The Product Life Cycle
Managing Your Product to Maximize Success
We're regularly bombarded by advertisements telling us about exciting new features of existing products: a car that now has SatNav as standard, perhaps; a brand of shampoo with a new, improved formula; or a snack that now contains even more delicious fruit.
Yet, at the same time, if we go to the shops, there are hundreds of products which are seemingly not advertised at all.
So why are some established products regularly given make-overs and generous new marketing budgets, while others are apparently left to sell themselves?
One answer is that the marketers are acting according to where the item is in its product life cycle.
Understanding the Model
Just as people go through infancy, childhood, adulthood and old age, so too do products and brands. And just as we swing from being needy, to being overall contributors to our families or to society, and then back to being needy again over the course of our lives, so – in effect – do products.
The four phases usually used to describe a product's life cycle are:
Sometimes a pre-launch Development phase is also included, but as the main application of the idea of the product life cycle is to guide the type of marketing used, we'll not consider it here.
During the earlier parts of the product life cycle, the cost of promoting the product may be larger than the revenue it brings in. However, for successful products that are marketed effectively, the product will become increasingly profitable during the Growth and Maturity phases. A typical life cycle for a well-managed product is shown in figure 1, below.
As products move from life cycle phase to life cycle phase, the elements of the marketing mix used to promote them change.
During the Introduction phase, there will most likely be heavy promotional and advertising activity designed to raise awareness of the new product, and to seek sales amongst early adopters – adventurous consumers who like to own cutting-edge products.
Depending on the nature of the product, it will either have a premium price so that its development costs can be recouped quickly (this is the approach used with most high-tech products) or be priced low to encourage widespread adoption – what marketers call "market penetration".
- Moving on to the Growth phase, promotional activities will tend to focus on expanding the market for the product into new segments – usually either geographic or demographic – and supporting this by expanding the product family, for example with new flavors or sizes (cartons of fruit drinks specifically sized for kids lunch boxes, for instance).
By the time a product reaches its Maturity phase, the company producing it needs to reap considerable rewards for the time and money spent developing the product so far.
The product's features may continue to be refreshed from time to time, and there will still be some promotion to differentiate the product from the competition and increase market share. However, the marketing activity and expenditure levels may be much lower than earlier on in the life cycle.
Finally, once the product begins to Decline, marketing support may be withdrawn completely, and sales will entirely be the result of the product's residual reputation amongst a small market sector. (Elderly people, for example, may go on buying brands that they started using forty or even fifty years earlier.)
By this stage, the most important decision that needs to be made is when to take the product off the market completely. It can be tempting to leave a declining product on the market – especially if it served the company well in its time, and there's a certain sentimental attachment to it. However, it is essential that the product is not allowed to start costing its producer money, and this can easily happen if production costs increase as volumes drop.
More importantly, the old product's very existence can absorb managers' time and energy, and can discourage or delay the development of a new, potentially more profitable replacement product.
Controlling the Length of Life cycle Phases
The duration of each life cycle phase can be controlled, to a certain extent. This is particularly true of the Maturity phase: this is the most important one to extend from a financial point of view because this is the period when the product is at its most profitable.
Typical tactics designed to extend the maturity phase include:
- Increasing the amount of the product used by existing customers (this is why food producers issue recipe cards that use their ingredients).
- Adding or updating product features.
- Price promotions to attract customers who use a rival brand.
- Advertising to encourage trial of the product people who don't use this category of product at all.
Limitations of the Model
One criticism of the product life cycle concept is that it in no way predicts the length of each phase, and nor can it be used to forecast sales with any accuracy.
Another is that the model can be self-fulfilling: if a marketer decides that a product is approaching its Decline phase, and so stops actively marketing it, the product's sales will almost inevitably decline. This might not have happened had it been managed as if it was still in its Maturity phase.
Furthermore, it's possible that by improving a product aggressively on an ongoing basis, growth can continue for a long time. Just think of the market for PCs in the 1980s and 1990s: successful producers launched new and better products month after month after month.
Successful marketers need to draw on a wide range of data and analysis to help them decide which phase a product is in, and whether that phase can be extended. And while this model is useful and thought-provoking, they need to base their decisions on a good understanding of the facts.
The Product Life Cycle model describes how products go through the four phases of Introduction, Growth, Maturity, and Decline after they are launched. Each phase requires a different mix of marketing activities to maximize the lifetime profitability of the product. In general, this involves early investment to help secure revenue later on.
While the model does not predict sales, when used alongside carefully analyzed sales figures and forecasts, it provides a useful guide to marketing tactics that may be most appropriate at a given time.
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