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Product Life Cycles

The Product Life Cycle Curve

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Product Life Cycles Consist of Four Stages

Exhibit 1
The Product Life Cycle

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If we plot a product’s sales over its life in the market place, the resulting curve looks much like the "S" shape curve depicted in Exhibit 1.  This is the product's life cycle and it can be divided into four distinct stages: introduction, growth, maturity and decline

Introduction Stage

Introduction begins when the product is first made available for commercial sale. During the introduction stage the product's sales are relatively low and slow to accumulate because it takes time to roll the product into multiple geographic markets, convince wholesalers and retailers to stock and sell the product, and to generate sufficient levels of customer awareness, interest, and trial.  Overall, demand  generally remains low during this stage.

Growth Stage

Eventually, as the product becomes more widely available and is adopted by more and more consumers, sales begin to grow at an increasing rate. It is at this point that the product has entered its growth stage. Sales continue to grow at an accelerated rate until the market approaches saturation i.e. the pool of potential customers for the product becomes depleted.  As this saturation point is approached, the sales curve begins to tip over -- the rate of sales growth tends to decelerate. At this point, the product transitions into its third stage -- maturity

Maturity Stage

Sales continue to grow during the first part of the maturity stage, although the growth rate is much slower than before. At some point during maturity, sales reach their peak. This peak will vary in duration, depending on the product category under consideration. For some product categories, such as automobiles, cigarettes, and refrigerators, sales may remain at their peak for decades.  

The maturity stage is usually the longest phase of the PLC. As a result, most products at any point in time, are at maturity. This means that most decisions made by marketing managers are decisions relevant to managing mature products. This makes the maturity stage of the PLC among the most important for us to consider from a managerial perspective.

Decline Stage

Eventually the product enters decline. The decline phase is characterized by a steady deterioration in sales and profits. This stage culminates in the product’s withdrawal from the market.

The Product Life Cycle Applies to Product Categories 

Exhibit 2
Products at Different 
PLC Stages

The PLC described in Exhibit 1 illustrates the typical life cycle for entire product categories i.e. entire industries. Examples of product categories at different stages in their life cycles are presented on Exhibit 2. Videophones certainly are in the introductory stage of the product life cycle. Limited numbers of consumers can afford this technology. As prices come down for videophones, and as consumers recognize the relative advantage of this form of communication over existing communication products, sales may begin to grow and the videophone should transition into its growth stage.

The Internet, more specifically the World Wide Web component of the Internet, is probably in the growth phase of its life cycle. The advantages of the Internet have resulted in its very rapid acceptance in consumer and business markets. Indeed, there is concern that the extremely rapid growth in the number of users and the sheer volume of equipment connected to the Internet will cause it to self-destruct unless substantial improvements are made, quickly, in communications technology and infrastructure.

CD-ROMs and personal computers are close to, if not fully, mature products. The number of households, at least in the United States, possessing personal computers is substantial. 

Refrigerators illustrate a product that has hovered at maturity for decades. Moreover, refrigerators will continue to remain in the mature stage of the PLC until a new technology emerges that fills the same need. The emergence of new technologies, by the way, is one of the main reasons why products transition into decline. New technologies that offer more efficient and better ways of filling customers’ needs can force products based on older technologies to become obsolete -- almost overnight. One need only think of the quick death of the slide rule as a result of the advent of the calculator to grasp this point.

Exhibit 3
The Life Cycle of 
Vinyl Records

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Vinyl records provide an excellent example of a product that is approaching the end of its decline phase and is in imminent danger of disappearing from the market entirely. Vinyl records now are mainly collector’s items. The decline of vinyl records can be directly attributed to the emergence of two technologies (Exhibit 3). Cassettes tapes were introduced in the early 1970’s, and gained rapid acceptance by the early 80’s. The dramatic increase in cassette sales in the late 70’s and early 80’s ushered in the decline of vinyl records. When compact discs [CD’s] were introduced in the early 1980’s, the market death of vinyl records was a certainty. Vinyl records are now sold almost exclusively as collector’s items. In fact, many of the classic albums of the 50’s and 60’s command very high prices in the collector market. One need only surf the Internet for a short period of time to find web sights dedicated to the buying and selling of these now prized collector’s items.

The Importance of Product Life Cycles

Exhibit 4:
The Importance 
of PLCs

The importance of the product life cycle should, at this point, be apparent. Several key points relative to its importance to marketing managers are worth highlighting (Exhibit 4):

First, marketing strategy will vary from one stage in the PLC to the next. How the product is managed during growth or introduction will be much different from how the same product will have to be managed during maturity and decline.

Because all products eventually transition into decline and face market death, we must continuously seek to introduce new products that will be in positions of market and competitive strength as these older products decline.

Third, there is a strong relationship between the specific stage of a product’s life cycle and its profitability. We will look at this relationship shortly.

 

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Page last modified: February 06, 2002