Product Life Cycles
New products follow four distinct stages in their life cycle. This article describes the stages of product life cycles and what to expect at each one.
What is the Product Life Cycle?
The product life cycle describes the phases that a product will go through from its initial idea and development right through to when it is withdrawn from the market.
The stages are illustrated in the diagram above and are as follows:
Introduction- Stage 1: In this phase, the product is researched, developed and then launched on the market.
Growth- Stage 2: In the growth phase sales are increasing at their fastest rate.
Maturity- Stage 3: Here sales are almost at their highest. However, the growth is slowing.
Decline- Stage 4: Sales begin to drop off in this stage
Introduction – Stage 1
At the Introduction Stage, the product is unknown, as is the demand for it. There may be no current demand even for that type of product, and therefore that demand has to be created in the market. In this stage, sales are likely to start very slowly and not to increase at any dramatic level.
The length of the Introduction Stage is variable and depends on the nature of the product, how complex it is, what alternatives are available and what the need is for it.
It can be tempting at this stage to skimp on the time and cost of developing the market. However, one of the biggest causes of failure in a new product is a lack of focus on this stage. Having said that, this can cost time and money and still give no guarantee of a successful product. As a result, there are many businesses that are now actively focusing on not being the first out with a new product, but maybe the second or third. This allows someone else to go through the expense and effort of developing a market for the product and if it looks to be successful, they jump on the bandwagon.
Growth Stage – Stage 2
Once the sales are starting to rise in the market development stage, the product moves into Growth Stage. Here there may be many potential competitors entering the market. Some will have a product very similar to the original; others may use technology or innovation to create an improved product and to differentiate themselves. At this point, the market can develop brand differentiation.
Now the players in the market are focusing not on getting consumers to be interested in the product generally, but specifically in their version of the product. This may need specific marketing strategies, which will be different from those required at Stage 1.
As the consumers in the market accept the product in larger quantities, it may become easier to set up new distribution channels, which in turn causes sales and therefore profits to rise. This attracts more competitors into the market and inevitably prices, and margins, start to drop. This takes us to the third stage.
Maturity Stage – Stage 3
The initial indication of reaching the Maturity Stage is market saturation so that most people who are likely to use the product have already purchased it. As a result, sales grow only as fast as the population does and there are no further distribution pipelines to be filled.
At this stage competition on price becomes fierce. Differentiation between products can become more and more subtle as producers try to show how they differ from their competitors. It can also force producers to focus on how effectively they can compete on price, customer service or any other way they can distinguish themselves from competitors.
The Maturity Stage can be quick (for example children’s toy trends) or can last for a much longer term. This will depend on the product and the market created for it.
Decline Stage – Stage 4
At the Decline Stage, demand reduces, and many of the competitors will fail. Often at this stage, the remaining producers may propose takeovers or mergers and the production is concentrated into fewer and fewer businesses. Again, the speed of the decline is variable and depends on the type of product. The options available at this stage are:
- Discontinue the product – possibly selling off existing supplies to other competitors
- Re-invest in the product – consider where the product can be developed further to create a new iteration of the cycle
- Continue as before – but to be successful costs need to be reduced and possibly more marketing expense to identify if there really is a true market.