The product life cycle is marketing concept that describes the way the revenues from the sale of a product behave over time. Typically the product life cycle is drawn as a bell curve, shown below, with the life cycle being divided into four stages:
The concept also applies to services, although the shape may be markedly different. It can also apply to product categories and the market as a whole.
It should be noted that the product life cycle is not necessarily a good 'predictor' of product behavior. Rather it can aid the marketer in understanding the market. For example, a product may have gone through a period of rapid growth and sales may have begun to level off. This does not necessarily mean that the product is maturing, it could just be a temporary slow down that culminates in the product sales beginning to grow rapidly. With living beings it is possible to have avery shrewd idea of where they are in their life span, how long they are likely to live and consequently the sort of issues that are going to occur at any given time, it is more difficult to gain this level of understanding with products.
The following chart gives an indication of how sales will vary as a product goes through the various stages of its lifecycle.
Figure 1: The product lifecycle
It takes time of a new product to begin selling in volume. There may be manufacturing or logistics issues to contend with. The marketplace may be unfamiliar with th product and creating awareness takes time. Consequently product sales show a slow growth during the introduction phase.
The marketer can adjust price, place (where the product is sold) and promotion to meet his marketing objectives. For example, in markets that are large with high potential competition it would make sense to invest heavily in promotion and to start with low prices. This strategy would also apply for a product for which production cost would decline quickly with economies of scale. Using this strategy, the market would be penetrated quickly before competitors had a chance to introduce competing products.
The growth space is characterized by a rapid increase in sales volume. This is created by increased product demand. Manufacturing and logistics issues are likely resolved and the market is far more aware of the product. Since economies of scale have started to take effect the marketer should be able to increase promotional activities. At the same time competition will begin to stiffen and so the marketer should make necessary adjustments to the 4 Ps of marketing. For example, it may be appropriate to tweak the products by adding new features. In this way the competition may be fended off. It amy also make sense to reduce prices a little to bring in more price sensitive consumers.
The maturity phase is characterized by sales volumes leveling off. At this point competition is strong and margins may begin to suffer. Signs of getting to this stage are that competitors may start advertising more strongly or using other promotional means to increase sales.
Finally product sales begin to decrease and it is at this point that some serious marketing decisions need to be made. It may be possible to extend the life of a product by changing some of its product attributes, repositioning it or by packaging it with other products. On the other hand it may make sense to delete the product from your portfolio.
Figure 2: Simple product portfolio for products A, B and C
The idea behind product portfolio management is that, inevitably, products will eventually reach maturity and decline. Although it may be possible to extend their lives and some products have an extremely long product life cycle, it make sense to manage a program of continually introducing new products. In this way, as some product revenues level off or decline, other product revenues increase. This is illustrated in figure 2.
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