2010 Q1 Product Life Cycle
The product life cycle (PLC) describes the stages through which product categories pass as they “age” in the marketplace. These stages are affected by such things as demand (the size of the pool of prospective buyers) supply (the number and types of competitors) and the resource environment (technology, materials, systems, regulations). The different stages also call for changes in marketing strategy. In typical PLC sales usually increase before profits do, with significant profits only being made in two of the six stages – growth and maturity. The six stages in the PLC are:
1. Development
2. Introduction
3. Growth
4. Maturity
5. Decline
6. Termination
The first stage, development, starts when the product is first seriously considered and continues until it is ready for selling and distribution. Most activities in this stage are in research and development and product design.
The relatively short period in which a product is introduced is the introduction stage. The product pipeline is being filled and positioning and brand image are being established and the target markets are being confirmed.
Once distribution has begun and brand awareness is established, the product enters the growth stage. The growth period is the time when a product can dominate its category. Profit per unit usually runs high because there are few competitors. To ensure that the product can compete with new products coming into the market,, product improvements are important in this stage.
The period during which the sales curve begins leveling off is called the maturity stage. Maturity is generally the longest of all stages. Most potential customers have already been identified and competitors established. Brands with significant shares are now getting repeat purchases. Profit margins may be high at established firms that have refined their operations to lower production, distribution, and selling expenses, or they may be reduced in an effort to compete on the basis of price.
The decline stage is the reverse of the growth period – sales begin to decline. A category or a brand can decline for many reasons, including technological changes, changes in consumer wants, or changes in economic conditions. As category sales decline, competitors drop out.
As a product category continues to decline, each brand in the category needs to decide when production and marketing activities should terminate, the final stage of the cycle. Note that a product category at one stage of the life cycle in one country may be at a very different stage in other countries. In addition, according to Warren Keegan, co-author of Marketing, product categories and specific brands each have their own life cycles. It is not unusual for each of these to be at a different life cycle stage at the same time.