Life cycle stages
The details of the product life cycle vary among different industries, products, and markets. However, the basic model describes a product's life cycle in terms of four stages. The stages in the product life cycle are introduction, growth, maturity and decline. During the final stage, the marketer may try to stimulate new demand or may stop offering the product.
INTRODUCTION During the introduction stage of the product life cycle, a new product enters the marketplace. (Consider a "new" product to be a good or service that is innovative enough not to have direct competition yet.) Sales start out low but begin to climb. Production costs are usually high because the producers do not yet have experience in making the product. Marketing costs tend to be high because sellers must devote resources to educating target markets about what the new product is and how it will benefit them. The objective for target markets is to be aware of the product and to try it. These efforts emphasize building desire for the type of product, rather than for a specific brand.
Because costs are high and sales only beginning to build, industry profits tend to be low, if they exist at all. Thus, one of the biggest challenges of the introduction phase is to keep enough money coming in to cover the expenses of building demand. Depending on its size and reputation, the producer may also have difficulty persuading resellers to handle the product or give it enough attention. Fortunately, the organizations that operate in this stage of the product life cycle tend to face little competition. If they can protect some aspect of the product with a patent or copyright, they can maintain their position as sole producer of the product for years. The lack of competition often leads a marketer to set a relatively high price.
GROWTH During the growth stage, sales climb the most rapidly as more and more buyers begin trying the product. Profits also rise as sellers learn to make best use of their production facilities and distribution channels. The challenges of this stage include keeping up with demand and fending off competitors, who are attracted to the market because of its growth. The increase in competition may lead sellers to lower prices and to look for ways to add services that will enhance the product's value.
MATURITY In terms of the product life cycle, a product is mature when it has become a familiar offering and when its success during the growth stage has led many competing firms to enter the marketplace. Because many buyers already own the product, sales growth slows and may even begin falling. Competition causes profits to rise more slowly than sales. This is because keeping up with competitors may require reducing prices, improving quality while holding the line on price, or increasing spending for promotion. In the mature U.S. market for personal computers, prices were recently reported to be falling an average of 8 percent every three months. In Japan, U.S. marketers of PCs made inroads by slashing prices by as much as 30 percent. Price-oriented advertising is common for a product in the maturity stage.
DECLINE Eventually the sales volume for most products begins to fall. There are many possible reasons for a decline in sales. Perhaps new technology has led to a superior alternative. Needs or values may change so that the product is no longer relevant or appealing. For example, a decline in sales of ground decaffeinated coffee has been attributed to consumer dissatisfaction with the product's taste. People who want to avoid caffeine are switching from coffee to other kinds of drinks such as soft drinks. Decaf makers blame the decline on a trend toward drinking soft drinks instead of coffee, but critics of decaf's taste point out that sales of gourmet coffee are on the rise. Marketers may respond to the sales decline by seeking ways to keep the product profitable. An obvious approach is to cut costs. Also, if a niche market continues to demand a product, customers may be willing to pay a higher price. If the product is no longer profitable, sellers may want to discontinue it altogether.