Product Life Cycle

What is the Product Life Cycle?

Product Life Cycle refers to the entire process that a product has to go through from the time it is launched into the market until the time it is taken off from the market and is divided into four stages – introduction, growth, maturity, and decline. This concept is predominantly used by marketing professionals along with the management team because it is seen as the precursor for various marketing strategies, which includes increased advertising, price reduction, expansion to the new markets, etc.

Explanation

The underlying principle of the product life cycle is fairly simple – as a product grows old, it tends to become less popular, while the demand for a new and up-to-date product draws more demand that increases quite rapidly once the product gains acceptance after its launch. Most of the companies acknowledge the concept of the product life cycle and the fact that all the products that they deal with have a limited lifespan. Accordingly, these companies make regular investments to either develop a new product or extend the life cycle of an existing product, which would ensure that their businesses continue to grow.

Stages of Product Life Cycle

Let us look at the four major stages in more detail.

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# Stage 1 – Introduction

In the introduction stage, a new product is being launched into the market. During this stage, the company focuses on building more and more product awareness in order to develop a market for their product. The strategies employed during the introduction stage are:

Establishment of brand and quality level along with filing for intellectual property rights, such as patents and trademarks.
Low pricing to penetrate the market in order to grow market shareMarket Share Market share determines the company's contribution in percentage to the total revenue generated within an industry or market in a certain period. It depicts the company's market position when compared to that of its competitors.read more quickly.
Operate through limited distribution channels until consumers indicate product acceptance.
Promotion is focused on early adopters, who are believed to be potential consumers.

# Stage 2 – Growth

In the growth stage, the product is gaining acceptance and popularity among consumers. In this stage, the company intends to build the brand stronger. The strategies employed during the growth stage are:

Maintenance of product quality, along with the introduction of additional features.
Pricing is retained at a relatively higher level as the demand continues to increase.
More distribution channels are added to cater to the increased demand.
The focus of promotional activities is shifted to the broader audience.

#Stage 3 – Maturity

In the maturity stage, the growth in sales tends to slow down or stagnate, marking the point of market saturationMarket Saturation Market Saturation is a situation where the products and services of a company are no longer in a heavy demand. This could happen either because of the diminishing level of quality or changing market trends.read more of the product. As such, defending market share while maximizing profit becomes the only objective in this stage. The strategies employed during the maturity stage are:

May focus on adding new features to the existing product to stay in the competition.
Resort to lower pricing because of the competitive market.
Distribution channels are offered higher incentives to prefer their products over competing products.
The focus of promotion shifts to product differentiation.

#Stage – 4 Decline

In the decline stage, the product sales witness a significant drop as the demand for the product deteriorates. The strategies employed during the decline stage are:

Rejuvenate the product demand by adding some new features and identifying new uses.
Reduce the cost of productionCost Of Production Production Cost is the total capital amount that a Company spends in producing finished goods or offering specific services. You can calculate it by adding Direct Material cost, Direct Labor Cost, & Manufacturing Overhead Cost. read more in order to improve profitability.
In case the above two steps fail, then stop the product sale.