Home > Product life cycle management

1 The stages

Products tend to go through five stages:

1. New product development stage
   • very expensive
   • no sales revenue
   • losses
2. Market introduction stage
   • cost high
   • sales volume low
   • losses
3. Growth stage
   • costs reduced due to economies of scale
   • sales volume increases significantly
   • profitability
4. Mature stage
   • costs are very low
   • sales volume peaks
   • prices tend to drop due to the proliferation of competing products
   • very profitable
5. Decline stage
   • sales decline
   • prices drop
   • profits decline

2 Management of the cycle

The progession of a product through these stages is by no means certain. Some products seem to stay in the mature stage forever (eg.: milk). Marketers have various techniques designed to prevent the process of falling into the decline stage. In most cases however, the life expectancy of a product category can be estimated.

A marketer's marketing mix strategies will change as their product goes through its life cycle. Advertising , for example, should be informative in the introduction stage, persuasive in the growth and maturity stages, and be reminder oriented in the decline stage. Promotional budgets tend to be highest in the early stages and gradually taper off as the product matures and declines. Pricing, distribution, and product characteristics also tend to change.

Customers respond to new products in different ways. Diffusion of innovations theory, pioneered by Everett Rogers, posits that people have different levels of readiness for adopting new innovations and that the characteristics of a product affect overall adoption.

3 Market evolution

Market Evolution is a process that parallels the product life cycle. As a product category matures, the industry goes through stages that mirror the five stages of a product life cycle:

1. Market Crystalization - latent demand for a product category is awakened with the introduction of the new product
2. Market Expansion - additional companies enter the market and more consumers become aware of the product category
3. Market Fragmentaion - the industry is subdivided into numerous well populated competitive groupings as too many firms enter
4. Market Consolidation - firms start to leave the industry due to stiff competition, falling prices, and falling profits
5. Market Termination - consumers no longer demand the product and companies stop producing it

4 Technology life cycle

The underlying technology subsumed within a product or product category can go though similar stages. This is typically referred to as the Technology lifecycle.

5 See also

• Product management
• New Product Development
• Technology lifecycle
• marketing
• products
• Planned obsolescence
• Extending the Product Life Cycle

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