Product Life Cycle

Article byWallstreetmojo Team
Reviewed byDheeraj Vaidya, CFA, FRM

What Is Product Life Cycle?

Product life cycle refers to the duration starting from the time of a product’s introduction in the market until it becomes unavailable to consumers for purchase. Businesses utilize product life cycle development as a management tool to make crucial decisions and formulate strategies related to product prices, packaging, and advertising budgets.

Product Life Cycle

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This cycle consists of 4 stages — introduction, growth, maturity, and decline. Managing product life cycles efficiently help businesses to provide customers with what they want and when they want. Moreover, it helps entrepreneurs or business owners determine the right time to introduce a new product to replace the previous one.

Key Takeaways

  • Product life cycle is the length of time from when a product first enters the market until it is no longer there on the shelves.
  • The four product life cycles stages are introduction, growth, maturity, and decline.
  • Managing product life cycle by formulating an effective strategy is crucial for businesses to maintain market share and provide the customer with the right product at the right time.
  • A product generates the highest profit in the third (maturity) stage.

Product Life Cycles Explained

Product life cycle definition is the process a product goes through after a business introduces it into the market until it becomes unavailable. Its four stages guide entrepreneurs in formulating strategies to utilize these stages to the fullest, ensuring the product succeeds in the market.

American economist Theodore Levitt developed this concept in 1965. According to him, replacing a product with a better one that fulfills new requirements of consumers is inevitable. Hence, the theory’s basic argument is that a product will eventually leave the market irrespective of how popular it is among consumers.

The product life cycle graph involves four stages. The first phase starts when a business introduces its product to consumers. In this stage, a company aims to make consumers aware of the product. During the second stage, the product continues to garner popularity. The marketing costs decrease when the product becomes well-known in the third stage. Finally, as the product moves on to the last phase, its demand declines.

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Let us understand the four stages of product life cycle development through the discussion below. This will help us ascertain the different intricacies of businesses and the product itself and how their consumers perceive it.

#1 – Introduction

Once companies introduce a product into the market, it will not generate revenue until the consumers know about it. Hence, businesses publicize their products through advertising, press releases, social media posts, etc.

Since they have to spread awareness among consumers quickly, the advertising costs are typically high. Moreover, there are additional expenses at the time of a product launch, for example, distribution and packaging. Thus, in the first stage, the cost of introducing the product is usually more than the income earned.

#2 – Growth

In the second stage, the product garners more popularity. As product awareness spreads rapidly among consumers, sales increases exponentially. Thus, a business can maximize production capability, reaping the benefits of economies of scale. Moreover, companies can open multiple distribution channels and add different features to its offering.

During the growth stage, a company may face tough competition if other businesses introduce a similar product in the market. This might lead to price competition. Moreover, companies might incur higher marketing expenses to maintain the product’s demand among consumers.

#3 – Maturity

The sales increase rate is lower than that of the growth stage. As a result, companies may cut their prices and increase their marketing activities to compete with other players in the market.

Entrepreneurs learn from the mistakes they made in the first two stages in this phase and take measures to improve efficiency. The advertisements aim at product differentiation from competitors’ offerings rather than spread awareness. A product’s profitability is the highest in the maturity stage as the cost of manufacturing the product decreases while sales continue to rise.

The main objective of a company in the last product life cycle stage is to keep the market share consistent when cheaper alternatives enter the market.

#4 – Decline

In the final stage, the product’s sales start to decrease along with its profitability. This is mainly because of the introduction of various new products that fulfill the consumers’ requirements better than it.

If a product is on the verge of becoming obsolete, the company can take the following measures:

  • They can remove it from the market.
  • The management team can lower the marketing expenses or reduce the production cost to maximize the product life for as long as possible.


Depending on different stages of the product in the cycle, the company may decide to adop different strategies. Let us understand them through the discussion below.

Introduction Stage

Companies introducing a product for the first time in the market might spend heavily on research and development (R&D) and marketing to ensure the visibility of the product is high and get a new set of target customers to buy the product.

Growth Stage

In this stage, the concentration for most companies to maintain the quality of the product and ensure that the after-sale services are top-notch. Moreover, businesses also concentrate on marketing the product in such a way that their customers keep coming back and repeating their purchases.

Maturity Stage

In this stage of the product life cycle graph, the company looks to maximize its profits and starts to realize that the saturation point of the business is being reached. Therefore, efforts to make slight innovations or change the perspective of marketing are made to extend this phase of maturity before it begins declining.

Decline Stage

In the final stage of a product, companies decide to maximize the sales and minimize extra productions as they do not want to end up with large volume of inventories that will most likely remain unsold for long periods. They also concentrate on developing a new product to fill the void of this product that has saturated and is most likely to not recover.


Let us understand the concept of a product life cycle graph and its rise and fall through the years with the help of a few examples.

Example #1

There are various examples at every stage of this concept in the home entertainment industry. For instance, videocassettes are no longer there in the market, and smart TVs are in the maturity stage.

Example #2

Suppose company ABC launches a mobile phone and updates it annually to ensure its market share increases or remains consistent. In this way, ABC makes the product feel new to consumers and delays the transition to the decline stage. This shows ABC is efficient in managing the life cycle.

Example #3

In July 2022, Unilever introduced a new laundry capsule. The company claims it to be the most sustainable one yet. This product’s specialized formula comprises biodegradable active ingredients and can deliver top-notch performance in cold and short cycles, reducing its carbon footprint by 16%.

The reduced emission across the product’s life cycle will spearhead the efforts put in to decarbonize the global laundry industry.


Let us understand the advantages of adopting a product life cycle development as a strategy through the points below.

  • It allows the marketing team and the product development team of a company to understand individual product’s worth in the overall product portfolio.
  • Reallocation of resources and effort can be made based on the stage at which the product is currently in, according to its life cycle.
  • It helps with sales forecasts for both seasonal and non-seasonal products as well.
  • Budgets can be set according to the demand and stage of the product in its life span.
  • It helps companies with the market placement of products and allocating workforce and resources of the product.


Despite the significant advantages mentioned above, there are a few factors from the other end of the spectrum that act as a disadvantage. Let us understand how a product life cycle graph’s rise and fall can be a problematic factor for businesses through the explanation below.

  • The majority of data is retrieved from the sales report of the product. In the practical world, it is often noticed that there are delays or unavailability of such data, which causes delays in decision-making.
  • Its inapplicability to all products makes it an inefficient tool to rely upon for a company with a wide range of products.
  • Considering the fact that the market conditions keep changing, it is tricky to interpret data from previous such cycles as the market condition between two years that are being compared can have stark differences.

Frequently Asked Questions (FAQs)

Why are accountants concerned about product life cycles?

The information required to make decisions regarding any product depends on the life cycle stage. Hence, an account of a business must be aware of the ongoing stage to prepare information and interpret the same.

Is there a product life cycle in healthcare?

Yes, the concept applies to the healthcare industry as well.

Are product life cycles getting shorter?

In the last few years, the amount of time a product takes to reach the decline stage has increased significantly. The duration varies for different products and depends on the industry as well. That said, on average, products are reaching the decline stage faster. The smartphone space is an ideal example in this regard. Companies are launching new models yearly in all budget segments to compete in the market.

What is product life cycle costing?

This refers to the accumulation of costs related to a product over its life cycle, i.e., introduction to abandonment.

This has been a guide to What is Product Life Cycle. Here, we explain its stages, examples, strategies, advantages, and disadvantages in detail. You may learn more from the following articles –

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