. This type of pricing is known as penetration pricing strategy. This pricing strategy usually increases the sale volume, which is ideal to build up market share. We will cover these pricing strategies and many more in the coming lessons. 

 

Stop and Think Question: Why do you think profit would be negative in the introduction stage? 

Research technician working on electronic product.

Businesses spend large sums of money in research and development as well as commercialization of new products. Due to high initial costs, profit initially would be negative.  

 

Hydrogen fuel pump and car.
Example: There are some product classes that are in the introductory stage of the product life cycle. For example space tourism and hydrogen cars.  

Growth Stage

This is the second stage in the life cycle. It follows the introduction stage. Characteristics of the growth stage include:

  • We usually observe rapid increases in sales. Sales increase at an increasing rate. 
  • Competitors start to appear in the market.
  • Profit usually peaks during the growth stage. 

Businesses focus on stimulating selective demand in their advertising. The goal is to compare their product’s benefits to those of competitors' offerings in order to gain market share.Businesses add new features to the original design of the product in this stage. The idea is to differentiate the company's brand from those of its competitors.

The marketing objective in the growth stage is to stress points of difference. The goal is to build market share by highlighting the superior characteristics of the product versus competitive products (stress differentiation). 

 

Photo of ebook on a pile of books. 

Example: E-book reading from Kindle or other tablets can be given as an example of a product in the growth stage

Maturity Stage 

The maturity stage follows the growth stage in the life cycle. Characteristics of the maturity stage inlcude:

  • Sales increase at a decreasing rate at the maturity stage and profit starts to decline. The reason is because of fierce price competition among many sellers in the market. 
  • Marketing attention in the maturity stage is often directed toward holding market share through further product differentiation and finding new buyers.
  • The marketing objective in the maturity stage is to maintain brand loyalty with reminder orientation. The company built its market share in the growth stage, now it is the time to maintain and hold the market share.   
bowl of cereal

Example: Soft drinks and presweetened cereals are some products in their maturity stage.  

Decline Stage 

The decline stage is the last stage of the life cycle.  Characteristics of the decline stage include: 

  • Sales and profits decline.
  • The product is completing the life cycle.
  • Environmental factors play a key role in entering the decline stage. It is not because of any wrong strategy on the part of the company.

In many cases, technological innovation is the reason behind the decline stage as newer technologies replace older technologies. For example, typewriters are replaced by computers. Cloud technology is replacing USB drives and other storage devices. 

Rows of old computer monitors.

Example: Examples of products in the decline stage would be analogue TVs and desktop computers. 

There are two strategies a company might follow in the decline stage.

1. Deletion:  The company simply removes the product from the market. It is the most drastic strategy for a declining product. The company still would need to address the existent users of the product with any support or maintenance if needed. It might take time to eliminate the product completely.

Liquid paper painting out a mistake.

Example: Sanford still continues to sell its Liquid Paper correction fluid. It is mostly used in typewriters and has not much of a need in the era of word-processing equipment. 

2. Harvesting: The company retains the product but reduces marketing support costs. The product continues to be offered in the market, however salespeople do not allocate time in selling the product. The company does not apply any promotional campaigns to the product, and no money is spent in advertising the product. 

Can of Tab. 

Example: Coca-Cola still sells Tab. It is the first diet cola, and is retained for a small group of die-hard fans. According to Coke’s CEO, “It shows you care. We want to make sure those who want Tab get Tab.”

Length and Shape of the Product Life Cycle

Above we have seen the four stages of the life cycle. Now, we turn our attention to the length and shape of the product life cycle.  

Length of the Product Life Cycle

There is no exact time that a product takes to move through its life cycle. It is not possible to know ahead of time when a product will move from introduction to growth to maturity and finally to the decline stage. Usually consumer products have shorter life cycles than do business products. As a result of 24/7 connectivity, consumers are informed about new technologies and products faster, which shortens the life cycles of existent products. Technology is the force behind innovation and leads to the development of new products which replace the existing ones. 

Shape of the Product Life Cycle

There are four product types that follow particular life cycle shapes. 

  • High-learning Product
  • Low-learning Product
  • Fashion Product
  • Fad Product 
Plot of Sales vs Time, with gradual increase and a peak over long time.
High-learning Product
Plot of Sales vs Time, with steep increase and a peak over long time.
Low-learning Product
Plot of Sales vs Time, with increase and 2 peaks over longer time.
Fashion Product
Plot of Sales vs Time, with steep increase and a peak over short time.
Fad Product

A high-learning product is one with a very large introduction stage. The introduction stage takes very long because consumers need to be educated. High-learning products are fairly complex and it takes time for the consumers to learn the benefits they would get from the product. 

Desktop computer.

Example: Personal computers experienced a high-learning product life cycle curve in the 1980s. People thought that computers were only useful for certain businesses to store data and keep track of sales records. It took time to understand and learn how computers are necessary for almost every household.

Low-learning products require very little learning period. That is why the introduction stage is not longer than the other life-cycle stages. Low learning products could easily be imitated by competitors. For that reason, the best strategy for such a product is to broaden distribution quickly to capture a large market share before competitors arrive. 

Photo of a Gillette Fusion 5 package.

Example: Gillette's Fusion razor can be considered as a successful low-learning product. It is easy to understand the workings and benefits of the product.

A fashion product repeats the life cycle over and over again. After the decline stage, the product makes a comeback and experiences a full life cycle each time. The length of each cycle can be years or decades or shorter. 

Photo of dress on a stand.

Example: Women’s and men’s clothing styles can be good examples of fashion products. Certain styles, such as hemline lengths on skirts, become popular for a period of time, then decline but make a comeback after a while. 

A fad product shows a very rapid increase in sales introduction and then an equally rapid decline. It is as if the growth and maturity stages do not exist.

Photo of the hand playing pokemon game on iphone.

Examples: Pokemon and the yo-yo were novelties with a short life cycle.