Marketing

Product life cycle

Every product goes through a ‘life cycle’, from introduction to growth to maturity and then decline.

Every product has a 'life cycle,' from introduction to growth to maturity, and then decline. Understanding this life cycle and where a specific product falls on it allows you to make better marketing decisions.

When to use it

● To determine how to position a specific product and how much money to invest in it.
● To manage a product portfolio.
● To determine how to launch a new product.

Origins

The product life cycle, like so many other management concepts, was recognized informally before it was discussed explicitly. 'Exploit the product life cycle,' written by marketing professor Ted Levitt in 1965, was one of the first articles on the subject. The goal of this article was to argue that your marketing strategy should change depending on where your product is in its life cycle. Many subsequent studies adopted and expanded on Levitt's ideas.

There have also been numerous variations on the theme of the product life cycle. For example, in the field of international business, Raymond Vernon argued that multinational corporations would frequently develop a new product in a developed region, such as the United States or Europe, and then gradually roll it out in less-developed countries as it matured in that region. Researchers have also investigated the industry life cycle (the pattern of growth and decline for the entire set of providers of a product category, such as personal computers), as well as the diffusion life cycle (focusing on the speed of uptake of a population when faced with a new technology).

What it is

Every product has a life cycle, which consists of predictable stages of growth, maturity, and decline. Older products gradually lose favor and are replaced by newer, more modern products. Many factors are at work in this process, some of which are related to the features of the product itself, while others are more concerned with changing social expectations and values. Some products have extremely long life cycles (for example, refrigerators), while others have extremely short life cycles (for example, mobile phones).

The product life cycle model describes the four distinct stages of a product's life cycle: introduction, growth, maturity, and decline, and it suggests that a different marketing mix is appropriate for products at each stage. For example, in the early stages of introduction and growth, it is often beneficial to invest heavily in order to secure revenue later on.
● Introduction: This stage is usually costly and uncertain. The market is likely to be small, and the costs of developing and launching a product are frequently prohibitively expensive.
● Growth: This stage involves a significant increase in production and sales, and it is often possible to generate significant economies of scale. As you try to gain market share ahead of your competitors, your marketing and promotion budget may be quite large at this stage.
● Maturity: The product is well-established here, but there will almost certainly be many competitors. The firm's goal is to maintain its market share while also looking for ways to improve the product's features and reduce costs through process improvements. At this stage of the life cycle, margins are typically the highest.
● Decline: At some point, a product's market will begin to contract. This is typically due to the emergence of an entirely new product category that has supplanted this product (for example, smartphones have supplanted laptop computers), but it can also be due to a market being saturated (that is, all the customers who will buy the product have already purchased it).

It is still possible to make very good profits at this stage, for example, by switching to lower-cost production methods or shifting the focus to less developed overseas markets.

How to use it

Marketers can use a variety of tactics at various stages of the product life cycle. The following are some typical strategies for each stage:

Introduction

● Invest heavily in promotional spending to raise awareness and educate people.
● To stimulate demand, use low initial pricing.
● Concentrate your efforts on capitalizing on demand, particularly from "early adopters," and use them to promote your product/service wherever possible.

Growth

● Advertise to raise brand awareness.
● Increase market penetration by increasing the number of product outlets.
● Enhance the product with new features, improved styling, and more options.

Maturity

● Differentiate yourself through product improvements and advertising.
● Rationalize manufacturing by outsourcing to a low-cost country.
● Merge with another company to eliminate competition.

Decline

● Advertise – try to reach a new audience or remind an existing one.
● Reduce prices to make the product more appealing to customers.
● Enhance the current product with new features.
● Diversify into new markets, such as less-developed nations.

Top practical tip

The product life cycle model describes the stages a product goes through well, but it is not definitive. Many products (such as milk) have been mature for decades, while others (such as laptop computers) have moved quickly from growth to decline without spending much time in the mature stage.

So, in order to apply the product life cycle in practice, it is necessary to consider the various paths a product could take. Is it possible, for example, to'reinvent' a mature product in a way that allows it to grow further? Coffee was clearly a mature product in the mid-1990s, but Howard Schulz founded Starbucks to revitalize it and turn it into a growth product.
Another way to think about the product life cycle is to consider your company's product portfolio. Products in the introduction and growth phases are generally cash flow negative, whereas those in the maturity and decline phases are cash flow positive. As a result, having products at various stages provides some useful balance.

Top pitfall

One of the problems with the product life cycle is that it can become self-fulfilling. If you are a marketer and you see a product approaching its decline phase, you may decide to stop actively marketing it, which will inevitably lead to the product's decline. Alternatively, you may believe that the product should receive additional investment but find it difficult to persuade your boss, who is in charge of the entire product portfolio.

Good marketers use a variety of data to determine which stage a product is in and whether that stage can be extended – perhaps through a new marketing campaign or product enhancements.

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