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Nikky Schreier

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Aug 3, 2024, 12:57:33 AM8/3/24

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The product life cycle is an important concept in marketing. It describes the stages a product goes through from when it was first thought of until it finally is removed from the market. Not all products reach this final stage. Some continue to grow and others rise and fall.

For example, some products may enjoy a rapid growth phase, but quickly move into a decline phase if they are are replaced by superior products from competitors or demand in the market overall declines quickly.

All products go through distinct phases or stages. Together these are known as the product life cyclecloseproduct life cycleThe theory that a product moves through different stages: introduction, growth, maturity, and decline.

The number of sales and the length of a product life cyclecloseproduct life cycleThe theory that a product moves through different stages: introduction, growth, maturity, and decline might be different for different products but all products share a general pattern of growth and decline. This cycle can be shown on a graph of sales over time.

The Product Life Cycle (PLC) defines the stages that a product moves through in the marketplace as it enters, becomes established, and exits the marketplace. In other words, the product life cycle describes the stages that a product is likely to experience. It is a useful tool for managers to help them analyze and develop strategies for their products as they enter and exit each stage.

When a product first launches, sales will typically be low and grow slowly. In this stage, company profit is small (if any) as the product is new and untested. The introduction stage requires significant marketing efforts, as customers may be unwilling or unlikely to test the product. There are no benefits from economies of scale, as production capacity is not maximized.

If the product continues to thrive and meet market needs, the product will enter the growth stage. In the growth stage, sales revenue usually grows exponentially from the take-off point. Economies of scale are realized as sales revenues increase faster than costs and production reaches capacity.

Competition in the growth stage is often fierce, as competitors introduce similar products. In the growth stage, the market grows, competition intensifies, sales rise, and the number of customers increases. Price undercutting in the growth stage tends to be rare, as companies in this stage can increase their sales by attracting new customers to their product offerings.

The biggest challenge in the maturity stage is trying to maintain profitability and prevent sales from declining. Retaining customer brand loyalty is key in the maturity stage. In addition, to re-innovate itself, companies typically employ strategies such as market development, product development, or marketing innovation to ensure that the product remains successful and stays in the maturity stage.

In the decline stage, sales of the product start to fall and profitability decreases. This is primarily due to the market entry of other innovative or substitute products that satisfy customer needs better than the current product. There are several strategies that can be employed in the decline stage, for example:

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This can be illustrated by looking at the sales during the time period of the product. A branded good can enjoy continuous growth, such as Microsoft, because the product is being constantly improved and advertised, and maintains a strong brand loyalty.

Some of these methods can form an 'extension strategy' that prolongs the life of your current product or service. Such a strategy can temporarily delay the decline and give you enough time to improve or amend your existing product or develop a new one. Read more about product life cycle strategies.

By understanding the product life cycle of all of your products and services, you can ensure that at least one of your ventures is at the growth or maturity stage, while another is in decline. By doing this you can guarantee a regular source of profit for all of your products.

The BCG (Boston Consultancy Group) Growth Share Matrix classifies product lines into four categories based on their market share and market share growth rates. The BCG growth share matrix helps firms decide how much money to invest in a product line, based on whether a product has a good market share and whether the market share is increasing, decreasing or remaining constant.

A product classified as a star by the BCG Growth Share Matrix has a high market share in a market that is growing. A star is at the growth stage of the product life cycle so it will need investment (money) to maintain its growth rate and market leading position. As it is generating money for the company, it is worth the investing in. The challenge for the business is to turn it into a cash cow once growth begins to decline.

Cash Cows are products at the mature stage of the product life cycle, they generate high amounts of cash for the company, but their growth rate is slowing down. As market growth rate is slowing, investment should be reduced to the amount needed to maintain current market share. A cash cow is at the maturity stage of the product life cycle but it generates a lot of profit because research and development costs should have been recouped by this stage.

Towards the end of the Cash Cow stage product sales will decline, so it is prudent to review marketing mix strategies to maintain high sales for as long as possible. The firm could also look at reducing costs through price leadership strategies.

Products categorised as dogs by the BCG Growth Share Matrix have a low market share and are in a market with a low growth rate. A dog product generates low profits and sometimes a loss. Dog products will drain money, time and other resources. A dog product is at the end of the product life cycle so it needs to be removed or redeveloped unless it is providing the business with another benefit such as being a "gateway" to other products.

As the name suggests a product classified as a question mark by the growth share matrix presents the company with a question; the question of what to do. This is because a "question mark" product is generating low sales but it is part of a market that has high growth. The challenge for the firm is to find out why sales are low and why the firm's market share is not growing. If the firm solves the problem of low sales it could turn the "question mark" product into a star but if they don't further investment in the product will be a waste of money and resources.

The BCG Growth Share Matrix is a good starting point when reviewing an existing product line to decide future strategy and budgets. The market share is compared (relative to) against the largest competitor in the industry. The BCG Growth Share Matrix helps firms analyse future opportunities or problems with their product lines so that they can streamline and grow product ranges effectively.

Explore the intricacies of the Product Life Cycle (PLC) in this comprehensive blog. Delve into understanding its four stages and grasp the significance of PLC in the business landscape. Unearth the limitations, discover various types, and conclude with a nuanced interpretation of this critical business concept

Product Life Cycle consists of four stages, introduction, growth, maturity and decline. A company frequently experiences higher costs of marketing when launching the Product into the market but also gets higher sales because of growth in Product adoption. The concept of Product Life Cycle assists companies in making informed business decisions, such as pricing, advertisement, expansion and cost-cutting.

As mentioned in the image above, every Product Life Cycle revolves around four stages- introduction, growth, maturity and decline. Usually, each stage in the Product Life Cycle delivers a different set of opportunities for marketing that directly or indirectly affects the Product sales. Let's understand each stage in detail:

The introduction stage is the stage when the Product is introduced to the customer or launched in the market for the first time. In this stage, the company usually includes significant investment in promotion and advertising campaigns aimed at making the customers aware of the Product and its advantages, specifically when they are broadly unfamiliar with what the Product will do. At the time of the introduction stage, there is very low competition for the Product, as competitors may just be introducing the first look of the new Product. However, companies still frequently incur negative financial outcomes at the introduction stage as sales are likely to decrease, or advertising pricing may be less to consumer engagement.

If the Product is booming, then it moves to the growth stage. This is distinguished by increasing demand, increased Production, and expansion in availability. The quantity of time invested in the introduction stage before a company's Product experiences substantial growth will differ between Products and industries.

At the time of the growth stage, the Product becomes more famous and noticeable. A company may still invest laboriously in advertising if the Product experiences rich competition. Yet, marketing campaigns will likely be adapted towards differentiating its Product from others instead of introducing the goods to the market. A company may refine its Product by enhancing functionality according to customer feedback. Financially, the growth stage of the Product Life Cycle leads to an increase in sales and higher revenue. Competition grows as it offers rival Products, potentially pushing the company to reduce prices and incur lower margins.