In the market, a new product progresses from introduction to growth, then maturity and may finally decline depending on the response of the product to the prevailing changes in the market. This sequence is what has come to be known as product life cycle. It can be systematic or unsystematic as it impacts on and is influenced by marketing strategies and interplay of a variety of other factors in the market. Vivid description of the stages involved in the product life cycle requires an insight into four major factors that interact freely in a market mix scenario as is identified and critically analysed in this report. The four factors which variably characterize every stage of the product cycle are products name or brand, the price, its distributive criteria and product promotion (Gorchel 13).
Based on the above features, the product life cycle is divided into four major stages or phases. These are; the introduction stage, Growth stage, maturity stage and declining phase. There is no clear time limit on how long a stage may last before the preceding phase commences. The duration of these stages vary from one product to the next and depend on the strategy that the firm adopts. Figure 1.0 below illustrates the four stages present in a product life cycle. The curve shown below gives the performance of a product in the market. It also captures the customers’ response to its sale as demonstrated by the company’s market share at each stage (Gorchel 13).
The stages in the product life cycle
This is the first stage of a product or service in its life cycle. At this point, the company seeks to sensitize its prospective customers about its product or service. In a case of a tangible good, the firms intentions is precisely focused on building product awareness in the market, while at the same time develop market for its future production. In the introduction phase, the objectives of the firm include branding, pricing, distribution and promotion. Branding and quality level is established through leveraging the quality and brands of its substitutes and complements already in the market. For a new line of production, intellectual property protections like patents and trademarks are obtained at this stage (Midgley 80).
Price of the commodity at this stage is low because the firm’s objective is to create demand. To maximise the awareness of the product, free samples are offered to give people an opportunity to try the new product. However, distribution of the product at this stage is still selective or discriminative because customers may be sceptical about it. This behaviour is repeated until the product is accepted in the market. A lot of emphasis is put on promotion at introduction of the product so that innovators and early adopters can invest in the product with high hopes and enthusiasm. This has a lot of impact in the entire cycle of the product because awareness of the product is reinforced by this group of people. At this stage most often the firm does not realize any profit from the sale of the product. The cost of advertisement and development of the product are still high at this stage. This stage is also characterized by little or no competition since competing firms are still observing the performance of the new product; before they decide their next move depending on the audience response to the new product (McGrath &Michael 120).
This is the stage that proceeds introduction phase. At this point, the main objective of the firm is to establish brand preference and increase its customer subscription base (improve its market share). Product quality is emphasised as an additional features and support services is injected. Pricing is maintained since the firm is likely to find increased demand with less competition, increased demand and improved production. Distribution channels are added as the demand increases (in a case where customers have accepted the product). At this stage, product promotion mainly targets a broader audience, unlike in the introduction stage where the promotion is intended to educate potential customers about the product and the target group is limited to consumer’s tastes and high preferences. The firm also begins to realize profits from sales of the product at this stage (McGrath &Michael 122)
Depending on the market mix, maturity stage may follow immediately or after a while. At maturity stage, strong growth in sales diminishes because of intensive competition. This is evidenced by appearance of similar products even in a new line of production in the industry. This stage is also characterized by enhanced and highly differentiated product features to distinguish the product from its competitors’. Pricing also tend to go down due to presence of competition. This can be witnessed by offers on the product and its complementary and outright slashing of its price. Discounts may also be introduced in order to maintain and increase market share. Product promotion at this level mainly focuses on product differentiation because a number of the same kind is now common in the market. Therefore the firm emphasises on the uniqueness of the product as farther education is meant to show the customers new and other uses of the product including its improvement (McGrath &Michael 123).
The final stage which is common when a company is winding up its production of a particular product in the product life cycle is the stage of decline and saturation. Predominantly, sales of the product begin to decline as the rule of marginal returns begins to trade in; sales volumes declines as price and profitability diminish. Now, the firm has a number of options. For instance, it can maintain the product by adding new features and ingredients thereby providing more value to its customers. Thus, customers would still find it more appealing and useful if it can serve other purposes apart from what it was originally designed for. This is done in an attempt to rejuvenate the product and strengthen its market share. If the products’ price elasticity of demand is elastic, a reduction in the price of the product automatically leads to increased sales. With limited pricewise competition, the company is predisposed to increased sales by reducing the price of the product (Gorchel 13).
To cope with unforeseen/ unsystematic changes that can emerge in this phase, the firm needs to add new distribution channels or increase the volume of the product flowing through each channel. Moreover, promotion in this stage can improve the sales if competitors fail to respond in the same way. However, it can significantly increase advertisement expenditure among other variable costs in the short run.
The firm may also harvest the product and cut its cost. It can then continue to offer it to possible loyal group segment. Again, this small niche segment can be profitable if the product captures just that proportion of its entire market profitably.
If the firm finds that technological advancements or societal changes have outdone the significance of the product in the market; it might be forced to discontinue the product and liquidate necessary remaining stock. On the other hand, it can opt to sell it to another firm willing to continue the product.
The market mix decisions in this phase depend entirely on the preferred strategy. For instance, if the product is changed, it is likely to be rejuvenated. Conversely, if it is left unchanged, there is a strong likelihood that it can be harvested or the firm may be liquidated. However, price reduction is likely to be followed by drastic liquidation of the firm or else if the price is maintained, the product can be harvest and reserved for a few customers whose loyalty remain seemingly unchanging over time (McGrath & Michael 150).
It is equally important, sometimes, for a firm’s product to weather this phase with care so that it can improve its image by allowing market mix variables to work for it, rather than allowing antitrust to arise in the market to censure the dominance of the firm and its product (McGrath & Michael 120,168).
Factors influencing the product life cycle (Marketing strategies)
In the third (maturity) stage, it is important for the company to increase its market share because it is associated with profitability and thus the company can increase sales relative to its competitors. Increasing market share or simply the customer subscriber base normally results into economies of scale which is associated with developing a cost advantage. It becomes cheaper for the company to operate on higher volumes. When an industry is stagnating, the firm can still grow its sale by increasing market share through promotions and cost reduction on the product. Stability and large market share also improves the company’s image through its dominant brand i.e. the product whose consumption is growing.With a large market share, the company has an advantage in negotiation with suppliers and its distribution channels (Alexander 17).
No clear boundary exists between product life cycle, and the discipline of product life cycle management. However, we can draw a strong clear relationship between the two items based on their applicability. The burdens of managing the challenges and responsibilities of marketing activities of a product/service as its customers’ response evolves through these phases is shouldered by the Brand Managers and marketing managers of companies. These are the two leaders in any firm that launches new product/service which they intend to ‘hit’ the market and stay in the consumers’ budget list.To realize this, they should be conversant enough with the different attributes that a product is required to exhibit in each stage in order to comfortably manage the product over the entire cycle (Hiam & Schewe 372).
Depending on the nature of the product, certain phases may ultimately culminate into crises if the challenges arising fail to meet adequate response from the firm. Nonetheless, a product life cycle expert must be able to generate a positive attitude in the market in relation to the product introduced so that the product can sell itself. This also calls for the firm’s culture to be positive enough to exude symbol of quality that can further promote the product.
Gorchels, Linda. The Product Managers handbook: The complete Management Resource 2nd ed. Illinois, USA. 2007, web.
Midgley, David. Innovation and new product marketing. London: Redwood Burn 1977, web.
Schewe, Charles & Alexander Hiam. The Portable MBA in Marketing, (The portable MBA Series) 2nd Edition. Canada. John Willey & Sons. 1998, web