The product life cycle concept suggests that a product passes through four stages of evolution from its initial introduction in the market through to its withdrawal. These stages are introduction, growth, maturity and decline. As a product evolves and passes through the four product life cycle stages, profit levels change and different strategies have to be employed to ensure continued product success.
Product Life Cycle Diagram
Below we have drawn a diagram plotting out each of the stages of the product life cycle
Product Life Cycle Introductory Stage
The introductory stage is the first stage of the product life cycle and occurs as soon as the product is available for sale. During this stage profits are low or non-existent because the firm will need to spend money creating product awareness: marketing campaigns can be expensive. The firm may also need to spend money publicising the product to distributors and retailers. Read our article about how manufacturers persuade retailers to stock their products.
Product Life Cycle Growth Stage
If the introductory stage of the product life cycle is successful, the product will move into the growth stage. At this point retailers are stocking the product and consumers have begun buying it. During the growth stage there is a big increase in sales so that the product will enjoy a period of rapid sales growth. At this point profit will also increase as the manufacturing and promotion costs per unit sold decreases. The challenge for the business is to make the growth stage of the product life cycle, last as long as possible. This may involve product enhancements or entering new markets.
Product Life Cycle Maturity Stage
Rapid sales growth will not last forever so products will move into the third stage of the product life cycle; maturity. In the maturity stage of the product life cycle, sales slow down as product sales have reached a peak. At this stage the business will introduce strategy to try and increase sales such as price reductions and additional promotional campaigns. Such strategy is expensive and is likely to lead to a drop in profits to cover the promotion costs.
Product Life Cycle Decline Stage
The decline stage is the final stage of the product life cycle. As the name suggests in the decline stage of the product life cycle sales and profits start to decline. During the decline stage the product manufacturer may try to change their pricing strategy to stimulate growth, however in most cases the resolution will need the product to be modified, or replaced.
Lots of products will go through each of the product life cycle stages, however there is always an exception to the rule. Products known as fashion, fads and styles have a specific product life cycle and curve. If you would like more information about different product life cycles read our article about fashion, fad and style products.