Product Life Cycle: The Model

The conditions required for a product to be successfully sold changes over time. The failure rate for new products can range from 60 present to as high as 90 present, depending on the industry and therefore the marketing management approach must be adapted as it moves through these changed conditions.

Research indicated that the changes in marketing conditions have certain similarities depending on the maturity level of the product in the particular market segment. It was further discovered that the succession of stages can be categorizes irrespective of the product, market segment or industry.

The term "product life cycle" was first published by Theodore Levtt in 1965 in a Harvard Business Review article with the title "Exploit the Product Life Cycle" in Volume 43 of November-December 1965 on pages 81 to 94. Due to the simplicity and the accuracy of this classification model the concept was quickly popularized. The result is that most marketing classes include the concept of a product life cycle as part of the curriculum in more or less detail.

When referring to the product life cycle it is standard to include the time period between the marketing launch of the product until the product is withdrawn in the end. The cycle is divided into four distinct stages that comprise the journey of the product from the initial appearance in the market up until the final removal from the market.

This is the first in a series of articles by the same author that deals with the product life cycle model as used in a marketing perspective.

Explaining the Stages:

The basic product life cycle model consists of four defined phases namely the introduction stage, the growth stage, the maturity stage and the decline stage.

Introduction stage

The product life cycle begins with the introduction of the product to the market. It starts with zero sales and profits are negative as marketing and distribution cost as well as other costs such as overheads is incurred to achieve the desired sales.

During this phase a focused and very intense marketing effort is required to successfully introduce the product to the individual market segments. It will be crucial to establish a clear identity and to ensure that the market awareness is maximized. Potential buyers must be made aware of the new product, its features, uses, benefits and advantage in order to entice them to buy it.

Growth stage

As demand increases, economies of scale will become possible and better prices can be offered. This stage can also be recognized by a rapid increase in sales with profits reaching a peak before it starts to decline.

The emergence of competitors during this stage is the biggest threat to the survival of the product. To counter this and maintain the growth for as long as possible the marketing function should focus on the basic features of the product and any additional features that may be added. The primary focus should be to build the brand and get consumers to prefer and choose the product as a result of the brand. The idea is to get some customers to make repeat purchases as a result of the brand recognition.

The phase also lends itself to an increase in the distribution channels in order to make the product available to a more extensive audience, thus expanding the market base.

Maturity stage

During the maturity stage the sales volume curve peaks and may even start to decline. The maturity stage is the stage when a steady level of high sales at a slow tempo is experienced. This phase can be recognized as competitors will start to exit from the market. At this point in time brand loyalty develops and most sales are typically generated by customers loyal to the brand. This normally results in an increase in profits.

During the maturity stage the marketing effort will be focused on promotion and distribution efforts in order to ensure that brand visibility is maintained at the point of sale. The focus on features, uses, benefits and advantage are reduced as most buyers have reached a high level of product knowledge to make an informed buying decision.

Decline stage

At the conclusion of the period of stable growth the product popularity declines and results in a reduction in revenue that is generated from the sales of the product. This is normally the first signs of the declining stage in the product life cycle. It is a clear sign that the consumers are losing interest in the product and have begun to look for substitute products or services. The decline can also be as a result of market saturation, strong competition or new technological developments that could make the product redundant.

This stage is distinguished by a reduction in market share, declining popularity of the product and falling profits. The decision regarding the future of the product should be carefully considered. This may include continuing with the product as it is, to revitalize the product or to withdraw it from the product offering. One can only justify continuing with the current unchanged product as long as it makes a contribution to profits or enhances the success of the other products in the product mix.

Conclusion

As a product moves through its life cycle the marketing strategies that relates to the marketing mix, including price, place, promotion and product should be reviewed and adapted to ensure that the best competitive advantage can be achieved in order to maintain the profitability of the product for as long as possible.

It should be clear that, utilizing the Product Life Cycle model to determine the marketing strategy has significant advantages for a company as it can be used to identify the distinct focus areas of the marketing effort for a product, from inception to its retirement.

© Carl Marx